Ever wonder how much that real estate agent you constantly see on bus benches or your grocery store receipts makes?
Given the ongoing commission lawsuits, and possible shakeup regarding how they earn money going forward, this is an even more interesting datapoint.
Fortunately, the National Association of Realtors (NAR) releases an annual report that details the earnings of its many members.
The “2023 National Association of Realtors Member Profile” covers the approximately 1.58 million active real estate agents in the United States.
It found that the median gross income for a “Realtor” was $56,400 in 2022, up from $54,300 in 2021.
Very Few Real Estate Agents Earn Six Figures
- There seem to be really big winners and equally big losers in the residential real estate business
- Top producers are capable of bringing in $150k+, while many others earn $10k or less annually
- Median gross income of Realtors increased to $56,400 in 2022 from $54,300 in 2021
- The typical agent closed 12 transactions yearly as sales volume increased to $3.4 million from $2.6 million
First things first, most real estate agents don’t make six figures. In fact, median earnings are about half of that.
And it’s actually even lower for those who function as sales agents as opposed to real estate brokers.
These agents earned a median $46,300 in 2022, which surprisingly was up pretty big from $33,800 in 2021.
However, there was quite a range in earnings based on years of experience. For a Realtor with 16 years or more experience, median gross income was $80,700.
Meanwhile, an agent with two years or less experience had a median gross income of just $9,600.
As you can see, more than half of agents have less than 16 years of experience. And 12% less than one year.
But typical experience increased to 11 years in 2022 from eight years in 2021, a reflection of newer agents leaving a tough housing market.
Most Real Estate Agents Are Married and Have Higher Household Incomes
While median earnings might be lower than expected, it’s important to remember that many agents are married and that real estate isn’t necessarily their primary source of household income.
In fact, the report points out that just six percent of agents indicated that real estate was their first career.
So while the median income of a real estate agent is well below the median household income of $74,580, per the U.S. Census Bureau, there’s more to the story.
The typical Realtor was a 60-year old white female, of which 69% were married. And the typical household had two adults and no children.
Once you add the other adult’s income, their gross household earnings were $141,200, up from $125,500 in 2021.
Additionally, the typical Realtor only worked 30 hours per week, down from the 40 years per week seen in preceding years.
The year 2022 was also challenging, with a lack of inventory the number one limiting factor affecting sales volume.
Simply put, there aren’t enough homes for sale, which is making it difficult to transact and earn more money.
Lately, housing affordability has also made a dent in home purchase volume as well, thanks to a combination of rising prices and significantly higher mortgage rates.
Essentially, you’ve got a large group of real estate agents who don’t close many if any transactions in a given year, then the heavy hitters who close the lion’s share of sales year after year.
That’s evidenced by their work rate, which ranges from 20 hours per week to some throwing down 60 hours per week or more. These top producers are the ones making a career in real estate.
The others might just be dipping their toes in the pool – we also have to consider the individuals who get licensed simply to close their own home, or to help a friend or family member.
This could explain the relatively low 12 transactions per year on average, which is just one per month.
How Real Estate Agents Get Paid
While you may have heard that real estate agents earn 2.5% to 3% of the sales price, this often isn’t entirely true.
This is because most agents must share their commission with their real estate brokerage.
The most common arrangement is a fixed commission split (42% were compensated this way per NAR), in which a portion of that 2.5% to 3% goes to the agent and a portion to the broker.
For example, a common 60/40 split on a $500,000 home sale with 3% commission would result in $9,000 going to the listing agent.
The remaining $6,000 of the $15,000 in total commission would go to the listing agent’s broker.
In reality, this agent makes about 1.2% of the sales price, less any costs they incur along the way.
The next most common setup is a graduated commission split, which increases with productivity, used about 19% of the time per NAR.
So an agent might start with a split of 50/50, then 60/40, then 70/30 and so on as they produce more throughout the year.
This allows a high-performing agent to get rewarded for closing more deals.
Lastly, there is a capped commission split, used 15% of the time, which increases to 100% after a predetermined threshold is met.
Once an agent makes X amount in a year, they earn 100% of the commission on subsequent deals. But they may receive less support and could be subject to monthly admin fees and/or transaction fees.
As you can see, there’s a good chance the agent isn’t walking away with the full commission listed on the MLS or in the paperwork.
[Can Real Estate Commissions Be Financed via the Mortgage?]
Do Realtors Practice What They Preach?
- 89% of Realtors own a primary residence as opposed to renting
- So the majority don’t just sell homeownership, they actively participate
- And nearly half of agents own more than just one property
- Such as a vacation home or investment property
Curious if real estate agents are also homeowners? Well, the answer is largely yes.
Per NAR, 89% of Realtors own primary residences, meaning they too are buying instead of renting.
This has held fairly constant over time. And nearly half (43%) own an investment property, or at least one vacation home.
Additionally, a small percentage own at least one commercial property. So they’re aren’t just out there selling real estate, they’re buying real estate as well.
Remember, the median gross household income for a Realtor in 2022 was $141,200, which is well above the national median, so I suppose they marry well too!
It will be interesting how 2023 looks, as it was one of the worst years for the housing market in recent memory.
Which speaks to another issue, that real estate is cyclical, so bad years are expected (and should be calculated) along with the good over time.
Read on: How do real estate commissions work post-settlement?
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