With the housing market booming, you might wonder how much real estate agents make. Many reality TV shows often glamorize these jobs, showcasing agents selling multi-million dollar homes and making boatloads from the commission.
While that’s not the norm, it does happen here and there. However, most agents earn a far lesser salary than their TV counterparts.
According to the Government of Canada’s Job Bank’s report, real estate agents earn between $24,746 and $134,783, with an average salary of $46,212.
But an agent’s salary isn’t cut and dry – many facets go into it. Let’s find out what makes up the ins and outs of a real estate agent’s potential income.
With most jobs, you usually have a set salary or an hourly figure to give you an idea of how much you’ll take home each week. The real estate industry is completely different. Agents don’t have the luxury of a recurring weekly paycheck in the same amount.
Instead, they rely on commissions. Commissions are paid to brokerages for their help in the sale or purchase of properties. It can be a flat fee, but more commonly, it’s a percentage of the property’s selling price.
Commissions in Canada range from 3%-7% of the final purchase price. But this whole amount usually doesn’t just go to one realtor. It’s often split between the seller’s and buyer’s agents.
For example, if the final purchase price of a home is $500,000 and the commission rate is 5%, the total commission comes to $25,000. That amount gets split between the two realtors totalling $12,500 each.
While that doesn’t seem like a bad day’s work, the average real estate agent isn’t selling houses every day. In fact, one Toronto real estate firm pulled average sale statistics from previous years, and the results are pretty eye-opening.
It might surprise you that the average agent sold between 1 and 6 homes over the designated period. That number might seem lower than what you were expecting, and overall, probably isn’t making the agent rich.
In addition to how much an agent sells, individual brokerage fees and administrative expenses also decrease their commission portion.
While the example above has the agent pocketing $12,500, that’s not the case. There are additional brokerage transaction fees that vary depending on where the agent works, along with operational expenses to keep the brokerage running.
Here’s a look at the breakdown:
- Brokerage Transaction Fee – Normally, the brokerage takes a cut of the commission. It can be anything from 10%-20% of the agent’s commission. The brokerage uses these fees for administrative and marketing costs.
- Operational Expenses – Real estate agents also usually need 20%-30% of their commissions to cover their everyday expenses. This includes things like:
- Car Payments
- Home Office Supplies and Expenses
- Continuing Education
If we take the above example of the agent earning a $12,500 commission and then include the brokerage transaction fee and operational expenses fee, the agent comes out with a bottom line of $6,250.
|Brokerage Fee (20%)||($2,500)|
|Expenses Fee (30%)||($3,750)|
|Total Take Home||$6,250|
If the typical agent only sells around six homes on average, that totals $37,500. Of course, not every property the agent sells will have a $500,000 purchase price. Some might be more and some less, but this example shows it isn’t as easy to make money as a real estate agent as some people think.
If selling six houses on average seems low, consider how most agents spend their time. From the minute a seller contacts an agent until the property sells, real estate professionals spend countless hours doing work behind the scenes to get their client the best deal.
First, they will need to make an initial site visit to scan the property and gather information. Next, they’ll need to do a market analysis of comparable houses nearby. From there, an agent can gauge attractive pricing options.
As soon as the house is listed, agents can set up open houses, individual appointment times, and negotiate any offers. Finally, once an offer is accepted, the final paperwork needs to be prepared.
This whole process can take much time and effort. Good real estate agents are always actively looking to boost the property – from giving their sellers tips to produce a good showing and sometimes even staging the home for added benefit.
Over the past ten years, average real estate prices have almost doubled. In some places like Vancouver and Toronto, it’s even more than doubled. From that stat alone, getting into the real estate business seems like a good idea.
But before you get ready to sit for a licensing exam, you might want to consider that not all agents, and housing markets, are the same.
And while there’s been a housing boom in recent years, that doesn’t mean all realtors are millionaires. Top brokerage earners tend to sell at least one house a month.
As we already know, that’s way more than average, so they’re already at the top of the game. But if an agent is claiming to make over $1 million, they’re at the top echelon of their craft and not the norm.
The top ten percent earn over $100,000 – closer to $150,000. While that’s not a bad chunk of change, it’s not the millionaire status some reality shows will have you believe.
Throughout Canada, certain real estate markets are much more profitable than others. Toronto and Vancouver are the most lucrative if you’re an agent. Home prices are usually higher in these areas, meaning a higher commission.
But higher commissions also bring out the competition. You can see that both of those provinces have more agents than the others and more homes sold during the year. So while you might have the potential for a higher income, you’ll also be dealing with competition from other agents.
Another interesting trend from that table is that agents in British Columbia and Ontario have significantly fewer transactions per year than others. The contrast is that agents from New Brunswick or Saskatchewan can work on more transactions per year yet earn less per commission.
The bottom line is that the area you work in as a real estate agent determines a big part of your income. Working in smaller cities with lower housing costs means fewer commissions and overall pay. The upside is that there are not as many agents, meaning you can take on a heavier workload.
To be at the top of your game and make as much money as possible, you can’t just sit around and wait for customers to come to you. Here are a few tips all successful real estate agents should follow.
- Nurture Leads – Whether following up with customers that left feedback via your website or reaching out to an acquaintance looking for a new home, actively seeking out potential customers is one of the big differences between high-level realtors and mediocre ones.
- Keep a Stager on Hand – A professional stager is a great asset when you’re looking to sell a home. Having someone that you know and trust is key to getting the job done. While it might cost you a bit more upfront, you should reap the rewards in the long run.
- Use Videos on Your Website – Most real estate agents post pictures of their listings. Take it up a notch and add videos. A simple tour showing the flow of the house might catch the attention of buyers that wouldn’t normally be interested just from the photos.
While an average agent makes around $46,212, there’s potential to make much more. The area you live in determines home prices and how much commission you make. However, real estate agents can take steps to increase their income by seeking out potential clients and staging homes effectively.
If you’re thinking of getting into the real estate market – why not try investing first? Check out these top real estate investing options.