The short answer is, “it depends.”
Not all real estate agents earn the same amount of money. For starters, real estate agents enter the profession for many different reasons. Some become a real estate agent for the money, some for the flexibility, and others for entirely different reasons.
As a real estate agent, you can work part-time or full-time. The number of hours an agent works can skew how much money the average agent makes. A mom who works part-time in a small city may only make $28,000 a year, while a woman who lives in a big city and works full time can easily quadruple that.
In general, the harder you work, the more money you can make. The most financially successful agents put in up to 50 hours a week; those agents who make that commitment, have an opportunity to make an unlimited income. This doesn’t consider agents who have been successful and hire other agents to work for them. Income for these “super agents” is sky high. Keep this in mind when thinking about the median salaries below.
The median income for real estate sales agents was around $46,000 in 2017, according to the Bureau of Labor Statistics. The top 10% earned more than $109,490, while the bottom 10% made less than $23,130. Here is the average annual income per state:
Remember, these are averages.
There are plenty of agents who earn more and plenty who earn less. Your earning potential is directly correlated to your ability to sell, the hours you work, and where you live. So it makes sense that in some states, agents make far more or less than others.
How Do Real Estate Agents Get Paid?
Agents earn their income through commission when they help sell or buy a house. A commission is a fee paid to a real estate agent for helping with the transaction. The commission is usually a percentage of the property’s selling price, although sometimes it can be a flat fee.
Many people believe that commission for a real estate transaction should be 6%, but it varies. Commission rates are established on the listing agreement. The commission rate is often split evenly between the seller’s agent and the buyer’s agent, which can be the same person. The broker receives their share, and the rest then goes to the real estate agent.
Here’s an example of a standard commission split:
A home is sold with a sale price of $300,000 and a 6% commission rate. The total commission at the rate of 6% is $18,000. It is then split evenly between the buyer’s agent and the seller’s agent at 3% or $9,000 each. After that, each agent would have to subtract their earnings depending on their license agreement. Typically it’s a 50/50 split between the broker and the agent. So when it is all said and done in this circumstance, the agent would take home 1.5% or $4,500.
Why Do Real Estate Agents Have to Split Their Earnings?
Well, real estate agents are licensed salespersons who work under a broker. Agents cannot operate independently, and they are prohibited from being paid a commission directly by consumers. Brokers, on the other hand, are able to work independently.
All commission must be paid directly to the broker; then, the broker splits the commission with his/her agents. Commission then is often divided into multiple ways, but it all depends on the license agreement the agent has with the broker.
Most real estate agencies do standard commission splits like a 50/50 split between the agent and the broker. Some agencies do production goals where the percentage of the commission goes up based upon how much is sold over the course of a year. For example 40/60 for the first $49,999 in sales, 50/50 for $50,000-$99.999, 60/40 for $100,000, etc.
There are some agencies that have adopted a 100% commission plan where agents pay a monthly fee similar to rent. In return, the agents have access to an office, computer, resources, and all of the commission rather than having to share it.
Should You Start a Career in Real Estate?
Working as a real estate agent has many benefits. One of the benefits of a career in real estate is the unlimited earnings potential. Another benefit is it’s relatively easy to get started; becoming a real estate agent does not require a college degree in almost all states. This opens the door for anyone with a good work ethic, and a positive attitude to become a real estate agent. For more on starting your real estate career, check out our article on “How to Become a Real Estate Agent.“