How much does a real estate agent make? A real estate agent’s job can be quite lucrative, considering that there are no shortage of buyers and sellers within the housing market.
There are plenty of agents that are making six figures working as a real estate agent. However, the industry can be competitive and some people quit before they even earn their first commission.
But if you are great at sales and customer service, you can earn incredibly well as a real estate agent.
How Much Does A Real Estate Agent Make?
Real estate agents earn money through making a commission. This means that they get paid most of their income after they help buy or sell a house. When a person sells a house with the assistance of a real estate agent, they give about 5-6% of the sales price as commission to the real estate agent.
The commission split may occur amongst several parties, for instance, the buyer’s agent, seller’s agent (or listing agent), and the broker (the company that the real estate agent is working for). In most cases, half of the commission may go to the seller’s agent and half goes to the buyer’s agent. Therefore, if the commission was 6%, then a common arrangement would be for each side to get paid 3% each. So, for example, a house sells for $300,000, each agent gets paid 3%, which is $9,000.
Real estate agents don’t generally receive an hourly wage. Some may earn a very low base wage, while also making a commission. However, the majority of real estates make their money purely from commissions once they have sold a house.
How much real estate agents make depends on a variety of factors, such as the number of completed transactions, the total commission they bring in, and how the commission is split. But how many transactions can an agent make per year? Real estate agents can make as many transactions per annum that they would like to.
However, it is not so much the number of transactions that matter but more so, the value of the property being sold. A real estate agent that sells million dollar homes will make a lot more money in commissions than someone that sells homes that are valued at around the $300,000 mark.
The Bureau of Labor Statistics (BLS) reports that the average real estate agent makes $45,990 per year. Still, how much real estate agents make depends on their years of experience. Top agents make as much as $111,800. It’s important to note that real estate agent’s salaries vary, with one-tenth of real estate agents earning less than $23,000, whereas the top 10% of earners make more than $110,000.
But why is there such a huge difference?
First of all, how much a real estate agent makes is dependent on a variety of factors. One of those factors is how many hours the agent works for. Some agents work part-time, whereas other agents work full-time. Real estate agents who work for 40 hours can easily earn anywhere between $46,000 to $80,000.
Agents that have also worked for a number of years and been able to build up their network, also earn more money. This is because they have established themselves as trusted in their field and people enjoy doing business with them. Basically, agents who are just starting out generally make lower commission, as they haven’t yet mastered the business. It’s common for a first-time agent to receive a small percentage of the broker’s commission.
But that’s not all.
The type of property you choose to sell and the location can also determine how much you will get paid. For example, residential real estate agents are likely to earn less than commercial real estate agents.
The amount of income a real estate agent makes also varies depending on the type of brokerage they are a part of. For instance, a agent working for a national franchise can earn an average salary of $82,535 per year. Alternatively, self-employed real estate agents earn an average salary of $106,280 per year. The earnings vary depending on the agent’s employment status and brokerage type.
How Realtors Make Their Money
The listing broker splits the commission earned with the brokerage that represents the buyer. All real estate commissions are negotiable, the percentage is mostly based on local customs.
Take for example the sales price of the house is $250,000. Suppose a real estate agent takes on this listing with a 6% commission. This equates to a commission of $15,000. If the house sells for this price then a 50% split of the commission between the buyer’s agent broker and listing broker would occur. Since the split is 50/50, both the listing broker and buyer’s agent’s broker each keep $7,500. The brokers then share the commissions with their agents.
A common split when it comes to commission is for the agent to receive 60% of the commission and the broker receives 40%. However, this split could be 50/50 or 70/30, depending on the agreement between the broker and the real estate agent. Real estate agents with years of experience earn a larger percentage of commission because they are able to bring in more business to the brokerage.
Therefore, using the 60/40 split. Each broker would receive $3,000 each ($7,500 x 0.4) and each agent would receive $4,500 ($7,500 x 0.6).
Overall, the agent commission is often shared between:
- Listing agent: $4,500
- Buyer’s agent: $3,000
- Listing broker: $4,500
- Buyer agent’s broker: $3,000
It is important to note that these commissions may be split amongst fewer parties. Take for example if the broker finds a buyer and also lists the property, they will be able to keep the entire 6% commission.
In addition to this, there will be expenses such as taxes, business expenses, insurance etc that may end up needing to be taken from the agent’s commission.
How To Earn More Than The Average Real Estate Agent
The good news is that there are ways to boost your earnings as a real estate agent. Typically, agents making the most do so by staying updated with the best practices, finding quality leads, and winning real estate listings. Experience helps you increase your income stream as a skillful agent who can work in different capacities to meet the needs of clients.
Some real estate agents fail to make much money because of poor selling skills. However, there are plenty of earning opportunities in the market, and you should not shy away from exploring different ways to sell the property.
Most Agents Make Money By:
Becoming a buyer’s agent: What this means is that you work with people who are looking to buy a house. The agent’s job is to take the client to sites where houses are available for sale and show them the houses that they think would fit the needs of the buyer.
List home for sellers: Some real estate agents become listing agents, who list the seller’s property. The agent helps the seller find the right price for their property and complete the buyer’s transaction process.
Completing Broker Price Opinion [BPO]: This is another way real estate agents make money. A licensed agent can work as a BPO report maker where you compare home prices and leave a commentary to benefit home sellers.
Working as a property manager: A real estate agent can also earn by managing properties on behalf of homeowners and investors. This job includes maintaining and repairing properties, collecting rent, finding renters, and handling accounts. The agent, in turn, will get paid a percentage of the rent collected every month.
Working as a broker: A broker is responsible for managing other real estate agents in the office. Your task is to ensure everyone follows the legal standards and does their jobs well. As a broker, you earn a percentage of the agent’s commission and desk fees from the agents. It’s important to note that many states will allow you to become a broker only after you’ve worked as a real estate agent for some time and have a real estate agent’s license.
The key to success is finding the right niche and building your reputation within the industry. You can do this by setting up a website or utilizing social media marketing. If you want to earn six figures, you have to be careful about how you spend the money you earn from each transaction.
Most successful agents are strategic with controlling their expenses and only spend money on activities that will allow them to obtain quality leads, e.g., Facebook ads. Over time, many agents end up hiring assistants and other agents to work under them. These agents earn lower commissions, as they work under the top agent. Building a team of agents is a great way that you can increase your income stream.
Lastly, it’s important to remember that the best way to succeed in the field is to handle each customer with great customer service. One way that people look for agents is by asking around. If you can build your reputation as a great agent, you will likely get repeat customers.
The Bottom Line
The housing market is booming, and you can earn a great income as a real estate agent. But before you start looking for clients, you need to get a license first. Once you do that, you can increase your chances of landing clients by informing your friends, neighbors, and family members so that they can spread the word. Also, be sure to use social media and reach out to your personal contacts as well.
Now that you understand how the average real estate agent is compensated, you could develop a plan on how you’ll sell a property and get a good split on commissions. Just remember that this is a competitive industry and success will sometimes take time and plenty of hard work.
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