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How Do Real Estate Agents Get Paid and How Much Do They Make?

A real estate agent is usually paid in the form of commissions. These commissions can range anywhere between 5-6% of the value of the property sold. However, the real estate agent doesn’t get the complete 5 to 6 %. This is as this commission is split between them and the broker and the other side’s agent and a broker.

While some brokerages do provide real estate agents with a fixed salary, it’s far more common to see real estate agents making money through commissions. This also means that there is no fixed or uniform salary for a real estate agent. Payment made because of commissions can’t be made uniform either, as it would violate federal antitrust laws.

Take, for example, a situation where a property sold for $200,000. The commission rate was 5%, and the real estate agent, after the money was split up and taxes accounted for, walked with $3500. Now say another property was sold for $2million, and because of a fixed rate, the agent still gets only $3500. To prevent this from happening, commissions are based on the property value and the price it was sold at. The broker’s compensation is always specified in the listings agreement. This can also be negotiated, as fixing the rate is illegal in the US.

What is the Average Median Pay for Real Estate Agents?

While the exact pay of a real estate agent depends on various factors, the median income can bear light on how much they make. According to the US Bureau of Labor Statistics, in 2019, the average real estate agent made around $49,093. This number was higher for real estate agents with higher degrees and more formal education. They earned an average of $59,720.

But this number can still be higher if the real estate agent is more experienced. Real estate agents with years of experience make anywhere between $60-80,000.

How Do Real Estate Agents Get Paid?

Their sponsoring broker typically pays a real estate agent. When the financial transaction is taking place, the money is directly given to the broker. This is as it’s illegal to give the money to the real estate agent directly. Once the broker has the commission fee, it is their responsibility to divide the commission between themselves and their agent.

This division will depend entirely on the previous agreement behind how this commission should be split between the broker and the real estate agent. While many brokers offer a 50/50 split, not all do.

There is more to take to into consideration as well. Since both the buyer’s broker and agent and the seller’s broker and agent split the same commission fee, the money goes four ways. So say the commission rate for a particular property was at 6%. Then, both brokers would be paid 3% of the total commission each. It then becomes their responsibility to split that money with their real estate agent. Should the same brokerage represent both the buyer’s and the seller’s sides, they can get the complete 6%.

While most brokerages adopt a commission-based system for paying real estate agents, not all do. Some brokers also offer total time salaries to their real estate agents instead of a commission-based system for payment. Sometimes, a real estate agent can represent both the buyer’s and the seller’s sides. This can happen even if two brokers are involved. During commissions like this, they tend to make more than if they represent only one party.

How Can You Increase Your Pay As A Real Estate Agent?

While being paid through commissions can enable you with a decent standard of living, you can also make more money if you know what you’re doing. There are specific tips that help real estate agents to earn more.

A good tip is to join the National Association of Realtors (NAR). Both real estate agents and brokers can join this body. When they do, they can call themselves ‘realtors’. Becoming a realtor enables you with various benefits, such as access to valuable information about the market.

Here are some things you can do to earn even more as a real estate agent:

1. Happy Agents Make More Money

Real estate agents who give off a positive vibe make more money at the end of the day. They are better able to enthuse potential buyers and convince them to buy various properties. An agent with a cheerful demeanour also sells more properties on average, contributing to their overall higher salary.

2. Longer Hours Pay Off

When it comes to real estate agents, the number of hours you spend working has a real bearing on how much you make at the end of the month. Working as a real estate agent gives you flexible hours. If you can take advantage of this flexibility to focus on productivity, then you’ll be making more than the average real estate agent.

Hours spent on work doesn’t include the hours spent behind an office desk, although this can be necessary for the paperwork. The more time you spend actively helping people buy or sell properties, the more you’ll make.

3. Your Niche Matters

The kind of property you’re selling also plays a role in how much money you make at the end of the month. Say you primarily work with low-income housing. In this case, your commission money won’t be very high since the value of the property you’re selling isn’t that high to begin with.

Alternatively, say you only work with luxury condos, houses and duplexes. In this case, you’ll be making a lot more money, as the value of each property you sell is so high. The commission you get from each sale is also very high.

Conclusion

While the average real estate agent makes a median salary that’s roughly around $50,000, there’s scope to earn even more. You’ll need to consider putting in longer hours with more focused work and be positive in your demeanour, but there are other things you can do as well. You can, for example, choose a brokerage where you get paid more through commissions.

Another way to protect your finances is with real estate agent insurance. Insurance for real estate agents can help you save your career if you encounter various risk factors. Real estate agent insurance coverage covers a wide variety of potential risk factors. These include liability insurance real estate and business insurance real estate. If you want to learn more about insurance for real estate agents, then click here.

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