New Real Estate Agents Earn Only $4.30/hr
According to the National Association of Realtors (NAR), the median gross income for a Realtor in the United States was $56,400 in 2022.
While the median does reasonably well for itself, it’s tougher on the newbies. Real estate agents in their first two years in the business make $9600/year. The median hours worked for an agent is 30 hours a week, which works out to $4.30/hr after expenses.
Meanwhile, experienced agents with 16 or more years in the business were earning a median of $85,000/year.
The National Association of Realtors conducts an annual member profile on Realtors from which most of this information comes. This information represents members of NAR and not all real estate agents. The information is based on NAR’s growing Realtor membership (1.6M Realtors).
Of course, this doesn’t include income agents might make from side jobs or even full-time employment, thanks to real estate sales often having a flexible schedule.
The Math of an Agent’s Commission
A typical home in America sells for approximately $350,000. A common commission is 5% (though commissions are negotiable; many discount brokerages charge as little as 4% or even less). 5% of $350,000 is $17,500!
That’s a lot of money.
But as a buyer’s or seller’s agent, a surprsingly small amount of that winds up in your own pocket.
Below is an estimate of how much a listing agent takes home from the real estate commission when they sell a home.
- $8750- Buyer’s Agent
- $2188 – Broker
- $1750- Expenses
- $962- Taxes
- $3850 – Income
That assumes 20% of your net income goes to expenses, a 75% broker split, and you are a top producer at the top US marginal tax rate. So if you improve those numbers (or have a solid CPA), great!
However, many top teams report spending as much as 30% of their gross revenue on expenses like lead generation, so this estimate might even be conservative.
But that is a lot of money for just one transaction! Agents do a lot of transactions every year!
Most don’t, actually. The median number of transactions for residential realtors is 12 transactions a year. Newbies do even fewer.
What Percentage Does a Broker Take?
For a single independent contractor, a common split ranges from anywhere between 50-50 to 95-5.
If you are on a team and working a team leader’s leads, commission rates can often be under 50%. You might take home only 30-45% of the commission, but you make that up on volume and the fact you have a significant amount of help marketing. The team leader may be the “rainmaker” who is paying for Zillow leads or handing an established database of clients to you to work, making the lower split very much worthwhile.
35% of Realtors have a fixed split that does not change, while 25% have a graduated split that improves as they hit volume or transaction targets throughout the year.
Those numbers do not count agents who work with 100% commission models….
100% Commission Models
There are several different commission structures for real estate agents, so knowing what to expect from a salary depends on which model you are talking about. Some examples are:
- Commission split
- Salaried
- 100% commission
A 100% commission model is a bit of a misnomer, as you are obviously still paying a broker.
But instead of a percentage of your real estate sales, agents earn the entire commission but pay a flat fee. The fee might be monthly, per transaction, or both.
The advantage of these models is that usually those fees are significantly less than what you would have paid a broker on a split.
The disadvantage is that often these brokers may not have the same amount of resources and support that a traditional brokerage might provide. For that reason, 100% commission brokerages are probably best suited for agents with at least a few years of experience.
The first 100% commission brokerage was the ubiquitous Re/Max in the 1970s. It has since switched to a split model, but the 100% commission model is not new.
But it does seem to be catching fire.
A list of a few of the major 100% commission brokerages includes:
What About Salaried Real Estate Agents?
An estimated 5% of real estate agents are W2 employees.
These agents often actually have a hybrid compensation, with base salary plus performance incentives (or commission). It depends on the company, but an example base salary might be around $30,000/yr with on target earnings that often can push that toward or even north of six figures.
They also often provide traditional employee benefits that most real estate agents don’t receive as independent contractors, including healthcare, travel reimbursements, and more.
The companies that hire salaried agents are often the flat fee or discount brokerages like Redfin or REX.
The iBuyers also hire licensed real estate agents as home advisors for their buyers and sellers.
Some of these companies, like the iBuyers, generally advertise for more experienced agents with at least a few years in the business. But some are also open to newer agents who haven’t learned the “bad habits” of experienced agents.
How Much Does an Agent Make an Hour?
The typical Realtor works 30 hours a week according to NAR. Knowing that the national average real estate agent salary is $56,400, we still have to account for expenses. The self-reported numbers are likely too low, and we will assume 20% of gross, or $11,280. So the net income was about $45,120.
Assuming a 52 week work year and 30 hours a week, that is:
$28.92/hr
An agent with less than 2 years in the business, though, does quite a bit differently. The median agent with less than two years earned a median of $9600. But they probably have many of the same expenses (website, business software, MLS and association dues, advertising). Their expense to income ratio is going to be higher than a more established agent, but we will assume just 30%. That works out to an hourly wage of:
$4.30/hr
Yikes!
Newer agents might be more likely to be part-time agents as they get their business going. So perhaps they aren’t working the full median 30 hours a week. But as I was getting started part time I was working that much trying to put a new business together! In my experience, these figures are not far off from what I would expect as an agent starting out.
I recommend having at least two years in which you don’t need to earn any money.
Getting Started Part-Time
There is a lot of resistance in the industry to part-time agents. Part-timers are looked down upon. Experienced agents think that part-time agents are likely to be sloppier, less professional, and less knowledgeable.
And face it. They’re probably right in most cases. When I started out, I made lots of mistakes and didn’t know what I didn’t know. Getting established in real estate is like drinking from a fire hose.
But that doesn’t mean you shouldn’t get started part-time.
In fact, that is how I spent my own first year in the business and I wouldn’t have done it differently. If anything, I probably should have done it part-time even longer than I did.
If you are the breadwinner for your family and aren’t joining a salaried position, I definitely recommend getting started part-time. Let your business grow until it can replace your current income.
Too many agents think they’ll have “made it” in six months or a year. I recommend expecting at least two years before you are making a decent, regular income.
Where to Find Real Estate Agent Jobs
Title companies.
There are plenty of job hunting sites like Indeed, LinkedIn, and Glassdoor. Brokerages often advertise both commissioned and salaried positions there.
But I think title companies are probably the #1 resource I would recommend talking with first.
Title companies deal with every agent in your market, see their transaction volume, how professional (or not) they are, as well as witness how strong the agents and brokers are at client satisfaction and transaction management.
Title agents know who the best agents and brokers are probably more than anyone else. I would start with them to find some solid leads as to which brokerages and teams are hiring and would be the best fit for your needs.
Next Steps
Start here if you are looking to become a real estate agent.
But you’ll need to get your real estate school requirements, take the test, and get your license from your State real estate commission. Then you’ll need to hang your license with your broker.
Then you’ll likely need to join both NAR and your local MLS, which will be at least $1000+/yr. If you have to join multiple MLSs in your market, then you can likely add about $500/yr for each MLS you need to join to search and advertise listings.
Lastly, (though don’t save this for last!), you’ll want to build a business plan, as well as start budgeting for a few of the tools you’ll need to achieve basic competency in your new job, like a CRM, accounting software, and e-signature tools. You may or may not need a website.
Of course, if you are a salaried or team agent, you should have a sales manager and mentor who can provide you these tools and guide you along your way!
Conclusion
If you are considering launching a real estate career, be realistic about what to expect! It is not easy to get started and established. Most agents will recommend you plan on it taking a while to earn a database of business and regular leads to keep your plate full.
And if you need more quicker from your real estate salary, then I strongly recommend joining a team as a salaried agent to learn the ropes and earn steady income as you begin your journey.
Updated March 21, 2024; Originally published March 5, 2019
