Understanding Real Estate Agent Salaries
Real estate agents have a fast-rising career graph and earn very well, more than what most sectors can boast of. Statistically, the average salary of a full-time real estate agent is $94,031. It is not a benchmark and can vary greatly. New agents start with a much lower salary but that picks up after they add experience to their resumes. With hard work, the salary can double once they complete a year on the job.
Moreover, the real estate agent’s starting salary is not typical of other industries. It is based on commission which is a certain percentage of the sale price. Additionally, brokers pay stipends to agents as part of the contract. The commission is split between the brokers and the agents.
This post will detail the various aspects of how much does a real estate agent makes a year.
Key Takeaways
- How Much Do Real Estate Agents Make?
- Factors Influencing an Agent's Earnings
- Commission Structure Overview
- Additional Income Streams for Agents
- How Much Does a Real Estate Agent Make a Year?
- High-End vs. Median vs. Low-End Earnings
- Yearly Bonus and Benefits
- Real Estate Agent Starting Salary
- Expectations vs. Reality
- Investments and Initial Costs
- Average Real Estate Salary
- How Real Estate Compares to Other Professions
- Regional Variations in Salary
- First Year in the Industry: Average First-Year Real Estate Agent Salary
- Financial Struggles and Triumphs of New Agents
- Tips for New Agents
How Much Do Real Estate Agents Make
The average real estate salary is $94,031 in the United States of America which works out to about $6,658 per month. Real estate agents receive their share of commissions directly from brokers after closing a home sale deal. The commission to the broker is typically 5% to 6% of the listing price.
Factors Influencing An Agent’s Earnings
The same monthly average real estate salary cannot be earned month after month like conventional salaried people from other sectors.
These are the general components of how much a real estate agent makes in a year.
- The number of deals closed: More homes sold by real estate agents mean more money in the bank. It is because the income is dependent on commission from sales closed.
- Years of experience: Agents with years of experience know which techniques work best and how to handle different situations. The number of sales made will thus be more.
- Network connections: Real estate agents who have a wide network of professionals and past clients benefit from referrals and repeat sales. This leads to increased commissions and earnings.
- Location of work: Agents working in large metropolitan areas like Los Angeles and New York earn more commission because the sale price of real estate is high in these locations.
- Brokerage fees: Real estate agents work under a brokerage firm. The firm receives the commission from sales which is then split with the agents. Typically, agents receive 60 to 70 percent while the broker keeps the rest.
- Cost of business: Real estate agents have a whole lot of operating expenses. These include costs for advertising, and business expenses like the Internet, cell phone bills, and office supplies. These costs are deducted from earnings to arrive at the net remuneration.
Commission Structure Overview
Listing agents and buyer’s agents often work together to buy a home. Hence, the commission received is split between the two. The earnings decrease after factoring in the broker’s share.
An example will clear this point better.
A home is sold for $300,000 with a 6% commission which amounts to $18000. Each broker takes half which is $9000 each. This amount is further shared between each broker and the real estate agent at a ratio of 60/40 (it might be 70/30).
At 60/40, each broker keeps $3600 and the agents $5400. In scenarios where the listing and the selling agent are the same person, the higher is the profit of the real estate agent.
Additional Income Streams for Agents
Apart from the regular commissions, there are a few avenues for real estate agents to make money.
- Be a Broker Price Opinion (BPO) maker: Help with additional paperwork like preparing the BPO report and making more money.
- Become a property manager: Landlords without time for administrative work hire property managers to manage their properties. Responsibilities include collecting rent and building maintenance.
- Be a commercial real estate agent: This field is more remunerative as these properties are generally leased out. This brings in consistent monthly income instead of only commissions.
Annual Earnings of A Real Estate Agent
The annual earnings of a first year real estate agent is $94,031. However, it is not consistent across the country.
High-End vs. Median vs. Low-End Earnings
A critical factor in the level of earnings of a real estate agent is the location of work. A few examples of real estate agents starting salary in the first year will illustrate this better.
- High-end earnings: Montana tops the real estate agent earning list with $114,976. Other states in the $100,000 plus bracket are Connecticut, Massachusetts, North Dakota, Oklahoma, Tennessee, and Texas.
- Median earnings: This bracket has earnings between $80,000 to $100,000. The states are Arizona, Arkansas, California, Colorado, Delaware, Idaho, Iowa, Kansas, Kentucky, Louisiana, Maine, Mississippi, Nebraska, Nevada, New Jersey, New York, Oregon, South Carolina, Utah, Washington, and Wisconsin.
- Low-end earnings: Other states fall into this category where the real estate agent’s starting salary is less than $80,000. The lowest is West Virginia at 55,300.
Yearly Bonus and Benefits
As of 2022, the bonus for real estate agents as a percentage of salary has increased to an average of 51.6%. This is not a benchmark and varies between senior and junior roles. Senior analyst and associates get the highest bonus of 30%. Bonus for asset management is a close second with juniors getting between 27 to 29 percent.
Real Estate Agent Starting Salary
Expectations vs. Reality
The average median salary for all jobs is $89,000 per year. Expectations vs. reality can differ when it comes to the average first year real estate agent salary because the earnings are commission-based.
The typical real estate agent’s starting salary of $94,000 might be a lot lower depending on the location and the commission-split agreed with the brokerage. So, be prepared to not get what you expect.
Investments and Initial Costs
A real estate agent’s starting salary is calculated based on the investments and initial costs of setting up the business. Expenses include acquiring a license, fixed hours of coursework, pre-license exam, and fees for a license.
When you join a brokerage, the initial costs will be desk fees and any other services provided by the broker. You must pay $30 to $60 monthly as Errors and Omissions Insurance to protect you against client work negligence claims. The local real estate board and the state association might charge a few hundred dollars in membership fees too.
Average Real Estate Salary
How Real Estate Companies Compare to Other Professions
It is relatively easier to become a real estate agent compared to other careers with the same salary potential. The pre-licensing and licensing exam requirements are simpler than becoming a CPA, CFA, medical practitioner, or engineer.
Other benefits include flexible working hours, meeting new people, and helping them meet their life’s biggest goal of acquiring property. The median real estate agent’s starting salary is generally more than other professions.
Unlike a typical desk job, a real estate agent’s routine is complex. It includes tracking leads, promoting and expanding business, and more. Further, there is no regular paycheck and you get paid a commission on sales only.
Regional Variations in Salary
The listing prices of real estate vary from state to state. Almost similar apartments or houses will set back a buyer differently in say, New York, Arizona, and West Virginia. Real estate prices vary according to supply and demand. This can be seen if you compare the availability of real estate in New York and Alaska.
The commissions from sales will thus vary as not only will sales be lower but the prices will be lower too. This factor leads to regional variations in average real estate salary.
First Year in the Industry: Average First-Year Real Estate Agent Salary
Financial Struggles and Triumphs of New Agents
An agent’s earnings are commission-based which is unlike a regular paycheck. Hence, they struggle if they do not have a safety net to adequately fund their lifestyle during low business months.
The triumphs of a real estate agent, on the other hand, are many. Dedication to the job results in sales and closing the first deal of the career is a memorable event. Setting up a business and reaching great heights in the first year is not a mean feat. Closing deals quickly as a new agent is a personal victory to be cherished.
Tips for New Agents
Here are a few tips for new real estate agents to follow.
Hire the right people for greater productivity. Set small bite-sized goals and achieve them consistently. Build a fixed routine into your daily operations and create a streamlined workflow.