How Much Money Can A Real Estate Agent Make?

If you’ve ever seen a billboard or a bus stop ad, chances are there is a real estate agent’s face on it. Real estate agents ave become a norm within society, they’re everywhere. Furthermore, becoming one has become a new trend. People have realized that becoming a real estate agent grants you access to copious amounts of commission with little to no schooling. Of course, you can’t just wake up one morning and begin to sell houses.

There are rules, regulations, and certifications that must be acquired before being eligible to do so. However, how much can they earn? As always, we’ll take a look into that. However, I also want to take a look into the different types of real estate agents and how to become one. This is due to the fact that even though the market is becoming saturated, many people still have this goal. However, with any business, you don’t need to reinvent the wheel, only make it slightly better or different.

How To Become A Real Estate Agent

Although becoming a real estate agent does not require any formal schooling, this does not mean that is a simple task. Becoming an agent takes time, money, effort and studying. Therefore, how do you become a real estate agent? The path to becoming a real estate agent is quite linear and very well documented. Comparing it to other careers where you can take multiple paths to reach the same destination, becoming a real estate agent can be quite linear.

To become a real estate agent, you first need to save up some money. How you save the money is up to you. However, save up are $10,000. This may seem excessive but the rest of the money that you have leftover will be used for marketing and branding purposes. To become a real estate agent, you’ll need to partake in a few courses and exams. Both of which you have to pay for. However, these courses and exams are not cheap in the slightest. The courses and exams can range from $100 to as much as $750.

Above are the necessary courses and exams that you’ll be needing to take, along with the cost. As you can see, it’s not going to be easy. Each of these courses carries valuable information. However, you won’t be able to do all the courses simultaneously. The licensing process can take up to 5 years to complete.

You’re not off the hook for spending money yet, there are still a lot of fees and certifications that you need to acquire. For example, there is a compliance e-learning module that you must complete. You can get this e-learning module from various places. For example, you’re able to acquire it from Humber college for $300.

Lastly, you will have to pay other ongoing annual fees. Some of these fees include, but are not limited to, Reco e & e insurance fee ($465) and CREA annual fees. Therefore, you will not only have to pay an upfront investment but maintaining your license as well. Therefore, this is the reason why you should save up a minimum of $10,000. However, if you’re passionate about real estate and have a bit of luck, you may be able to earn the money back quickly.

Types Of Real Estate Agents

When diving into the world of real estate, you’ll come to find that there are three (or two) particular types of agents. The two different types of real estate agents are buying and selling agents. As you probably guessed, this can be either the same agent or two different ones. If you manage to become a dual agent in any instance, you’ll be able to garner commissions from both sides of the transactions. However, before we get into that, what are the contrasting responsibilities between a buying and selling agent?

The buyer’s agent’s main priority is to help you find a home. They’ll take into account everything you’re looking for, including price and try to work within these guidelines. However, their responsibilities can extend beyond just helping you find a home. They can refer you to home inspectors, photographers, and even contractors. Furthermore, they will do their best to negotiate with the sellers and their agent. Getting you the best price is one of their main priority. Therefore, when becoming a real estate agent, you need to always have your client’s best interests in mind. If you don’t, there is a lower likely hood of you getting paid.

The seller’s agent will be doing almost the complete opposite. As a seller’s agent, you’ll be trying your best to find a buyer for your client. This includes listing your house, finding buyers and even staging open houses for people to come and see your property. Much like the buyer’s agent, they’re going to try and haggle the other side. The goal for both agents is to find a healthy compromise for both of their clients. That way, both parties get what they want and the agents earn their commission. However, if you’re a dual agent, it may be less of a headache considering you’re dealing with everything yourself. Therefore, fewer situations are out of your control.

Commission Structure

Real estate agents work off of commissions. However, the percentage is based on how much a house sells for. If you’re thinking that this can equate to a lot of money, it can. Some people sell a couple of houses a year and live off of the commission that they earn. This can be in the tens of thousands. According to fivewalls.com, the industry standard that a seller will have to pay out is 5%. This means 2.5% goes to the buying and selling agent. However, there are many times where a selling agent will reduce their take to as low as 1%. This is especially common in saturated areas.

The concept of 1% commission real estate agents is becoming quite common. However, it is important to note that regardless of how much commission they earn, many agents will try their hardest, even for a lower percentage. Buyers agents don’t often take less than 2.5% commission. Furthermore, buyers do not pay a commission when purchasing a property. This means that the seller has to shell out the whole 5% or whatever percentage is agreed upon.

How Much Can They Earn?

Since we’ve established how much commission they can earn, let’s take a look at an example. To make it simple we’ll use 5% as the amount the seller has to pay in commission on a $1,000,000 home. 5% of $1,000,000 is $50,000. If the buying selling agent is both taking 2.5% each, they’ll split this amount down the middle. That means from this one transaction they can earn $25,000. However, there are taxes and fees that realtors often have to pay out when making a sale. Therefore, they, most likely won’t be earning $25,000 on the dot.

Since that was a hypothetical, it’s time to take a look at more practical examples. The reality of being a real estate agent is often very different from how people perceive it. A lot of people think that they’ll be selling homes right off the bat and earning $25,000. However, those sales are often few and far between unless they’re extremely well known and are in a high ticket area. Therefore, it’s time to take a look at the average income that real estate agents earn.

According to an estimation from 700 employees, real estate agents in Ontario earn approximately 7% over the national average. This leaves an average income of over $100,000 per year. However, the real estate agents who’re earning this much are most likely well established and have a large client pool.

When you first start off, you’ll be in the negative due to the initial investment. This means you’ll most likely start off at the lower end of the spectrum. However, as you progress, word of mouth will start taking effect and you’ll start to snowball. Gaining momentum with every new client you pick up. Therefore, becoming a real estate agent can be a great way to earn money as a main or side income. However, it takes a lot of time, effort, learning and grit to become truly successful.

Shameed Chris Khan

Shameed is just a man on a mission to help those around him gain financial success. Obsessed with writing about all things finance, this GTA native is constantly learning and sharing his experiences with others.