How Much Does a Real Estate Agent Make?
BY BRANDON VAGNER, CPA, Ph.D., & WALLET WIT FOUNDER AND KORI VAGNER
My wife got into real estate last year and it was quite the ride. In this article, she is going to show you exactly how much she made, what her costs were, what sales strategies worked, and how much work it took. If you’re thinking about getting into real estate, this article will really help you know the numbers before making the commitment.
The great thing about this article is that she breaks down all your fixed costs as a real estate agent and also walks you through the numbers of a single house transaction. That way you can get an inside look into the cost at a transaction level and easily estimate what you should make based on how much you want to work.
I always want to know national averages first. So, here you go. From a national average perspective, how much does a real estate agent make? Well, you might be surprised to know that real estate agents make a median salary of $45,000 per year. Keep in mind though that higher earnings are VERY possible.
Article Table of Contents
- My Wife’s First Real Estate Transaction & Commission
- How Much Does It Cost to Get a Real Estate License?
- Does the Real Estate Agent Pay for Marketing Costs?
- What Commission Percentage of the Sale Do Real Estate Agents Get?
- How to Get Your First Real Estate Client?
- The Good and Bad of Being a Real Estate Agent
- My Plan As a Real Estate Agent Going Forward
My Wife’s First Real Estate Transaction & Commission
My wife’s first real estate commission was a big one! We live in the Nashville TN area where home prices are high and there are a lot of big expensive homes. That inherently increased her likelihood of scoring a big commission.
We will talk about her detailed strategy here in just a minute, but she was primarily targeting houses in the mid $200,000’s. She did an incredible amount of work trying to get her first client in that price point, but she ended up landing her first client that had a house and 5 acres worth $438,000. There of course is an element of luck in that, but she worked her tail off. More on that shortly.
Long story short, my wife was able to sell the house in less than 30 days. Her commission on that sale was $10,539.92. Yes, one sale earned her over $10,000. Holy cow were we excited! Now, before you go saying to yourself you could easily do 2-3 transactions per month like that, you’re going to want to read this full article. Yes, you can and some agents do way more than 2-3 transactions per month, but it’s not easy. You need to know that going into it.
This is the point where I’m going to hand things off to my wife, Kori. She is going to walk you through absolutely everything including her strategies; what you need to know about the cost behind being a real estate agent; how to get started; her experiences; and more. Enjoy this incredible inside look into being a real estate agent.
How Much Does It Cost to Get a Real Estate License?
Getting a real estate license is no joke and for good reason. You’ll be helping people make the largest purchase of their life, and you have to know what you’re doing. So, you’re required to first take a Pre I and Pre II course. Both the pre I and II courses are one week long for 6 hours/day.
I took both courses in person with an instructor, but you also have the option to do both courses online. I felt like the best way to keep me motivated and able to ask questions on the spot was with the in person class. I had also been told that the online class is hard to follow and does not give great explanations. So, I chose to have an easy to follow class with a live instructor.
That being said, the cost of taking both the Pre I and Pre II classes, was a total of $369. Once you go through the two weeks of classes, you will then need to sit for the exam, and I’ll talk about that pricing in just a second.
The school I took my classes through was called Trees, and conveniently they sent in all the paperwork for me to get set up to schedule my exam. The paperwork just validated that I had taken and passed the courses, which enabled me to schedule my exam through a testing center, which cost $39. I then took the exam and found out right away that I passed!! Woo Hoo :)
I then had to take a new affiliate course. Just like the other courses, you also have the option of taking it either in person or online. Since I already passed the big exam and had some confidence rolling, I felt like the new affiliate course would be fine to take online. I went at my own pace and actually finished the course in 3 days, which was much faster than the in person full week option. This new affiliate course cost $175.
In order to obtain my real estate license, I also had to get finger printed, which cost $32.65. Once the finger printing went through okay, I had to apply through the State of TN to receive my affiliate license. The cost to get my license was an additional $110.
All that being said, the total cost to actually obtain my license was $725.65 when you add everything up, but there are more costs…
Once you have your license, you are required to hang your license with a broker. I ended up hanging my license with a company called United Real Estate, which I really liked. The primary reason I went with them is because they don’t take a percentage of your commissions. Instead, they take a minimal flat fee every time you make a transaction. It doesn’t matter how much or how little the house costs, the fee will always be the same. Unlike most real estate companies, where they take out a percentage of your commission (usually around 30% of the commission), United Real Estate has a flat fee of $495 for every real estate transaction. So, if the commission total is $10,000, you take home $9,505 and United keeps $495. It is a great way to get more money from your commissions, but there are still some other costs to know about.
The first thing I learned was that in order to be a practicing real estate agent, I had to obtain errors and omissions insurance. I went through a company called RISC (Rice Insurance Services Company). They seemed to have the best deal. The cost for 6 months of errors and omissions insurance was $132.
I paid $75/month for my website with United and miscellaneous company fees. That said, if I needed to borrow any type of sign, such as an open house sign, or if I went over the allotted color copies, this miscellaneous fee did increase. Meaning, the $75/month was not all encompassing without exceptions.
I paid a monthly MLS fee of $42/month, United Real Estate annual fee of $600/year, and was required to go to ongoing trainings to keep my license active which cost around $20/training.
I also had to purchase a sentri-lock lock box for when I sold a home, which in order to keep active, I paid $131/year plus a one time fee of $21.95 for the sentri-lock smart card.
Another thing that was required of me by United Real Estate was to become a Realtor. In order to become a certified Realtor and not just a real estate agent, I had to pay $427.08/year to MTAR (Middle TN. Association of Realtors). Additionally, I had to take a one time training to become a certified Realtor that cost me $45.
Lastly I had to pay for a service called CSS when I listed a house. The CSS service enabled realtors to easily call and make an appointment to see the home I had listed and give instant feedback after they viewed the home. This service was something all realtors in my area used. So, I had to get it. The cost was $30/month per house listing for CSS.
As you can see, there are a lot of upfront and ongoing costs throughout the year. This doesn’t even include all of the marketing costs, which are huge in real estate, and I talk about those marketing costs below.
Does the Real Estate Agent Pay for Marketing Costs?
As a real estate agent, you are essentially running your own business. There are all types of ways you can write up the contact, but for most beginners you will be footing the bill upfront to market the home you are listing. So, if you want to roll social media ads, then be prepared to cover that cost upfront. Now, you technically could write up the contact to say the seller covers those costs, but then you run the risk of not even getting the listing.
Included in the cost of marketing is photography and/or video costs. Prices are all over the board for this, but expect to pay upfront between $200 – $500 for high quality pictures of the house you’ll be listing.
I spent approximately $1,000 in total on photography, videos, social media ads, and google ads. Looking back on it, I probably could have easily gotten by with spending around $600. It all depends on the house you are listing, but you can do things like sharing the house on local Facebook market places, which is free. Things like that can significantly reduce your marketing costs.
What Commission Percentage of the Sale Do Real Estate Agents Get?
If you are trying to sell someone’s house, then the real estate agent’s commission percentage is always negotiated between the agent and the seller. Keep in mind though that you can either be an agent that works on the buying side of the deal or an agent that works on the selling side of the deal. This is known as a seller’s agent or a buyer’s agent.
Either side you are on, in most all cases, you will get some kind of commission based on the purchase price of the home. On average, the buyer’s agent and the seller’s agent each equally receive around 3% of the purchase price of the home. Meaning, they are splitting 6%, but this isn’t always the case, which I’ll explain.
The seller of the home (i.e. the client or homeowner) is the one that is responsible for paying both the buyer and seller agent commissions. Some homeowners don’t like the high commission percentages and will negotiate smaller percentages. For example, they may pay 2% to the sellers agent and 3% to the buyers agent; for a total of 5%. This would be a good negotiation on the homeowners part, which would save them a significant amount of money.
Many agents are willing to negotiate smaller commission percentages than the average 6% total, because there are so many agents and so much competition. Once the real estate agent and homeowner do come to a percentage agreement, the house is then listed.
If you end up being a buyer or sellers agent on a home that sells for $400,000, and the agreed upon percentage per the listing contract, was a total of 6% (3% to each agent), then the commission for BOTH the buyers and sellers agent would be:
1.) Buyers agent commission: $400,000 (purchase price) x 3% = $12,000
2.) Sellers agent commission: $400,000 (purchase price) x 3% = $12,000
But your commission doesn’t stop there. As an agent, you are required to either pay a flat fee or a percentage of your commission to your brokerage company. As mentioned above, the company I chose to hang my real estate license with was called United Real Estate, and they are known for 100% commission. So what this means, is that you keep all your commission money minus a flat fee per house sold. It doesn’t matter if the house sold for $1,000,000 or $100,000, the flat fee would always be the same, which was $495/transaction. To me, this was the selling point for me to go with United Real Estate because this meant more commission money in my pocket!
Not all brokerage companies are like United Real Estate. Most of them, like Keller Williams, Century 21, and Remax, require you to give away a percentage of your commission to the brokerage company. The percentage ranges from company to company, but on average most real estate companies require you to pay them 30% of your commission, per transaction. Below you will see a scenario of the two different types of brokerage companies:
Example: Assume a real estate agent made a $10,000 commission on a house
1) If you go with a 100% commission based company, you take home:
$10,000 – $495 (flat fee) = $9,505 take home commission
2) If you go with a percentage based company (usually around 30%), you take home:
$10,000 – ($10,000 x 30%) = $7,000 take home commission
That’s a HUGE difference of $2,505. It is crazy how much more you take home with a 100% based brokerage company.
How to Get Your First Real Estate Client?
Marketing is key to getting your first real estate client. In order to get your first client, you have to put in some MAJOR work.
First, you should always consider your “sphere of influence.” These are people that know you personally and are in the market to buy or sell a home. Make sure everyone you know knows that you are a real estate agent. Just by telling people about your new career as an agent, you might land an opportunity with a close friend or family member. Even though this is an easier strategy, it doesn’t necessarily mean that it will work. I learned that a lot of friends and family members would rather not use you because they don’t want you to know about their financial position or if something were to go wrong, they don’t want it to ruin your personal relationship. I completely get it, but it means you have to start getting your name out there other ways.
Social media is anther opportunity to market yourself to land that first client. Having your own Instagram and Facebook business pages are important. It’s critical that people see your content. So that means pumping out interesting and valuable content to your followers. Maybe every couple of days you pump out something valuable like the average number of houses sold in the area for the month; average house prices; or what to look for in a home. Anything that is valuable is key. Try and think outside the box.
Also, you can run ads through Instagram and Facebook to target clients. Maybe you run an ad on a picture of a house that someone in your office has listed and in order for them to see all the pictures, they have to enter in their contact info. BOOM! Just like that you have a contact to reach out to that might not have an agent yet.
Also, you will need to cold call and door knock! That’s right, you heard me. You have to cold call and door knock. The reason being is that most agents don’t want to do this; so, you will be ahead of the pack if you take time each week to cold call AND door knock. Start by cold calling For Sale by Owners. This is actually how I got my first client!
For Sale by Owners (FSBOs) are people that usually think selling their home will be a breeze and that they can save money by not having to pay an agent a commission. Little do they know, statistically, over 80% of FSBOs fail and end up going with a real estate agent.
If you call FSBOs and ask to tour their home so that you can potentially match a client to it, most of the time, they will let you. Now, some of them absolutely hate realtors, which means you can’t be pitchy at all! Be warned that some might hang up on you and say you can see the pictures online, but some know that any agent in the door is better than nothing. Getting your foot in the door with those FSBOs is huge!
You have to work on your speaking skills and crafting just the right saying to get the FSBOs to let you in their house, but once you do this, your likelihood of getting a listing goes way up!
Once you are able to tour a FSBOs home, make sure you don’t try to pitch them to list. This is a HUGE no no and they will hate you if you do this. You basically are just looking at their home and commenting on the positives to their home and building a relationship with them. Maybe they have Cardinals baseball stuff in their game room and you happen to be a huge Cardinals fan. Just by simply striking up a conversation on baseball can lead to a positive relationship between you (the agent) and the seller.
Once you are done touring their home, tell them thank-you and potentially offer to do a free open house for them. This could potentially lead to you finding a client or could lead to them wanting to list with you because you are offering them something valuable for FREE. You can even send them an email a few days later commenting on what you came across in terms of the value of their house.
Most FSBOs fail because they are overpriced. So, just reach out every once in awhile to stay top of mind. I usually emailed or texted them interesting data about either their home or subdivision, and they seemed to respond positively to it.
If you do hold a free open house for a FSBO, don’t forget to door knock to further advertise your open house. I did this and actually got another client with this strategy. If I did a free open house for a FSBO, I would door knock with pretty colored flyers around the neighborhood and ask neighbors if they had thought about selling their home. If the answer was yes, get their contact info!
If you aren’t doing a free open house for a FSBO, then ask an experienced agent if you could door knock on neighbors of their open house. Usually they go for it because it is free marketing for the house they have listed.
Also, you should be scoping out neighborhoods that regularly have quite a few houses sell. I recommend door knocking in those neighborhoods with informational flyers on houses sold in their neighborhood. Who knows, they may be wanting to sell soon, and you could be the first person they think of. Just remember, don’t just leave the flyer in the door. You need to make a face to face connection and have a meaningful conversation.
You also need to be door knocking within apartment and townhouse communities. Most of the time people in apartments will be moving in the near future. So, it’s a way to get in front of them. This is especially true in communities that are seeing high growth trends. Many people move to a new area and want to first live in an apartment to get a feel for the area before they buy a house.
Lastly, network, network, network. It’s important to meet people at church, the gym, etc. Get involved in community service or any group that interests you. The more people that know you and like you, the more people you have willing to promote you and your real estate business.
Referrals from people you know is big in the game of real estate. Most of the big-wigs in real estate don’t have to do a ton of marketing, because their business is based on repeat customers and referrals. If you want to eventually be like them, you have to go to community events, join clubs, etc. in order to make yourself known.
The Good and Bad of Being a Real Estate Agent
Being a real estate agent can sometimes seem like this glamorous job where you are working your own hours and getting paid big bucks, but that’s definitely not the case in the beginning and, for most people, is never the case. If you want to make a living doing real estate you have to put in the time and hard work to get there.
I was told by my broker that it can take around 3 years to start making a decent salary. On average, in the city I live in, agents only produce 3 transactions a year. This means they aren’t making very much money unless those three transactions are $1,000,000 homes.
If you are the sole supporter of your family, trying to start out being a real estate agent full time might not be a good idea, because it can take around 2-3 years to see a decent salary coming in. However, it can be done if you understand that real estate is hard work and you are willing to cold call, door knock, use your personal funds for advertising, work Saturdays and Sundays, and work late nights by going to happy hours and joining clubs to meet new people.
To be a real estate agent, you have to be creative and savvy with technology. For example, you have to pump out eye catching videos and marketing campaigns via social media. In today’s digital world, online is how most people look at homes and pick an agent. So, you have to be on top of the internet game! At least, you do in the beginning until your referrals pick up.
Competition is TOUGH. You are up against a lot of realtors and some who have TONS of transactions under their belts. Just think about it…I bet you can name at least 2 real estate agents you know right now. That being said, agents can be very aggressive and they are very interested to know what you are doing to try and get clients. Don’t be surprised if you tell other agents what you are doing and then next week they start doing the same thing as you. They are out to make money and it can be really hard to get clients.
I personally felt like being an agent was a “dog eat dog world.” Remember, a lot of agents do this full time and they rely on a paycheck each month. I’ll leave it at that.
Keep in mind that being an agent will never be a 100% guaranteed salary each month. You are commission based, and some months you might not have a single transaction, but other months you might have 3 transactions. It is very volatile and has a lot to do with the economy, jobs, and the housing market both globally and locally.
The great thing about being a real estate agent is that you ultimately control your schedule (kind of), but remember, if you don’t put in the time, that means you are losing clients to other agents.
Also, if you love talking to people, it can be really fun and rewarding to get to know people and help them find their dream home.
All-in-all, real estate is not for the weak. If you want to make it a career, I advise you talk to someone who has been in it for a long time and have them mentor you. This will help while you learn the ropes and progress into becoming a successful agent.
My Plan As a Real Estate Agent Going Forward
Going forward as a real estate agent, I plan on doing this strictly as supplemental income. I was not a fan of the the “dog eat dog world,” and I would rather have my real estate business be strictly a relationship based business. I love being involved with different organizations at church and meeting people at the gym or out and about, but I never want to be pitchy or over the top. The people I know through organizations, know that I’m an agent and that’s as far as I want to take it.
I did the door knocking, I did the cold calling, I made videos, I had my social media business pages, I posted the relevant content, I hired a real estate coach, I worked weekends doing open houses, I spent money on advertising myself and trying to collect contact info, and I even was enrolled in a program through United Real Estate that helped connect me to low income buyers, but I discovered that being super sales oriented just wasn’t for me. I can make a sales pitch with the best of them, but it’s difficult for me to feel fulfilled being pitchy all day.
Constantly door knocking and cold calling was at the root of this feeling, and I just flat felt like I was bothering people. I don’t ever want to feel that I’m a nuisance. I am in the business to help others, not bother people. I think it’s important for all people to find what makes them happy and to do it in a way that makes them happy.
Find what works for you in real estate with trial and error, and once you find your sweet spot, stick with it. Just don’t ever do real estate for the money. You have to have a passion for it. If you have the passion, others will notice and you will surely be successful.
I hope this article is beneficial to you. If it was, please make sure to share it with your friends and also let us know in the comments. My husband and I love hearing from our readers here on Wallet Wit.
Also, if after reading this article you don’t think being a real estate agent is for you, maybe you should consider starting your own blog to make passive income. The world would love to hear your voice on whatever it is you’re passionate about. Check out this wonderful article my husband wrote on how to start a wordpress blog. It walks you step-by-step through exactly what you need to setup a blog similar to the one you’re on right now.