Say you have your average real estate agent in suburbia. He/she sells $200,000-$400,000 houses for a living. Nothing spectacular, regular homes that are reasonable price.
On average, what does that Agent bring home yearly before and after taxes?
Because I’m thinking of going into this profession and I know the test is rather difficult and I would like to “know thy enemy”, so to speak.
Which I found surprising. I thought they made between 2 and 4% on their sales. Assuming a 3% commission on a $300,000 sale that’s $9000. Surely you can sell at least one house per month (?) and rake in six figures.
Maybe there are lots of expensive incidentals that you have to pay out of your own pocket, like licensing or something.
I know that during the CA real estate boom a couple of years ago, our agent cleared about $1 million in one year…
Our average home price is still around $400,000, so one house a month at 3% is pretty good…
Yeah, that is kinda weak. Damn. Maybe I won’t take the test. Car salesmen seem to make double that on average.
There are a whole lot of real estate agents around. It is a classic job for a housewife to take when the kids are out of the house. I can easily imagine that a lot of agents only do a couple of deals a year. I was always under the impression that it is pretty easy to get a license a short class and relatively easy test.
The standard 6% is split 4 ways. Buying agent, the company the buying agent works for, Selling agent and selling agent’s company. I don’t know what the traditional split between agent and company is but I always thought was about even. That leaves about 1.5% per agent.
Don’t forget that that particular statistic includes real estate agents from all over the US dealing on all kinds of properties and doing all kinds of numbers of deals per year. The median salary for agents in your area may be higher, but it would behoove you to do your homework first.
Our average home price is still around $400,000, so one house a month at 3% is pretty good…*
You are in Orange County, correct? As of today, per the OC Register, the average home price in the county is $633,000.
I was always under the impression that it is pretty easy to get a license a short class and relatively easy test.
My wife took a 10 hour class and studied for a month before taking the 3 hour test…many people have to take the test multiple times, but she passed on the 1st try. And she is currently an Escrow Officer, so she went in knowing a thing or two already!
The standard 6% is split 4 ways. Buying agent, the company the buying agent works for, Selling agent and selling agent’s company. I don’t know what the traditional split between agent and company is but I always thought was about even. That leaves about 1.5% per agent.
No, the split between broker and agent is NEVER 50/50…my wifes’ broker takes 10%.
Typical split between commercial brokers and their agents is 50/50.
Residential pays much more to the agent.
I am a commercial real estate agent. Residential agent incomes vary a great deal as a minority of the agents make the majority of the income. The reason the averages are low is because a great number of people enter the field and soon leave when they don’t make any money. Turnover is quite high in many offices.
There are typically two main commission models.
The first and most typical is where the agent is paid a “split” or percentage of the commission income. Splits vary but they are typically around 55/45 or 50/50 agent /company to start and the agents share increases incrementally up to 80-90% as they achieve various increasing sales targets during the year. To get beyond 65% or so you really have to be selling some serious real estate volume. This split re-sets back to the base level at the beginning of each year. Over time a productive agent with several years tenure may start at slightly higher split level than new agents.
The 100 percent plan (or variations) is another model, and this is where the agent keeps 100% of the commission, but has to pay a monthly fee to the agency for the provision of their office. This is usually around 3,000 to 5,000 (or more) per month. In addition the 100% agent pays for a variety of administrative fees and services that are usually covered by the brokerage under the split agent structure.
Under both scenarios agents are responsible for advertising, signs, direct mail, and a host of other costs. Sometimes agents have to come out of their own pockets to take care of costs or points of contention that neither the seller or buyer are willing to cover, if they want the deal to close.
The average retained commission percentage (for split agents) is probably around 2% or so on average after all the dogs have eaten at the bowl. Say a typical commission is 5%-6% then divided between 2 agents (selling and listing) and then divided with the brokerage. In some cases you will hit a home run and get both sides of the deal (ie you have the listing and find the buyer, but that is relatively rare) and out of that you still have advertising expenses, insurance, MLS and association fees, taxes etc. etc. to pay.
You have to sell a lot of real estate to make a decent living.
No it doesn’t. The typical residential commission models are detailed in my post above. Commercial models are either exactly the same if you have a mixed house with both commercial and residential agents. For higher end commercial brokerages the compensation plans are considerably more complex, and in some cases the agents are actual salaried employees vs being independent contractors. The level of individual staff support provided in these brokerages is also much higher.
What if we just sell high value/high demand real estate? Say we work in…oh…Malibu. How do those agents make out?
Diggle, what state do you live in?
There was an article recently in the New York Times about average real estate agent income being somewhere around $45,000, with major expenses (like health care) not being covered by one’s employer.
Apparently a relatively few “star” agents make a lot of money, and the rest of the pack scuffles.
Look for things to get tougher as Internet-based firms succeed in breaking down the National Association of Realtors lobby and those 6% commissions drop.
Well my house went into escrow today, I might be able to help.
The agent I hired charged me 5% of the sale price which she split with the selling agent 3-2(3% to buyers agent, 2% to sellers agent), the total of which was 13,250.
The sale took a week. You can do the math for yourself, but I had to sell 
.
I don’t know if the agent makes this on a regular basis, but if it is, I need to get a Broker license.
They would do great assuming a steady stream of nice houses to sell and a steady stream of willing buyers. But how many million dollar houses are realistically going to turn over in a year? Also, there’s at least 2000 real estate agents on Vancouver Island alone (I answer the phones for all of them) so competition is pretty fierce. It’s not realistic to say “I’m going to only sell houses in Oak Bay” (very posh southern tip of Vancouver Island) because there are already a few dozen agents in the area who have already established themselves by making sales there.
Of course, out of those 2000 agents, some work their asses off and sell a house every couple of days. Some get their license, join a company and do nothing. So from my experience, I’d say the ones who work the hardest and advertise the most make the most money. How much they make depends entirely on what they sell, which depends on how hard they’re willing to work.
This is the arrangement that a few of my friends work with. In addition to all of the fees and costs that they pay their office, they also have significant costs for being self-employed: health insurance, unemployment insurance (I think), etc.
One of my friends uses the rule of thumb that he takes home about 50% of his commission. So if he sells a house at 5%, splits it 50/50 with the other agent and gets 2.5%, then pays his expenses, he takes home 1.25% net.
He said it also took him a while to get used to the large fluctuation in business throuhgout the year. He might have a year where he just doesn’t sell a house in Dec/Jan/Feb. This means that he has to carefully budget and spread his income out through the year. Likewise, entire years fluctuate as well: lately we have seen some booming business, but before that were plenty of down years.
Still? Damn…
While there are still more people who need houses than there are houses for sale, the homes around here in the $1-2 million and upwards range are difficult to sell. Things have slowed way down, but not so much that you can find a 3 bedroom house in a decent neighborhood for under $600,000…
Not many car salesmen make 18k a month. The average probably makes 3-4k and the top 1/2% make about 15-20k a month.
When everyone is calculating the 3% commission that a real estate agent makes, keep in mind that unless they own their own agency, they do not get to keep the whole 3% commission. So on a 400,000 house, they might only make 5000, and after taxes, etc. might only clear 3000.
With the real estate boom that we recently had, a LOT of people jumped on the real estate bandwagon. This flooded the market, hurting the amount of houses sold per realtor. The ones who have been around for a while make the most money, as word of mouth is probably the most important form of advertising for any agent, or repeat business (upgrades, downgrades).
On credit applications for some agents I have seen reported incomes ranging from 60k a year (newer agents) to 500k a year (those who own their own agencies). We have a personal friend who only sold about three houses in six months. She jumped on the bandwagon thinking she would make all of this money she heard about and was a little disappointed. She had NO weekends off because most people tend to look at houses at THEIR convenience and would sometimes show a 10-15 houses to one prospective client to have them change their minds or go with another agent.
I can only speak for my area of the country, which might not be typical. My area is driven largely by resort properties and 2nd homes.
In my county there are about 176 agents. My guestimates are 70% make only occasional sales and are not able to make a living on commissions. Another 20% make a decent living, and 10% really clean up, making over $100,000 (gross) per year. Some, a very few, make WAY over that.
Commission splits between house & agent are typically 50/50, with the agent’s cut rising slightly on a graduated scale if the agent’s total yearly sales are good (starting about $1,000,000).
One thing that might not be typical is the split between selling & buying brokers. Here it is about 2/3 to the selling side, 1/3 to the buying. This puts quite a bit of pressure on getting listings instead of courting buyers, as the listing agent will make twice what the buyer’s agent does in any transaction.
The 2/3 - 1/3 split is determined by the broker (house) at listing time. Some firms offer a little less to buyers. All things considered, it is not uncommon for me to make .75% of the selling price as my agent’s cut.
Out of the commission, all agents must consider these expenses:
[ul][li]Taxes[]Social Security (both sides)[]Medical & other personal benefits not offered to independent contractors[]Other expenses not covered by the house such as phone calls from home or cel, transportation, computers & Internet, etc.[]Insurance including Errors & Ommissions[]Printing & advertising (sometimes partially covered by house)[]Signs (house provides some, not all)[]Membership in Realtor boards, MLS fees, lockbox key fees, other professional fees[]All education costs, including mandatory continuing education[/ul]Other considerations are listings that don’t sell, causing a dead loss in all efforts and advertising, and listings that sell after a very long time at a reduced price. [/li]
My company charges a reduced commission percentage for residential properties priced at more than $500,000, so you can’t assume that a 6% rate applies to a $2mil property.
On the positive side, in a hot market, some properties sell almost before they hit the market. There are too few of these! Also, my firm charges a higher commission for commercial and vacant land on the theory that these require more effort. If I am lucky to find a buyer for one of my vacant land listings right away, the take-home commission can be 4%. Of course, vacant land is typically priced much lower than one with a structure on it, so it’s a larger percentage of a smaller amount.
Everything in this post refers to an agent working for a company. If the agent also owns the company, the situation changes quite a bit; more income, more expenses and more responsibility. There are many more agents than company owners.
I live in Grande Prairie, AB, in Canada… and one of the real estate agents has a brand new Lamborghini… then again, GP is the second-fastest growing city in Canada, from what I’ve heard…