Real estate agents play an influential role in helping clients buy and sell properties. There is a vast range of homes for sale in the US and realtors come into the profession from all walks of life. As such, average incomes for real estate agents can vary hugely. In this guide, we’ll talk about how much real estate agents make, discuss how realtors make their money, and explore the factors that impact earnings per house.
In 2020, the median salary for real estate agents in the US was approximately $49,000. Bear in mind that real estate agents’ yearly earnings can vary enormously according to the value of the properties listed, the location, and the agent’s level of experience. A junior real estate agent salary could be as little as $25,000 per year, while the top dogs could earn more than $1 million annually.
Real estate agents may have a fixed salary depending on the brokerage they work for, but most earn the majority of their income from commission. Realtor commission is paid when an agent makes a sale. It usually represents a percentage of the value of the purchase price.
When a house gets put on the market, an agent will show clients around and organize open house events to market the property and drum up interest. If the agent makes a sale, they will earn commission. The amount of commission will depend on the terms of the realtor’s contract with their brokerage and whether agents have access to shared commissions.
In most cases, the commission on a property sale is set at around 5% or 6%. However, it is possible for percentages to go as low as 1% and as high as 10%.
Statistics suggest that real estate broker earnings are higher than the real estate agent average salary. In 2020, the median pay for real estate brokers was $60,000 per year. Real estate agents work for brokerages. When a sale goes through, commission is paid directly to the brokerage and then divided according to the terms set out by the individual company.
Salaries for real estate agents can range from less than $30,000 per year to over $1 million per year. This is a vast range reflecting multiple factors that affect earning potential. Here are the key factors that drive realtor salaries.
The more homes realtors sell, the higher their earnings through commission. Realtor commission is only paid on completed home sales. If an agent doesn’t sell any properties, they won’t earn any commission in that year. If they sell multiple homes during the year, they will earn commission on every completed sale. Often, working in real estate can be something of a roller coaster ride, and sales that look promising don’t always go through. When agents are heavily dependent on commission, it’s essential to get deals over the line to boost their earnings. Most real estate agents sell between two and eight properties per year.
The level of experience of a real estate agent can greatly affect their earnings. More experienced agents are likely to have a higher average salary than those with less experience working in the same area. Gaining experience enables you to hone your skills and build a contact list, which is vital for securing sales. Real estate agents who have worked in the industry for many years have in-depth knowledge of the market; they know buyers and sellers, they have excellent relationships with developers, and they know what helps to sell properties and close deals. They may also boast a higher earning percentage of sales than agents who are new to the field. Statistics from the National Association of Realtors show that in 2020, the average US real estate agent had nine years of experience.
As well as considering the number of completed home sales, real estate agents must also think about the value of the homes they sell when calculating median annual salaries. The higher the price of the house, the higher their earnings through commission. A real estate agent who specializes in luxury homes that cost millions of dollars may make more in commission from a single sale than an agent who sells several properties that are at the lower end of the scale. In property hot spots, such as New York City and Los Angeles, salaries are likely to be higher due to more substantial earnings per house.
Real estate agents work for brokerages. When a sale goes through, commission is paid to the brokerage and then split between the relevant agents. The level of agent commission may vary according to the individual brokerage, but typically, agents will receive around 60% of the commission, with the broker taking the remaining 40%. Some brokerages may have an even split or a 70/30 split. Agents will also be liable for business costs.
Building an extensive network of contacts is hugely beneficial in real estate. The bigger the network, the higher the chances of finding a buyer and attracting new clients.
The area in which they work can influence how much realtors get for selling a house. House prices vary hugely, and location is one of the driving factors. In some areas, the average selling price will be over $500,000, while in others it may be around $200,000. Agents working for brokerages located in exclusive areas where properties are expensive and sought-after have the potential to earn thousands of dollars in commission per sale. Statistics suggest that average house prices are highest in Hawaii, Connecticut, Wyoming, California, and Alaska, and lowest in Iowa, Indiana, Ohio, Nebraska, and Kansas.
Real estate agents who earn on commission have the potential to earn a huge amount of money if they work in areas where property prices are high and they have expensive houses on their books. The top 10% of realtors earned more than $112,000 in 2020. Some agents based in prime locations can earn over a million dollars per year.
Real estate brokerages that deal in exclusive properties in the most in-demand, expensive areas can make vast sums of money through commission on completed sales on properties listed for millions of dollars. In Los Angeles and New York, for example, agents may have properties listed for sale at over $5, $10, or 20 million.
Location plays an integral role in agent earnings per house. The average salary for a real estate agent varies according to the state in which they work. The highest average annual earnings in 2020 were in the following states:
The lowest average annual salaries were in:
Bear in mind that these averages can be skewed significantly upwards by top-end agents earning millions per year. This explains why the average salary looks significantly higher than the median salary.
Real estate agents have the potential to earn a lot of money, but high salaries are not guaranteed. Real estate agents work for brokerages and their earnings are heavily dependent on closing deals and earning commission. If an agent sells a lot of houses, or they sell expensive properties, they’ll get paid well. The median salary for a real estate agent was around $50,000 per year in 2020. The location of the brokerage, the commission split between agents, and the level of experience of realtors can all impact salaries.
It’s natural to ask ‘How much do real estate agents make?’ if you’re interested in becoming a real estate agent. Top real estate agents can earn an impressive salary. Statistics show that the top 10% of earners had annual salaries over $110,000 in 2020. Some agents, including those who sell luxury homes in areas such as Los Angeles and New York City, can earn millions.
It can be difficult to reach a point where you earn a lot of money as a real estate agent because it takes time to build up client lists and create a contact network. The more experience you have, the higher your earnings are likely to be. It’s also important to note that real estate agents do not personally reap the entire commission on a home sale. The brokerage will take a percentage, which could be up to 50%.
There are some differences between requirements in different states, but typically, if you want to become a real estate agent, you’ll first need to obtain your license. This involves completing a pre-licensing course, taking a licensing exam, and activating your license. Agents will need to join a brokerage in order to start selling and earning commission.
Julia A. is a writer at SmallBizGenius.net. With experience in both finance and marketing industries, she enjoys staying up to date with the current economic affairs and writing opinion pieces on the state of small businesses in America. As an avid reader, she spends most of her time poring over history books, fantasy novels, and old classics. Tech, finance, and marketing are her passions, and she’s a frequent contributor at various small business blogs.
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