Several people know real estate agents make a decent commission from every sale, just for photographing the house and listing it on various platforms. In reality, handling properties is a complex process, and it involves a bunch of agents and brokers working together to finish every deal. They also bear the cost of keeping the house in the market, maintaining it well, conducting open houses, hidden taxes, and much more.
How much do real estate agents make?
A reliable source states four real estate agents earn nearly $2500 for every sale worth $200,000, roughly accounting for almost 5% commission. The seller’s agent and broker and the buyer’s agent and broker share the $10,000 commission, which both the seller and the buyers often pay. The calculation is a rough estimate, and there are many hidden costs the real estate agents bear to get the house sold or keep it listed in the market.
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Real estate agents work
Real estate agents do a plethora of work, from listing the house or the property in the market to bringing in potential buyers to view the house. They explain the house’s best features, persuade the customers to buy the home, and negotiate the price. They also take care of all the documentation work and even arrange for property management services if the buyer wants to rent or resell the house.
Real estate agents have high people skills, excellent communication skills, and very high subject matter knowledge to deal with numerous documentation work. Though their commission might seem high, a buyer can’t handle the workload of buying a property alone, and paying for a real estate agent’s services seems right. The time and effort put into doing the work real estate agents get done with expertise can be used for several other things.
Who exactly pays them?
It is a highly debatable million-dollar question, and almost most of the industry tends to agree the buyers pay the real estate agent. But each seller has a broker and a real estate agent who connects them with the buyer and gets paid handsomely. Is the $10,000 commission shared equally between the buyer and the seller, and each pays their agents and brokers individually?
Actually, most of the amount comes from the buyers, but they do not pay it directly, and the price usually gets included in the price of the house. The sellers also pay a certain amount to their real estate agent to get the work done and have the amount spent on the house’s price. Though it might seem like a no man’s money, nearly 75% of the real estate agent commissions come from buyers and the remaining from the sellers.
Base salary in real estate
Most real estate agents have no fixed base salary, though it is hard to believe because of their posh lifestyle. But most real estate agents do not have a limited base salary except for some working in massive conglomerations (Redfin). They get paid minimally, and their income mainly revolves around their commissions, and they earn more if they close more profitable deals. The real estate market is fiercely competitive mainly because of the agents competing with each other to get better commissions.
Most real estate agents make around $5000 or $6000 a month by closing two deals a month. Even at Redfin, only 30% of the income is the base salary, and 70% is commission. As the agents get more experienced, this percentage gap closes a bit but not much, making each agent strive hard for commissions. Experienced agents get extra bonuses for the deals they close, but their base salary doesn’t increase much.
There isn’t a fixed income for any real estate agent, but they take regular clients and ensure they close at least a deal or two in a month, one within a fortnight. They get paid only the commissions, and their working mode enables them to get paid regularly. Most real estate agents without a base salary often work with extraordinary tenacity to close every deal to make more commissions.
High-end real estate agents have a vast network that allows them to get tipped about huge properties, which will earn them abundantly in commissions. They work relentlessly for months and even years until they get paid. They use that income until the next deal is closed and invest it wisely to get regular monthly dividends. Since the earning threshold is very high, real estate agents and brokers do not give importance to earning a steady income and treat their job more like a business.