How much do real estate agents make? You’ve probably asked yourself this question if you were in the housing market to buy or sell a home, and you worked with a real estate agent.
Real estate agents play a huge part in the real estate transaction process. In fact, according to the National Association of Realtors (NAR), 88% of property buyers will purchase a property only with the help of a real estate broker or a real estate agent, and the majority of property sellers also rely on real estate agents.
Related: What to Expect When You Don’t Use a Real Estate Agent
Now, you’re probably thinking that if real estate agents are that important: How much do real estate agents make? A real estate agent does not make money in regular intervals like a landlord or a real estate investor who receives monthly rental income from an investment property. To answer the question how much do real estate agents make, let’s first explain what real estate agents actually do.
What Exactly Do Real Estate Agents Do?
In short words, real estate agents are salespersons who represent a party of a real estate transaction. Typically, they work under the umbrella of a designated broker, both of whom are licensed from the state. Since there are two parties to consider in real estate transactions, there are two types of real estate agents:
- Seller’s real estate agents: They help property sellers capitalize as much as possible on the property sale by suggesting appropriate improvements to the real estate property, while advertising the property for sale.
- Buyer’s real estate agents: They help property buyers find the best (cheapest) property for sale that suits their goals and budgets.
Clearly, the purposes of the two types of agents conflict with each other. Nevertheless, using an agent will save both a buyer and a seller a lot of time and energy.
Related: How Do I Find the Best Real Estate Agents Near Me for Investment Properties?
Since real estate agents work with real estate property transactions, this means that they are bound to get paid from them, right? This leads us to the next point.
How Do Real Estate Agents Get Paid?
Real estate agents get paid real estate commissions after a real estate transaction is made based on the sale price of a property. The commissions of a real estate transaction are negotiable and range anywhere from 1% up to 10% of the property price; the percentages vary especially based on the experience of the agent. Here we will use a 5% commission rate example.
For a $250,000 property, the 5% commission will be $12,500. But that does not mean that the agent walks away with $12,500. Real estate commissions are paid to the real estate broker, who then splits the commission with the agents involved in the transaction.
The most common arrangement of payment between a broker and an agent is the traditional 50/50 commission split. For our example, each will receive a commission check of $6,250 at the closing of the transaction on that property.
How Much Do Real Estate Agents Make?
Finally, this leads us to the answer of our main real estate question of the day: How much do real estate agents make? According to the National Association of Realtors, a full-time real estate agent makes a median annual income of $55,000-$100,000. While this seems like a very good amount of money to make, you need to keep in mind that this is just an average and that there are successful agents who make much higher profits which means that other real estate agents make much less.
However, as a real estate agent, you should not expect a fixed salary. There are other factors that have an impact on the answer of how much do real estate agents make.
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Factors That Impact How Much Do Real Estate Agents Make
1. Some real estate agents, depending on their goals or simply on the transaction process, only work part time. Others choose to work full time, which naturally increases their overall pay.
2. Experience, as mentioned previously, is another factor that determines how much do real estate agents make.
3. Location plays a role with everything in the real estate business, including how much do real estate agents make. Location affects commission rates; some areas have higher or lower commission rates depending on the price range for homes in the local market.
Related: Location, Location, Location – Is Location Really All in Real Estate Investing?
4. The commission rate also affects how much do real estate agents make. In the real estate industry, a 6% rate is pretty common. Remember, though, that commission rates are negotiable – just like a salary.
5. The rate of your sales: Another factor determining how much do real estate agents make is “How many homes do they sell in a year?” This obviously depends on many factors such as your skills or the strength of the housing market. However, the more important question is “What type of homes are they selling?” A real estate agent who sells cheap homes for a low commission might sell 20 homes a year, but he/she won’t be making as much as an agent selling four or five luxury homes.
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Conclusion
To answer the question “How much do real estate agents make?”, there are a number of things to understand. First, real estate agents break down into two kinds: buyer’s and seller’s agents. Each type aims to maximize his/her party’s profit in a real estate transaction. Also, real estate agents are assigned to work with real estate brokers, and they get paid through commissions based on the property sale price. Factors including experience, location, and the commission rate all impact how much do real estate agents make.
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