Does starting a career in real estate as an agent interest you? You might be interested, but before making the jump, you probably want to know one big answer to a question, how much could I make as a real estate agent?
To be able to understand a salary for a real estate agent, you first need to understand the job of a real estate agent. A client hires a real estate agent for the purpose of representing them in the purchase or selling of a property.
The salary on average for a real estate agent varies from each year and this is due to the commission for a real estate agent is based on performance. Which means that the amount of money that you earn is based upon the number of properties that you are able to sell and the amount of commission that you are able to receive on each sale.
As of May 2020, the United States Department of Labor cited that the average salary for a real estate agent was around $59,000.
There are some real estate agents with realtor licenses in California who make significantly more due to the market they serve, type of real estate they represent, and their skill level. Conversely, many agents can earn less particularly during the first year. A new real estate agent typically will work under the supervision of another party which could be the broker or record or another agent whom is successful and has experience. This means that you will be the one selling and listing the property, but you will still need to split any commission that you make between yourself and the managing broker, giving an amount to them that was agreed upon. Oftentimes, new agents represent the buyer or seller, however senior agents or the broker of record will assist with paperwork and deal with title and escrow to avoid issues that a new agent may not be aware of.
The managing broker may also have to split their part of the commission with a different broker, one who represents the side of the transaction for the buyer. Let’s breakdown what this process looks like.
Breaking Down The Math
Now it is time to break out your calculator and do some math. This way you can actually determine how much you will make with each sale. Check out the example below.
Let’s say, for example, you sell a home for $200,000 and the commission rate for that home is 6%, which would be $12,000. So this amount is then split between the broker for the buyer and the broker for the seller, typically a 55 percent to 45 percent ratio.
That means that the broker for the buyer would receive $5,400 and the broker for the seller would receive $6,600. Then the $6,600 is split between the managing broker and yourself based on the amount you agreed upon.
For the sake of this example, let’s say that you agreed upon a 50/50 split. This means your commission of $3,300 is for listing and selling a home that was valued at $200,000.
This is not taking into account any additional expenses that you may incur in selling the home, such as signage costs, expenses for marketing, reductions in commission, and other expenses that may occur. These costs should be paid by the client.
With improper management of your expenses in a sale, you can potentially wind up losing money on a sale. You can use the math on the sale of any home and then determine what the final price of the home will be. This is also why math is so important, even though most of us hate doing it, basic real estate calculations are necessary!
Longer Hours Increase Income
Do real estate agents make a lot of money? This can be determined by looking at what agents who put in an average amount of work earn. A longer working week typically leads to a higher income in real estate. Our survey indicates that agents who work 40 to 50 hours a week can expect to earn approximately $113,054. Working 51 to 59 hours a week, agents can expect to earn roughly $143,469 per year. Several factors can influence these estimates, so keep in mind they are only estimates.
Top Commissions for Experienced Agents
Having more experience in the real estate industry typically translates into more earning potential for the agent. When they are in the middle of their career, a real estate agent might earn anywhere between $149,000 and $164,000 dollars per year. Additionally, this number is dependent on other factors affecting the average real estate agent’s earnings.
Income Can Be Greatly Influenced By a Niche
Real estate agents make different amounts depending on their niche. Real estate agents who specialize in residential properties might earn less than those specializing in commercial properties. As a rule of thumb, the average real estate income fluctuates between $60,000- and $100,000, with some niches — like property management or affordable housing — having notably lower incomes and others — like luxury homes or green properties — having significantly higher incomes.
How to become a successful real estate agent?
It does not matter what the “average” income is in your niche, what your experience level is, or how much time you put into your job. As long as you take the right steps, you can rise above the median level of earnings. It has been our experience that agents who earn more often excel at managing their marketing dollars, finding quality leads, winning real estate listings, and staying updated on the latest marketing techniques.
How to Quickly Grow Your Income as a New Agent
Increasing your real estate income greatly depends on experience, and managing four financial aspects of your business properly will ensure that you have a successful first year: affordable marketing opportunities, effective networking, smart earnings strategies, and education about the industry. Find out how to leverage these areas to generate more listings, bigger commissions, and a rapid growth rate during your first year as an agent.
Tell your friends and family that you are a real estate agent. Tell them on all your social media accounts, your neighborhood acquaintances, people you do business with, and your family. Mot importantly be ready to talk in person. Talk to people in person greatly increases the rate of business one can get.
Invest in markets with high prices: Since the average commission is 5-6%, you can seriously increase your earnings by focusing on higher-priced real estate markets at the beginning. At 5% commission (divided by four), the sale of a $200,000 house is $2,500; however, it’s nearly $4,375 if you sell a $350,000 house.
Customer service is key: Don’t just help people buy and sell their properties; get to know their concerns, wants, and dreams so that you can present them with the best offers. It can pay off handsomely if you follow this tip properly. In a Nielson survey, 84% of people trust their friends and family for product recommendations, making this form of marketing one of the best free tools you want to use your first year as a real estate agent.
Keep Learning: The real estate industry is ever-changing, and there are numerous ways to learn throughout your first year. You can gain an advantage over competitors if you have industry designations, for example. Likewise, certifications such as Certified Residential Specialist (which can help you earn up to three times as much income) are extremely beneficial or you can switch to a real estate crash course in California. Additionally, you can shadow a mentor from your brokerage firm to gain invaluable, industry-based insights.
Be Creative: Offer a unique service to stand out from other real estate professionals, such as customized video marketing with the client’s favorite music or a blog to show you know the community. Your real estate business cards can also be left at the counters of the businesses or event coordinators mentioned in your articles if they’re willing to comment on or share your articles.
Visit the local events: Farmers markets, festivals, home and garden shows, and crafts fairs offer a fun way to learn more about your area and connect with people who may need an agent. If you’re interested in highlighting your creative marketing expertise, set up a booth at one of these events.
The first step to success is getting a broker: Your broker should provide support as you enter the industry by introducing you to their network, enabling you to access MLS systems, and maybe even setting you up with office space, marketing tools, and learning opportunities to help you grow your income – and theirs!
Join the National Association of REALTORS® (NAR): NAR membership unlocks numerous benefits, including marketing tools and industry discounts, as well as a network of nearly 1.4 million members. About a third of designated REALTORS® choose to increase their income options by becoming licensed brokers or broker associates in order to increase their income.
Keep Track of Your Goals: Because you set your own schedule, it is imperative you keep track of what you want to accomplish and in what timeframe. If your goal is to collect 10 leads within the first week, you will also need a plan of where you will canvass and decide in which online forums you will share your information.
You are responsible for achieving your real estate career goals, but share your plans with your peers. You can further increase your chances for success by reporting your progress to your peers on a regular basis.
Consider Real Estate as Plan B: Your first year can be lean, and one of the best ways to pay your bills and maximize your real estate sales is to take an hourly position doing just about anything real estate, including administrative and marketing duties. The quickest way to learn all the latest trends and negotiation tips is to immerse yourself in the industry.
Real Estate Niches That Can Boost Your Salary
If you get your real estate license, you can not only use these tips to raise your salary, but you can also choose from multiple career paths, thus enhancing your earning potential. There is a wide range of options available to you after you complete your Pre-Licensing education, so you can find the perfect niche for your skills and interests. As an active real estate investor, some people choose a higher risk path like flipping houses, while others pursue becoming a commercial real estate agent, property developer, or broker.
In the commercial real estate industry, for instance, commercial agents make an average of $85,000. Businesses and investors can use these agents to buy, sell, lease, and market office, warehouse, and manufacturing space. They also help with land development. Their main responsibilities include identifying industry trends, conducting space needs and investment analysis, and managing properties and assets to gain the best return on investments for their clients.
Consider becoming a real estate developer if you wish to gain experience in multiple areas of the industry. The role of a real estate developer can vary based on whether they work in commercial or residential real estate. They search for investors, locate land, and renovate or build new projects. Those who are interested in real estate development often focus on certifications related to real estate finance and construction management, while others pursue a higher education degree in Real Estate Development. ZipRecruiter reports that the national average salary for a real estate developer is $73,875.
If you want to become more independent and keep a greater percentage of the commission split, is that possible? In some cases, new real estate agents see the benefits that their real estate brokers enjoy, particularly the split commission on every sale, and decide to follow their lead. In most brokerage firms, agents start in the position of Associate Broker before becoming Managing Brokers, which includes hiring and training new agents, writing and reviewing sales contracts, marketing the brokerage, and providing lead generation services to their agents. Brokers earn a national average of $100,514, ZipRecruiter states. The requirements for becoming a Broker vary based on where you live.
Increasing your income in the first year, regardless of your career path, is a challenge almost all real estate professionals face. You can take advantage of real estate’s limitless potential and California real estate salesperson license by taking advantage of these tips, hard work, and perseverance.
Summarizing It All
So, overall the earning potential for a real estate agent mainly depends on how many sales the agent is able to close and how much commission you are able to make off of the sales. The income also varies based on the number of hours you choose to put in, what level of training and licensing you have, and sometimes it depends on what part of the country you are living in.
Now you know how to calculate the salary for a real estate agent, so you can determine whether you are interested in seeing if a real estate agent career is right for you. It is not an easy career and requires that you put in a lot of work to really succeed, but if you are serious about it and work at it, real estate can be a very rewarding career. Real estate agents income potential has no limit due to the fact that they can represent some of the top properties and make significant earnings.
It is not like a typical job where your earning potential is capped and you can only earn so much. You can earn as much as you work for.