How Much Money Do Real Estate Agents Make? 2023 Commission Breakdown
Many are drawn to real estate professions for the high earning potential and freedom to make your own schedule. If you’re considering a career change, you’ve probably wondered how much money real estate agents make and how they get paid.
Real estate agents work on commission, meaning they earn a percentage of the listing price they help their client buy or sell. Keep reading to learn everything you need to know about starting your real estate career and what you can expect in your first few years as you build experience.
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What’s the Average Real Estate Agent Salary?
There can be a lot of variability in how much real estate agents make because it’s a commission-based profession. Here’s the average salary in each state:
According to ZipRecruiter, the average real estate agent salary is $86,356. This ranges from $64,446 in Arkansas to $98,516 in Washington. However, many real estate agents are part-time professionals who earn less than these averages. Commission for real estate agents generally hovers between 5% and 6%, which is split between the listing and buyer's agents.
What Factors Affect How Much a Real Estate Agent Earns?
If you’re trying to figure out how to earn a living as a real estate agent, it’s important to know what factors will affect your earning potential. Here are the top things to keep in mind:
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Number of homes sold vs. home price: To earn a living as a real estate agent, you need to help your client sell or buy a home. Depending on the market in your location, you may want to focus on making more sales if homes are valued for less. Alternatively, you can make fewer sales if the homes you’re working with have higher listing prices.
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Marketing capabilities: As a new real estate agent, you’ll need to invest time and money into getting the word out about yourself to make connections and find clients.
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Experience: Building a trusted reputation as a real estate agent can take time — you typically make more money the more experience you have.
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Brokerage fees: Real estate agents must work with a brokerage firm and split their commission. A brokerage firm typically takes around 40% of the commission.
How Much Do Real Estate Agents Make Their First Year?
The first year in real estate for most agents is almost always going to be the most difficult. You’re still building experience and your reputation, so it can be challenging to find clients. The home buying and selling process can also take a couple of months.
Real estate agents in their first year can expect to go nine months or more without making anything. It’s a good idea to build up some savings or have a second income stream until you can earn enough to support yourself on your real estate experience alone.
One of the best ways to get started in real estate is to join a team or brokerage that can provide you with an influx of leads that will lead to closings and help you build more experience. Joining a team with a positive reputation can also help you build trust within the community and generate more leads.
When I moved to Raleigh from Boston and became a Realtor, I knew no one in the local area and nothing about how much money to expect to make in my first year. In my first year as a real estate agent, I closed three transactions and made $14,372.13 after paying my broker their split of my commissions.
For anyone who has tried to live on $14,372.13, it is nearly impossible, especially when you're spending money to market your real estate business.
Fast forward to my second year, I closed 16 homes. A year later, my brokerage closed over 50 homes. Now my real estate brokerage makes the money and I pay myself a salary.
Do Real Estate Agents Make Money by the Hour?
Real estate agents do not make money by the hour; they make money off commission from the houses they sell.
However, there’s a direct correlation between how many hours you work and how much money you make. Investing time and energy into marketing yourself, networking, and giving your clients the best experience possible will translate into more success.
If you want to make a living wage from being a real estate agent, you’ll probably need to pursue real estate full time rather than part time.
How Much Do Real Estate Agents Make per House?
Every house a real estate agent makes money on will have a different commission structure and percentage. Factors such as location and whether or not there’s an agent bonus also affect how much you earn per home.
Here’s what a typical breakdown might look like:
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A listing real estate agent charges 6% to sell a house, splitting the commission with the buyer's real estate agent.
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Both real estate agents’ 3% commission is paid to their respective real estate brokerage.
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The brokerage writes their real estate agent a check, typically taking around 40% of their commission based on the agreement between the brokerage and the agent.
In my early days as a Realtor, my real estate brokerage took 36% of each commission check. That was too much of my hard-earned money, considering they weren’t adding much value, such as bringing me leads or helping support closings. So I made a change and I joined a brokerage that charged me a flat $399 per transaction instead before opening my own brokerage, Raleigh Realty.
How Do Real Estate Agents Get Paid?
Real estate agents either represent the seller, the buyer, or both in a real estate transaction. The amount the agent will be paid depends on the commission agreed upon between the agent, seller, buyer, and real estate brokerage.
As we discussed above, both real estate agents’ commission goes to their brokerage, and then the agent is paid for the sale by their brokerage.
When you join a real estate brokerage, they will have specific guidelines on how you will be compensated for every home you sell. Each agent makes a different amount of money on each home they sell based on the sales price, the commission split, the brokerage split, and any expenses they may have incurred while selling the home.
What Kinds of Expenses Do Real Estate Agents Have?
Many people underestimate the expenses and overhead real estate agents have. Becoming a real estate agent can take a large investment upfront. At a typical office job, your employer usually provides some resources for you. As a real estate agent, you need to find those resources yourself. Here are some expenses you should consider as a real estate agent:
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Office space
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Health insurance
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Office supplies
You’re also likely to incur more transportation-related costs, such as gas or car repairs, as there can be a lot of driving to meet clients and view homes.
One of the biggest expenses most people don't realize when beginning their career as a real estate agent is that it costs money to be a Realtor. You will have to pay for your:
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Real estate education
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Fees for joining the MLS and other necessary organizations
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Continuing education
These expenses are ongoing and add up to thousands of dollars pretty quickly.
The largest expense we have at Raleigh Realty is our technology, which is our number one form of marketing. We have spent more than $30,000 on our website and over $10,000 on online marketing. Our website is our top form of lead generation, so it only makes sense that we spend the bulk of our earnings on growing and improving our real estate website for folks searching for homes for sale in Raleigh!
FAQ
How much do most real estate agents make in a year?
The average real estate agent salary is $86,356 in 2023.
How can you make $100,000 in your first year in real estate?
It’s not realistic to expect to make $100,000 in your first year as a real estate agent. It takes time to build your skills and connections to make a high salary. Though many real estate agents are compensated well, we recommend you have a secondary income for your first year until you’re able to make enough from commission.
What percentage do Realtors get?
Typically, around 6% of a home's listing price goes to the Realtors or real estate agents involved. However, it's split between the buyer’s agent, the listing agent, and their brokerages.
How much does a Realtor make on a $100,000 sale?
Each sale agreement has a different commission for real estate agents, and each real estate agent has a different agreement with their brokerage on how much they’re paid. If agents got a 6% commission from a sale, then their brokerage took 40%, they’d make $3,600 from a $100,000 home sale.
Starting Your Career in Real Estate
Don't let these numbers deter you from a career as a real estate agent. Hard work pays off, so if you’re ready to invest your time, you can find success.
Here are some of my recommendations if you’re thinking about becoming a Realtor:
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Join a well-established team: Connections are everything in real estate. A respected team can help you build a positive reputation, and you’ll have successful colleagues to learn from.
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Start in new construction sales: Inventory for new construction homes can be more reliable, and these homes may score you a larger commission.
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Start part time: The real estate sales cycle is long — working part time might slow your growth, but if you’re struggling with bills, it can ensure you can stay in the business long enough to see real returns.
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Become a subagent: Subagents work with listing agents to help bring in buyers for a seller. This can help you build more experience.
Becoming a real estate agent, especially for the first year, can seem daunting. However, with our tips and knowledge about how real estate agents make money, you can launch a satisfying and profitable career.
Ryan Fitzgerald
Hi there! Nice to 'meet' you and thanks for visiting our Raleigh Real Estate Blog! My name is Ryan Fitzgerald, and I'm a REALTOR® in Raleigh-Durham, NC, the owner of Raleigh Realty. I work alongside some of the best Realtors in Raleigh. You can find more of my real estate content on Forbes, Wall Street Journal, U.S. News and more. Realtor Magazine named me a top 30 under 30 Realtor in the country (it was a long time ago haha). Any way, that's enough about me. I'd love to learn more about you if you'd like to connect with me on Facebook and Instagram or connect with our team at Raleigh Realty. Looking forward to connecting!