Sep 30, 2013

How Much do Realtors Make?

Now that the real estate market is hot again, more people are considering becoming agents. Do you ever wonder how much real estate agents make? Realtors are paid by brokers. Brokers are typically paid a commission by home sellers. At my brokerage, the broker charges 3% for handling the sales side of the transaction and the buyer's brokerage is also paid 3% for handling the buyers side of the deal. So the seller pays a total of 6% of the sales price to the brokerages.

The real estate broker retains a portion of their percentage and then pays the balance to the agent. From that percentage, the agent pays her overhead costs, marketing expenses, taxes, etc. which can easily amount to more than 50% of the net. A listing agent's true salary ranges from 20% to 30% of one-half the total commission.

Most people don't realize that the costs for everything from the flyers in the house to the photography comes out of the agent's pocket, not the broker's. Full-service agents typically spend more on overhead than their discount competitors. An agent's expenses also vary depending on how long the house stays on the market. If a home sells in the first few days of going on the market, it's a nice payoff. But if the home lingers on the market, the agent holds 20+ open houses, spends money on continual advertising, etc. - the profit drops dramatically.

One big consideration to keep in mind is that, like any commission job, there is a big risk in compensation. The agent and brokerage can spend a lot of time and money to sell a property that may result in no pay day if it doesn't sell. It's a bitter pill to swallow when you've put your heart, soul and money into trying to sell a property only to have it taken off the market. There are plenty of dead-end hours spent working for a deal that doesn't happen.

It is said, the higher the risks, the bigger the rewards. Real estate can be a risky career. Studies have shown that the average real estate agent makes between $30,000 and $40,000 a year. And agents in Texas are considered self-employed, independent contractors. [where: 75230]

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