If you’re considering a career as a real estate agent, you’re likely curious about the earning potential. Understanding the financial aspects of this profession is crucial for making informed decisions.

In this article, we will tackle the question, “How much does a real estate agent make per year?” We’ll explore the factors that influence real estate agent income, including commission structures, and variable expenses. By looking into an agent’s earning potential, you can better assess the financial rewards and challenges of pursuing a career in real estate.

How Much Money Does a Real Estate Agent Make Per Year?

Real estate agents typically earn money through commissions, which are a percentage of the property’s sale price. The commission is shared between the buyer’s agent and the seller’s agent, with each receiving a portion.

According to the US Bureau of Labor Statistics, the median annual income for real estate agents was $49,980 as of their most recent data. This figure represents the midpoint, meaning that half of all real estate agents earn more than this amount, while the other half earn less.

While the median annual income of real estate agents is reported at $49,980, it’s worth noting that actual earnings can vary.

Successful agents often surpass the median income and have the opportunity to build a real estate career. However, like any profession, it requires hard work, dedication, and ongoing efforts to grow one’s client base and expertise in the industry.

Additionally, factors such as location, experience, market conditions, and individual effort all play a role in determining an agent’s income.

Factors That Impact Real Estate Agent Salary

When it comes to determining the salary of a real estate agent, several factors may arise. These factors can have a significant impact on the earnings potential and overall income of a real estate professional, including:

• Experience: The national average real estate agent salary is around $86,356 per year. As agents gain more years of experience in the industry, they tend to build a solid network, develop market knowledge, and refine their negotiation skills
• Location: Real estate markets vary greatly from one state to another, with some areas experiencing high demand and high property values, while others may have slower markets. Most real estate agents working in cities or areas with robust property markets have higher earning potential due to increased sales activity and higher property prices
• Market Conditions: During a seller’s market, where demand exceeds supply, agents may have more opportunities to sell properties and negotiate higher prices, resulting in increased commissions. During a buyer’s market, where supply exceeds demand, agents may experience fewer transactions and potentially lower commission rates
• Work Ethic and Sales Volume: An agent’s income is directly influenced by their level of commitment, work ethic, and sales volume. Agents who actively prospect for clients, market properties effectively, and consistently close deals tend to earn higher incomes
• Niche or Specialization: A luxury broker, commercial real estate agent, or niche market specialists (vacation rentals, investment properties) often has the potential to earn higher incomes due to the higher price points and larger transactions typically involved in luxury and commercial properties

While these factors play a significant role in determining an agent’s salary, individual effort and skills, marketing strategies, and the ability to provide excellent customer service also contribute to success in the industry.

Understanding Commissions

The commission structure for real estate agents involves a percentage-based fee calculated on the final sale price of a property.

The commission is typically shared between the seller’s agent (listing agent), the buyer’s agent, and the brokerage. The specific percentages can vary but is commonly around 5% to 6% of the final sale price.

For example, a home sells for $500,000, and the commission is set at 5%. The total commission is $25,000. The seller’s agent and buyer’s agent would split this commission, and each would receive a fair share of $12,500.

Real estate agents are supervised by real estate brokers. The broker will receive a portion of the commission earned by the agents. The exact split between the agent and the broker can vary based on their agreements.

The broker might take a 30% share of the agent’s commission. In this example, the broker will take $3,750, and the agent will receive $8,750 (70% of the commission).

These numbers can vary based on your individual agreement, brokerage practice, and real estate transaction.

Variable Expenses

Alongside the commission-based income, real estate agents often incur variable expenses as part of their job. Here are some common variable expenses that agents may encounter:

• Licensing Fees: Agents are often required to complete continuing education (CE) requirements and training to maintain their licenses and stay updated with industry practices. You will have to pay the necessary CE and renewal fees.
• Marketing and Advertising: Many real estate agents invest in marketing tools and campaigns, which can include expenses for online advertisements, photography, virtual tours, brochures, signage, website maintenance, and social media marketing. The costs can vary depending on the extent of marketing efforts and the competitiveness of the local real estate market.
• Professional Fees and Memberships: Agents often join professional associations, such as the National Association of Realtors (NAR), multiple listing services (MLS), and other industry organizations. Membership fees for such organizations can be considered as part of the variable expenses.
• Office Expenses: Agents who operate independently may have office-related expenses, such as rent, utilities, office supplies, technology, and equipment costs. These expenses can vary depending on whether an agent works from a dedicated office space or a home office.

Real estate agents must carefully track and manage their variable expenses, as they directly impact their net income. By monitoring and budgeting for these expenses, you can ensure you allocate sufficient funds to cover your business costs and tax payments, while maximizing your overall profitability.

How to Become a Real Estate Agent

Becoming a real estate agent involves several steps and requirements. Here is a general outline of the process on how to become a licensed real estate agent:

1. Complete pre-licensing coursework. Successfully complete the pre-licensing coursework, which may include passing exams and assessments. The duration and specific requirements of the course can vary depending on your state. Be sure to comply with all the course requirements and deadlines.
2. Apply for and pass the licensing exam. After completing the pre-licensing education courses, apply to take the real estate licensing exam administered by your local real estate commission or similar authority. The exam evaluates your knowledge and understanding of real estate principles and laws. Upon passing the exam, you will be eligible to move forward in the licensing process.
3. Undergo a fingerprint-based background check. Most states require agents to submit to a fingerprint-based background check to check if a candidate has any felony or criminal history.
4. Find a brokerage. In most cases, real estate agents must work under a licensed real estate brokerage. A brokerage firm provides support, resources, and a platform for real estate agents to conduct their business.
5. Apply for licensure. Once you have identified a brokerage, submit an application for licensure, which typically requires providing documentation such as exam results, background checks, and other necessary forms and fees.
6. Complete post-licensing education. Post-licensing education for agents refers to additional coursework or training required after obtaining a real estate license, focusing on practical knowledge and skills relevant to the profession.

Getting a real estate license is important because it enables you to legally engage in transactions, access higher earning potential through commissions, and expand your career opportunities in the real estate industry.

Alternatively, we recommend you check out our state-specific Real Estate Agent Licensing page.