Your real estate agent friends are always impeccably dressed and show up to events in swanky vehicles that they seem to afford effortlessly. Yet, in your second year of working as a real estate agent, you feel you barely earn enough to keep your car’s fuel light off. Trust us—we’ve all been in your (slightly worn) shoes.
Becoming an agent is a two-fold decision for most: You want to be happy and satisfied in your career, but you also want to make money. Working as a real estate agent can check both boxes. You can earn a sizable income if you know how to work hard and educate yourself in the industry.
Just how much a real estate agent’s income will be is relative to several factors and definitely dependent upon how you choose to use your license.
The team at Harris Real Estate University compiled this guide to tell you:
- How agents make money
- What costs are associated with having a real estate license
- Factors that determine your income
- How much you’ll actually make.
We’ll also give you some pointers on how you can increase your earnings and become more successful in your career.
How Real Estate Agents Make Money
Obviously, you’ll make money through the sale of real estate, and probably not through an hourly wage. A real estate agent guides sellers and buyers in their sale and purchase of properties, from small residential homes to commercial properties and everything in between. In some states, they even facilitate rental agreements. Real estate agents help those looking to rent in New York, Washington, and more.
While there are numerous ways to make money with a real estate license, we’ll focus on the three main ways you’ll likely use yours.
Acting as Listing Agent
Listing agents help owners sell their properties. They facilitate all parts of the transaction, from MLS listing (aka Multiple Listing Service) to showings, negotiating offers, and reviewing contracts.
As a listing agent, you’ll be entitled to the commission that will be split between you and the buyer’s agent. Depending on your state, that commission may be paid by the buyer or the seller.
Typically, the seller will also pay a fee to you for listing their property. This is especially true if you work for a brokerage. In most states, the listing agent will receive 3% of the sales price of the property as commission.
Representing a Buyer
When someone wants to purchase real estate, they’ll contact a real estate agent to help them secure showings of properties and protect their interests in the purchase.
As a buyer’s agent, you’ll receive a commission based on the purchase price of the property your buyer chooses. This commission will be split with the seller’s agent.
Acting as a dual agent can be tricky because you’ll be representing both the buyer and seller in a transaction. This means you’ll facilitate the entire sale and purchase of a particular property. It might sound complicated, but the benefit is that you’ll receive the entire commission check for the transaction. Note that dual agents are not allowed in every state.
Dual agencies are illegal in:
How Much Commission Will You Get?
Real estate agents are salespeople. Like many in sales roles, you are paid through commission. In most states, the total real estate commission on a single translation is between 5% and 6% of the sales price of the property. While this is standard, it isn’t written in stone. Commission is negotiable, and the commission split is also negotiable.
Assessing Real Estate Agent Costs
Agents incur job-related expenses like many other professions. Even if you work for a brokerage, you’ll still have expenses that you’ll need to consider when calculating how much you’d like to earn each year.
Licensing Fees and State Exams
We know; once you passed the state licensing exam, you were thrilled to finally pull your head out of the mountain of textbooks and be a real estate salesperson.
However, after your initial licensing, you’ll still need to pay for continuing education, especially if you aren’t working for a brokerage that picks up the tab for you. What you pay will depend on where you are—for example, someone who lives in Connecticut will likely pay a different amount than someone in Mississippi or Montana.
Coaching and Training
Your journey as a real estate agent should involve continuing education, coaching, and training. Ask any seasoned agent what has made them successful, and they’ll likely tell you that they never stopped being teachable.
Training seminars, workshops, materials, and online courses are fees you’ll need to pay to keep up to date with market trends, federal and state transactional laws, and new regulations that impact your career.
Professional Association Dues
We all know marketing is important, and professional associations are a way to not only market yourself and make connections but also to cultivate potential client relationships. Being affiliated with a particular association can mean the difference between getting a client or losing one.
You’ll likely join your local real estate board. This can provide you with a wealth of resources for training, local market tips, and trends. Plus, it may even help you dive into your local community of real estate sales agents.
Marketing and Advertising
It goes without saying you’re going to spend a lot of time marketing. How much money you’ll spend marketing and advertising is up to you and largely depends on your target clients (if you have a niche) or how much of your wages you want to reinvest in your business.
There are certainly less expensive ways of marketing than renting an outdoor advertising display on a major freeway. However, the ends may justify the means if a particular billboard location would reach more people than paper mailers.
Brokerage Firm Payments
Virtually every new real estate agent works for a brokerage, and many agents choose to remain with a real estate broker throughout their entire career. Real estate agents who are not brokers cannot work independently.
While every agent can become a broker (by studying for and passing another state exam), it’s usually easier to gain experience while working for a broker. The real estate agents who do this are often technically independent contractors. Overall, working for a broker will save you money in terms of professional liability insurance and give you a safe place to learn the ropes.
Working for a brokerage means you’ll pay them fees. Generally, a brokerage will take a portion of your commission. These commission splits can vary, but popular splits are 50/50, 60/40, and 70/30.
Also, many brokerages have a cap on their splits. In other words, once you’ve paid them a certain amount, you no longer split your commission with them and can keep your total commission on future transactions.
The cap that a particular brokerage has will generally reset yearly. Also, some brokerages charge lower fees, but be careful. Not every listing broker can offer as many services as you may need to be successful in your business.
You’re going to be in your car—a lot. Showings require you to have a car that is comfortable, professional, and kept in good condition. You’ll burn gas, get more oil changes, and take more spins through the car wash. This additional care can add up when calculating a real estate agent’s income.
Factors That Determine Your Income as a Real Estate Agent
Just like costs will have to be deducted from your annual income, other factors play into how much you make, aside from just how many properties you move. In the end, your salary is determined by much more than just securing the listing of a multi-million dollar home.
Hours of Work
One of the factors that helped you decide to become a real estate agent was likely the ability to work on your own schedule. You might have been (unpleasantly) surprised to learn that isn’t entirely true.
Sure, you can decide you don’t want to make appointments before 9:00 a.m. or answer your phone past 5:00 p.m., but you’ll definitely limit the ability you have to serve your clients. There is a direct correlation between the amount of time you invest in your career and the amount of money you make.
As you gain experience, you’ll also gain income. The more you know about your market and your clients will help you become a better resource that is used more frequently. Experienced agents have also honed in on marketing techniques that work, eliminated ones that don’t, and learned to streamline their business to keep costs low.
Finding a Niche
If you’re good at selling houses on the west side, sell houses on the west side. Do clients seeking rural investment property gravitate toward you? Work that angle. A niche can give you a leg up on the competition and help you become an expert in your particular subsection of real estate.
Finding a niche isn’t always easy, and it takes time and coaching from experienced professionals to do it properly.
Being satisfied in your job matters, and your attitude should always be positive, whether you consider yourself successful or not. Most laypeople aren’t familiar with real estate, and they depend on you to guide them through one of the biggest purchases they’ll ever make.
If you’re happy in your job, it will also help you invest the amount of time needed to be successful. An agent who is able and willing to devote time and attention to their business will be more successful than one who does not enjoy their work and avoids marketing like the plague.
Location (Location, Location)
Where you work also determines how much you’ll make as a real estate agent. Laws and generally accepted rules regarding commission vary state to state, just like market value varies from state to state.
A real estate agent working near NYC in New Jersey will make more money per transaction than an agent working in a small town in Oklahoma or Nebraska. However, the overhead and cost of living are also very different.
The Bottom Line: How Much Do Real Estate Agents Make?
On average, an entry-level (one to four years of experience) real estate agent makes about $52,000 per year. However, this is a ballpark figure due to the factors we discussed above. As such, your mileage may vary, and it’s quite possible for you to make more or less based on your demographics and personal investment in your career. It also depends on whether you work full-time or part-time.
Still, that’s an excellent starting salary that is easily manipulated with the right coaching and a hard-working attitude.
Hacking the Statistics
Earning more income as a real estate agent is well within your reach. A simple internet search pulls up hundreds of online coaching opportunities and training seminars. It can be difficult to know which one to use or whether you can trust them. An interesting fact: most real estate coaches have little experience actually selling real estate.
There’s a solution. Tim and Julie Harris have dedicated their careers and lives to educating real estate agents and helping them achieve success. Our publications and podcasts help thousands of agents (both green and experienced) make better career decisions, thereby increasing their earning potential.
The Harris Way
The Harris family has been working in the real estate field for over 45 years. Together, we’ve achieved success and financial freedom through real-life property transactions. We’ve decided to pass on the methods of mastering our craft.
With the Harris Real Estate University Premier Coaching plan, you’ll get professional coaching calls in real-time, access to a library of hundreds of past coaching calls, numerous resources to handle objections and generate better scripts, and the support of an ever-growing community of like-minded professionals who encourage each other to reach their goals.
You’ll also get access to other helpful tools, like:
- Lead generation systems that help you find leads on demand
- Buyer leads systems that help you generate leads from unexpected sources
- Mindset techniques and coaching to keep your head in the game
- Pre-listing package to help you get the listings of your dream
- DISC personality system that teaches you the psychology behind buyer and seller attitudes
- Goal-setting strategies that keep you accountable
Best of all, you’ll have access to Harris Certified Coaches, the mark of excellence in the real estate coaching field. Harris certified coaches are professional, qualified, and share their success based on their personal, real-life experiences.
Learn More, Earn More
Your income as a real estate agent relies heavily on your willingness to remain teachable and coachable. It requires a hard work ethic and a positive mindset that isn’t easily swayed by minor setbacks. Feel like you might need a little assistance? We can help.
Harris Real Estate University can give you more than just ways to generate leads and create better advertising. We’ll show you how to reframe your mindset, learn how to communicate more effectively with your clients, and increase your capacity to earn.