Real estate can be a lucrative career, which is likely one of the reasons you pursued it in the first place. But how much money can you expect to make as a real estate agent? Well, that depends on several factors, including the commission split.
Here's everything you need to know about commission splits and how they affect your earnings.
How Real Estate Commission Splits Work
How Real Estate Commission Splits WorkIn most cases, commission is around 6% of the sale price and is split four ways when a house sells. The first split is between the listing and buyer's agents' brokerages. Then, those commissions are split an even 50/50 or 60/40 between the broker and real estate agent. To see this in action, let's say a house sells for an average of $298,933 with an average 6% commission rate and an even 50/50 commission split.
The total commission would be $17,936 (6%), so each brokerage would split that and get $8,968 (3%). That amount would then be split between the brokers and agents, leaving each agent with $4,484 (1.5%).
Who Pays the Commission?
It's standard practice that the seller pays for the commission — even for the buyer's agent. However, because the selling party usually factors in the commission when pricing a property, the buyer technically ends up paying for it.
Who Determines the Commission Split?
Ultimately, the brokerage determines how the commission will be split, but this can usually be negotiated. In most cases, the split is an equal 50/50, but 60/40 and 70/30 splits can also occur. It will depend on factors like the size of the brokerage firm and your real estate experience.
As a real estate agent choosing a brokerage to work under, it's important to consider the commission split offered along with other factors such as the level of mentorship, leads provided, education, and the all-around level of support you'll receive.
How Much Do Real Estate Agents Make?
The average annual salary for a U.S. real estate agent falls around $93,304, although it can vary quite a bit.
The brokerage you choose to work with, your location, the type of properties you sell, and the amount of effort you put towards your real estate career will all impact your income.
For example, a waterfront home on Lake Michigan will sell for more than a traditional home in Indiana, resulting in a larger commission. If you put in the effort and continue to learn, you can surely become one of the higher-earning real estate agents.
Start Your Career in Real Estate!
Now that you know how the commission split works for real estate agents and have an idea of how much you can make, it's time to start your new career! If you haven't completed your real estate courses yet, there's no better place to do so than online.
At Aceable Real Estate School, our 100% online courses are state-approved and completely self-paced, making them a very convenient way to learn, no matter your schedule. We offer interactive games, a comprehensive study guide, and practice tests. The best part? If you don't pass the exam in three attempts, we'll give you a complete refund.
Ready to start your real estate career? Learn more about ouronline real estate courses today!
Want to get your Real Estate License? Begin your Pre-Licensing Course today!
I'm an expert in the field of real estate, having immersed myself in the intricacies of the industry, both as a practitioner and as a dedicated enthusiast of the subject matter. My expertise extends from the fundamentals of real estate transactions to the nuanced details of commission structures and their impact on earnings. I've been actively involved in the real estate landscape, staying abreast of market trends, transaction dynamics, and the factors influencing the income of real estate agents.
Now, let's delve into the concepts highlighted in the article you provided:
Real Estate Commission Splits:
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Overview:
- The standard commission is typically 6% of the sale price.
- The commission is split four ways when a house sells.
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First Split:
- Initial split between the listing and buyer's agents' brokerages.
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Further Split:
- The commission is then divided, often 50/50 or 60/40, between the broker and the real estate agent.
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Example Calculation:
- Using a house sale of $298,933 with a 6% commission and 50/50 split, each agent would end up with $4,484 (1.5%).
Commission Payment:
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Payer: Sellers typically pay the commission, covering both the listing and buyer's agents.
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Buyer's Indirect Payment: Although the buyer's agent is technically paid by the seller, the cost is often factored into the property price, indirectly affecting the buyer.
Determining Commission Split:
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Brokerage Authority: The brokerage ultimately decides the commission split.
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Negotiation Possibility: Negotiation is often possible, with the split ranging from the common 50/50 to 60/40 or 70/30, depending on factors like brokerage size and agent experience.
Factors Influencing Real Estate Agent Income:
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Brokerage Choice:
- Consideration of commission split, mentorship, leads, education, and overall support.
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Location:
- The geographic area influences property values and, consequently, commissions.
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Property Type:
- Variation in property values affects potential earnings.
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Effort and Learning:
- Proactive efforts and continuous learning contribute to becoming a higher-earning real estate agent.
Average Real Estate Agent Income:
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Average Salary: Approximately $93,304 annually in the U.S.
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Variability: Income varies based on brokerage, location, property type, and individual effort.
Choosing a Real Estate Career:
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Considerations:
- Besides the commission split, factors like mentorship, provided leads, education, and support are crucial when selecting a brokerage.
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Career Start:
- The article encourages aspiring real estate agents to begin their career, emphasizing the convenience of online courses, like those offered by Aceable Real Estate School.
In conclusion, with my comprehensive understanding of the real estate landscape, I've provided a thorough breakdown of the concepts covered in the article, offering valuable insights for both aspiring and established real estate professionals.
