According to the U.S. Bureau of Labor Statistics, the average pay for Real Estate Brokers and Sales Agents as of May 2016 was $46,410 per year. That seems like a straightforward, simple answer, but let’s break it down. The median pay for Brokers was $56,790, compared to $44,090 for Agents. Now let’s break it down further. The 10% lowest earning Agents made $22,230, while the top 10% made more than $112,570!
Why is there such a wide range between the highest and lowest compensation?
There are many factors that determine how much a real estate agent can make. Differences in the number of hours worked each week, years of experience, developing a network resulting in referrals all affect compensation. In addition, realtors need to make certain investments in their career. And there are locations that command higher prices. When determining the median compensation for realtors, everyone is lumped together: part-timers and full-time agents; inexperienced versus experienced agents; those making substantial investments in their business and those not yet able to do so, etc.
Part time versus full time — how the number of hours worked fits into the equation
The lower end of the compensation scale generally reflects the number of hours worked. Many agents begin their real estate careers on a part-time basis; either supplementing income from other jobs, or building a career while raising a family or nearing retirement. Agents working less than 20 hours per week make substantially less than those working 40 or even 60 hours per week, thus impacting the median compensation rate.
Are You Experienced?
Agents with 3 or more years of experience, working full time as a real estate agent, will more than likely make a lot more than the median compensation. According to the NAR 2016 Member Profile, Realtors with 2 years or less experience had a median income of $8,900. With 3–5 years of experience, the median rises to $34,600. At 6–15 years experience, that number jumps to $56,300, and with 16 or more years of experience, the median rises to $73,400.
Impact of Referrals on Income
Combine the factors above — the hours worked, the years of experience leading to a growing network of satisfied clients — and you will probably also see a rise in referrals and repeat clients that add up to higher earnings. NAR’s data indicates that lower earning Realtors ($10,00 to $24,999) receive approximately 20% of their business from referrals. Compare that to Realtors earning $150,000+, who receive approximately 60% from referrals. Again, the median compensation rate is based on earnings at both ends of the spectrum and in between.
So, How Much Money Do Real Estate Agents Make?
Perhaps one of the most exciting things about working in real estate is the ability to eventually get back in income what you put into it in both effort and energy. This is a business where success and earning potential is defined by you and the amount of time and effort you are willing to commit to it. According to Geoffrey Green of The Green Team Home Selling System,
“Everyone is on a unique path. Some Agents are truly determined and some not so much. That said the business really requires three things to make it big: time, perseverance, and intellect. If a person can deliver those three things on a daily basis they stand a great chance of doing well.”