Real Estate Management

Real Estate Agent Income: How Much Should You Be Making?

Published by in Real Estate Management

Technology is making a lot of professions obsolete these days, but it’s still good to be a real estate agent. Although Zillow and other real estate sites have become extremely popular, people still rely on real estate agents to get the job done.

Eighty-eight percent of buyers in 2013 purchased their home through an agent or broker; a number which has actually increased since 2001, when that figure was just 69%.

So, your services are more in demand than ever, and the real estate market is looking better than it has in a long time—how do you figure out exactly how much you’re worth?

It’s tricky; after all, your pay is dependent on many more factors than, say, a banker or a mechanic. Someone in a standard salaried profession is probably only going to see slight variances in pay depending on where they live and how much experience they have. You also have to worry about stuff like commission and what neighborhood you’re selling in.

But there’s a fairly scientific process you can use to figure out a ballpark figure. To arrive at that number, we’re going to need to examine all the factors that go into your income, but we’ll start with a few statistics.

Real estate agent salaries in the U.S.

The median real estate agent income in 2016 was $44,090, according to the Bureau of Labor Statistics (BLS).

But, as you might suspect, this number isn’t necessarily the perfect benchmark for you. It can tell you if you’re woefully underpaid—or overpaid—considering your experience and the value of the local housing market. But, chances are, you can do much, much better than the median in this profession.

For example, the BLS says the lowest 10% earned less than $22,230, while the top 10% earned more than $112,570. That’s a huge range.

Why is that? There are three main determining factors.

Factor #1: Location, location, location

As a real estate agent, this should be drilled in your head by now. Where you work matters when it comes to pay in just about every industry, and it’s doubly the case for real estate.

After all, real estate agents rely on commission, based on a percentage of the price of the house, as a large portion of their income. So, the price range for homes in your local market affects how much you have the potential to take home.

To determine if you’re making as much as you should, you can start by doing some simple math based on your local real estate market.

The U.S. existing home median sales price was $252,800 in May 2017. If the median sales price in your neighborhood is close to that figure, your income should probably be close to the national median listed above. If you’re in a market where home sales are 20% above the national average, for example, increase the median salary by 20%.

Factor #2: Commission rates

Your earnings may vary widely from the national median, depending on how successful you are at selling homes. That’s because you earn your salary through commission. Let’s figure out what your commission should be.

In most cases, your broker will treat you as an independent contractor not paying you a base salary, forcing you to rely entirely on commission. In this scenario, you can expect a fairly high commission. A 6% rate is pretty common in the industry, but keep in mind that gets split between the agent representing the buyer and the agent representing the seller. If you represent both sides, you get to keep the entire 6%.

So, as an example, if you’re just representing one side at 6% and you sell a house for $300,000, you’ll get 3% of final sale price, meaning you’ll score a payday of $9,000.

But wait—you’ve still got to pay your broker. If it’s a 60/40 split, which is common, you keep $5,400 for a 3% commission. And then you’ll have to pay your own taxes, since you are an independent contractor.

If you accept a real estate agent position with a broker that offers a base salary—which is not standard but does happen in the industry—you should expect a much, much smaller commission.

Remember, though, commission rates—like salary—are negotiable.

Factor #3: The rate of your sales

The next question is, how many homes should you be selling in a year? This will certainly depend on many factors such as your skills or the strength of the market, but the more important question is what type of home you’re selling. Someone spending all year selling cheap homes for a low commission might sell 20 homes, but they won’t make as much as someone selling four or five luxury homes.

But you can easily hit the median real estate salary by selling just 10 homes at the median real estate price, earning a 3% commission on each for about $75,000 total for the year, or about $45,000 before taxes once the broker is paid 40% of your commission.

If you want to go above and beyond that, the best way is to up your game by focusing not on trying to sell more houses, but on selling houses that are worth more.

Experience and hard work matter … a lot

Don’t sell yourself short. You can earn a ton more than the median salary via two pretty simple strategies: working harder and building experience.

The first one, you can do right away. Agents working 60 hours or more per week averaged $95,000 per year, according to the National Association of REALTORS 2015 Member Profile. Try investing in real estate agency software to improve your efficiency. You might even spend some time designing your real estate website to attract more customers.

Building experience takes time, but if you put in the work now, it’ll pay off down the road. The data also shows that agents with 15 years of experience average nearly $70,000 per year, or $25,000 above the median income. You can also educate yourself as much as possible and learn from the best by devouring as many real estate books as you can.

How much do you make?

It’s not the most polite question, but we’re all friends here. How much do you typically make as a real estate agent? What tips do you have for boosting your real estate agent salary? Are there factors that go into a salary that we’re missing here? Let us know in the comments below.

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About the Author

Dan Taylor

Dan Taylor

Dan is a content writer at Capterra, specializing in hotel management, construction and real estate. Outside the office, he enjoys spending time with his family and friends, catching up with the latest offering from HBO or paying a visit to a new place.


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