How much does a Real Estate agent make? It’s a question that gets asked a lot. Not only do potential agents thinking about entering the industry ask it, but also consumers.
There is no secret that real estate is a highly lucrative industry. However, many people don’t realize that the upper echelon of Realtors is raking in the big bucks.
The average real estate agent is not pulling in earnings that would make you gasp, far from it.
Unlike other industries where employees are paid a salary, Realtors are paid commissions. Real Estate agents are considered independent contractors.
A real estate agent will not get paid until the transaction is complete and the deed is recorded. In other words, agents are compensated strictly on a performance basis.
From experience being a Realtor for the past thirty-seven years, I know some agents do exceptionally well while others languish. It can be one of the most lucrative jobs in real estate.
What Factors Determine How Much a Real Estate Agent Makes
Real estate agents’ money earned each year depends on a few factors, including the number of transactions completed, the commissions brought in, and the split with the broker they work for.
A Realtor can work with a seller or buyer for months without a sale. They are not paid for any of this time. A Realtor’s commission will be based on the home’s sale price. They will only receive their commission when the job is complete.
Please note: a Realtor and a real estate agent are not the same things. A Realtor is a member of the National Association of Realtors. Real Estate agents are not. However, for this article, I’ll be using the words interchangeably.
It would not be surprising if Realtors made more income than real estate agents. Some of the best agents I know are also Realtors. A code of ethics binds realtors and puts their client’s best interests first.
Many wonder what does a real estate agent do to earn their money. Have a look; it may surprise you.
Let’s take a closer look at commissions in real estate sales.
Factors Affecting Real Estate Agent Earnings
Earnings for real estate agents are influenced by various factors that play a significant role in their income potential. Let’s explore some of these factors below:
Location and Regional Differences
The geographical location where a real estate agent operates can significantly impact their earnings. Agents can earn more in areas like California, with higher property prices. On the other hand, regions with lower property values may have lower earning potentials for agents.
Experience and Career Progression
Experience plays a crucial role in determining a real estate agent’s income. When agents gain more experience and establish themselves in the industry, their earning potential increases. Typically, agents see significant growth in their income between the fourth and tenth year of their career.
Usually, when a real estate agent starts to do a more significant volume of business, they will hire a transaction coordinator to assist them.
Salary vs. Commission-Based Income
The income structure of real estate agents often revolves around commissions. While some agencies, like Redfin, offer a base salary and healthcare benefits, most agents work on a commission basis, providing them unlimited earning potential.
Agents earn a percentage of the property’s sale price as their commission, usually 5-6%. This commission is typically divided between the agent and their broker. Agents working as buyer’s agents may also offer commission refunds to clients as an incentive to continue working with them.
Real estate agents’ location, experience, and income structure significantly impact their earnings. Understanding the dynamics of these factors can help aspiring agents set realistic income expectations and plan their career paths accordingly.
Part-Time Real Estate Agent Income
Exploring a career in real estate while maintaining other income sources can provide flexibility and financial stability. Part-time real estate agents can gradually transition into the industry without immediately giving up their existing jobs or income streams.
Exploring a Real Estate Career while Maintaining Other Income Sources
Starting as a part-time real estate agent allows you to gain experience, build networks, and test the waters of the real estate market. This approach can be ideal for individuals who want to ensure a smooth transition and minimize financial risks. By combining real estate work with other income sources, such as a full-time job or freelancing, you can maintain a stable income while exploring the potential of a real estate career.
Being part-time doesn’t mean you won’t achieve success. Many part-time agents have established themselves in the industry and eventually transitioned into full-time roles, leveraging their existing networks and experience.
Average Income for Agents Working Less Than 30 Hours per Week
Part-time real estate agents can earn a respectable income even when working fewer than 30 hours weekly. According to recent data, the average annual income for part-time agents is around $24,566, which can be considered a supplementary income alongside other sources.
Although part-time agents may have fewer working hours, their success often relies on time management, prioritizing client needs, and staying updated with market trends. By dedicating focused efforts during their available hours, part-time agents can still achieve significant results and contribute to their client’s real estate goals.
- Part-time agents should optimize their time by leveraging technology tools to streamline administrative tasks, such as managing listings, coordinating appointments, and communicating with clients.
- Building solid relationships with clients and maintaining regular communication is crucial for part-time agents to establish trust and ensure a high level of service.
- Part-time agents should also actively participate in industry networking events, online forums, and professional associations to stay connected and enhance their knowledge base.
While part-time real estate agents may not have the same availability as full-time agents, their dedication, efficient time management, and commitment to client satisfaction can contribute to their success in the industry.
Remember, the specific income and success achieved as a part-time real estate agent can vary based on various factors, including location, market conditions, individual effort, and professional networks. With careful planning and a strategic approach, part-time agents can create a fulfilling and financially rewarding real estate career.
How Much Commission Does a Realtor Make?
How much do Real Estate agents make on a sale? That comes down to the commission charged in the transaction. The average real estate commission around the country comes in at around 5.5%.
Commissions are entirely negotiable between the seller and the real estate brokerage. Real Estate commissions are not fixed due to the Sherman Antitrust Act. Fixing Realtor commissions is illegal.
Sometimes, the listing agent is empowered to negotiate the commission, and others are not. It depends on the real estate company they work for.
So, how much does a Realtor make? It boils down to the sales price for the property. Using a sales price of $500,000 with a commission of 5 percent, the total commission would be $25,000.
Most of the time, the commission is split equally between the listing and selling agencies. However, it could be different. For example, the listing agent could take more or less than an equal split.
Sometimes, a listing agent could reduce the commission to entice a seller to list with them. For example, instead of charging 5 percent, they charge 4.5%. However, the listing agent still gives the buyer’s agent 2.5% and takes a reduced fee of 2 percent.
Many intelligent listing agents will not discount the buyer agent commission because they want to be competitive in the real estate market. If most other homes in the marketplace have a higher commission rate, lowering the fee is not a good business practice.
Commission Rates and Incentives
Commission rates play a crucial role in determining the earnings of real estate agents. As mentioned, Both REALTORS™ and non-affiliated agents typically charge a 5-6% commission per transaction. However, it’s important to note that these rates can vary based on experience, market conditions, and whether the agent represents the buyer or the seller.
Typical Commission Rates for Realtors and Non-Affiliated Agents
The standard commission rates for both REALTORS™ and non-affiliated agents usually fall within the 5-6% range. This percentage is calculated based on the final sale price of the property. It’s worth mentioning that the commission is typically split between the agent and his or her broker, with each receiving a portion of the total commission earned.
Commission Differences for Buyer and Listing Agents
The real estate industry has two primary roles: buyer and listing agents. Buyer agents represent individuals looking to purchase a property while listing agents work with clients who want to sell their property. The commission earned by each of these roles can vary.
In some cases, buyer agents may offer a commission rebate to their clients as an incentive to continue working with them. Agents who work with buyers often have a buyer agency agreement to ensure they will get paid and are not wasting their time.
How Much Do Real Estate Agents Make Per Sale?
Let’s look at what a real estate agent makes per sale. Here is an example of a typical commission schedule. We will use a 5 percent commission split equally for purposes of discussion.
In this scenario, the listing agency would get 2.5%, and the selling agency would get 2.5%. Each company would then split the 2.5 commission with their respective agents.
Assuming that each agent is splitting the commission with the brokerage, the listing agent would get 1.25%, and the buyer’s agent would get 1.25%.
Using a home selling at $500,000, the listing agent and buyer’s agent would each gross $6250. Keep in mind this is before any expenses. You then have to figure out the taxes paid to the government.
What a real estate agent makes on a house sale is much less than you think when all is said and done.
It is vital to understand that commissions are typically split four ways between the listing agent, their real estate broker, the buyer’s agent, and the buyer’s agent’s broker.
The gross income and net income are very different.
Understanding Real Estate Agent Commissions
Regarding real estate transactions, commissions are crucial in determining an agent’s earnings. Let’s delve into the commission structure, the division of commissions with brokers, the importance of agents in the buying or selling process, and the alternative option of ‘For Sale By Owner.’
Commission Structure and Division with Brokers
The commission structure for real estate agents typically involves a percentage of the final sale price of a property. Most agents work under a brokerage, and the commission is divided between the agent and the broker.
The specific division varies depending on the agent and brokerage agreement. For example, a common arrangement could be a 60/40 split, where the agent receives 60% of the commission, and the broker takes 40%.
Importance of Agents in the Buying or Selling Process
Real estate agents play a significant role in the buying or selling process. They bring valuable expertise, market knowledge, and negotiation skills. Agents assist clients in pricing their properties, marketing listings, conducting property showings, negotiating offers, and ensuring a smooth closing process. Their guidance and support help buyers and sellers navigate the complexities of real estate transactions.
‘For Sale By Owner’ as an Alternative to Agent Representation
In some cases, homeowners may choose to sell their property without the assistance of a real estate agent. This approach, known as ‘For Sale By Owner’ (FSBO), means that the homeowner takes on the responsibilities typically handled by an agent.
While FSBO can save on commission fees, it’s important to note that sellers may have limited marketing reach, reduced access to potential buyers, and challenges in negotiating the best deal without an agent. Engaging an experienced agent provides professional representation and advocacy throughout the selling process.
- Commission Structure: Based on a percentage of the final sale price
- Division with Brokers: Varies but commonly involves a split between agent and broker
- Importance of Agents: Expertise, market knowledge, and negotiation skills benefit buyers and sellers
- ‘For Sale By Owner: Homeowners selling independently may face specific challenges
Understanding real estate agent commissions is essential for professionals in the industry and those considering buying or selling a property.
How Do Realtors Get Paid Their Commission?
Realtors get paid their commission by the owner of the company they work for or the broker of record. Commission checks are paid at closing and made out to the listing real estate company and the buyer’s agent’s company.
The individual agents are then paid by their respective brokerages.
There are commission splits that vary from company to company. When a real estate agent starts, they often split the real estate commission with the company’s owner.
As they progress and produce more sales, their split with the house will often increase. Usually, there are tiers of production whereby an agent’s split will go up incrementally.
For example, if they hit a certain gross commission amount, their split will increase to 60/40. There can be multiple levels of production, which typically get capped anywhere from 80/20 to a 90/10 split with the house.
RE/MAX Works Differently Than Traditional Real Estate Companies
As you become more successful as an agent, you will earn a higher commission split. Some real estate companies, like RE/MAX, work differently.
In the RE/MAX system, the listing agent keeps 95% of the commission and gives the brokerage 5%. However, unlike a traditional real estate company, the agent manages all the business’s overhead.
The owner of a RE/MAX firm makes most of their money by charging agents monthly rent. It is a system that is built for top-producing real estate agents. Top producers come to RE/MAX when they are not worried about where their next sale is coming from. RE/MAX agents typically have many years of experience.
New agents rarely join RE/MAX because they are like self-employed individuals paying all their expenses. It is the complete opposite of traditional agencies.
So, how much does a Realtor make on a sale? It will vary from company to company, and the split is with the company the agent works for.
Keep in mind the commission check an agent receives is not what they are making. Like other businesses, real estate agents have overhead and business expenses which can be significant.Click To TweetHow Fast Do Real Estate Agents Get Paid?
One of the downsides of the real estate industry is agents don’t get paid right away. The average time to closing is 45 to 60 days. Some real estate closing dates are much longer than that.
The vast majority of all real estate agents do not get paid a salary, so they can go quite a while from paycheck to paycheck if they are not producing sales.
When a sale does close, real estate agents are usually paid within a few days by their brokerage.
How Much Do Real Estate Agents Make in Earnings?
So this leads back to the original question of how much Real Estate agents make. The answer is it depends. The range goes from a poverty-level income to some of the best-paid individuals in the U.S.
Some of the top real estate agents in the industry can earn six and even seven-figure commissions. According to the employment website Indeed, the average yearly commission for a Realtor right now is $95,602. These earnings are up substantially from years past.
Keep in mind that home values have skyrocketed over the last few years. Commissions are paid based on the sales price of a house. That means more money in every real estate agent’s pocket.
So far, for 2022, Indeed has the annual pay for what a real estate agent makes in the range of $85,597-$112,309, depending on their time in the business.
According to the most recent U.S. Bureau of Labor Statistics statistics, the median annual earnings were $48,770. For real estate brokers, the mean wages were $86,490.
The best real estate agents and brokers can earn much more. The upper ten percent in the industry earned over $102,000. The top ten percent of brokers made over $176,000. Successful agents can undoubtedly make a better-than-average income.
You can see a breakdown of what real estate brokers make in commission in all fifty states.
How Much Do Real Estate Agents Make By State?
What a real estate agent makes can vary tremendously by location. For example, what real estate agents make in Massachusetts could be very different than an agent in Florida, Michigan, or Nevada.
One vital factor that makes this the case is home values. The average sales prices of homes are different all around the country. A Realtor’s commission on a similar home in one place will be dissimilar to another.
Forbes has an excellent article that breaks down what a real estate agent makes in each state. You will see the average yearly earnings by state. It doesn’t come as much of a surprise that New York tops the list on average agent commission earnings.
What is surprising is that Massachusetts comes in at #2, and California is down at #7. I would have expected California to be at the top of the leaderboard for how much real estate agents get paid.
Here are a few states with average real estate agent commission earnings. Have a look at the resource for the complete list.
- Massachusetts average real estate agent yearly commission = $84,170
- New York’s average real estate agent yearly commission = $111,800
- California average real estate agent yearly commission = $74,140
- Florida’s average real estate agent yearly commission = $62,790
- New Hampshire’s average real estate agent yearly commission = $49,970
- Texas average real estate agent yearly commission = $72,830
- Michigan average real estate agent yearly commission = $57,170
As you can see, there is a decent swing from state to state on how much commission a real estate agent makes per year.
The top ten states for real estate agent commissions are Northeast and West.
What Does a Real Estate Agent Make in The First Year?
Of course, what a Realtor makes in the first year will vary from agent to agent. Zip Recruiter has put together some stats on what first-year agents make. Frankly, the information does not look that accurate to me.
As shown above, they have first-year agents making as much or more on average than those who have been in the business. It doesn’t make sense. Take the info with a grain of salt because it’s probably off. It would be interesting to know the methodology, but it is not provided.
Zip Recruiter says, “ZipRecruiter salary estimates, histograms, trends, and comparisons are derived from both employer job postings and third-party data sources.”
Some licensed agents get in and make very little if any, money in the first year.
What Are Flat Fee Real Estate Companies?
There is one situation where traditional real estate commissions are not paid. It’s called a flat fee. A flat fee brokerage firm adds a home seller’s property into the multiple listing service.
A home seller does not pay the traditional commission fees but a fixed amount, usually a few hundred dollars. The owner receives minimal help in the real estate transaction. Instead of paying a full commission, the seller does all the work themselves.
It is essentially a DIY service where an owner pays lower commissions. The owner saves in the transaction since there is no traditional listing broker. Sellers going this route should pay a buyer’s agent. Otherwise, they are unlikely to succeed.
Keep in mind successful real estate agents do not work for these firms. It is usually a one-person brokerage.
What A Real Estate Agent Does to Earn Their Commission
Real Estate professionals take on a myriad of tasks to earn their commission. What a buyer’s agent and seller’s agent do will be different. See the difference between listing and selling agents for a complete understanding.
A top real estate agent will go above and beyond to make their clients happy. They will be strong advocates for their needs. A fiduciary that will put their client’s interests first. They will explain the downsides of things like dual agency and open houses.
Putting their self-interests first will not be part of their business.
How to Become a Real Estate Agent?
To become an agent, you need to get a real estate license, take the required course curriculum, and then pass a real estate exam to get your license. New real estate agents need to understand there will be a time when they are not making any money.
How much money an agent makes will be tied to numerous factors. New agents should never assume they will get rich quickly in this business. It takes hard work and long hours of dedication.
Part-time agents rarely do well. It is a career that takes a full-time commitment. It would be best if you were ready to accommodate a client’s time constraints, which is difficult when you’re part-time. Telling them you’re unavailable because you have a second job as a bartender is unlikely to cut it.
A real estate career should be taken seriously as you will handle a buyer and seller’s most significant asset. There will be considerable responsibilities once you sign that listing agreement or offer to purchase.
Final Thoughts on Real Estate Agent Income
Having been a Realtor for the past thirty-five years, I know real estate can be a lucrative career. I’ve been lucky enough to be one of the top earners in the industry. Without passion and dedication, it never would have been possible.
If you think it will be easy, you’re kidding yourself. Market conditions can play a significant role in an agent’s development and, ultimately, their income. Whether it is a buyer’s or seller’s market can impact commissions, among a number of factors.
Put your mind to it, and you can be one of the best.
About the Author: The above Real Estate information on how much a real estate agent makes was provided by Bill Gassett, a Nationally recognized leader in his field. Bill has expertise in mortgages, financing, moving, home improvement, and general real estate.
Learn more about Bill Gassett and the publications he has been featured in. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-625-0191. Bill has helped people move in and out of Metrowest towns for the last 37+ years.
Are you thinking of selling your home? I am passionate about real estate and love sharing my marketing expertise!
I service Real Estate Sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Natick, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton, and Uxbridge MA.
Bill – a very detailed and informative article.