I’m not sure if you have seen any of my videos on YouTube yet, if not, go and check them out. I have a whole channel full.
I recorded a video some time ago and titled it “How Much Money do Real Estate Agents Make?” Let me tell you, that video generated a good amount of views. I was pretty surprised at how many people were actually interested in this. I’m pretty sure it’s because of the real estate shows people see on TV, but still!
I am continuously shocked, to this day, how many views this video has received. It’s by far my most popular video with tens of thousands of views. I know that’s not the biggest number of YouTube views but it sure was big for me.
Let me start this off by saying, most real estate agents are commissioned sales people. This is a commissioned career.
I’m sure you know what that means but if not, it simply means if we don’t sell, we don’t get paid.
If an agent does not get clients and help them buy or sell homes, they don’t eat. As an agent, I do not have a salary nor can I be guaranteed when my next check will be, nothing is guaranteed in this business. I know you are probably thinking about the big agent commissions that you see on TV. Let me say, yes those do exist. But, you must also understand, those agents work very hard for their money.
According to NAR (National Association of Realtors®), the median gross income for agents was $45,800 in 2014. Let me break down a little bit how the commission structure works when it comes to real estate.
In Texas, the typical commission for a sale is 6% of the sales price. So as an example, if a home sells for $150,000, the commission is $9,000. [$150,000 x .06) That sounds like a good chunk of change right? With that, someone can probably get them something really nice and extravagant. Or maybe even not work for a couple of months. Well, stay with me here.
During most real estate transactions, there are 2 different parties involved. There’s the buyer and there’s the seller. I’m sure by now you knew that already. Well, each side has their own agent that has to get paid out of the deal. Guess what that means… yes, the commission is split in half. This is noted in most listing agreements for sellers to see.
Now, if my calculations are correct, each side receives $4,500. Each side is inclusive of the broker who is paid next. In Texas, all salespeople are required to have their license held by a broker and work under a broker. The broker is the big liable responsible party for the agents. Brokers have splits. The split is what the broker keeps in a transaction and what an agent keeps in a transaction. There’s no magic number for the split that an agent may have with their broker.
Some may have a 50/50 split, some may have a 100% split, or anything in-between. That means the agent would keep 50% of the $4,500 and the broker would keep the other 50%. On a 50/50 split, the agent takes home $2,250.
Still with me? So far we have accounted for both sides of the transaction and the brokers split. Unfortunately, that’s not it. Since we are in the United States of America and commissions are income, you know what comes next…taxes.
Taxes have to be paid, each year. Along with insurance and anything else that the government requires us to have these days.
Want to know how much a real estate agent makes? I’m sure you have a general idea by now. The reason I say this is because I often speak with sellers and buyers that ask for reduced commissions or rebates. Basically, they are asking the agent to pay them for selling their home or doing their job. I’m a pretty understanding person and I can’t fault someone for not knowing exactly what an agent makes or will make from a transaction, but that question really makes me cringe.
Discount on commissions
“I will let you sell my home if you do it for only 1%”
Since real estate is a commissioned position, nothing is guaranteed. So, just a bit of advice, before you decide to talk down your agent or ask for money back, just think about what they may have to pay for out of the money they will receive for doing their job. You never know what someone has going on or who or what they have to support in their life. Don’t discount your agent. If you feel that their services were not as they promised, that’s a different discussion. But to discount an agent just for the heck of it, that’s just inconsiderate if you ask me.
I explain all of this a bit more in my video. You should still check it out. As a matter of fact, I have a few videos on my channel speaking about different areas of the actual career of the real estate agent. They’re pretty interesting.
If you need a discount, I would recommend contacting a discount brokerage. Those are brokers that will work for pennies on the dollar. Don’t expect to be impressed by the work but it may be a solution for you if you are needing to save money. It does not take much to be an agent but it does take a lot to know how to market and negotiate. You get what you pay for these days.
The rewards can be extremely beneficial in this business, but one must work hard. It does not come easy. If you have had a chance to read my book, you will remember, I moved here from a different city. Heck, a different state. I had to start, establish, and build a real estate business.
Want to see what I do to sell homes?
If you want more information on my marketing and how I work, download a piece of my listing marketing plan here. I know I do a great job and it does not worry me to give this away for free. Not everyone can do what I do and the way that I do it still remains a secret. Get my free download here. To contact me, just visit my contact us page on my website. You can always follow me on my social media pages. I have profiles everywhere including Twitter, Facebook, Instagram, and Youtube.