How Much Money Does Your Realtor Make?

By
Real Estate Agent with Keller Williams

The average commission rate real estate agents in the Chicago area is 5% of the selling price of a home. This is paid by the seller at the time of closing. The listing agent, who represents the seller, agrees to split the commission, usually half and half, with the buyer's agent.

Thus, each side of the transaction gets 2.5% . Then, each agent shares the commission with his or her brokerage firm, according to the agreement each of them has with the firm. Some top agents may keep all of their commission (however, they usually pay a hefty monthly fee to their company), but more likely 80%, while the brokerage gets 20%. New agents usually split the commission 50/50 with their brokerage. However, some companies charge the agents as much at 65%, especially if they support the agent with sophisticated lead-generation services.

HeapocashOn average, here is how much money the agent gets to keep (based of $500,000 home sale):

Total commission paid by the seller: $500,000 x 5% = $25,000
Commission per side: $25,000/2 OR $500,000 x 2.5% = $12,500

Top-producing agent:
Agent's net commission: $12,500 x 80% =  $10,000

New agent:
Agent's net commission: $12,500 x 50% = $6,250

For each transaction, the agent also incurs certain expenses. For example, a listing (seller's) agent will pay for all marketing and advertising for the property, which can run into hundreds of dollars, and open house expenses. A buyer's agent may incur transportation costs, parking and meal costs. And, since agents are independent contractors, they owe a significant portion of their earnings to Uncle Sam.

To net a million dollars (pre-tax), a top producing agent has to sell 100 half-million-dollar homes. The vast majority of agents are not top-producing, and are lucky if they sell two homes a month.

There you have it.

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Location:
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Comments 9 New Comment

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Rainer
32,051
Ronda Myers-Waters
Willems Realtors, Principal Broker

Justyna,

Very good point!  Thanks for the post!  That's a great way to inform people that complain about are so called high commissions.

June 12, 2007 10:05 AM
Rainmaker
201,028
Stephanie Edwards-Musa
knitwit at thred UP
thredUP.com
Excellent point. Thanks.
June 12, 2007 08:44 PM
Anonymous #3
Anonymous
J
so you're saying the vast majority of agents only make $250,000 pre-tax? you're right, i do feel sorry for them :-P
June 22, 2007 03:18 AM
Rainer
10,205
Justyna Frank
ABR
Keller Williams

Dear P or J,

If you read carefully, you will notice that I said they "are lucky" if they sell two homes a month. That does not imply that they regularly do so. Many new, or less successful realtors have several dry months in a row. Especially in this market. Furhtermore, obviously not all the homes we sell are at or above the half million dollar mark.

I would encourage you to poke around this site and find our about some real experiences from real agent. You will find that some are very very successful. But many are here to figure out how to make a living in this profession. 

I should have expressed myself more clearly .

June 22, 2007 08:10 AM
Rainer
113,250
Leslie Godbold
Leslie Godbold host "Positively Living" Radio Show
WZGM AM1350 Independent Asheville Radio

Justyna,

Your blog points out some very interesting points. The top producer's and new Realtor's commissions are reduced by all of the expenses incurred in listing or showing homes, plus overhead such as insurance, GAS PRICES, marketing/advertising costs. I am sure there are other expenses that I ,as a non Realtor, can not list.

Oh yes, what about the listings expenses for homes that for some reason out of your control don't sell and showing expenses that don't end in a sell. I tried to forget taxes but you better not. :.) 

Thanks for your blog that made me think, Leslie

June 22, 2007 09:05 AM
Rainer
10,205
Justyna Frank
ABR
Keller Williams
Thanks, Leslie, I was trying to keep it very simple, but these additional costs cannot be overlooked. Realtors have this image of being able to make a lot of money very easily (see comment above), and few members of the public realize what a hard, and sometimes ungratefu, profession in can be. 
June 22, 2007 09:28 AM
Anonymous #7
Anonymous
Bethany

Leslie made a great point - In this market we can't forget that many properties are marketed for MONTHS and then still may not sell. Therefore the expenses of listing a home that may not sell are just money out for the agent...

July 07, 2008 05:05 PM
Anonymous #8
Anonymous
Rigel P

There's also the fact  that the agent pays the office they work for a split of their commission. The house usually takes between 25% and 50%. There's also expenses for having a license, and lots more expenses that go with being a member of the National Association of Realtors, the mls fees, errors and ommissions insurance, and desk fees.

December 02, 2008 02:09 PM
Anonymous #9
Anonymous
Anonymous

fsdadf

December 13, 2010 11:35 AM
Anonymous
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Rainer
10,205

Justyna Frank

ABR
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