This question will be answered in the article below: Do real estate agents get paid hourly? We will also provide examples and try to answer other commonly asked questions.
Real estate agents do not typically get paid on an hourly basis. Instead, they are paid a percentage of the property’s sale price through commissions. This means that their income is based on the properties they sell rather than the hours they work. This can be both positive and negative, as agents may have to work long hours and hustle to find and sell properties, but they can potentially earn significantly more income if they are successful.
Some real estate agents may also receive a salary or hourly wage from the real estate brokerage they work for in addition to their commissions. However, this is different from the norm, and most agents rely on real estate commissions as their primary source of income. It’s important to note that real estate agents are not brokerage firm employees but instead set up as an independent contractor. Which means they are responsible for their own taxes and benefits.
Real Estate Commission Actual Example
Here’s one example of an average commission payout:
Imagine a real estate agent is helping a client sell their home for $500,000 as their listing agent or seller’s agent. Then let’s say the agent’s brokerage has a commission rate of 5%. Typically an agent will get half of that, and the other half is shared with the buyer’s agent on the other side of the transaction.
So the agent will earn a commission of $12,500 or 2.5% of the purchase price of the home. Additionally, this commission is typically split between the real estate broker and the agent. For example, the brokerage firm might take a 30% cut, also known as a commission split. Which would leave the agent with a net commission of $8,750.
It’s important to note that commission rates and splits can vary significantly from one brokerage firm to another, and real estate agents should carefully consider these factors when choosing a firm to join. Some agents may also negotiate a different pay structure or negotiate higher commission rates in order to increase their income.
What is the average hourly wage of a real estate agent?
Figuring out your average hourly pay, as most real estate agents do, can be surprisingly easy! All you need to know is your total commissions for the year and the number of hours you worked. Take that full commission and divide it by the number of hours worked. That number is your average hourly pay! Keep in mind that this is an average and not your actual pay per hour for each particular job. Things such as time spent marketing yourself, research time, etc., should all be taken into consideration when trying to find out what you’re really earning for each hour of work.
For example, let’s say you earned $100,000 in net commissions for the year and worked an average of 40 hours per week in your real estate business. This means you would have worked 2,080 hours throughout the year. So you divide the $100,000 by 2,080 hrs and get an average of $48 per hour worked.
Real estate agent net pay per transaction
The average prices for a home sold can vary widely. Let’s use a rough starting price of $150,000 in Detroit, Michigan up to $600,000 for a starter home in a ski resort town in Whitefish, Montana.
$150,000 (purchase price) x 2.5% (average commission) = $3,750
$600,000 (purchase price) x 2.5% (average. commission) = $15,000
On the low side, you can expect $3,750 in gross commission income for the typical real estate transaction all the way up to $15,000 and beyond.
Then, of course, remember to subtract out whatever your brokerage split is, and you end up with your net commission income for the transaction. Trust me, as a real estate sales agent, you get used to calculating this math very quickly over time.
What is the average salary of a real estate agent?
It is difficult to determine an average salary for real estate agents, as their income can vary greatly depending on many different factors, including their level of experience, the area in which they work, and the number and value of the properties they sell. The median annual income for agents was $50,300 in May 2020, as stated by the United States Bureau of Labor Statistics. However, it’s important to note that this figure includes agents at all levels of experience, and good real estate agents can earn significantly more. In fact, some successful real estate agents can reach millions of dollars per year.
If the average of $50k doesn’t seem like an inspiring amount of money, know that I have personally made well over six figures in real estate sales commissions for a number of years now. I’ve also helped multiple agents quit other full time jobs they had for a sustained career in real estate. It’s easier than many make it out to be if you have the proper training and knowledge of how to achieve this goal.
Do real estate agents ever get a base salary?
While it is not common, some real estate agents may receive a base salary in addition to their commissions. This typically occurs at larger brokerage firms that have a more traditional employment structure rather than the independent contractor model that is more common in the industry.
In these cases, the real estate agent would receive a salary for their work, as well as a commission on the properties they sell. The pay may be based on the agent’s level of experience and the market in which they work, and it may be subject to annual increases or bonuses based on performance.
A base salary is very very uncommon in the industry, and you can expect to generally be compensated via commissions rather than a base pay.
When are real estate commissions and fees typically paid?
Real estate commissions and fees are typically paid after the sale of a property has been completed and the funds have been transferred from the buyers to the sellers. This naturally occurs at the closing of the deal, after the buyers and sellers have signed the necessary documents and the final details of the sale are finalized.
At the closing, the seller’s attorney or closing agent will typically disburse the commission to the agents and brokerage firms involved in the sale. The commission is generally paid out of the proceeds of the deal, and the agents will receive their share after any applicable fees or expenses have been deducted.
What happens with commissions when a real estate sale doesn’t close?
When a real estate sale does not close, the real estate agent typically does not receive a commission. This is because the commission is only paid out upon the successful sale of a property. If the deal falls through, the agent does not receive any payment.
There can be exceptions to this rule. For example, some real estate firms may have policies in place that allow agents to receive a percentage of their commission if the sale falls through due to circumstances beyond their control, such as the buyers being unable to secure financing or the property being damaged before the sale can be completed.
Additionally, some real estate agents may have written agreements with their clients that outline the terms under which they will be paid, including provisions for partial payment in the event that the sale does not close.
Overall, it’s essential for real estate agents to carefully consider the terms of their compensation and ensure that they are clear on how and when they will be paid for their work.
What are some other, less common, ways real estate agents can get paid?
In addition to earning commissions on the sale of properties, there are several other ways that real estate agents can get paid. Some of these methods include:
Stock awards
Some real estate firms may offer stock awards or options to their agents as a way to incentivize and reward top performers.
Revenue share
Some real estate agents may have agreements with their firms in which they receive a percentage of the firm’s overall revenue in addition to their commissions.
Profit sharing
Similar to revenue share, some real estate agents may be eligible to participate in a profit-sharing program with their firm, which allows them to share in the profits generated by the firm.
Referrals
Some real estate agents may also receive referral fees for directing clients to other agents or service providers, such as mortgage lenders or home inspectors.
These methods of compensation are less standard than commission based pay and may not be available at all real estate firms.
Wrapping Up
As we’ve stated throughout the article, it is clear that realtors typically do not receive an hourly rate of compensation. Instead, they make most of their successes through commission based payouts that are based on the successful sale and completion of real estate transactions.
Real estate agents, much like any other professional in the industry, put in a great deal of work to ensure successful results, and having a commission based system ensures they can reap the rewards when they do so. If you are looking into a career in real estate, we hope you found this article helpful and suggest you take a look around, as there are many valuable resources on this website to get you started.
