How Much Do Real Estate Agents Make?

Thinking about quitting your nine-to-five job? Maybe you’re looking for a new challenge or want to get back in income what you put into it in effort and energy.

Just think carefully about what we’re going to say next…

… have you considered working as a real estate agent?

Yes, that’s right. A career in one of the most exciting jobs out there. You get to meet new people all the time, work whenever you want, and most importantly, the earning potential is very high.

So how much do real estate agents make? Keep reading to find out.

What Is a Real Estate Agent?

Let’s start with the basics. A real estate agent is a licensed professional who connects buyers and sellers and helps in the process of leasing, buying or selling properties.

Essentially, a real estate agent is a salesperson who works under a real estate broker. The brokerage agency’s task is to ensure that the estate agents work in compliance with the state laws. Furthermore, the percentage from one sale is paid directly to the brokers, who are obliged to split the income with the agent. That’s how the agents are paid — getting a commission for each closed deal.

How Much Does a Real Estate Agent Make per Sale?

A real estate agent’s success is determined by their ability to close a deal. A certain percentage of each transaction goes to the estate agent. Now, let’s see how much income a sale brings.

The typical real estate commission is between 5% and 6% of the property’s sale price. However, that commission is split between:

  • Seller’s brokerage agency — approximately  3% of the total commission
  • Buyer‘s brokerage agency — approximately 3% of the total commission

And as we previously mentioned, the broker and the agent split the earned commission, so that would be 1.5% for the broker and 1.5% for the agent on average.

Now, the final result — a real estate agent makes a 1.5% commission per sale.

Commission

(Image source: Real Estate Witch)

For things to be clearer, check the following example:

Property’s sale price Total commission of 6% Agent’s income of 1.5%
$100,000 $6,000 $1,500

Note: The split isn’t always even.

How Much Does a Real Estate Agent Make a Year?

As of July 12, 2022, the national average salary of real estate agents in the US is $95,365 per year.

This is just the average basis, though. The actual amount you could make as a real estate agent varies depending on many factors. Let’s elaborate on some of them.

Commitment

The level of commitment an agent puts in greatly impacts their salary. Those who dedicate more time and effort to their real estate career earn more.

Average Income by Hours Worked per Week

(Image source: McKissock)

Tip: Start with setting your own goals. By having targets that you need to reach, you’re keeping yourself motivated and efficient.

Location

The location where you work as a real estate agent has great importance. While the commission rates are generally within the same range across the US, the dollar amounts vary greatly, depending on the local economy’s strength and market dynamics.

California, for example, is home to 70% of the priciest 100 US zip codes. Naturally, each deal closed there brings a small fortune to the real estate agent. At the other end of the spectrum are states like Vermont, Maine and Louisiana, where real estate agents earn around 25% less than the national average.

Experience

The more experience a real estate agent has, the more income they earn. For 1-5 years of experience, the national average salary is just over $82,000 per year. With more than 10 years of experience, the average annual salary is nearly $165,000.

Average Income by Years of Experience

(Image source: McKissock)

Tip: After gaining experience as a real estate agent, consider using the acquired knowledge and skills to become a real estate investor.

Network

Real estate is a relationship-based business. One’s sales depend significantly on their network and ability to turn connections into transactions.

So try to make acquaintances and gain as many referrals as possible. As much as 19% of the agent’s income is gained from referrals.

Brokerage firm

Last, but not least, your income depends on the brokerage firm you work for. The commission rate structure from our example above is the typical one, but split models vary by firm.

In addition, some brokers charge agents desk fees, office supply fees, and transaction fees. There are also benefits to consider, such as health insurance, marketing and advertising, vehicle expenses coverage, etc. These all affect your operating expenses. The brokerage’s reputation also impacts your income earning potential. So choose wisely.

How Much Does a Real Estate Agent Make an Hour?

Real estate agents aren’t paid by the hour. Yet, those who work 40 hours per week tend to earn more than those who work 20-30 hours per week. Why? Well, when you invest more hours in your job, you will likely close more deals. However, when talking about commission-rate jobs, it’s mostly about efficiency.

Even so, having an idea about the average hourly wage is crucial when considering a job switch. So, for a clearer image, we’ve taken the annual salary estimate and calculated the real estate agent’s average hourly income at $40.92.

How Much Does a Real Estate Agent Make a Month?

By the same token, you may need to know how much a real estate agent makes a month. Again, using the annual salary data, we’ve calculated that the average monthly salary is $6,752.

Also, something else that would be of great importance for people interested in becoming real estate agents is the benefits that go along with this job position. These are the most common ones:

  • Health, dental, and life insurance
  • 401(K)
  • Flexible work schedule
  • Paid time off
  • Parental leave
  • Profit sharing
  • Referral program

How Much Does a Real Estate Agent Make per House?

No specific amount could be provided. But, here are some estimates.

First, let’s take the median property sales price. According to data from the National Association of Realtors (NAR), the median price for property sales was $416,00 as of June 2022.

Now, let’s take the average real estate commission of 6%. Then what?

With these data, we could establish that the average total commission per sale would be $24,456. Assuming that the split is even between the buyer’s and seller’s agents, each gets $12,228. However, this still isn’t the actual real estate agent’s profit.

A quick reminder: Each real estate agent works under a brokerage agency and splits the commission from each closed deal.

Now, after this clarification, we can get to the final point. When the amount is split between the real estate agent and its brokerage agency, the agent will get $6,114 on average per house sold.

How Much Does a Real Estate Agent Make in Texas?

Texas is considered to be one of the best states for working as a real estate agent. Why? In 2021, according to a survey from NAR, Texas was the number one state for the largest shares of land sales with 15%.

Now, let’s compare the national average salary of a real estate agent with the average salaries in some of the cities in Texas:

City Average annual salary Compared to the national average salary ($95,365)
Texas City $110,479 16% above
Galveston $106,232 11% above
Austin $101,057 6% above
Houston $98,693 Approximately the same
San Antonio $96,035 Approximately the same
Dallas $95,986 Approximately the same

How Much Does a Real Estate Agent Make in California?

Thanks to agriculture, tourism, education, Hollywood, and more, California has one of the strongest economies in the US. So, have you considered starting your carrier as a real estate agent or broker here? If not, maybe knowing that this state has highly paid jobs will change your mind.

Still, let’s focus on the real estate area. In which California cities do real estate agents earn the most? How is that compared to the national average salary? Check out the following table and find out:

City Average annual salary Compared to the national average salary ($95,365)
California City $118,260 24% above
Santa Monica $104,697 10%
Long Beach $102,320 7% above
Sacramento $101,941 7% above
Los Angeles $101,747 6% above

How Much Does a Real Estate Agent Make in Florida?

According to a survey conducted by NAR in 2021, Florida is the state with the highest number of realtors – 213,963.

The number refers only to the agents who are part of NAR. And what about those who aren’t? So this tells us that the number of real estate agents in Florida could be much bigger.

Now that we know which state has the most real estate agents let’s check in which cities do real estate agents earn the most money:

What Are the Most Profitable Real Estate Niches?

As previously presented, real estate agents’ earnings depend on one’s location, experience, skills, and commission rate. But, one more factor worth mentioning is the niche.

Already asking yourself, which are the most lucrative real estate niches? Luckily, we have the answer. Let’s take a look:

  • Green/Eco-friendly properties — The creative and artistic side of being a real estate agent would be specializing in green or eco-friendly buildings. It’s about properties that have LEED certification — efficient, healthy, and cost-saving buildings. Professionals working in this field earn the most – $263,183 a year, on average.
  • Foreign investments — some real estate agents enjoy expanding in the global economy and exploring the conditions of the foreign real estate markets. So, they focus on international properties. Their average salary is $183,774 per year.
  • Luxury properties –  Every new real estate agent wants to break into the luxury home market. Who wouldn’t want to sell one house for the same commission they’d make selling ten? The average annual income of professionals in this niche is $183,482. Bear in mind, though, that this is a limited market, already saturated with agents with affluent clientele.
  • Affordable housing – It may be hard to believe, but real estate agents in this niche make $168,440 a year, on average. The strong, consistent demand for affordable housing is an opportunity to keep yourself busy in the real estate business.
  • Commercial properties — Agents specializing in commercial real estate require a lot of training. But it’s worth it. The average annual salary is $165,940.

Average Income by Niche

(Image source: McKissock)

How to Get Started as a Real Estate Agent?

Right off the bat, you don’t need a college degree to become a real estate agent. Yet, you do need a licence.

The requirements differ from state to state. But the standard steps are:

  • Take a prelicensing course
  • Take a licensing exam
  • Activate the newly gained real estate agent license
  • Join a brokerage agency
  • Becoming a realtor® (optional)

Take a prelicensing course

Each state requires a prelicensing course before taking the main exam. These courses are provided by licensed real estate schools. Their cost varies in the range of $200 to $400.

Another thing that varies from state to state is the hours you need to attend to take the prelicensing exam at the end of the course. For example, Texas requires 180 classroom hours, but Florida only 63.

Also, some schools have online courses, while others offer only an in-person classroom option.

Note: When it comes to choosing a licensed school, make sure the school is part of ARELLO — Association of Real Estate License Law Officials.

Take a licensing exam

Now, the main thing — the real estate exam.

You need to check with your state’s real estate regulatory body about when and where is the next exam scheduled. Also, you need to pay an application fee specified by your state. This is typically up to $50. The exam has two parts, federal and state real estate laws. Most states require a minimum score of 70% to pass the exam.

But before you apply, be certain of one thing — you need to be full of knowledge to pass the exam, as it’s not as easy as it looks. Almost 50% of Americans fail their first time when taking the exam.

Even so, there is no need to worry. Most states allow multiple attempts within two years from submitting the first application. When this timeframe pass, you need to renew the process from the beginning, taking the pre-license course and exam. And some states like Texas, for example, require you to take additional education after three failed attempts.

Activate the newly gained real estate agent license

Congratulations on your passed exam! But, the process of becoming a real estate agent doesn’t end here. Next, you need to activate your license. You can do that by contacting your state’s real estate regulatory organization. One more thing, for activating your inactive license, you need to pay a fee specified by the state issuing the license.

And voila, now you’re a licensed real estate agent, ready to dive into the real estate world.

Join a brokerage agency

Real estate agents work for themselves, but not independently. They must work for an employer broker.

As mentioned above, real estate agents aren’t earning a base salary but a commission from the broker for each closed deal. Thus, as a newly-licensed agent, you should do your research and consider brokers’ commission split models and additional benefits, such as access to resources and onboarding assistance

Consider becoming a realtor®

This step is optional. But, by becoming a part of NAR, one of the largest associations of realtors in the US, you’re immediately expanding your career growth opportunities.

As of 2022, to join the association, you need to pay a membership fee of $185. Once a realtor®, you can access detailed market information, property data, and various helpful tools.

Also, NAR has a strict code of ethics, which all members must respect. The code guarantees to all potential buyers and sellers that the agents and brokers would work for their best interests.

Wrap Up

So, how much do real estate agents make?

The estimated average is $95,365 per year. But in reality, this profession offers unlimited  income potential. That’s because real estate agents work for a commission. The typical rate is around 3% of each closed deal. Depending on the local housing market prices, the dollar amount of this commission can be substantial.

But success doesn’t come overnight. Especially not in the real estate business. You need to gain experience and build connections. This involves putting in a lot of time and effort. But is it worth it? We’d say definitely!

ABOUT AUTHOR

When you were a kid, what did you want to be when you grew up? Maybe you dreamed of being a doctor, a singer, or an athlete. Well, believe it or not, my answer was always loud and clear: “I want to be an economist!” So, here I am, not a typical office worker with a pile of documents to sort or a lot of complex data to analyze, but a financial content writer exploring all things money-related. And, I must say, I really enjoy sharing my financial and economic knowledge with all of you.

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