If you watch too many episodes of Millionaire Dollar Listing, you may be thinking real estate agents make a lot of money. Is this true? In this post, we break down how real estate agents make money and how much money real estate agents make.
How Do Real Estate Agents Get Paid?
In most cases, real estate agents are independent contractors (not employees) which means they are not salaried. They only make money on commission from representing buyers and seller. However, they typically have to pay a brokerage split with their broker and pay other expenses.
So, for example, let’s say you sell a $200,000 home and earn a 3% commission. That means that your gross commission is $200,000 x 3% = $6,000.
But you have to pay a 75/25 split with you broker, which means you only get 75% x $6,000 = $4,500. And that’s not even taking into account any outside expenses you may have such as gas or marketing expenses.
What Does the Average Real Estate Agent Make?
According to the Department of Labor, the average real estate agent makes $50,300. According to the National Association of Realtors, the average home price is $219,300.
Using the above example, if you make an average of $4,500 for every deal you do, then you would have to do $50,300 / $4,500 = 11-12 deals per year. This is roughly one deal per month to be an average agent.
How Much Can a Real Estate Agent Make?
The beauty of real estate though, is that you don’t have to be average! There are plenty of top agents making A LOT more than $50,300. If you want some inspiration, check out Real Trends The Thousand. There are agents there that have done over 100+ transactions.
Even at 100 transactions per year at $4500 transactions, that would be an annual salary of $450,000! Not bad for a real estate agent! While this obviously comes with skill, hard work, and dedication, it is entirely possible to make a very good salary as a real estate agent.
If you are interested in making a lot of money as a real estate agent, I would recommend reading the Millionaire Real Estate Agent by Gary Keller.
And if you are having trouble passing the math portion of your licensing exam, check out our products to help you pass the real estate math questions on the exam.