How do real estate agents get paid? Commission is king

However, as those who are trying to make a living working in the real estate world will tell you, it is not easy, especially when you are just starting out. Many of the celebrity real estate agents, like Ryan Serhant or Barbara Cochran, have significant additional income from things like TV shows and books.

“I think people may underestimate how competitive this field is. There are a lot of agents in the industry, but not many people who are as successful as they are made out to be,” says Jason Alimhead of real estate service Redfin.

Real estate brokers and sales agents earn a median salary of just $56,620 per year, according to the U.S. Bureau of Labor Statistics. US Bureau of Labor Statistics.

Since most people in the real estate world make money through commissions rather than salaries, figuring out how real estate agents get paid can be difficult. Luck you’ve got your back.

Houses change hands

The most common and obvious way realtors put money in their pocket is when a house changes hands.

“Agents primarily make their dollars on commissions—either they represent a seller and that seller pays them a certain commission for selling their home, protecting your interests and getting them big money, or you work with a buyer who works with us to help them find home and determine what they need,” says Alim.

There are different business models within these transactions. Agents can work alone, work in a team and share with their broker, or work a la carte and charge by the hour or activity, Alim adds.

Sales commission rates typically average around 5-6% and are split between the buyer and the seller’s agent. However, the commission’s future is in doubt due to an agreement reached this year with the National Association of Realtors (NAR). While this is good news for home buyers and sellers, it does not bode well for agents as commissions could soon drop by as much as 30% over time.

However, the general gist is this: the more houses you sell or help someone buy, the more commissions you can take home.

In rented premises and beyond

The supply of rental housing in the United States has gradually increased over the past few decades; In fact, only in 2022, according to data collected by Statista.

Real estate agents play an important role in helping investors and property owners keep properties occupied. Not only do they help with the initial leasing process, during which they may earn a commission, but they can also sometimes act as a sort of property manager, acting as a liaison between the tenant and the owner.

On the rental side, agents can help individuals find and negotiate rental properties and premises, which can earn the agent a finder’s fee. This can range from a flat fee, a percentage of the annual rent, or the cost of one month’s rent.

This can apply to all types of housing units, be it a single family, apartment, apartment or commercial premises. If you’re looking and someone helps you find it, the agent will want to receive a commission for their time and services. There is also the world of real estate consulting, in which agents can earn income only through their knowledge.

“There are a lot of different ways when you look at real estate sales where people generate income,” Aleem says.

Become a broker

After approximately three years of licensed real estate experience and additional education requirements, an agent can become a broker. This allows people to work independently as well as hire agents. Brokers can not only continue to work with their clients, but also receive a portion of their agents’ commissions.

This is exactly the path Alim took. After becoming an agent at age 21, he gained enough hands-on brokerage experience to become a broker himself and then eventually join Redfin.

Those who have the entrepreneurial spirit to become an agent and then open their own brokerage can certainly make it in the world of real estate, but it requires hard work and many long days. There remains significant turnover among real estate agents, with thousands leaving the field every year. Among those who stand out, securing a transaction is difficult. Aleem says the average agent completes just four to six transactions a year, including a portion who complete none.

Conclusion

Making money in real estate is difficult. With new commission rules emerging this year stemming from the National Association of Realtors settlement, it’s unclear what the future of the real estate world will look like. Being a largely independent professional, there is often no security of income, health benefits or pension system. You are your own support system. While it may seem daunting, for those who truly enjoy the freedom to create their lives and futures, real estate is an exciting space.

At the same time, it is important to remember that this is not a joke: those who work the hardest get the most rewards. If you can find the perfect balance between being a person and a businessman, you may be on your way to success.

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