If you’re asking, “How Much Do Real Estate Agents Make?” you came to the right place. Our guide covers average earnings, factors affecting those, and how to maximize yours.
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Considering starting a career as a real estate agent? There are a lot of factors to consider. One of the most pressing questions you might have: How much do real estate agents make?
The amount is different depending on factors like the state you’re in, your commission, average volume, home prices, whether you’re working full or part- or full-time, and your level of experience.
So it’s smart to look at the range of income (and taxes) you can expect each year as a licensed real estate agent.
How Much Do Real Estate Agents Make?
An agent’s income varies widely across the nation, but Forbes states that, as of last year, the average yearly income is $41,289.
What kinds of factors result in a real estate agent getting paid more or less than this amount? Let’s take a look.
Income Factor 1: State and Location
Averages like the $41,289 figure above take both much higher and lower incomes into account. Some states are known for real estate agent income on the upper end of the spectrum.
This is possibly due to more home sales and higher average home prices. According to the same data from Forbes, the top 10 states where real estate agents make the most are:
Keep in mind that the numbers reflected above are each state’s averages, so some Colorado real estate agents and realtors make much more than $63,000, and some make much less.
Real estate agents in Ohio make the lowest yearly average income at $41,650. Compare that amount with an average realtor in New York, earning $102,310, and you can see just how much location influences income for a real estate professional.
Income Factor 2: Average Volume
Another factor that affects realtor and agent income is the average sales volume they deal with or the number of houses and properties sold.
- One figure from The Balance says the average real estate agent will sell 48 to 72 homes and properties each year. That’s equal to selling 4 to 6 homes per month, which might seem a little outside of the norm for most agents.
- Another figure from Mark Ferguson at InvestFourMore says the average agent sells about eight houses each year. That’s a vast difference from the first statistic, but it’s a great example of just how much variation there is in this industry.
Again, because these are averages, some agents will sell many more homes, and some will sell a lot fewer. Relating this to income is simple: The more homes a realtor sells, the more money from commissions they’ll earn. More on that later.
Income Factor 3: Part-Time or Full-Time
One of my favorite motivational phrases is, “You get out of it what you put into it.” In terms of real estate income, it’s certainly true. After all, the barrier of entry is low in real estate.
Just take your required courses, get your license, find a broker to sponsor you, start selling. This means that many agents in the industry are doing it part-time or as a hobby.
There’s nothing wrong with that! Working as a part-time real estate salesperson on the side is a great way to earn additional income and get more involved in your area.
But it has a lot to do with the extreme variations in average real estate agent income. A part-time real estate agent might only sell 1 or 2 homes a year.
And a full-time agent can get closer to the average sales volumes we talked about above (anywhere from 8 to 48 houses per year).
Income Factor 4: Home Price and Commission
The amount an agent makes (commission) is directly related to the price of the home sold. Most real estate agent commissions are a total 5-6% of the sale price divided by 2.
Each agent involved in the sale gets half the commission, minus the commission split with their own brokers. Let’s look at an example for clarity.
So why does home price matter? We’ll run the same scenario with a more expensive home: $400,000. This time, the total commission earned between both agents is $24,000, leaving $12,000 for each side.
If the broker is taking a 50/50 commission split, that leaves $6,000 commission earned from the sale. The more expensive homes an agent can sell or help a buyer purchase, the more income they’ll make each year.
Income Factor 5: Level of Experience
Finally, real estate sales income is related to how experienced the agent is. Over time, agents who have sold more houses and worked with more clients have a sharp increase in total yearly sales and income earned.
These figures come from PayScale, who looked at the incomes of more than 700 real estate agents. Here’s what they found:
Based on this data, agents with 1-4 years in the industry are making about $4,440 more than first-year agents per year.
This could be due to more houses being sold, selling more expensive houses, or improved commission rates from their brokers.
Agents with 5-9 years’ experience are making $51,512/year, about $6,203 more per year than those with 1-4 years of experience.
And agents with 20 or more years of experience are making about $7,814 more per year than their colleagues with 10-19 years of experience.
The income gap tends to widen as agents get more experienced in the real estate industry, and it’s an important factor in agent pay.
Real Estate Agent Income and Taxes
Real estate agents are self-employed, meaning they are not earning a direct check from an employer, and taxes are not deducted out of their pay.
Independent people in the United States have to approach paying taxes differently. Taxes are directly related to and affect real estate agent income.
So it’s essential to understand this if you’re looking at becoming an agent or real estate broker. Let’s break it down.
Agents must work under brokers, who officially pay all earned commissions and income to the agent throughout the year.
At the end of the calendar year, the broker will be responsible for filling out a 1099-MISC form from the IRS to report and record the full amount of income the agent earned in the previous year. A copy of this form is sent or given to the agent as well.
The 1099-MISC form is used because the agent worked as an “independent contractor” for the broker and did not have federal taxes automatically taken out of their pay.
Because real estate agents are considered self-employed, they’ll need to file Schedule C (Profit or Loss From Business).
This is where the agent will report all income, expenses, and deductions. It should be filed along with the personal return (Form 1040).
Paying Taxes on Real Estate Income
Federal taxes are not taken out of the income an agent receives from a broker. That part is up to the agent. Most don’t wait until tax time and pay a large lump sum.
Instead, many agents will withhold part of each commission to make quarterly estimated tax payments in intervals throughout the year.
These quarterly estimated tax payments are due on:
- April 15
- June 15
- September 15
- January 15
So, How Much Do Real Estate Agents Make?
While most real estate agents don’t strike it rich in this industry, income averages show us that the income potential in real estate sales is right in line with other sales careers.
With enough perseverance, dedication to working full-time, and a high-paying location, you can make thousands more per year than the average amounts show, and your pay will only rise the longer you stay in the game.
If you enjoy working with people, learning all there is to know about an area or region, making financially responsible decisions, and keeping busy with paperwork, phone calls, and appointments, becoming a real estate agent might be the perfect career path for you.