How Much Money Do Real Estate Agents Make Each Year?

how much money do real estate agents make each year

Are you looking for a high-paying job? You can make a six-figure living as a real estate agent, even without a college degree.

Many people make less than six figures, and many quit real estate before earning their first commission.

What is the average income you can make as a real estate agent? This article examines the potential income for real estate agents.

What is the average income for a real estate agent

Most real estate agents work on commission. This means that most or all of their income comes from selling (or helping to buy) houses. So how do real estate commissions work? A typical commission of 6% is paid by a seller when they sell a home with the assistance of a real agent. The commission is split between the buyer agent and the seller agent. Each side will receive a 3% commission. This is a common arrangement. Each agent can expect to make $7,500 if they sell a house worth $250,000.

The commission split

The commission can be split between buyers and sellers. The broker (i.e. the company the agent works for), may also receive a portion of the commission (up to 50% for new agents). Agents in real estate must also pay their expenses. This includes driving customers around, professional fees, signs, advertising costs, and any other expenses.

In the above example, an agent might make $7,500, but only $2,500 after expenses.

Because so much money is at stake in each transaction, the question becomes: How many transactions can a realty agent handle each year? The National Association of Realtors averages 12 transactions per year. The average real estate agent would earn $5,000 per transaction after expenses, which would bring them $60,000 annually. These real estate agents average 10 years of experience. Since newer agents will generally sell fewer properties; they will have lower incomes and earn less.

The average agent income nationwide

If you want to know how much real estate agents make, the average real estate agent makes $45,990 per year according to the Bureau of Labor Statistics. However, there is a wide range of income. One-tenth earned less than $23,000 and 10% earned more than $110,000. While some agents work part-time, most of them work 40 hours per week. Below is a chart from Indeed.com.

How much real estate agents make in each state

StateLocationAvg. Salary
AlabamaBirmingham$95,571
AlabamaStatewide$94,433
ArizonaPhoenix-Mesa-Scottsdale$84,440
ArizonaStatewide$88,959
ArkansasLittle Rock-North Little Rock-Conway$90,670
ArkansasStatewide$91,228
CaliforniaLos Angeles-Long Beach-Anaheim$91,205
CaliforniaStatewide$92,223
ColoradoDenver$89,243
ColoradoStatewide$82,601
GeorgiaAtlanta$75,612
GeorgiaStatewide$78,002
HawaiiHonolulu$120,471
HawaiiStatewide$117,392
IllinoisChicago$79,654
IllinoisStatewide$81,122
IndianaIndianapolis$82,357
IndianaStatewide$92,372
IowaDes Moines$53,035
IowaStatewide$98,908
KansasWichita$81,931
KansasStatewide$76,528
KentuckyLouisville$80,722
KentuckyStatewide$94,740
LouisianaNew Orleans$76,302
LouisianaStatewide$59,548
MarylandBaltimore$82,680
MarylandStatewide$79,619
MichiganDetroit$76,972
MichiganStatewide$80,080
MinnesotaMinneapolis-St Paul$73,331
MinnesotaStatewide$81,426
MississippiGulfport-Biloxi-Pascagoula$69,761
MississippiStatewide$98,675
MissouriSt. Louis$72,936
MissouriStatewide$81,287
MontanaMissoula$61,798
MontanaStatewide$73,925
NevadaLas Vegas-Paradise-Henderson$80,770
NevadaStatewide$88,169
New YorkNew York-Long Island$93,343
New YorkStatewide$86,872
OklahomaOklahoma City$85,459
OklahomaStatewide$72,246
PennsylvaniaPhiladelphia$72,234
PennsylvaniaStatewide$87,700
South CarolinaColumbia$57,656
South CarolinaStatewide$89,376
TexasDallas-Fort Worth-Arlington$84,044
TexasStatewide$75,456
UtahSalt Lake City$87,987
UtahStatewide$87,576
VirginiaArlington-Alexandria$82,415
VirginiaStatewide$78,204
WashingtonSeattle-Tacoma-Bellevue$96,415
WashingtonStatewide$95,050
Washington, D.C.District of Columbia$85,281
WisconsinMilwaukee$75,170
WisconsinStatewide$79,855

What does it take to be a successful real estate agent?

You will need to have more than a few yard signs if you are looking to make six figures as a realty agent. Real estate agents must be careful about their expenses, particularly advertising costs (on sites like Zillow), which can take up large chunks of profits. The more money that you make on each transaction, you will earn more overall.

Real estate marketing

Spending money is a big decision. Many agents invest their advertising dollars on Facebook ads to maintain a professional and easy-to-find online presence. Some invest in mailings to be sent to potential buyers who may wish to sell their homes in the near future. Successful agents have created custom videos to help each homebuyer grow their social reach. These videos include music, photos of the new home, and a view from the buyer’s house. These videos are shared on Facebook by many happy clients to announce their major purchase.

Hiring other agents

Many real estate agents eventually become brokers and hire agents to work for them. Although they have lower costs (which are paid by the hiring agent), these agents also earn lower commissions because the agent takes a cut. Many agents can add agents to their team without doing a lot of extra work.

Customer service matters

It is important to provide exceptional customer service. Even though buying a house can be a major deal, many people sell and buy houses every few years. You will be referred to your friends by repeat customers if you are a good agent. The best way to generate new business is through word of mouth.

Which market to target

Depending on where you live, there may be a wide range of home prices. It is wise to target a specific market. Going for the lower-end market may provide more clients, but each sale will net only a small commission. If you choose to go after the high-end housing market, the clients will be fewer, but each commission will be significant.

Either way can work and there are several levels between the bottom and the top. Selling 100,000 condos is easier, but selling homes for $500,000-$1,000,000 is much more lucrative per sale.

how fast can i make my first commission

How quickly can you generate your first commission?

A key factor in becoming a successful realty agent is to generate your first commission quickly. Before they can find their first client, real estate agents have to pay several thousand dollars in costs (licenses and education, signs, etc.). You’ll lose money if you take longer to get your first commission.

Friends and family

Let your family and friends know you are a real estate agent to ensure you make money quickly. You can let people know by using social media or personal contact. Let people know that you are an agent when they mention that they may be moving. Although it might seem a bit ostentatious, you must get the word out. After you have completed a few transactions you can start to see your business expand through referrals.

Work consistently

Hourly work at a realty agency is a good option if you are looking for an income to supplement your commissions. You’ll gain experience in the right area and earn an income, regardless of whether you are doing marketing work, clerical work, or advertising work. Your work in a real estate office will allow you to have some spare time to grow your agent business.

You need a real estate license

To become a licensed real estate agent in your state, you will need to be licensed. You may need to be licensed in several states if you live near a border. Although the requirements for licensure are different from one state to another, you will need to pass a test. You must also be at least 18 years of age. You will need to pass a test that covers a variety of topics, including the real estate laws in the state you will be licensed.

Other than your state licensure you don’t require any certifications. It is vital to continue learning about your field to grow as a real estate agent. However, just getting the certificate won’t bring you any new clients.

Final thoughts

When considering this field, it is important to understand the compensation of real estate agents. The average real estate license sells one home every two years. This means that many agents don’t make much money. However, many agents make as significant amount of money, especially those who open their own brokerage or buy into a franchise.

You want to hire the best 10% of agents when you’re a customer. This shows they can sell homes in your local area. Even if they offer a great commission, you won’t want to work with a seller who only sells 1-2 homes per calendar year.