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
In 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 our online real estate courses today!