With home prices still high across most of the country, you may be considering a career in real estate. According to the U.S. Bureau of Labor Statistics, there are about 54,800 openings for real estate agents and brokers every year. And the real estate job market is expected to grow.
However, being a real estate agent is more challenging than it may appear. Over 87 percent of new agents fail within their first five years. So, before you sign up for classes to get your real estate license, let’s look at how real estate agents get paid and whether it's a good career choice.
How do real estate agents get paid?
Real estate agents and brokers are paid primarily on commissions earned from selling homes. You don’t make any money until you help someone buy or sell a home.
And, even when you do assist a client in a real estate transaction, you’ll have to split the commission with about four other real estate professionals involved in the sale. The standard commission on a home sale is 5 percent to 6 percent, which is split between the seller’s agent, the buyer’s agent, the listing broker, and the buyer’s broker.
For example, say you are a buyer’s agent whose clients buy a $350,000 home with a 5 percent commission on the sale. The total commission from the sale is $17,500, and that amount gets split between you (the buyer’s agent), your broker, the seller’s agent, and their broker. So, in reality, you will only earn 1.25 percent of the sale, or about $219. At that rate, you’d have to sell a lot of homes to make any real money.
What’s the difference between a real estate agent and a broker?
If you’re the broker on the sale of a home, then you can pocket more of the commission because you don’t have to split your commission with an agent who works for you. A real estate broker is someone who has been in the real estate industry longer and has received additional training to get their broker’s license.
As a real estate agent, you're required to work under a real estate broker, and thus, you’ll have to give them a share of your commission. But a broker can work independently and even open their own real estate agency. Most states require that real estate agents work in the field for 1–4 years before they can apply for their broker’s license.
How much do real estate agents make on average?
According to ZipRecruiter, the national average salary for a real estate agent is $93,230. About 45 percent of agents make less than $84,000 annually, and only about 25 percent earn more than $100,000 annually.
Where you work also plays a factor in how much you can earn as a real estate agent. For example, agents working in San Francisco, one of the most expensive housing markets in the country, earn an average annual salary of about $105,135.
How often do real estate agents get paid?
Since real estate agents work primarily on commission, they don’t have a steady monthly income. Their income can fluctuate month to month depending on how many homes they sell. Real estate agents don’t get paid their commission until after the home sale has closed.