How Much Can You Earn as a Real Estate Agent?

How Much Can You Earn as a Real Estate Agent?

Should you be thinking about switching careers to real estate, you could be wondering, “How much can I earn working as a real estate agent?” That depends on several things. Apart from the kind of clients one has, many other factors can help one earn extra income.

Once you have popularity among the clients then you will become an approved Real Estate Agent. On average, they earn between $1,500 and $10,000 monthly.

We surveyed real estate agents countrywide to find out what they earn annually and what determines that annual income.

What is the amount of money a real estate agent earns on average? 

One way we can find this out is to consider the amount of money earned by agents who work for an average amount of hours. In estate agency, with all other factors kept constant, the more the number of hours one works the more the income they earn. Estate agents who work an average of 40 hours per week can earn between $46,000 and $80,000 according to our research.

Agents working above 40 hours to 59 hours a week would earn between $80,000 and $100,000. These numbers are just an approximate guess. Note that they can be manipulated by many other factors in the Real Estate Industry.

In real estate, the more experience you have the more you are likely to earn. A real estate agent in the middle stages of his/her career might earn between $50,000 and $70,000. This depends on other conditions that have an impact on the average agent’s earnings.

What an average real estate agent earns also depends on the niche he is in. The middle ground residential estate agent will certainly earn less than a commercial real estate agent. From the trend established above, a real estate agent’s income tends to be $70,000 on average. 

Some real estate niches like property management have relatively lower incomes, while other niches like the commercial sector have notably a higher income potential.

Real Estate Agents Salary Depends on the Type of Brokerage

Salary Depends on the Type of Brokerage​

The type of brokerage adopted by the estate agent can also influence what an estate agent would earn. A real estate agent who is working at National Franchise Sales (NFS) is likely to earn approximately $7,000 monthly.

A self-proclaimed Real Estate Agent earns about $9,000 per month. So when seeking to know how much money the middle-ground real estate agent is earning, you can get widely varying answers depending on the type of brokerage and the estate agent’s employment status.

How Much Real Estate Agents Make Per Purchase

The average real estate agent rarely earns wages on an hourly basis. Instead, their income is derived from the properties that they successfully manage to sell. Their income is usually a percentage of the prices of the assets they sell, called the commission. So to estimate how much they make means we have to shift our focus to how much they have sold.

Redfin and The National Association of Realtors (NAR) both provide for agents to charge a commission of 4-5% on the sale price of every property they sell successfully.

At the end of 2019, Zillow, the online real estate platform, obtained a median sale price of $244,000 for a home in the US. At a commission of 6%, the estate agent would earn $14,600. At 5%, the estate agent boasts of an income of $12,200.

The figures reported for the high-end areas would bring tears to the more affluent people’s eyes. Selling a mansion in Beverly Hills or Manhattan worth $50 million attracts a charge of $2.5 million to $3 million as the agent’s commission using the above rates of 5% and 6% respectively.

Where do Real Estate Agents get Their Commission from?

So if you are going to buy a house, there is good news! The seller will pay commission to the estate agent! That’s no good news if you are selling though.

But if you are a smart buyer, you will have your own buyer’s agent. To have a professional opinion by your side when you are doing that kind of big purchase is a perk!

The seller usually pays their agent and caters to the buyer’s agent too. In retrospect, that does not amount to an extra cost to the seller. The commission is shared between the seller’s agent and that of the buyer on a 50/50 basis. Technically, it is all included in the 5-6% commission mentioned above.

Note that the agents are charging commission instead of a fee. This means that they are getting paid for the work that they got done. So whenever a deal goes through, they are likely to make money.

Sometimes as result agents make large amounts of money within a short time for small and quick transactions. On the other hand, agents are often unlucky and do not get any payment for their effort.

How Real Estate Agents Deserve Their Commission?

gents Deserve Their Commission

Having a real estate agent to assist you as a buyer can make home purchasing easier— and you are likely to find better deals, or acquire more suitable properties than what you would find on your own. For a seller, engaging a real estate agent will most likely attract more prospective buyers, hence giving your property a competitive advantage in the marketplace.

Having a professional by one’s side is helpful for sellers and buyers alike. This person can help you maneuver the complexities of real estate transactions that are usually large and fairly complex.

Buttner says that buyers’ agents have to work harder than sellers’ agents for their money. They often work with the same buyer for months. They have to show them multiple houses and make many offers before something sticks.

Due to this, the buyer’s agent earns a bit more than the seller’s agent.

The bad thing is that the agent’s work is not necessarily rewarded by the buyer.

According to the real estate attorney/ Realtor Bruce Ailion, not all transactions in real estate translate into real estate agents getting a commission. So the costs associated with transactions that don’t close must be taken into account when considering those that do.

Distinguishing Between Real Estate Agent, a Broker, and a Realtor

Lets first take a look at the Real Estate Agents.

Real Estate Agent

This is a person with the license to give professional assistance to people who want to buy, sell or rent real property.

To obtain that license, states require interested individuals to first go through relevant professional training. The number of hours of training required may vary depending on the jurisdiction in play. For instance, in Virginia, estate agents are required to train for up to 60 hours while in California it’s about 135 hours.

After the completion of the relevant training, the prospective agents sit for a licensing exam. This exam has two sections: the first section is on government real estate laws and overall real estate principles, while the second section is on state-specific laws.

The successful completion of this exam earns them a license and the title “real estate agent”. They can also join an association or brokerage through which they can start working with home buyers, renters and home sellers.

Responsibilities:

Agents act as a link between the relevant parties in a real estate transaction and communicate offers and counter-offers, along with queries that the parties might have. An agent works with another agent when the offer is accepted and guides clients through the filing process when doing the paperwork.

Estate agents also make sure their clients know the requirements for completing a sale. They assist during inspections, when moving, and on vital dates such as the closing date.

Real Estate Realator

So how does one become a Realtor? A Realtor is a real estate agent with a professional license. Further to that, this agent has to be a member of the (NAR).

Once a member of the NAR, the professional is bound by the operation standards of the NAR and its code of conduct.

As per Peggy Yee, essentially, the NAR holds its members to a higher standard. A member of the NAR also accesses a wide variety of real estate market information and data. There are so many other benefits.

Responsibilities:

In so many cases, the word “realtor” is often used interchangeably with “real estate agent”. The designation is open for use by quite a several professions within the real estate industry. For example:

  • Residential and commercial real estate brokers
  • Property appraisers
  • Property managers
  • Sales-persons

Realtors should be experts in their fields regardless of the role they play. They should be transparent and deal with their clients with honesty. They should avoid misrepresentation and exaggeration of information. They also need to conduct their affairs with the best interest of their clients at heart.

Real Estate Broker

A broker is a professional who has furthered his education above the level of the estate agent by the state laws and who has achieved an impressive result in the broker’s license exam.

Fortunately enough, this exam is similar to that of the real estate agents. Each state sets its exam to be sat by potential brokers and training requirements. This exam covers such topics as taxes, insurance, ethics and contracts among others. It is more comprehensive than what is covered in the real estate agency course.

Prospective brokers are also taught the legal issues and the application of the law when operating a brokerage. They are also trained in real property development, construction, property management, and real estate investment.

Brokers have a vast knowledge of the real estate business. Therefore, to sit the broker’s exam, prospective brokers are required to have some amount of experience, usually a minimum of 3 years as a licensed real estate agent.

Responsibilities:

Brokers who work alongside buyers usually seek facilities that match their clients’ requirements, prepare offers, coordinate negotiations and assist the buyer with any other issues that may arise in the course of operation.

On the other hand, brokers who work alongside sellers help determine market values of the subject properties, conduct listings and show properties to prospective buyers, communicate with other sellers to know recent offers and coordinate the whole transaction process.

Similar to the real estate agents, brokers receive a commission on every sale once the sale is completed. This is usually included in the remuneration clause in the contract between the buyer or seller and the broker. The listing agreement usually states what percentage of the sale would be paid to the broker.

Which One is for You?

Globally, various people operate in the real estate industry as real estate appraisers, estate agents, sales-persons and property managers, with their duties somehow unclear to them since their fields of work are quite similar and intertwined.

The common real estate agent serves to facilitate transactions on real estate. They are responsible for bringing potential buyers and property sellers together. For that, they receive a commission.

A broker is one who owns a brokerage and hires real estate agents to work under him/her. All other factors kept constant, a broker is often more experienced than an estate agent and usually takes care of the more complex transactions and complicated parts of a transaction.

The realtor is an estate agent who is a member of the NAR. This category could include sales-persons, brokers, appraisers, etc.