How Much Do Real Estate Agents Make? How Agents Earn Money + Expected Incomes by Location

Employment amongst real estate agents is expected to grow about 5% until 2031, equivalent to the average for all occupations. The good news is: If you’re looking to change career paths, it’s not a very lengthy process to become an agent. In fact, all that most real estate brokers and sales agents typically need is a high school diploma or equivalent to enter the occupation, although every state in the U.S. requires real estate brokers and agents to be licensed.

If you’re considering becoming a real estate agent, you’ll want to do your research first to understand the average income of most agents in your area. 

Real estate agent salaries vary considerably based on factors including: 

• The real estate market in specific locations
• The type of listings an agent has
• Whether an agent works for a brokerage or not
• How many sales the agent makes each year

While it’s certainly possible to make a good income selling or renting properties, it can take time to establish a steady income stream from real estate sales. In this article, learn about how real estate commissions work, plus how much realtors make according to national averages.

How Much Do Real Estate Agents Make?

Real estate agents are those who rent, buy, or sell property for clients. Their responsibilities include listing properties online, meeting with and interviewing prospective clients, accompanying clients to visit properties, discussing conditions of sales, and writing real estate contracts. 

So, how much do realtors earn on average? It depends on how many properties they rent or sell, how expensive the properties are, as well as their commission rate. Incomes among realtors can change over time, as wages vary significantly from year to year and also region to region. The more experience an agent has, and the more hours they put in, the more they usually make.

How Real Estate Commissions Work

Here’s a breakdown of how commissions usually work based on listing prices:

• Splitting Commissions: The exact split can vary, but a common arrangement is a 50-50 split between the buying and selling agents. So, if a property sells for $500,000 with a 6% commission, the total commission would be $30,000. The seller’s agent and the buyer’s agent would each receive $15,000.
• Brokerage Fees: When an agent works for a brokerage, as many do, they will need to give some of their commission to the brokerage. For instance, a new agent might have a 50/50 split with their broker, meaning they keep half of their earned commission while the broker gets the other half. As agents gain experience and perform better, they might negotiate better splits like 70/30 or even 90/10. According to Simple Showing, overall a brokerage may take anywhere from 5% to 20% of the agent’s commission, on average.
• Deciding on a Commission Structure: In the U.S., Bankrate reports that the total commission paid to agents is often around 5–6% of the property’s selling price, though this can vary. In some regions or situations, the commission rate may be negotiable, and certain brokers or agents may be willing to work for lower commission rates. 
• 100% Commission Structure: In some brokerage firms, especially discount brokerage firms, agents might get to keep 100% of their commissions but pay a regular “desk fee” or flat transaction fee to their broker. These fees cover the broker’s expenses like office space, marketing, insurance, training, and more.
• Graduated or Sliding Commission Split: Some brokerages use a graduated commission split that changes over the course of the year as the agent hits certain sales targets. For example, an agent might start the year at a 50/50 split, but after selling $1 million in property, the split might change to 70/30 for the rest of the year. A brokerage may also have a cap on how much commission they take from an agent in a given year, meaning after a certain threshold of sales, the agent gets to keep 100% of their commissions.
• Simple Showing Fees: If an agent uses online sites to help them make a sale, they will likely need to pay about 1% of their commission to the site, which is called a “simple showing fee.” This helps the agent keep more money since they aren’t paying a brokerage.

How Do Real Estate Agents Earn Money?

Real estate agents can earn money in several ways, including:

1. Commission-based income: As explained above, the most common way that real estate agents earn money is through commission-based income. Agents typically earn a percentage of the total sale price of a property that they help buy or sell. The commission percentage can vary depending on the agent, location, and type of property, but it typically ranges from 2.5% to 3% for each side of the transaction.

2. Referral fees: Some agents may earn money by referring clients to other agents or professionals in the real estate industry. In such cases, they receive a referral fee, which can be a percentage of the commission earned by the agent who closes the deal.

3. Additional fees: Real estate agents may also charge additional fees for their services, such as administrative fees, transaction fees, or marketing fees.

4. Salary or hourly pay: Some real estate agents may be employed by a real estate brokerage and receive a salary or hourly pay for their work.

States Where Real Estate Agents Earn the Most

Agents in high-priced urban areas, like New York City, Los Angeles, or San Francisco, typically earn more than the national average because properties are more expensive, leading to higher commissions. The National Association of Realtors reports that agents in New York have some of the highest incomes in the U.S., averaging more than $93,100, while agents in states including South Carolina and North Dakota have the lowest incomes.

According to ZipRecruiter, agents in the following states make the most and the least money annually from real estate sales:

Average Annual Income in the Highest Earning States

• Maryland: $102,169
• Virginia: $99,100
• Washington: $98,516
• Nebraska: $95,666
• New York: $93,951
• California: $93,212
• Massachusetts: $91,150
• Vermont: $90,604
• Tennessee: $88,436

Average Annual Income in the Lowest Earning States

• Florida: $71,720
• Mississippi: $71,263
• Arkansas: $70,058
• Georgia: $70,052
• North Carolina: $69,361
• Louisiana: $68,000
• North Dakota: $64,978
• South Carolina: $63,787

Independent Real Estate Agents vs. Brokerage Agents

Most real estate agents work full-time under a licensed brokerage. As Tyler Nicely for Zillow explains, “The main difference between a real estate agent and a broker is that a real estate broker can own a firm or be an independent contractor, while a real estate agent must work under the supervision of a broker.”

When a broker works independently, they receive the full commission of a property, which is usually between 3% and 6% of the total selling price. Most often, “associate brokers” represent buyers and sellers and complete real estate transactions, just like agents do (only brokers don’t need to be supervised).

On the other hand, listing agents who work for a brokerage, such as a national brokerage like Keller Williams or RE/MAX, must pay a portion of their commission to the brokerage.

In most cases, the broker/agent and the brokerage will split the total commission. A typical brokerage percentage is between 20% and 50% of the agent’s commission. As an example, if the brokerage keeps 50%, this means that if an agent earns $15,000 in commission from a sale, the brokerage would take $7,500.

Brokerage commission splits depend on experience and overall sales. Bob Vila points out, “More experienced real estate agents may keep as much as 90 percent of the commission, but newer agents may pay up to 70 percent of commissions to their broker.”

How to Get a Real Estate License

In terms of how to get into real estate, the requirements for obtaining a real estate license vary by state in the U.S. However, generally, the following steps are required:

1. Meet the eligibility requirements: Typically, a candidate must be at least 18 years old, have a high school diploma or equivalent, and be a legal resident of the state where they plan to work as a real estate agent.
2. Complete pre-licensing education: Most states require candidates to complete a certain number of hours of pre-licensing education. Training often covers topics such as real estate principles, contracts, property ownership, and financing. 
3. Pass the licensing exam: After completing the pre-licensing education, candidates must pass a licensing exam. The exam usually consists of two parts: a national portion that covers general real estate principles and practices and a state-specific portion that covers state-specific laws and regulations.
4. Submit a license application: Once the candidate passes the exam, they must submit a license application to the state’s real estate regulatory agency. The application includes personal and professional information, as well as proof of pre-licensing education and exam completion.
5. Complete a background check: Some states require candidates to undergo a background check as part of the licensing process.
6. Obtain sponsorship or work for a brokerage: In most states, candidates must work under the sponsorship of a licensed real estate broker or a brokerage to ensure they comply with state and federal regulations. Brokers themselves can start their own brokerages.
7. In some cases, complete continuing education: Depending on the state, agents may have to complete continuing education courses to maintain their license.

Things to Consider Before Becoming a Real Estate Agent

A career in real estate can be rewarding, but it also comes with challenges, including uncertainty about income, initial costs, and potentially challenging hours. There may be income instability, especially at the beginning, which is something important to account for. Before deciding to become a real estate agent, especially if you’re leaving another secure job and changing career paths, keep these things in mind:

• Consider the time, patience, and effort involved: Be sure you’re willing to complete training, licensing, and possibly interning before you begin making much money. You’ll likely need to rely on savings while you work on becoming licensed and building experience.
• Make sure you can cover startup costs: On top of needing to be patient while you build your network and reputation, you’ll also need to cover costs, including licensing fees, costs for marketing materials, transportation, and possibly membership fees for local real estate boards. To stay current with market trends, real estate agents also often have to take continuing education courses and pay for them out of pocket.
• Decide if it’s enough work-life balance for you: Real estate often requires working outside of typical business hours, including evenings and weekends, to accommodate clients’ schedules, open houses, and networking events to build a client base. If you have a family, another job, or other obligations, this type of schedule can be challenging to keep up with.
• Be prepared for setbacks: Closing a real estate deal can be a lengthy and exhausting process, not to mention that many sales fall through and “waste your time.” To be a successful agent, you’ll have to practice persistence and also need good interpersonal skills to maintain relationships, keep calm, and understand and meet your client’s needs.
• Speak to other agents: It’s always a good idea to speak with people already working in the field you’re considering entering to get a firsthand perspective. They can offer valuable insights and advice on what to expect and how to succeed as a real estate agent. You can also gain perspective on what it’s like to work as an agent by reading this article by Kaplan Real Estate Education and this one by Investopedia.

Want to learn more about making money from real estate by flipping homes? Check out this article:

How to Start Flipping Houses Like an Expert