How Much Does A Real Estate Agent Make

It was a sweltering July afternoon when Jennifer left her office job for the last time. After years of sitting behind a desk, managing reports, and feeling utterly uninspired, she finally decided to leap into real estate. Like many others, she was drawn to the promises of flexibility, independence, and the potential to earn a high income. But as she sat in her car, thinking about the next steps, a thought crept in—how much does a real estate agent make? The stories she’d heard were mixed. Some agents seemed to thrive, while others struggled to close deals. The excitement of her career switch was now tinged with uncertainty. What would it take to earn a solid living in this new field, and how much could she expect to make? In this article, we’ll explore the real earning potential for real estate agents, breaking down how much they make, what factors influence their income, and how their commission structures work.

How Do Real Estate Agents Earn Money?

how much does a real estate agent make typically earn commissions, a percentage of the property’s sale price. Unlike salaried employees, real estate agents are usually independent contractors, meaning they don’t receive a consistent paycheck. Instead, their income is directly tied to the number and value of the transactions they close.

When a property is sold, the seller typically agrees to pay a commission to the real estate agents involved. This commission is usually split between the listing agent (the seller’s agent) and the buyer’s agent. The standard commission rate in the United States is around 5-6% of the home’s sale price, though this can vary based on the location, market conditions, and the specific agreement between the seller and the agents (1).

For example, if a home sells for $400,000 and the total commission rate is 6%, the agents will collectively earn $24,000 in commission. This amount is typically split evenly between the buyer’s agent and the listing agent, meaning each agent would earn $12,000 from the sale. However, it’s important to note that agents usually don’t get to keep the full commission. They often work under a brokerage, which takes a percentage of their earnings—usually between 20-50%, depending on the brokerage agreement (2).

Average Income of Real Estate Agents

The income of real estate agents can vary widely depending on factors such as location, experience, and the number of transactions completed. According to data from the U.S. Bureau of Labor Statistics (BLS), the median annual wage for real estate agents in 2022 was $48,770 (3). However, this figure only tells part of the story, as earnings can range from well below the median to well above it.

The BLS also reports that the top 10% of real estate agents earned more than $112,610 annually, while the bottom 10% earned less than $29,670 (3). This wide range highlights the variability in income based on the number of deals an agent closes and the value of the properties involved.

How Location Affects Earnings

Where a real estate agent works significantly impacts their potential earnings. Agents in high-cost real estate markets, such as New York City, San Francisco, and Los Angeles, tend to earn higher commissions because property prices in these areas are much higher. In contrast, agents working in smaller markets or rural areas may close more transactions but earn less per deal due to lower property values.

For example, an agent in New York City might close a deal on a property worth $2 million with a 5% commission, earning a total of $100,000 in commission for the transaction. After splitting the commission with the buyer’s agent and the brokerage, the listing agent might walk away with $25,000-$30,000 for that one sale. In contrast, an agent working in a smaller market where homes sell for $300,000 would earn around $7,500 for the same deal, assuming similar commission structures.

According to a 2022 report from Real Estate Express, real estate agents in California earned an average annual income of $91,040, while agents in Texas earned $72,480, and agents in Florida earned $56,460 (4). These differences highlight the importance of location in determining real estate agent income.

How Experience Influences Earnings

Experience is another critical factor in determining how much a real estate agent makes. New agents often need help to make consistent sales in their first year as they build their client base and learn the ins and outs of the business. However, their income typically increases as agents gain experience, develop a network of contacts, and close more deals.

A survey conducted by The National Association of Realtors (NAR) in 2022 found that real estate agents with less than one year of experience earned a median gross income of $8,900, while agents with 16 or more years of experience earned a median gross income of $86,500 (5). This wide gap underscores the importance of persistence and growth in the real estate industry.

Additionally, experienced agents often have the advantage of repeat business and referrals from satisfied clients, which can lead to more consistent earnings over time.

What Determines a Real Estate Agent’s Income?

Several key factors influence how much a real estate agent can earn:

Number of Transactions Closed

The most straightforward factor affecting an agent’s income is the number of deals they close. Agents who consistently close a high volume of transactions can earn significantly more than agents who close only a few deals each year. In hot real estate markets, some agents may close multiple deals each month, while in slower markets, they may only close a handful of transactions annually.

Property Values

The value of the properties an agent handles directly impacts their earnings, as the commission is typically based on a percentage of the sale price. Agents specializing in high-end or luxury properties can earn substantial commissions on a single deal. On the other hand, agents working in areas with lower property values may need to close more transactions to earn a comparable income.

Market Conditions

The real estate market is cyclical, and agents’ incomes fluctuate depending on market conditions. In a strong seller’s market—where demand for homes exceeds supply—agents may find it easier to close deals quickly and earn higher commissions as home prices rise. In contrast, during a buyer’s market or an economic downturn, transactions may take longer to close, and agents may face more competition for fewer listings.

For instance, during the housing boom in 2021, many agents reported record earnings as demand for homes soared and prices surged. However, as interest rates began to rise in 2022, home sales slowed, impacting some agents’ ability to close deals as quickly (6).

Specialization

Some agents specialize in specific real estate types, such as commercial properties, luxury homes, or vacation rentals. Agents who focus on niche markets often have the potential to earn more as they become experts in their field and attract clients looking for specialized knowledge. However, these niche markets can also be more competitive and require additional experience and training.

The Benefits and Challenges of a Real Estate Career

Being a real estate agent offers several advantages but has its fair share of challenges.

Pros:

Flexible Schedule: Real estate agents often can set their schedules, which can be a significant perk for those who prefer independence and work-life balance.
Unlimited Earning Potential: Because real estate agents earn commissions based on the number of deals they close and the value of those deals, there’s no salary cap. Top-performing agents can earn six-figure incomes or more.
Personal Satisfaction: Helping people find their dream home or sell a property can be personally rewarding, as agents play a pivotal role in one of the most significant financial transactions of their clients’ lives.

Cons:

Inconsistent Income: Unlike salaried jobs, real estate agents’ income can fluctuate month-to-month depending on how many transactions they close. Slow months can be financially stressful.
High Competition: The real estate industry is competitive, especially in popular markets. Standing out and building a client base takes time and persistence.
No Guaranteed Benefits: Since most agents are independent contractors, they don’t typically receive benefits like health insurance or retirement plans from their brokerages.

Conclusion: Is Real Estate a Lucrative Career?

So, how much does a real estate agent make? The answer depends on various factors, including experience, location, the state of the housing market, and the agent’s hustle. While the median annual income for real estate agents is around $48,770, the potential to earn significantly more exists for those willing to put in the effort, close deals consistently, and potentially specialize in higher-value properties or niche markets (3).

For those like Jennifer considering a career in real estate, it’s essential to recognize that success only happens after some time. Building a successful career in real estate requires persistence, networking, and a thorough understanding of the local market. However, the financial and personal rewards can be well worth the effort for those passionate about real estate and willing to work.