How Do Real Estate Agents Get Paid?

how do real estate agents get paid
It’s a big question: How do real estate agents get paid?

If you are considering a career in real estate, one of the first questions you’ll ask is, “How do real estate agents get paid?” The majority of real estate agents in the world are independent contractors who are paid commission. That means no base salary.

The good news is there are no income limits in real estate when you are working for commission. The sky is truly the limit. If you want to make more money, you simply have to sell more houses. There is no cap to what you can make.

I personally know several agents who are making multiple millions of dollars in commission every year. One of them has only been in the business for FIVE YEARS. He’s very good, but it shows you what’s possible.

For people who have never worked in a commission-based job, it can be a little unnerving to walk away from a steady paycheck at the beginning. Believe me when I tell you, IT’S WORTH IT. You should have some cash reserves before you get started in real estate, but you can start getting paid pretty fast with some determination and hard work. (When I got started in the business, I put all my initial expenses on my credit card. I do NOT recommend that for most people, but it worked well for me and I had it all paid off within my first six months.)

If you are currently working in a salaried job and you are considering making the move to real estate, here’s one question for you:

Have you ever had to give up something good in order to get something GREAT?

Well, this situation is just like that.

For some nitty-gritty details, I have included a sample scenario:

Real estate agent sells one of her listings for $400,000.
Commission earned is 3%, or $12,000.
Real estate agent is on a 70/30 commission split with her brokerage.
70% of $12,000 equals $8400 to her for that transaction.

Of course, she has to pay taxes and business expenses from the $8400, but it’s still a good chunk of change for one transaction. If she only sells one house like that every month, that’s just over $100K in commission in one year.

Pretty good deal, eh?

How do real estate agents get paid in London?

For those who are curious, here’s a great story from overseas. When I was opening our office in London, England, it was UNHEARD OF for people in the real estate business to work for commission only.

One day, I was interviewing a top agent in London and he earned about £600,000 in total commission for his company the previous year. From that £600,000, he took home about £100,000. That’s okay, but that means the company made £500,000 from him. That’s crazy since he was doing all work!

There’s a twist: He was receiving a wimpy £30,000 salary on top of his commission bonuses. He was unwilling to walk away from the £30,000 salary even though he could make an ADDITIONAL £400,000 for doing the exact same amount of work. He simply didn’t want to let go of the “stableness” of the salary.

I’m not speechless very often, but I was speechless here. Seriously? You’re throwing away £400,000 a year because you *need* a £30,000 salary? That’s crazy.

(Click here for more about how Keller Williams in London works)

Being a real estate agent who works for commission is the best way to do it, but it may take some getting used to. This is especially true if you have parents, significant others, friends, etc. who have never worked for commission and don’t understand how it actually works.

When someone asks you, “How do real estate agents get paid?” you can let them know that you get paid on performance. If you don’t perform, you don’t get paid. The ONLY way real estate agents get paid is when a property sells.

Are you interested in getting started with a real estate career? Follow the link.