How Much Money Does A Real Estate Agent Make?
People are attracted to the world of Real Estate often because of the promise of freedom and money. And sellers are sometimes wary of signing over a percentage of their home sale, thinking that it seems like too much money to “give away” on their home sale. But what no one outside of the industry is really clear on is just how real estate agents are paid and how much they really take home at the end of the year. We’re going to demystify this challenging question for you. The short answer is, “it varies” because there are so many factors that go into the calculation. We’ll use some national averages and simplified situations in order to give you an easy to understand overview.
Working A Commission Based Job
Most people work for an employer, doing a specific job for a set salary. You know that if you show up and do your job that you will always receive the same salary. Sales people that work on commission, such as real estate agents, have no predictable salary. Working as a contract employee who receives only commission means that you will work for many hours, days, weeks or even months on a project and will only get paid if the deal closes. Have you ever heard the terms “high risk yields high rewards?” Well this applies to real estate perfectly. An agent will spend time and money working with a buyer or seller but only gets paid at the closing table – and only if the property closes.
Basic Commission Math
Commission paid to a real estate agent on the sale of a house is always negotiable and will vary by area and part of the county. For simplicity we will assume a 6% commission has been agreed upon by the seller and listing agent.
The seller typically pays the commission out at the closing table out of the proceeds from the sale of the house. All of the following calculations and payments are done by the title company.
Your listing agent does not keep all of this money! The total commission will first be split between the listing agent and buyer’s agent. Then, each agent will have fees to pay and a split with their brokerage. The follow illustration is based on some national averages and basic assumptions just to give you a general idea of how this works.