If you know me, you know how much I love side hustles! I wanted to try a new type of side hustle and recently took on being a Realtor along side my full-time role of being a software engineer as well as closed my first deal. I represented the buyer and it was a ton of fun learning about the whole home buying process from the stance of a real estate agent.
I was always curious on how much you could make as a real estate agent and wanted to break down my first deal’s earnings for anyone who was interested. It’s actually pretty expensive to be a Realtor and I break that down here if you’re interested in reading that as well.
If you’re looking to buy or sell real estate in the Southern California region, feel free to contact me! Keep reading to learn how much you make as a real estate agent including my first deal and commission that I earned.
Who Pays Real Estate Agents?
Real estate agent commission is typically paid for by the seller. This is generally 5-6% of the home cost and isn’t paid to the real estate agents until the home closes, or is sold. If at any point in escrow, which is a fancy word for the home buying process, the deal falls through, neither the buyer’s agent or listing agent will receive any commission.
Being a real estate agent can be a tiring job because many deals will inevitably fall through. It’s important to note this before you decide to jump into the occupation. Because being a Realtor is an entirely commission based job, if you close no deals throughout the year, you won’t be paid a single penny no matter how many hours you put in.
Buyer Agent vs. Listing Agent Commission
The commission amount is agreed and set by the listing agent and the seller and is typically split 50/50 between the buyer’s agent and the listing agent. Each agent has their own broker and has their own commission split rules with their broker. The commission that the listing agent and the seller set are the sole determining factor of how much you can make as a real estate agent for that deal.
For example, in my first deal, I represented the buyer and was with eXp Realty while the listing agent was with RE/MAX. Each of our brokers has our own rules and while it may seem like we get the exact same pay to anyone onlooking, much more happens behind the scenes before either of us gets truly paid.
How Much Do You Make as a Real Estate Agent?
Being a real estate agent can be as lucrative or as unprofitable as you make it. Because you aren’t being paid an hourly wage and you’re only paid commission when you close a deal, you could easily make nothing in a year by not closing a single deal.
Average Salary of a Realtor
Real estate agents don’t get paid salaries and rather they are paid by commission per deal instead. The salary you make can vary greatly on a variety of factors, some of which include:
How much you spend on marketing
Your choice of broker and commission split, and how much the broker helps you in getting leads
Whether you’re working with a skilled mentor or not
Whether you’re working as a real estate agent part-time or full-time
The city that you work in
Your understanding of your market
In June 2023, the median salary a real estate agent made in California was $49,993 according to Salary.com with an average range between $48,838 and $63,590. The highest performing real estate agents who work with luxury properties average $142,000 per year with some reaching up to $10,000,000! The sky is the limit if you’re a highly skilled Realtor.
My First Deal and Commission as a Real Estate Agent
I represented the buyer for my first deal. The home sold for $649,900 and the buyer’s agent commission was 2%. This means that 2% of the purchase price of the home, or $12,998, went to my side of the deal. It’s a common misconception to non-Realtors that this entire amount gets paid to them. Unless you’re your own broker, you’ll be paying fees and a cut to your broker. Even as a broker, you may still pay a transaction coordinator to do your paperwork for you.
The amount you make as a real estate agent in California is generally lower than the national average of 5-6% per deal because each property is worth more than the national average.
Broker Fees for my First Real Estate Deal
Here’s a breakdown of the fees I paid and how much I made after all of it:
$2599.60 for my broker
$2599.60 to my mentor
$40 for Errors & Omissions insurance
$25 for a broker review
After all the fees, I made $7733.80 on a $649,900 value home. Not bad, but also make sure to read my article about how much it costs to be a Realtor even before you show your first home!
Miscellaneous Fees While Closing Your First Deal
If you made it to the point where you opened escrow, you may think that you have the deal in the bag. While most of the costs of being a Realtor will be paid upfront even before you open escrow, you’ll still pay a decent amount of money during the process of buying or selling a home for your client.
Closing Gifts for the Client
I spent around $1300 on closing gifts for my client. Real estate agents typically spend $100-200 or not spend any money on a closing gift at all. However, because this is a client based industry, it’s important to nurture your relationships and never burn any bridges.
For my deal, because I was helping out a good friend (and because this was my first deal), I decided to spend a decent amount on the closing gift.
Marketing Fees
If you’re going to be hosting open houses, it’s good practice to have flyers and refreshments for your guests. You also might have to spend money on signs and business cards to hand out to the visitors.
Gas
Driving around to show your buyer clients homes will definitely cost a decent amount in gas, especially if you’re going to homes outside of your current county or during rush hour. The average number of houses shown to each buyer is about 10 before they actually close on one. Sometimes, you could show someone a ton of houses and they’ll decide that they actually don’t want to purchase a home in the end!
Taxes
As a real estate agent, you are an independent contractor and will pay much more taxes than a W-2 employee. Because being a real estate agent is basically like running your own business, you’ll be able to write off all your expenses pertaining to the business, but you’ll still be paying a sizable amount of taxes in the end.
Summary – My First Real Estate Deal and Commission
My first deal was lucky in that my friend trusted me to be her Realtor but I know it won’t be as easy for future deals. I’ve been networking, learning, and brainstorming ideas to find new leads so I can increase the amount I make as a real estate agent. I’m doing this as a part-time and expecting slow progress and I’ll keep you guys posted as I make more deals!
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Hello, I’m Chloe! I’m the primary author of Off Hour Hustle. Currently, I work as a software engineer, sell products through eBay, Etsy, and OfferUp, have 26+ credit cards, and am always working to diversify my income streams. In my spare time, I enjoy climbing, hiking, and other outdoor activities.
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