Home Buying Process How Real Estate Agents Earn Their Commission

How Real Estate Agents Earn Their Commission


How Much Real Estate Agents Make

The True Value Of A Real Estate Agent

Are you thinking of selling your home? Are you considering hiring a real estate agent? If you answered yes to both of these questions than your very much aware of the likelihood that your property will be sold with the help of a real estate agent.

Ever wonder why real estate agents make so much money? Let’s take an inside look into why real estate agents get paid so much money to sell your home.

Commission Earning Business

Although real estate agents are paid on a commission split after the property sells, the amount of money is substantial enough to ensure that real estate agents make a great living. The national average value of a home is about $240,000. Since real estate agents get a percentage of the sell value of your home, a real estate agent is entitled to 2.5-4% of an actual sell.

Let’s use these values to compute the actual commission from selling a property at $240,000. If your agent commission is 2.5% your gross agent commission is $6,000 which is paid to the brokerage. There is a 50/50 split with the brokerage to cover brokerage related expenses including but not limited to office space, supplies, and legal fees. After a little is taken off the top the real estate agent earns $3,000 before taxes. After Uncle Sam takes his portion, a real estate agent will walk away with $2,550 after selling a $240,000 property.

Marketing and advertisements is an additional expense that real estate agents have to incur. Marketing helps agents sell homes and other properties. Even though some homes may require different marketing schemes and tactics, other homes require very little marketing. Be sure to discuss all available marketing options with your real estate agent.

Some common marketing strategies include internet marketing which cost approximately $150 while direct mail campaigns cost an upmost of $800. An open house typically costs about $350, flyers amount to $100, and gas to travel to and from open house events and other marketing campaigns is $80. After taking all of these factors into account the net real estate agent commission is $1,070 which is approximately $29 an hour.

Now that we know more about how much money real estate agents actually make after selling a property, let’s examine how much time is allocated to these tasks. Real estate agents tend to spend an average of 16 hours on open houses, 6 hours on contracts and closing, 8 hours showing the home, 3 hours doing research, 5 hours staging the home which amounts to a total of 38 hours.

Since selling your home is one of the biggest ordeals you will ever be involved in, you must hire a highly reputable real estate agent to assist you with such a large transaction. Although you may believe real estate agents are paid too much money, it is worth every dime.

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Brandon Gaille is one of the top marketing and business growth experts in the nation. Every month over 200,000 people visit his small business marketing blog, BrandonGaille.com. Brandon has founded 5 multi-million dollar companies over the past two decades. He is currently is the CEO of ByReputation, which is an internet marketing firm specializing in social media, SEO, and content marketing.