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How Much Commission Do Real Estate Agents Get – One of the most common questions people ask when considering a career in real estate is how much do Real Estate Agents make and how do they get paid? It is important to understand that Real Estate Agents are not paid hourly, rather, they make a commission on the sale of the home they represent the client.
Realtor commissions are based on a number of factors including the price of the home, the division of commissions marketed to the real estate firm and the firm-Realtor split. Again, Agents are not paid hourly and they operate as independent contractors within their real estate firm (the brokerage they work for). How much a Real Estate Agent makes per sale is unique to each situation and there are several factors that affect it. Let’s dive in and learn how it works:
How Much Commission Do Real Estate Agents Get
One of the first questions people ask before starting a career as a Real Estate Agent is “How Much Money Does the Average Real Estate Agent Make?” The infographic above tells you exactly how much Realtors make as well as how the commission is made. Many Realtors are part-time professionals who hold a real estate license, without actively selling homes and thus the numbers are somewhat skewed to account for full-time and part-time Real Estate Agents.
When Do Real Estate Agents Get Paid Their Commission?
$38,067 is the average commission made by a Real Estate Agent, although most full-time Agents will exceed that amount. My first year as a Realtor was the only year I earned less than the average total commission of $38,067 and I think most hard working Agents will see the rewards can be greater than $38,067 per year.
Real Estate Agents in their first year should expect to go at least 9 months without making anything. One piece of advice for most first year Real Estate Agents is that they should have additional income either in the form of another job or earning money in another way.
One of the best ways to get started in real estate is to join a team or brokerage that can provide you with an influx of leads that will lead to closings for you.
When I moved to Raleigh from Boston and became a Realtor, I didn’t know anyone in the local area and had no idea how much money to expect to make in my first year. In my first year as a Real Estate Agent, I closed three transactions and made $14,372.13 after paying my broker my commission split.
Is It Worth Paying A Real Estate Commission
For anyone who has tried to live on $14,372.13, it is almost impossible, especially when you are spending money to market your real estate business.
Fast forward to my second year, I closed 16 houses and a year later my broker closed over 50 houses. Now my real estate brokerage makes money and I pay myself a salary.
The short answer is no. Real estate agents don’t make money by the hour. Real Estate Agents make money based on the number of homes they sell and there is a direct correlation between the number of hours you work and the amount of money you make.
There are many part time Agents who have real estate licenses and will not sell houses. Their time and effort is not used to build their real estate business.
How Do Real Estate Commissions Work And Charge?
Agents who make real estate a career and full-time job work hard and strive to build a successful career as a Real Estate Agent. These people will earn much more than the average Real Estate Agent who brings in $38,067 on average.
Each house generated by a Real Estate Agent will have a different commission structure and percentage. Location is important. Some houses also have Agent bonuses.
If a Realtor charges 6% to sell a house, chances are they will split the commission two ways, with the Buyer’s Realtor. Once the split occurs, the remaining 3% will be paid to the Real Estate Brokerage who will then write a check to their Real Estate Agent for the agreed upon amount or percentage.
In my early days as a Realtor, I remember my Real Estate Brokerage taking 36% of every commission check. That was too much of my hard earned money going to my Brokerage without them providing enough value to earn it, so I made a change. If my Brokerage supported my growth with leads and more closings that would be a different story, they didn’t. I joined a brokerage that charged a flat fee of $399 per transaction before opening my own brokerage, Raleigh Realty. How Are Real Estate Agents Paid?
How Much Commission Do Real Estate Agents Make?
A Real Estate Agent either represents the seller, the buyer, or both in a real estate transaction. The amount to be paid to the Agent depends on the commission percentage agreed between the Agent, the seller, the buyer and the real estate brokerage. If we use a 6% commission as an example, as we did in our infographic above, it would work like this:
The 6% commission is split between the two Real Estate Agents who represent the buyer and the seller. The commission check is made out to the real estate brokerage that the Agent works for. The brokerage will take a cut of each check and write the check to the Realtor for the sale of the home. After all, all is said and done Realtors make a lot less money than it might seem.
It is important to remember that Realtors are not paid by the hour, they are paid by the number of homes they sell. The money doesn’t flow directly to the Realtor, either. Commissions are paid to the real estate brokerage first and the Realtor then receives a percentage of the commission.
When you join a Real Estate Brokerage they will have specific guidelines on how you will be compensated for each home you sell. Each realtor makes a different amount of money on each home they sell based on the sales price, commission break, brokerage break, and any expenses they may have incurred along the way to selling the home.
How Do Real Estate Agents Get Paid And How Much Do They Really Make?
One thing that people take for granted is the amount of expenses and overhead that Real Estate Agents have. Real estate agents are among the most expensive careers because the money spent is often your own. Office space, health insurance are two of the bigger expenses you will incur compared to a typical 9-5 corporate world job. Often your employer is the one spending money on office space and health insurance while your expenses are minimal.
Another big expense that Realtors have is their vehicle, insurance, maintenance and gas money that they spend driving all over town to show homes and meet with Clients.
The biggest expense we have at Raleigh Realty is our technology which is our number one form of marketing. We have spent well over $30,000 on our website and over $10,000 on online marketing. Our website is our number one form of lead generation so it’s only natural that we spend a large portion of our income growing and improving our real estate website for people looking for homes for sale in Raleigh!
One of the biggest expenses that most people don’t realize when starting their career as a Realtor is that it costs money to become a Realtor. You have to pay for your real estate school, your real estate license, the MLS and other organizations you join. These expenses are ongoing and add up to thousands of dollars quickly. Plus, you’ll be paying hundreds and hundreds of dollars a year for continuing education that is a commission requirement.
Realtor Commission Splits: Who Gets How Much?
Don’t let this number deter you from a career as a Real Estate Agent. Good Real Estate Agents make a lot more money than the average Agent who earns more than $38,000/year and if you are dedicated and work hard, you will too! Here are some steps to becoming a Realtor. A great way to get started in Real Estate is to join a team, start new construction sales, or go it alone with a part-time job to help you handle the bills. The sales cycle in real estate is long and you probably won’t make much! Today we will discuss a rather complicated topic. Forget stories about Realtors walking in on naked people, feuding households or crazy neighbors. The most taboo topic in the real estate industry is commissions and how they are divided.
Many agents may be surprised at how the general public thinks they are paid. Based on the buyer and seller comments I heard before, during and after closing, the perception of total agent fees is equally skewed.
In recent years there have been several new business models for making a living in the real estate business. Most Dallas-Fort Worth-area Realtors (and certainly those who work for large companies) still make their income through commissions based on a percentage of the sale price of the home. They do not
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