In this post I wanted to address the popular question “How much do Realtors make?”
I want to look at the numbers and do some math.
The median income for Realtors is 42K a year. Keep in mind that this number has those Realtors that don’t sell any houses in a year, and those that sell tons, so it isn’t a very reliable number.
Another number to consider is that only 24% of Realtors make over 100K a year.
Now let’s do some math.
Let’s say that the purchase price of a home is 300K. The average commission rate nationwide is 2.8%. With that commission rate, and that house price, you would net around $8400. It would be awesome if the Realtor got to keep all of that, but there are a lot of expenses that are involved and need to be considered.
The biggest expenses are taxes, which takes out 1/3, or 2800 of the scenario above. The reason that we are taxed so high, is because as real estate agents we are considered 1099, or contract workers so we pay taxes on our own.
The next 1/3 of that amount I keep separated for running my business. These are things like my monthly MLS subscriptions, monthly office rent, cap or commission splits that come with working with a broker, and so on. It also goes to pay my admin staff, our box truck, events, giveaways and all the extra little costs.
If I budget correctly, I get to take 1/3 home. I did some calculations and if I were working on an hourly pay for a 40 hour work week, that would mean that I would get around 17.50 an hour that month.
Some weeks I work less than 40 hours, but most weeks I work more than that. Real Estate is very much a job where you work around the schedule of your clients. During the day I am in the office from 9-5, but showing houses and working with clients doesn’t really have a set time frame. Lots of work happens after hours.
The average Realtor sells 4-6 houses a year so they would be making way less than what I described above if we broke it down into a monthly hourly pay.
The interesting part is how long it takes to go through a transaction from contract to close with a client. I have had clients that I have worked with for over a year as they try to decide what they want, and I have also had clients that know exactly what they want and have everything lined up and ready. Everyone is different and every transaction is on a different timeline.
With all of that being said, it is hard to know how much a Realtor makes. There are so many factors that go into it. In real estate we have what is called the Pareto principal, that is 80:20. So, 20% of Realtors make 80% of the money and the other 80% of Realtors make 20% of the money. A lot of people just don’t give the job enough time to see the results they need.
With all that being said, I would recommend finding a Realtor that is working hard enough and diligent enough so that they can dedicate the time necessary to helping you. There are so many agents out there, do your research to make sure you are in good hands.
