How much the “average” real estate agent makes is a complicated question. There are a few things you need to consider.
First, real estate is hyper-local and niche. A Realtor specializing in luxury properties in one zip code could make vastly different money from a real estate agent who works on commercial properties just down the block.
In addition, real estate commission is what you make of it. How you negotiate, how often you work, and how successful you are at closing deals will all matter. You can find out the average real estate commission in your area, but that isn’t likely to tell you how much you will make as a real estate agent.
In this post, we’ll explore how much the average agent makes, how they can boost their salary, and what you can do if you aren’t making enough.
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How Much Does the Average Real Estate Agent Make?
In 2019, the median gross income of all Realtors was $49,700. Realtors with 16 years of experience or more had a gross income of $86,500.
There are some caveats. Not every real estate agent is full-time; this statistic includes the real estate agent salary for part-time members. When calculating the median gross income of real estate agents, that number will also include those who have just started working in the industry.
How Much Does Location Affect the Salary of a Real Estate Agent?
According to Indeed, in California, the average real estate agent makes around $102,000 a year. Comparatively, the average real estate agent earns about $58,000 in Arkansas. So, a California real estate agent generally expects to make twice as much as someone in Arkansas.
There are exceptions, of course; someone dealing with luxury properties in Arkansas may make more than someone just starting in California. But your location controls quite a bit when it comes to your real estate sales revenue.
Those in lower value markets may be able to boost their salaries through things like collecting a referral fee or Realtor fee, providing additional services as a listing agent (like home staging), and negotiating with their managing broker.
How Do Real Estate Agents Make their Money?
As either the listing agent or the buyer’s agent, you generally make a commission. While you theoretically set your commission rate, real estate agent commission has an upper ceiling. The rate depends on your area, but it isn’t likely to go higher than three to five percent.
A commission is split four ways: the listing agent, the listing agent’s broker, the buyer’s agent, and the buyer’s agent’s real estate broker. So, the percentage that your broker takes per transaction also matters.
As the seller’s agent, you don’t get paid until you sell your client’s home. As a buyer’s agent, you don’t get paid until the deal closes.
Because you don’t get paid until you make your commission, you need to have excellent money management skills. There’s no telling when your next commission might come. If the deal falls through last minute (or if you’re never able to make a deal), you don’t make anything.
Both residential and commercial real estate run on commission. But the commission for commercial real estate is usually a flat fee because the final cost and closing costs will be much higher per transaction. Regardless, a real estate agent’s salary is almost entirely made up of the commission they earned.
How Can a Real Estate Agent Boost their Salary?
It’s common knowledge that most agents end up burning out within the first few years. This is because it’s difficult to be an agent; you need to be highly self-motivated and reliable.
When you first start out, your real estate agent income will be low. But there are things you can do to boost your income beyond the average.
1. Close more deals
As you start to make a name for yourself with your brokerage, you’ll get more opportunities. The amount of time you put in with your brokerage is usually correlative to the results you get out of it.
2. Provide more services
When working with your listing broker, you can offer services such as home staging, high-quality, high-resolution photos, video photography, and even 3D walkthroughs. The more services you provide, the faster you can sell.
3. Don’t be afraid to negotiate
As a seller’s agent, if you boost the sale price, you increase the commission. Of course, if you’re the buyer agent’s broker you want to negotiate on behalf of your client — and in doing so, you can get better referrals in the future.
4. Network more
Real estate is all about who you know. The more people you know, the more deals you can get, and the more you can boost your income. When you aren’t directly working on closing a contract, you should be working on meeting new people.
5. Get a different broker
You don’t need to stay with your original broker. You’re an independent contractor, so you can switch to any brokerage you want once you’re a fully licensed real estate agent. Another broker might have more training opportunities for you, give you more connections, or let you keep more of your commission.
6. Work part-time
The truth is that many people just starting their real estate sales agent career only work part-time. They work a full-time job during the day and network and build their experience during the rest of their time. But an exclusive real estate brokerage usually wants its recruits to work full-time, so there are trade-offs.
7. Chase dual agency deals
Your income can easily double when you have a dual agency deal, which is a deal where you represent both sides. Because many people are now finding properties and trying to sell their own homes online, there are more opportunities for you to be the only real estate agent involved in a transaction.
8. Build your referral network
When you refer someone to another Realtor, you make a significant amount of their commission. Some agents make an entire career on referrals alone.
It’s understandable that income starts low for real estate agents because they don’t have many connections. But as you gain new relationships, you will find your income growing, too.
What If You Aren’t Making Enough?
The most common reason people drop out of the real estate industry is they discover that they just can’t make enough money.
A Realtor should be guided by their real estate broker, but the sponsoring broker can only do so much. For this reason, the agent has to have the determination and motivation to grow their own business.
Being motivated is perhaps the most important aspect of developing an income as a real estate agent. A Realtor will need to set their own hours, work hard, and constantly improve their network and skills.
While there are always down markets, those who work hard should be able to succeed. However, there are always mitigating circumstances and uncontrollable factors, such as bad timing.
Sometimes, a real estate agent may need to change to a different focus or niche. If the market is crashing, for instance, perhaps they need to focus on townhouses and condos rather than separate, single-family homes. Sometimes a real estate agent may need to move or get licensed in another area because the market is simply crashing.
Either way, there are a plethora of opportunities in the real estate industry. When the market is down, some Realtors even focus on rental properties rather than sales, or commercial properties rather than residential ones. Being agile and able to pivot is part of what makes someone an excellent real estate agent.
Starting Your Real Estate Career
Once you have your real estate license in hand, it’s time to chase your first real estate transaction. Over time, you’re going to find out more about the real estate market, how to market yourself effectively, and how to negotiate with others.
Whether your goal is to become a commercial real estate agent, refer tenants to a property manager, or operate as an independent, licensed real estate agent, there are ways to increase your income well beyond the average income for an agent.
But the average income for an agent — even one who is inexperienced — is already quite good. And the average income grows significantly the longer that an individual works within the industry. If people can stick with it, they can usually find success.
Nevertheless, knowing the average commission and average home sale in your region can help you estimate how much you will make as a listing or buyer agent.
Final Thoughts on How Much Real Estate Agents Make
Looking for more resources? Check out my post on how to grow your real estate agent salary so you can make $100k your first year in real estate. Also, read my post on how much commission a Realtor makes in 2021.
What motivated you to join the real estate industry? Let me know in the comments below!
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