If you’re a fan of Million Dollar Listing or Selling Sunset, you may think that all real estate agents are rolling in dough. All you have to do is sell a few luxury condos and you’re set for life. But in reality, that kind of lifestyle is a fantasy for most agents. The truth is that an agent’s financial success varies drastically from city to city and person to person. In major cities like New York and Los Angeles, the commission on the sale of one unit can be enough to last you for the year - whereas in other parts of the country paying seven or eight figures for a home is unheard of. And only the most experienced and successful agents can get access to those kinds of listings. The majority of agents are forced to find more practical deals, even in popular urban areas. Here is a look at the average salary of a real estate agent and what you can expect if you’re considering going into the field.
No, generally speaking, real estate agents do not receive a base salary. They are independent contractors paid on commission. There is nothing set in stone that says brokers cannot receive a salary if the brokerage is willing to offer it. Sometimes, a brokerage will hire an assistant or manager who may be paid a salary and perform certain brokerage services for commission if they are appropriately licensed. But the vast majority of real estate agents in the US do not receive a salary.
As independent contractors, real estate agents are expected to run their own businesses using the brokerage’s guidance and resources to make sales. There is usually a training period where the agent is taught the ins and outs of the real estate business and the local markets. But eventually, it is expected that the agent will go out on his or her own to bring in clients and close deals.
Being a contractor comes with advantages and disadvantages. Real estate agents are often permitted to make their own schedules have other businesses or jobs on the side. Plus, there is no limit on the amount of money they can make in a given year. But, if they do not make any sales, they are not paid anything., even if they are putting in the work and doing everything they’re supposed to be doing. Real estate can be a fickle business, and not everyone is cut out for it. But those who are willing to hustle and learn from their mistakes will reap the benefits.
The brokerage does not pay real estate agents a salary. Instead, they receive a commission from the final sale or lease of a property. The brokerage pays for the office expenses- like rent, equipment, legal counsel, etc. – that the agents may utilize. But the actual commission comes from the client. How commissions are structured depends on the brokerage and the type of deal being executed.
In the case of a residential sale, the seller is typically charged a 5-6% commission. That commission will typically be split in half and shared equally between the buyer’s and seller’s agents. Or, if the buyer does not have an agent, the seller will keep the full commission. In the case of a For Sale by Owner, if there is a buyer’s agent, he or she will typically receive the normal 2-3% commission.
Keep in mind that residential sales are not the only deals available to agents. Renting apartments can be a good way to make a quick buck. Agents can often collect a commission on a rental that is equal to one month or higher in busy markets. Commercial sales and leasing are other avenues many real estate agents utilize to make money. The commission splits are similar to residential (4 -6% of the sale or lease price). But commercial units can get quite pricey, and one deal can net you a hefty return. However, you need a bit more experience and have seniority to be successful in the commercial industry.
Real Estate is one of the most varied professions in terms of income. An agent who only works one or two days a week may make next to nothing, whereas another broker who grinds 24/7 may make well over six figures. Likewise, an agent in a major city who is working in a luxury market may collect a commission that is 5x the check of an agent in a small town. But if you’ve been in the game for a while and you get a solid stream of referrals, a high volume of smaller deals can also make you rich. It all depends on how much you hustle, how much experience you have, and how well you know the local market.
According to the Bureau of Labor and Statistics, the average annual wage for real estate in 2017 was $62,060, while the median wage was only $48,930. The top 10% of agents had a median income of $111,800, but the bottom 10% had a median income of $24,000.
Real estate is a business where some flourish and some struggle. The average income is much higher than the median because the top earners do so well it skews the data. But the majority of real estate agents barely make enough to stay above the poverty line. Keep in mind that not all real estate agents work full time – some do it to make side income or work in another facet of the industry and occasionally work as an agent. Most agents who stick with it and are willing to make mistakes and adjust can manage to make a decent living. But it’s certainly not the kind of business where every practitioner is an overnight millionaire. There is the potential for six to seven-figure income if you’re willing to put in the work. But just know, it won’t come easy.
The biggest hurdle to most new real estate agents is how to survive while learning the ropes and closing your first few deals. If you’re just getting started as a real estate agent, here are a few ideas of how you can make side revenue.
- Offer photography services: Every brokerage needs a good photographer. Stunning photography helps generate leads and advertise inventory. If you are good with a camera, you may offer your services to your broker or other listing agents in the office for a fee.
- Become a freelance copywriter: Good writing can also help move inventory, especially when it comes to digital ads. If you’re good with words, you should consider offering to help write ads for other agents in the office or maintain a company blog to attract clients.
- Offer your services as a personal assistant: If you’re good at administrative tasks and you like organization, offering your services as an assistant to some of the top agents in the office is not a bad idea. They may cut you in on deals, and you’ll learn a lot just by watching how they run their business.
- Drive an Uber: Driving for Uber or Lyft can be a great way to make side revenue in between deals. It’s flexible, and you may even pick up a new client!