Whenever I speak to a person who has aspirations to be a real estate agent, one of the first questions always asked is, “How much money do real estate agents make?”
The following information is based on data from the National Association of Realtors and was compiled by my friend, Saul Klein.
In 2021, there were a total of 5.92 million homes sold. In 2022, projections based on current activity have that number dropping to 5.4 million homes sold.
For every home sold, there is an agent on both the listing side and the selling side (listing agent and buyer agent). That means that there are 10.8 million “sides” projected for 2022.
There are 1.5 million Realtors® in the United States. Dividing the number of transactions by the number of Realtors®, the average number of homes sold nationally per agent is 7.2 homes.
The median home price in the US is $407,000 so far this year. If the average commission is 5% (2.5% per side) then the average total commission per sale is $10,175 per agent.
That means the average agent’s gross commission income before splits with the company, before taxes and before expenses is $73,260.
Using a generic agent/broker split of 80% to the agent and 20% to the broker, that means the agent would receive $58,608 after paying the broker.
If we consider that expenses are 20% of the agent income, that means that the “Net Self Employment Income” for the agent is $48,886.40.
After Self Employment Tax (13%) and before income tax, the annual agent net would be $40,791.16.
There is the simple answer to the question based on national numbers; $40,791.16 is the average income for a Realtor® in the United States.
Many agents will argue and say, “But you CAN make so much more,” or, “Average is not a good indicator for income.” I agree, however, the numbers do not lie. There are many agents in this business that only sell 1-3 homes per year. Others sell hundreds.
Like most businesses, there is an 80/20 rule; 20% of the people making 80% of the money. With the advent of large teams, that number is more like 10% of the agents making 90% of the money.
Variables exist in every statistic. Again, this is the “Average.” My advice if you are considering real estate as a career is, “Don’t be average!”