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How Much Do Real Estate Agents Make?

Real estate is considered the new gold. There are more investments into real estate at the moment than at any other time in history. The reason is not far-fetched. Records show that the area has the possibility of providing more profit than any other investment pathway. Thus, investors are incentivized by the promise of making more money than they would ordinarily earn wither investing in shares or any other such securities.

The good news is that it isn’t only real estate investors who are getting paid through investments in real estate. Real estate agents are also in the league of those making money from real estate. Real estate agents work with brokers to help people either buy or sell homes. A commercial real estate agent works to ensure their client gets the best deal out of any transaction. However, they are not left in the lurch afterward. As soon as any sale gets completed, the agent in charge of that transaction earns some financial rewards.

What agents earn vary, depending on the nature of the transaction, location of the building, and the amount of commission the client agrees to, and so on. However, the average real estate agent makes enough to live comfortably and even invest in real estate themselves. Asides from the financial rewards you get, there is also the satisfaction of helping people find their ideal homes. More so, the real estate market is easy to venture into. Real estate agents with different qualifications are venturing into the sector. This low barrier to entry is fantastic, especially for those who feel they lack the requisite qualifications. Finally, real estate has come to stay. It isn’t like one of those sectors that technology could replace in the near future.

In summary, if you are looking to start a new career in the real estate space, you are on the right path. However, there is still one thing to look out for before signing up: financial rewards. So, how much do real estate agents make? We’ll break it down and get you the answers you need in this guide!

Real Estate Agents

How To Become a Real Estate Agent

A real estate agent is anyone whose job is to professionally help buyers or sellers in transactions. In most cases, they act as sales agents and ensure that their client gets the best deals possible. They also insist on making sure that a home seller pays the agreed commission.

To become a real estate agent, you have to be at least 18 years old, a resident of the United States, and must have passed your state’s qualifying exam and obtained a real estate license.

From the start, you may want to find out the specific requirements of your state. You could visit your state’s real estate regulatory office to do so. Next, you will have to take a pre-licensing course. This is mandatory nationwide. You will have to pass this course before you get to sit for the licensing exam. The exact format the course takes differ depending on the state. Some offer only in-person courses, while others allow you to take online courses. You have the option of also completing your coursework at a community college.

Next, you will have to take and pass the licensing exam. The format of the exam is usually handled in the pre-licensing course that you’ll take. Ideally, you have two parts. The first covers national real estate principles, while the second concerns the rules in your state. You will have to pass both parts to be eligible to practice as an agent. After the exam, you will have to make a formal application to activate your license and start working as a real estate agent.

Becoming A Real Estate Agent

To be successful in the real estate business, you need to be careful about expenses. Most agents go as far as taking out advertisements to make sure they get the best price for their home sales. Some also use a multiple listing service to get the homes to the right people. These moves are not wrong at all and are hence employed mainly by new agents. It is possible to get a suitable buyer for a home seller and thus earn good commissions through advertising. However, it makes little sense to spend a considerable chunk of your profits even before you reach them.

If you want to advertise, you could employ an organic and hence less expensive option. For example, a lot of listing agents advertise on Facebook. This introduces you to a community of people who need your services. Word-of-mouth advertising is also very effective.

Finally, pay attention to your clients. Treat each transaction like it is your last. Do your best to impress your clients.

How Much Do Real Estate Agents Make?

In 2019, it was reported that the average income for a real estate agent was $49,000. Those on the upper end of the income pole earned around $112 000, while the lowest earned less than $25 000. Specifically, according to the Bureau of Labor Statistics, the 2020 median pay for real estate agents was $51 220 annually, with $24.63 per hour. There were 518 800 jobs available in the same year.

Most agents make money through commissions. Typically, an agent’s commission is a percentage of the building sales price. However, some agents charge a flat rate.

Average Real Estate Agent Money

To understand how agents earn commissions, you need to be familiar with the relationship between a real estate agent and a broker. Although both agents and brokers can be realtors – getting under the umbrella of the National Association of Realtors qualifies one to be a realtor – brokers enjoy more flexibility than agents. For example, an agent cannot get real estate commissions directly. A broker, however, can.

The commission percentage is stated in the listing agreement. A listing agreement is an arrangement between a listing broker and a real estate agent. It spells out the particulars of each real estate transaction. Commissions are negotiable. In fact, it is against the law to insist on a uniform commission rate for brokers. Regardless, most real estate agents charge between 4 to 6% of the sales price as commission. However, some agents choose to charge lower or higher than that. Sometimes, the commission is split between the buyer and seller. However, a commission split rarely makes any difference because agents typically factor this into the price they set. More so, if the buyer has an agent, they get some percentage of the commission also.

Thus, in a typical real estate transaction, four people could get to split the commission. These are the listing broker, the listing agent, the buyer’s agent, and the buyer’s broker’s agent. Thus, in the end, the real estate agent could end up with just a tiny piece of the commission. This makes it imperative to close as many transactions as possible. In some cases, the buyer’s agent and the listing agent are the same people. When both parties have the same agent, commission on both ends is reduced.

In some cases, real estate agents get paid salaries and do not earn commissions. Typically, a broker or team of brokers employ real estate agents who work for them and get paid wages. However, the average real estate agent will not go through this path. Instead, many real estate agents prefer earning commissions. This is because it gives them the liberty to make money, proportional to their effort. In most cases, the commissions from sales will be above the average salary an agent who works for a broker gets.

Factors That Affect How Much Real Estate Agents Make

Being that the average real estate agent makes money primarily through commissions, their income varies. The total revenue a real estate agent gets is highly dependent on many factors. We will discuss a number of them below. When you learn these factors, you will be able to make sure your income increases over time.

Factors That Affect How Much Real Estate Agents Make-Number of Homes Sold

Number of Homes Sold

The number of transactions a real estate agent completes determines how much they get paid. Because earnings are commission-based, the total income of the average real estate agent is the total commission they get within a period. Understand that you typically have to spend money on advertisement, transportation, and other necessaries. Thus, do your best to ensure that your expenses are as minimal as possible. Successful agents strike a balance between how much money they spend and what they bring in through sales.

Network and Contacts

In the real estate world, maintaining connections with the right people is indispensable. The job is primarily skill-based. Hence, a home buyer can be persuaded to uses the services of a real estate agent simply because of the recommendations of past clients. Thus, as a real estate agent, you have to be intentional about creating strategic relationships. Even if you aren’t doing so to earn income in the strictest sense, you could also benefit in other ways.

Brokerage and Administrative Fees

Most realtors work with brokerage firms. The usual process is for the fees and commissions to be paid to the broker, who then splits with the real estate agent. The typical arrangement is usually 60/40 in favor of the real estate agent, although some brokers require that the commission be divided equally between them. Thus, what real estate agents make might not be what they agree to be the commission from the start.

Experience

Experience also plays a massive role in determining how much an agent makes. An experienced real estate agent will understand the real estate market better and be more equipped to handle any challenges they may encounter. They are also able to convert clients quickly. Unfortunately, if you are a new agent, you can’t do so much about your lack of experience.

Area of Opportunities

Some locations are great for the real estate business, while others are not. Large cities such as New York City and Los Angeles typically have thriving real estate scenes. Thus, the annual income of real estate agents in such locations will be higher than the national average and what is obtainable in other places. If you work in any high-paying area, you should be expecting to earn more than the average real estate income.

However, if you are stuck in a location without a thriving real estate business, you can deliberately discover ways of making more money than the average. For instance, you can use a commission rebate. This is a process through which a seller returns some part of the profit, or commission in this case, to the buyer. Hence, here, you replace some part of the commission from every home sale to the seller. That is, paying the seller a commission for selling their property. This could appear counterintuitive but would eventually earn you some new clients.

Final Thoughts: Becoming a Real Estate Agent

This article has discussed how much real estate agents make. Do remember that learning about the average real estate income or cramming labor statistics on the subject will not mean that you will be successful yourself. However, it prepares you better than someone who goes in blind.

Kevin

Kevin is an ambitious entrepreneur that is obsessed with all things related to finance. From a young age, Kevin has always been involved with side hustles ranging from online selling to freelance work. Over the years, Kevin graduated from side hustles and started launching multiple online and offline businesses. Kevin is a serial entrepreneur who loves starting new businesses and exploring all things related to business and finance. He is constantly looking for new ways to save money, invest money, and create income streams.