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How Much Money Do Real Estate Agents Make

Real estate agents don’t always get paid for our efforts. Sometimes by choice and sometimes by chance, we work without pay. We offer many free services as a way of “getting our foot in the door” and if a comfortable connection occurs, we can establish a relationship that could lead to a successful settlement on a home purchase. We work very hard with the hope that we get paid for our efforts. I help people achieve the goal of home ownership. Often I’m the problem solver when no solution seems possible. My job offers great rewards, not just financial ones. I know just how lucky I am to enjoy my work the way I do. I owe my successes to all of the wonderful people and families that have trusted in me.

When a REALTOR lists a house for sale, the agent and the home owner have already agreed to an amount (usually a percentage) of the sales price, that will take care of paying for the sale. The listing agent and the homeowner also decide how much of that total commission, will be shared with the selling agent (buyers agent) who brings the buyer.

Real estate commissions are completely negotiable. I’ve heard of them being as low as 4.5% and as high as 8%. Mine have historically been between 5% and 7% depending on several factors. Let’s just take my average of 6% as an example. If I list a house for $400,000 and charge a 6% commission, that’s a $24,000 commission. We’re going to offer the agent who brings the buyer half, which is$12,000 which they have to split with their Broker. What do I mean, split with the Broker?

The commission to sell a house is split, usually four ways. If a buyer buys a home directly from the listing agent the seller still pays the same amount of commission, it’s just that the agent and the Broker will get twice as much. The listing agent and the home owner negotiate the commission. The listing agent offers an amount to any other agent and Broker who brings a buyer, usually half. So that’s two sides… the listing side and the selling side. The listing agent has to split their commission with their Broker and the selling side has to do the same. So of the total $24,000 of commission charged, each side usually sees about a $6,000 check. After an estimated tax payment it’s in the mid $3,000′s per transaction. To stay in business REALTORS spend many thousands of dollars each year to maintain their licensure and for advertising and promotion.

Most good real estate agents make normal incomes. There are some of us that make a lot of money, into the 7 figures and there are some who may never sell a home.  Real estate has a high turn over rate for the newly licensed. The majority of us career REALTORS are right in the middle. Nationally the average income for a real estate agent is $33,000. I’m certain that in the DC area the average income is higher. Agents in our area, I feel, make close to or into the 6 figures, which allows us (along with our wives or husbands incomes) to make our mortgage payments, car payments and other bills and if we’re lucky, to save and invest a little. The income stream seems pretty wide but it’s all relative. Perception varies and it depends on what you’re accustomed to. The money we earn is gross income with no consideration for taxes, insurance, retirement, health care, life insurance, real estate insurances, real estate dues, MLS fees, continuing education costs, voice mail, sign fees, and a dozen other costs involved with being a REALTOR. The hard part for a REALTOR is the impossibility of a budget. We don’t get a fixed amount every single month. We can have good months and bad months. Sometimes we have bad months for many months. Not only do we work free for buyers and sellers until we sell the listing or find the “right” home for a buyer and then go to settlement but we also spend money in hopes of that eventual settlement. There are many times we spend hours and hours with buyers and sellers without pay and the settlement never occurs.

I was online recently (within the year) and saw a worksheet on how to negotiate with a realtor for time spent doing things V.S. cost so you could negotiate with the agent. Kind of like, the worth of an agent. I was dumbfounded by the naivete of the person putting that out there. A 100% commission based person is completely different than any other industry. If such a worksheet was adhered to, we would only be paid fairly for the time spent with an actual buyer or seller. All REALTORS would have to quit and seek other employment because of the hundreds and hundreds of unpaid hours spent prospecting, advertising and working with non-performing buyers and sellers. All REALTORS in this scenario would be brand new agents with no experience and buyers and sellers would suffer great financial loss working with these inexperienced agents who would be on their way to unemployment.

Ok, watch me hurt myself as I hop down off of my soap box. I am VERY lucky. I love what I do and I manage to meet and form relationships with enough new people every year that I can pay the bills. I want to reach that next level so that I have a more comfortable future for my family. I wouldn’t do anything else!