Are you thinking about getting your real estate license? Do you wonder how much you could make in a year as a real estate agent?
You’ve probably heard stories of real estate agents making big bucks. Is that true? Or are the big income earners few and far in between?
In this article, we will share realistic income figures real estate agents make. Plus, we’re going to give you some tips on how you can get more clients and earn more money as an agent.
In This Article
- How Much Money do Real Estate Agents Make?
- How Soon Can Real Estate Agents Earn Their First Commission?
- Your First Commission Depends on You
- What Percentage Will A Real Estate Agent Earn on Each Sale?
- What About Commission Splits?
- How Can a Real Estate Agent Get More Clients?
- Do You Need a License to Become a Real Estate Agent?
How Much Money do Real Estate Agents Make?
Annual income for real estate agents varies widely. This is because most real estate agents work on commission, and the amount of money they earn depends on several factors. But we’ll talk about that later.
There are several sources that report what they say is the average income for real estate agents. Here are some numbers from varying sources:
- The popular income sourcing site Payscale says real estate agents earn an average of $47,910 per year (year not cited).
- The National Association of Realtors (NAR), a popular real estate membership association, reports that in 2018 agents earned an average of $41,800.
- The Bureau of Labor and Statistics reported agents earned an average of $48,690 in 2018.
However, when assessing the annual income of real estate agents, it’s important to take years of experience into account. For instance, the NAR report stated the average agent making $48,690 in 2018 had 16 years of experience.
Honestly, it comes down to how much you put into it. In fact, there are several real estate agents in my office that are making well over six digits per year.
I started working as a licensed real estate agent in 2018. My first year’s gross income was $20,455. My broker manager told me this was a high number for a first-year part-time agent like myself.
Many first-year real estate agents don’t see their first commission for quite some time. But your career as a real estate agent can be a great path to new and lucrative career. Or it can be a side hustle idea for making extra money.
Just know that being a real estate agent takes training and commitment, no matter whether you choose to do it full-time or part-time.
How Soon Can Real Estate Agents Earn Their First Commission?
So, how soon can a real estate agent earn their first commission? An agent can make their first commission quite quickly – within a month, depending on the situation.
House sales typically take a couple of months to close, but if you happen upon the right deal, you could be closing your first sale as a real estate agent within a month.
In my case, I completed six sales in my first year of becoming an agent. I attribute this early success to keeping my eyes open for opportunities.
My first client literally fell into my lap. As I was searching for a house for our family, I’d been made aware that the client was selling.
I asked if I could see her house. I wasn’t licensed at that time but would be within a couple of weeks. In my state, it’s the law that you reveal your position as a real estate agent when talking to a person about selling their house.
I let her know that I was there to see her house for my family. But I wanted to be upfront about the fact that I was in the process of obtaining my real estate license.
By the end of our visit, I decided that her house wasn’t right for us, and thanked her for her time. She then asked me if I’d be willing to represent her in the sale of her house.
I hesitatingly (but with an appearance of confidence) said “yes,” left the house and called my manager, excited and freaked out at the same time. I listed the house and we closed two months later.
Your First Commission Depends on You
The point is that how soon you earn your first commission depends mostly on you. When the woman owning the house I looked at asked me to represent her, I wanted to run.
I felt incompetent and green as could be. But with the help of a supportive manager, we got the deal done.
The point? After you get your real estate license, dive in. Start spreading the word about your new career without being “sales.” Let people know you want to help them.
Look for opportunities, move forward even when you’re scared to do so and eventually you’ll earn that first commission.
What Percentage Will A Real Estate Agent Earn on Each Sale?
You might be wondering what percentage of a commission a real estate agent makes on each sale as a real estate agent. The answer to that question depends on two main factors:
- The percentage each client has agreed to pay
- The percentage your broker offers real estate agents
Each geographical area has an average for what clients pay for real estate services. In addition, each state or region varies on who pays that commission.
Typically, sellers pay real estate commissions, and buyers don’t. This isn’t always the case, and most buyer representation contracts will have a clause saying the buyer has to pay the agent for a completed sale.
This clause exists to help discourage buyers and sellers from negotiating each other through agents and then going off on their own to make a deal. However, the commission is most often paid through seller profits.
The amount of that commission varies by state or geographical area. For instance, I live in the Minneapolis/St. Paul area, which borders Wisconsin.
Minnesota home sellers typically pay a seven percent commission. However, just a few miles away in Wisconsin, home sellers usually pay a five percent commission.
Also, the commission a client pays is often negotiable. What that means is, in my seven percent state, some agents may only charge six percent.
As you can imagine, this makes it tough for agents licensed first in Minnesota to swallow. They’re automatically giving up a nice chunk of income if they choose to operate in Wisconsin.
However, I’m a big believer that some income is better than no income, so I choose to operate in both states. Many people near me live in one state and have cabins in the next state.
The point? The percentage you’ll earn depends on multiple factors.
What About Commission Splits?
Commission splits impact your income as a real estate agent too. When working as an agent, you’ll typically split your commission with two entities: the brokerage company you work for and the other agent in the party of the sale.
Brokerage firms that represent agents get a cut of the sale. The brokerage firm is the licensed managing firm (or person) that oversees real estate agents. This cut covers the money the broker puts into representing and managing the agent.
Even though the brokerage firm may get a portion of the sale, it’s important to note brokerage firms exist for a reason. Agents must work for an employing broker. There are many licenses and regulations involved in real estate. Working for a reputable broker is essential.
The percentage that goes to the broker depends on their commission set up and the deal you have with them.
For instance, I work for Edina Realty, one of the largest real estate companies in the U.S. (owned by HomeServices of America, a Berkshire Hathaway affiliate).
Edina Realty offers several tiers of commission splits for real estate agents. Agents can keep between 50% and 90% of their commission. The amount is determined based on the agent’s annual income and other factors.
Some real estate brokerages pay a higher commission but offer fewer services for agents. These types of firms are usually utilized by real estate agents who are quite experienced and need very little guidance from a broker manager.
You’ll also need to split your commission with any agent that partners with you in a sale. As an example, let’s say you list a home for sale. If another agent brings in a buyer and the sale with the buyer closes, you’ll split your commission, in some fashion, with that partnering agent.
Splitting Up the Commission: A Typical Scenario
If you list and sell a house for $250,000, and charge a seven percent commission, the total earned on the transaction will be $17,500. Listing and selling agents often get different commission amounts.
In a seven percent deal in my area, the listing agent would get 3.7 percent, and the selling agent would get 3.3 percent. So, as the listing agent, your firm’s commission portion (commissions belong to the brokerage firm, they split with the agent) would equal $9,250 on this deal.
So, if you were signed on at a 50% split, you’d get $4,625 before taxes. If you were signed on at a 90/10 split, you’d get $8,325 before taxes.
Also, remember that you’ve got to take expenses out of that money too. As a real estate agent, you’ll have costs such as:
- Travel expenses such as gasoline and car maintenance
- Listing expenses such as photographers, home stagers, advertising, etc.
- Money paid for sign installation on the property if you’re the listing agent
- Other fees such as license fees and training fees
- Niceties for your client such as house cleaning
Plus, some clients will cost you more than others. You’ll have clients that buy the third house they see. Then you’ll have other clients you look with for a year or more before they find a home they like.
Similarly, when you list a home, it might sell right away. Or you might have to do a lot of extra advertising and other work to get it sold.
By the time you get done deducting all of the costs, you’re walking away with less money than you might think. However, from an hourly wage perspective, many agents find the career quite lucrative.
How Can a Real Estate Agent Get More Clients?
As a new real estate agent, you might be wondering what is the key to getting more clients.
Here are some tips:
1. Spread the Word
People won’t think of utilizing you if they don’t know you’re an agent. Use your social media accounts and other chances to share about your new career. But don’t do it in a “salesy” way. Just be sure you tell about your experiences and share tips that might help your followers.
2. Look for Opportunities
Simply watching for opportunities has been instrumental in my success as a real estate agent. When someone wonders aloud about buyer or selling or any other housing question, I jump on it.
I tell them I’m a licensed agent and ask if they’d like some advice. Or, I offer to help them with research as a courtesy, provided it won’t take up an excessive amount of my time.
3. Repeat Business
After years of selling homes, you build up a clientele. Make sure you keep in touch with those clients you either sold a home too or sold their home. They may move again. Especially after the kids moved out and need to down size or they added more kids and need to up size.
4. Get the Sale
Last but not least, when someone asks for my help, I ask for the sale. I typically do this in a semi-passive way. For instance, when someone talks about wanting to sell their house, I’ll say, “I’d love to come by and give you a market analysis if you’d like.”
After I give them the market analysis, I’ll ask for the sale. Being successful in real estate involves being proactive.
Above all else, a successful real estate agent tries to be very helpful. Having knowledge is important. But, if you don’t know an answer to a question, you can always find out if you ask.
In comparison, service is more of a character trait. And I’ve found the best real estate agents have a genuine desire to help others.
The markets may change throughout the years but remember, your genuine caring for your clients always get the sale, no matter if it’s an up-market or down.
Do You Need a License to Become a Real Estate Agent?
Are you wondering what it takes to become a real estate agent? The answer to that question varies depending on where you live. In most states, like in my case, yes.
Every state has different regulations about what it takes to obtain a real estate license. In most states, you’ll need to begin by completing a certain number of education hours.
Check your state’s department of commerce or similar department for more information on becoming a real estate agent in your area.
Also check with reputable broker firms that may support you in your efforts to become a real estate agent.
Working as a real estate agent can be very lucrative. However, you will have to work for your money. Learning the trade, developing relationships and continually refining and adding to your skills is vital.
Real estate agents make what they put into it. It also comes with a high level of satisfaction knowing you helped a family find their new home where they will share years of memories.
Have you ever considered working as a real estate agent? What do you think about the income numbers for real estate agents?