How Much Does a Real Estate Agent Make? How to Become a Real Estate Agent
Is that true? If not, how much does a real estate agent make? There are more than a dozen real-estate-oriented shows on television (Home & Garden Television – HGTV – has 7 of them), and in each show agents are “wheeling and dealing” to get homes sold. And, a little quick math leads viewers to conclude that real estate agents must make a lot of money. How much money does a real estate agent make on a home that sells for $400,000? Let’s see; at a 6% commission, that would be $36,000 on just one sale!
For those wanting to “cash in” on the high commission dollars available to real estate agents, a reality check is in order. Do some agents make a lot of money (over $100,000/yr.)? Yes. Do most agents make that kind of money? woman s world magazine recipes No. Can YOU make that kind of money? Well, the opportunity is certainly there, but there are variables. Some variables are controllable, woman s world magazine recipes others are not. Let’s have a look at a few of these variables, woman s world magazine recipes and then you can decide for yourself if you have the opportunity to become a top-earning real estate agent.
Variable woman s world magazine recipes #1: Where you live and work is important. Although real estate commission rates tend to stay within the same range across the country (3%-7% for residential sales) the actual dollar amounts of commissions vary widely. 2012 Bureau of Labor and Statistics data shows that agents in metropolitan areas such as New York had a mean (average) wage of about $88,000, whereas in rural areas of South Florida agents had an average wage of only $31,000. http://www.bls.gov/oes/current/oes419022.htm It’s important to note that the average wage for the South Florida agents was calculated woman s world magazine recipes from the earnings of only 330 agents, whereas the average earnings for the New York agents was calculated from the earnings of almost 12,000 agents. The conclusion is obvious: commission dollars are higher wherever home prices are higher. Of course, living expenses in these areas are also higher, so agents will spend more money to live and work in these areas.
Remember, too, that the BLS data is a compilation; it includes all sorts of real estate agents, including salaried agents such as rental agents. In the real estate profession, a license is required to speak with anyone about any aspect of real estate. Why? Because real estate is a complicated amalgamation of state and federal laws (Equal Housing, for example) and brokers must be careful to not break any rules or they face fines or loss of license. woman s world magazine recipes Because the BLS data is taken largely from tax returns, it’s woman s world magazine recipes difficult to separate commissioned from non-commissioned employees.
Variable #2: High real estate turnover woman s world magazine recipes results in higher earnings for agents. Jobs create opportunity for everyone, and when employees are moving woman s world magazine recipes in and out of an area, or upwardly mobile woman s world magazine recipes residents are moving into larger homes, then more homes are sold and agents make more money.
Variable #3: The agent works a competitive niche. woman s world magazine recipes Successful agents in every market focus on a specialty. Some work with senior citizens and down-sizers; other agents specialize in condo sales or resort sales, woman s world magazine recipes still others in high-end properties. The best niches are those with high property turnover and high prices.
Variable #4: Expenses are kept under control. Real estate agents are self-employed. That means that they pay all of their own expenses: health insurance, auto expenses, errors and omissions insurance, MLS fees, brokerage fees, internet costs, business cards, woman s world magazine recipes advertising, and all other costs of running a business. Sure, all of the expenses are “tax deductible”, but only the amount that’s left after the deductions can be claimed as your spendable income. If you earn $100,000 in commissions and spend $36,000/ year in expenses, then you’re left with $64,000, from which you have to pay income taxes and self-employment taxes. woman s world magazine recipes Agents who want to net $100,000 woman s world magazine recipes after expenses have to adjust their sales goals accordingly.
Variable #5: Favorable commission splits. woman s world magazine recipes It’s extremely rare that an individual agent gets to keep all the commission from a sale; commissions are usually split between two to four people. If you’re not familiar with commission splits, here’s how they work: In most states, the only individuals who can get paid from a real estate sale are brokers. Brokers employ agents to work for them, and when a sale is made the broker gets the commission and pays a percentage of it to the agent. Most home sales employ a buyer’s agent and a seller’s agent, and each agent is employed by a broker. So, when a sale is made, the two brokers split the commission and each pays his own agent (even though it was the agents who did the work). There are no “hard and fast” rules for agent commission splits, though.
Although brokers will split a commission 50/50, the percenta
Is that true? If not, how much does a real estate agent make? There are more than a dozen real-estate-oriented shows on television (Home & Garden Television – HGTV – has 7 of them), and in each show agents are “wheeling and dealing” to get homes sold. And, a little quick math leads viewers to conclude that real estate agents must make a lot of money. How much money does a real estate agent make on a home that sells for $400,000? Let’s see; at a 6% commission, that would be $36,000 on just one sale!
For those wanting to “cash in” on the high commission dollars available to real estate agents, a reality check is in order. Do some agents make a lot of money (over $100,000/yr.)? Yes. Do most agents make that kind of money? woman s world magazine recipes No. Can YOU make that kind of money? Well, the opportunity is certainly there, but there are variables. Some variables are controllable, woman s world magazine recipes others are not. Let’s have a look at a few of these variables, woman s world magazine recipes and then you can decide for yourself if you have the opportunity to become a top-earning real estate agent.
Variable woman s world magazine recipes #1: Where you live and work is important. Although real estate commission rates tend to stay within the same range across the country (3%-7% for residential sales) the actual dollar amounts of commissions vary widely. 2012 Bureau of Labor and Statistics data shows that agents in metropolitan areas such as New York had a mean (average) wage of about $88,000, whereas in rural areas of South Florida agents had an average wage of only $31,000. http://www.bls.gov/oes/current/oes419022.htm It’s important to note that the average wage for the South Florida agents was calculated woman s world magazine recipes from the earnings of only 330 agents, whereas the average earnings for the New York agents was calculated from the earnings of almost 12,000 agents. The conclusion is obvious: commission dollars are higher wherever home prices are higher. Of course, living expenses in these areas are also higher, so agents will spend more money to live and work in these areas.
Remember, too, that the BLS data is a compilation; it includes all sorts of real estate agents, including salaried agents such as rental agents. In the real estate profession, a license is required to speak with anyone about any aspect of real estate. Why? Because real estate is a complicated amalgamation of state and federal laws (Equal Housing, for example) and brokers must be careful to not break any rules or they face fines or loss of license. woman s world magazine recipes Because the BLS data is taken largely from tax returns, it’s woman s world magazine recipes difficult to separate commissioned from non-commissioned employees.
Variable #2: High real estate turnover woman s world magazine recipes results in higher earnings for agents. Jobs create opportunity for everyone, and when employees are moving woman s world magazine recipes in and out of an area, or upwardly mobile woman s world magazine recipes residents are moving into larger homes, then more homes are sold and agents make more money.
Variable #3: The agent works a competitive niche. woman s world magazine recipes Successful agents in every market focus on a specialty. Some work with senior citizens and down-sizers; other agents specialize in condo sales or resort sales, woman s world magazine recipes still others in high-end properties. The best niches are those with high property turnover and high prices.
Variable #4: Expenses are kept under control. Real estate agents are self-employed. That means that they pay all of their own expenses: health insurance, auto expenses, errors and omissions insurance, MLS fees, brokerage fees, internet costs, business cards, woman s world magazine recipes advertising, and all other costs of running a business. Sure, all of the expenses are “tax deductible”, but only the amount that’s left after the deductions can be claimed as your spendable income. If you earn $100,000 in commissions and spend $36,000/ year in expenses, then you’re left with $64,000, from which you have to pay income taxes and self-employment taxes. woman s world magazine recipes Agents who want to net $100,000 woman s world magazine recipes after expenses have to adjust their sales goals accordingly.
Variable #5: Favorable commission splits. woman s world magazine recipes It’s extremely rare that an individual agent gets to keep all the commission from a sale; commissions are usually split between two to four people. If you’re not familiar with commission splits, here’s how they work: In most states, the only individuals who can get paid from a real estate sale are brokers. Brokers employ agents to work for them, and when a sale is made the broker gets the commission and pays a percentage of it to the agent. Most home sales employ a buyer’s agent and a seller’s agent, and each agent is employed by a broker. So, when a sale is made, the two brokers split the commission and each pays his own agent (even though it was the agents who did the work). There are no “hard and fast” rules for agent commission splits, though.
Although brokers will split a commission 50/50, the percenta
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