Table of Contents
- What is a realtor?
- What does a realtor do?
- Types of real estate jobs
- How much do realtors make on a sale?
- Real estate agencies
- Concluding remarks
There is a lot of appeal to working in the real estate industry. From the opportunity to get out and travel, to the flexible hours, and competitive sales experience. There is also a good bit of risk associated, as with any commission-based industry, not to mention the volatility of the US housing market. So anyone curious about working in real estate probably has some questions about it, such as how much do real estate agents get paid? What are the different real estate jobs? What are some good real estate agencies? And of course like the title says, how much do realtors make on a sale?
In this article, we will briefly go over what a realtor is, how you become one, what they do, and of course, as the title suggests, how much do realtors get paid on a sale. Feel free to skip over to the parts that interest you if you like because we will be trying to provide a good amount of information in each part to give a general rundown on the topic.
What is a realtor?
Before we can say how much do realtors make on a sale, we have to define what they are first.
“Realtor” is a title that refers to real estate professionals that are licensed members of the National Association of Realtors or NAR. This is a nationally recognized organization of real estate brokers and agents that promote the profession, as well as their code of ethics that their members are meant to adhere to in their professional practice.
The organization provides a host of tools and benefits to members that help to streamline work in their professional practice, and even has over 1,600 affiliate organizations at home and abroad.
Members who hold the Realtor title are experts in their field and are expected to uphold a high level of professionalism and follow the code of ethics outlined by the NAR. This title encompasses individuals who work as both residential and commercial real estate brokers, sales representatives, appraisers, property managers, and others in the real estate profession.
Realtor statistics in the USA
According to the NAR, there are a total of 1,396,575 member Realtors as of June of 2020. Of this number:
- 65% are real estate agents
- 22% are real estate brokers
- And 15% are associate brokers
After learning about these stats, many would want to know how much do realtors make on a sale.
The “Realtor” title is trademarked by the NAR and they have strict guidelines on its use by its members. Realtor and realtor associates may use the trademark along with their names and the names of their real estate business, however, the NAR prohibits it from being used as part of any legal corporate names.
What does a realtor do?
So with the technical definition out of the way, let’s learn about what does a realtor does before asking the question of how much do realtors make on a sale.
Well, a realtor or real estate agent or broker represents their clients, as either buyers or sellers of real estate. So in the simplest sense realtors are licensed professionals that help people to buy, sell, and even rent properties.
Real estate agent’s duties include organizing transactions between buyers and sellers, as well as between owners and renters when applicable. They are also responsible for making offers and counteroffers between parties and forwarding any queries that may be brought up. Agents work with other agents when an offer is accepted, and then proceed to guide clients through all the paperwork that follows.
There is a key difference however between real estate agents and brokers. Brokers are licensed professionals that may work independently with their clients. Agents on the other hand, although also licensed, will usually find themselves working under a licensed broker or brokerage.
An agent may become a broker through additional training and passing additional licensing requirements. This is an important distinction to make as both are “realtors” but because of the difference the answer to “how much do realtors make on a sale” will depend on which of these two we are talking about.
Types of real estate jobs
As we mentioned earlier, there are some differences in real estate jobs titles. The title realtor can apply to any real estate professional that is a member of the NAR so really any of these could be “realtors”.
Some real estate jobs include:
Real estate agent
Real estate agents buy and sell properties for clients. To go into a bit more detail there are different terms for these.
When an agent represents a client who is buying a property they are known as buyer’s agents, and when representing a seller they are listing agents. To become a real estate agent, it is necessary to take a training course and then receive the state licensure exam to become a full real estate agent. It is this position that we will focus on later to answer the question of how much do realtors make on a sale.
Real estate broker
Real Estate brokers are the next step for licensed real estate professionals. A real estate agent will need to gather experience working in the profession for a while before trying to take the exams to become a real estate broker.
Although there are no outright educational requirements other than a high school diploma some employers may have a preference for brokers that possess a college degree. Real estate brokers can either be managing brokers, who run their own real estate offices, or associate brokers, who work under a managing broker. We will also take a look at how much brokers make later when answering how much do realtors make on a sale.
Real estate clerk
Real Estate clerks are another job position in real estate. This one however does not need any licenses to do their job. This job entails the organization and maintenance of records and other administrative duties for real estate brokerages.
Real estate appraiser
Real estate appraisers are professionals that appraise properties for their estimated values. This is very useful to many people including the brokerage, but many find themselves working for banks that wish to get a good appraisal of a property’s value before approving any loans to buyers.
Real estate consultant
Real Estate consultants are real estate professionals that take on a more advisory role, guiding clients in making good financial decisions in real estate investing for financial returns.
Requirements to become a real estate agent
There is no federal license for real estate agents, so the requirements will vary from state to state. In general, the requirements are:
- Must be a legal resident of the United States.
- Must be at least 18 years of age.
- Must have completed the state-mandated pre-licensing classes
- Have passed the state’s real estate license exam
- Sponsorship from a licensed real estate broker
- A complete background check
How much do realtors make on a sale?
So now to the question stated in the title of how much do realtors make on a sale.
Real estate agents make the bulk of their earnings from commissions on sales. This is how real estate agents get paid. This commission is a percentage of the total sale value of the property that they handle for their clients. In some instances, the commission can also be a flat value but this is less common.
So, how much do realtors make on a sale? There are a few things that we have to know such as how many transactions they can complete, the rate of their commissions, and the split they have with the broker that they work under.
To answer how much do realtors make on a sale we will have to ask the following questions.
How much commission do realtors make?
The commissions will depend on the agreement made with clients of course, but there is also a matter of how it is split. A single commission is oftentimes split multiple ways between both parties. So a portion will go to the seller’s agent and another to the buyer’s agent. After this, each agent also has to pay a portion of this to their broker, before we can say how much their actual earnings are.
To give a general estimate, the Bureau of Labor Statistics (BLS) in the United States reported that in 2019, the median annual earnings for a real estate agent was $48,930. Real estate brokers on the other hand had a median annual income of $59,720. This does not however go into the individual sales numbers, and so doesn’t answer the question “how much do realtors make on a sale”. The question of how much commission do realtors make depends on the number of sales and the percentage commission which we will look at later.
How do real estate agents get paid?
Besides commissions, young aspirants also wonder how do real estate agents get paid?
Well, the payments are first sent to the real estate broker by the client, as it is prohibited for clients to process payments directly through their real estate agent. The broker then splits the received payment among all the agents that were involved in the transaction.
In general, the commission earned from a real estate sale is 5-6% of the sales price of the property. As stated earlier, however, this will still be divided up by all parties involved. Often the split between the seller’s agent and buyer’s agent is 50% so an even split of the commission for both parties so that’s 2.5-3% of the sales price. After this, the broker takes a part of the commission. This may vary from brokerage to brokerage, but a common split is 60% goes to the agent and 40% goes to the broker.
So to give you some semblance of an answer for the original question of “how much do realtors make on a sale?” We can present a hypothetical situation.
Let’s say an agent manages a listing of a property that sold for $300,000 at a commission of 5%. This means the total commission will amount to $15,000. This will be split equally between the buyer’s agent and the listing agent. So $6,000 to each party.
If we then assume that the split between the agent and broker will be 60/40, then that would mean that the commission earned by a real estate agent in this hypothetical situation would be $3,600 and the broker would earn $2,400 from the commission. This makes some general assumptions but should give you an idea of how much do realtors make on a sale, and how much commission do realtors make.
Now that you know how do real estate agents get paid, let’s find out about the real estate agent salary.
Do real estate agents earn a salary?
To answer simply, no. There is no real estate agent salary because the real estate industry works purely on the commission basis previously discussed. This means that it can be quite a struggle for agents who are unable to make sales, as evidenced by statistics from the Bureau of Labor Statistics (BLS). In 2019 they recorded that the bottom 10% of earners in the real estate industry only made $23,600 a year.
This is a natural difficulty when working purely on a commission basis rather than getting a real estate agent salary, but this means that there is also a high potential for reward, as the BLS reports in the same year found that the top 10% of real estate professionals were making more than $178,000 annually.
Real estate agencies
Real Estate agencies or real estate brokerages are companies that are run by real estate brokers and employ associate brokers and real estate agents. Most real estate transactions will involve a brokerage.
The competition in the real estate field is not only in customers and listing but also among experienced and skilled agents. Brokerages are constantly on the lookout for up-and-coming talent to help them grow their businesses and make sales.
So to conclude the question of how much do realtors make on a sale is not one that has a very easy answer, but we hope the examples and information we have given provide you with a good idea and enough context to understand how money is made in real estate on an individual basis.