One of the things a shrewd career-shifter would ask about the new career they’re getting into is how much they’ll be making when they start selling houses. In the case of new and upcoming real estate agents, it all depends on how successful they are and how much work they “actually” put into their job.
As most of you may know, real estate agents don’t follow a fixed schedule. They work on their own terms, and unless they are diligent in following leads and closing the deal, they won’t be able to make a sale.
How are agents compensated?
Real estate agents make a living based on sales commissions. This commission is split between the seller’s agent and the buyer’s representative, and their respective brokers (all agents have to work for one). So, if you do the math, you can see that agents will be able to make around one-fourth of the total commission of the sale.
Conventionally, this commission shares five to eight percent of the property listing price. This price will be split among the agents who will take about 30 to 75 percent, depending on their experience or how new they are to the job.
What do statistics say?
According to the National Association of Realtors (NAR), the annual median income of licensed real estate agents is $40,000 in 2010. Per sale, the average commission ranges between five to six percent of the listing price although this may be higher or lower depending on the jurisdiction and the brokerage that employs the agent. Agents sell half a dozen of properties on average annually, according to the NAR.
Which party pays for the commission?
You may wonder where the commission comes from. So, who pays for it? Often times, it is paid for by the buyer. It may seem like both parties will be sharing the commission fee, but if you think about it, it’s the buyer who always assumes the fee as the commission is always part of the listing price and not paid beforehand by any party.
Where do all the money go?
When commissions are paid to the listing agent, he or she will have to split it with his or her broker. Why? It’s because brokers are the ones who spend time and money in dressing the house and promoting it through advertising. If the broker and house owner have signed an exclusivity agreement for the listing, the broker will assume the receipt of a full commission since they have the exclusive rights to sell the house, regardless if the homeowners have sold the property themselves.
On the other hand, when the buyer’s agent receives his or her commission from the seller’s agent, he or she will have to share it with his or her broker. This commission will be split equally or depending on the percentage agreed upon by the brokers and agents of both parties.
To sum it up, the amount of money a real estate agent can make in a year will generally depend on the number of properties they’ve sold within that period. To earn more, an agent has to work diligently in pursuing leads and expanding their network.
Mark Acantilado currently contribute as an online marketing specialist and researcher for several websites powered by 360training.com Inc. He has been in the field for 1 1/2 years and continuously provide support for the top e-learning provider in the US.
He is currently handling AgentCampus.com