What Do Agents Actually Earn From Their Commission?



A lot of people come to me asking how people make so much money with real estate. But, before you get too excited and get a real estate license yourself, you need to consider the truth about what agents really earn.
 
Let’s consider a house listed at $500,000 with a commission rate of 6%. In this case, that 6% adds up to $30,000. This may sound like a lot, but what if you start breaking it down?

Keep in mind that 99% of the transactions will have two real estate agents. One agent will represent the buyer, while one is going to represent the seller. This means that the 6% we mentioned earlier is going to be split in half.

But it doesn’t stop there. Agents often work on a team, so the $15,000 you thought was left is actually going to be split again. Let’s be generous and assume this split is going to be 50/50 again, and that the agent will be left with $7,500. What happens from there?


The next time you see a big total and think that’s what an agent is actually earning, think again.


Well, to have an active real estate license, you’ve got to associate yourself with a brokerage. This means that you’ll need to pay fees.

The broker fee can be 30% or even 40%. If you take that fee out of the $7,500 we mentioned earlier, that leaves just about $4,000.

That isn’t all. Then you pay other annual fees, your multiple listing services dues, and a few other costs as well, leaving a grand total of about $3,000.

Ultimately, agents may tend to end up with just 10% of the commission. So, the next time you see a total like $30,000, $40,000, or even $50,000 and think that’s the number an agent is actually earning, think again.

If you have any other questions, would like more information, or want advice on how you can be successful as a real estate agent, feel free to give me a call or send me an email. I look forward to hearing from you soon.