Have you ever wondered how much money a real estate agent actually makes when they sell a house?
Let's walk through an example together.
- Sale Price: $500,000
- Listing Agents Commission: 3%
$500,000 x 3% = $15,000
One would assume that this agent is taking home $15,000 dollars.
Seems simple right?
Well... it's actually not even close to $15,000.
Assuming this agent has a 70%/30% split with their brokerage, this $15,000 gets turned into $10,500
And if this agent is doing things the right way they would be moving 30% of that $10,500 into another checking account for taxes.
Now that $10,500 has turned into $7,350.
But wait... There's still a bunch missing.
Pictures and media expenses: $500
(Side note: these numbers are assumptions and can vary drastically.)
After including those expenses, the original $15,000 is now down to $6,600
That's all the math we will do but this agent still needs to move money from the $6,600 into their savings, retirement, and investment accounts.
In addition, an agent has to pay for their own health insurance and E&O insurance.
There's also licensing dues and continuing education courses that agents have to dish out money for every year.
But as you can see... an agents commission gets spread very thin and two things should be clear from this example:
1. Agents don't make as much money as it appears on the surface.
2. Managing your commission checks as an agent is very hard.
I wish all new agents understood and recognized this from the start.
The ones that do have a higher chance at long-term success.
And pro-tip: use a breakdown like this as a rebuttal if a client ever wants you to cut your commission.