If you’re thinking about getting your real estate license, one of the first questions you probably have is, “How do real estate agents get paid?” Understanding the compensation structure in the real estate industry is key to deciding if this career is the right fit for you. Unlike traditional salaried jobs, real estate agents typically earn income through commissions. In this blog, we’ll break down how real estate agents get paid, the factors that influence their earnings, and how you can start your career on the right foot.
How Real Estate Agents Get Paid: The Basics
Real estate agents earn their income primarily through commissions, which are a percentage of the property’s sale price. When a property is sold, both the buyer’s agent and the seller’s agent typically earn a commission. This commission is usually split between the agent and their brokerage.
For example, if you help someone sell their home for $300,000, and the commission rate is 6%, the total commission would be $18,000. This commission is typically split between the buyer’s and seller’s agents, with each receiving $9,000. However, that $9,000 doesn’t go directly into your pocket—your brokerage will take a portion of it as well.
The Commission Split
Most real estate agents work under a licensed broker. The broker provides support, training, and office space in exchange for a percentage of the agent’s commissions. This is known as the “commission split.”
The commission split can vary depending on the brokerage and your experience as an agent. New agents often start with a 50/50 or 60/40 split, meaning the brokerage takes 50% or 40% of the commission. Experienced agents, or those who generate more sales, may negotiate higher splits, such as 70/30 or even 80/20.
Example:
- You sell a home for $300,000 with a 6% commission.
- Your commission share is $9,000.
- If you have a 60/40 split with your brokerage, you’ll keep $5,400, and the brokerage will take $3,600.
As you grow and build a successful career, you can negotiate better commission splits or even consider starting your own real estate team or brokerage to maximize your income. Be sure to read our recommendations on how to become a successful real estate agent
Factors That Affect Real Estate Agents’ Earnings
While commissions form the basis of most agents’ earnings, several factors can influence how much you actually take home:
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Market Conditions: The real estate market can fluctuate, impacting the number of transactions and the price of properties. In a booming market, agents tend to close more deals at higher prices, increasing their income potential.
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Location: Agents working in high-end markets, where home prices are higher, typically earn more per transaction compared to agents working in markets with lower-priced properties.
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Experience and Negotiation: As you gain more experience, you can negotiate higher commission splits and handle more transactions. Experienced agents often have larger networks and generate more leads, which leads to more closed deals.
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Specialization: Some real estate agents choose to specialize in niche markets, such as luxury properties, commercial real estate, or investment properties. These specializations can offer higher commissions but may require more expertise and connections.
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Effort and Hustle: Since real estate agents work on commission, how much you earn is directly tied to your effort. The more homes you sell and the better you manage your time and lead generation efforts, the more you’ll make.
Additional Income Opportunities for Real Estate Agents
While most agents earn through commissions, there are other ways to supplement your income as a real estate professional:
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Referral Fees: If you refer a client to another agent, you can earn a referral fee—typically 20% to 30% of the commission the other agent earns from the transaction.
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Property Management: Some real estate agents manage rental properties for clients, earning a percentage of the monthly rent as a management fee.
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Coaching or Training: Experienced agents often offer coaching or training services to new agents, which can be an additional source of income.
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Brokerage Ownership: Eventually, you might decide to open your own brokerage. As the broker, you’ll earn a percentage of the commissions from all the agents working under your brokerage.
How to Get Started as a Real Estate Agent
If you’re serious about pursuing a career in real estate, the first step is getting your real estate license. Each state has different requirements for becoming a licensed real estate agent, including specific courses and exams.
Once you’re licensed, it’s crucial to join a reputable brokerage, start building your client base, and take advantage of the opportunities to learn from experienced agents. Be sure to interview brokers thoroughly. I always recommend these 5 questions to ask a broker when interviewing.
Pro Tip: Looking for a real estate school to start your journey? Head over to the Power Unit Coaching Tools page, where you can find discounts for many popular real estate schools. This will help you save money as you work toward getting your real estate license.
Is a Real Estate Career Right for You?
Real estate can be a rewarding career, offering flexibility, growth potential, and unlimited earning opportunities. However, it’s important to remember that real estate agents don’t earn a salary; they work on commission. This means your income is directly tied to your hustle, your network, and your ability to close deals.
If you’re ready to take the first step toward becoming a top real estate agent, make sure you have the right training and support. Check out the resources available on the Power Unit Coaching site, where you can access discounts on real estate schools and other essential tools to help you launch your career.