Many people believe that Real Estate Agent is a lucrative position that offers a lot of benefits and a high salary, but is it the reality? The income of a real estate agent depends a lot on the amount of work the agent puts in because most of it comes from the commissions, which means the number of transactions they complete plays an important role in what they earn. On average, real estate agents in New York earn the most real estate commission compared to all other states, but there is also more competition in the area.
Almost all real estate agents in New York City are hired by real estate brokerages as independent contractors, which means that their salary consists of commissions only. A real estate commission is a fee a broker collects for helping a buyer to purchase a property or for helping a seller to sell a property. Generally, all transactions run through a brokerage, and the agent receives a part of the overall commission depending on the agreement with the brokerage. A part of the overall commission agents receive is called “Split”, and it can go as high as 70% for more experienced brokers. Since most, if not all, of their salary depends on the commission they get from the sales, salaries of real estate agents vary greatly even if they operate in the same market.
Where Does Commission Come From
In every transaction, there are usually 2 real estate agents: a listing agent and a buyer’s agent. A seller usually pays a commission for both agents, but the process of the commission distribution may look a little bit tricky at first.
- A seller of a property agrees to pay their brokerage a commission of 5 – 6% of the selling price at the time of sale.
- The listing agent posts a property listing to services like Multiple Listing Services (MLS).
- The buyer’s agent contacts the listing agent to view the property and potentially prepare it for a purchase.
- If a buyer chooses to purchase the listing, the two brokerages split the commission equally. In this way, each brokerage usually receives about 2.5 – 3% on every transaction.
- The agents receive their “Split” depending on their agreement with the brokerage.
Given the prices for real estate in New York City, there is a potential to earn large commissions from each transaction even if it is no more than 3% from the selling price. Unfortunately, job markets with the potential to have high income tend to get overcrowded with workers.
There are approximately 30000 licensed real estate agents in Manhattan alone and about 50000 licensed real estate agents in the NYC Metro Area. On average, there are about 35000 real estate transactions happening in New York City every year. Since most transactions require two agents, there are about two transactions for every real estate agent. Of course, some agents close more than two transactions per year, but others struggle to close even a single transaction. This means that there is a large difference between the best and the worst real estate agents. It is also important to note that there are a lot of part-time real estate agents who do not rely on their income from real estate sales and may not sell a single property in a year.
Regardless of the number of hours a real estate agent spends working as one, they are still considered real estate agents. With a large number of people working only part-time, there is a large skew of the income distribution of real estate agents in New York City. The average salary for a real estate agent in NYC is approximately $74000 per year with most agents receiving less than the average. The income of a real estate agent in NYC may be as low as $36000 per year. On the other hand, the best real estate agents in the city can make up to $650000 per year.
What Real Estate Agents Do Better
It is very hard to make money as a real estate agent during the first few years in the industry. New real estate agents tend to struggle to learn everything needed while building a strong client base, so they either do not have any clients or they cannot close the deals with them. They also tend to accept lower “Split” with the brokerages to be a part of a well-known real estate brokerage brand.
As the real estate agent becomes more experienced with a proven sales history and a large clientele database, the agent can negotiate with brokerages for a larger “Split”. As the client database grows, the agent spends less time on marketing themselves and more time on selling properties, which drives up the number of sales. Top producers rarely spend time advertising themselves because their clients spread the word for them.
Being a real estate agent is like running a business. It takes a lot of effort in the beginning, and the outcomes may not meet expectations. On the other hand, consistent work will make the agent skilled in the areas needed for the job, and it will attract new customers. With time and consistent efforts, it becomes easier to attract new clients, and the agent can start focusing on selling properties.