Explore Real Estate Agent Earnings with income sources, including commissions and fees, to understand how much agents really make.
Over the past couple of years, I’ve sold over $4 billion worth of real estate. But what does that really mean? How much do real estate agents actually make?
Hello to all you beautiful people! A few things before we get started—yes, the book is still strapped to my hand. If you could, please pre-order Big Money Energy, my new book that comes out February 2nd. I wrote it during quarantine, and the link is in the caption. Also, if you haven’t subscribed yet, please subscribe—it’s really, really important! I love you all so much, and while you’re at it, send this to your friends!
Most of you probably know me from Million Dollar Listing New York on Bravo, a show I’ve been on for nearly 10 years. On the show, they show me making money, selling property, personal life moments, and all that—but it’s always capped by sale price and commission. People see it and think, “Whoa, $2 million commission, $600,000 commission, wow!” But it doesn’t go into the splits, doesn’t talk about taxes, doesn’t cover marketing fees, or any of the little details that eat into that commission amount.
So, I want to bring some clarity to those of you who might be thinking about getting into this business, because this is the greatest business in the world. And until a house can figure out how to sell itself to another house, there will always be a need for real estate agents.
New York City Real Estate vs. the Rest of the World
First, let’s state the obvious: New York City real estate is very different from the rest of the world. The average price point in NYC is just over $1 million—and that’s maybe for a room this size. The rule of thumb in New York is you’re paying about $1 million per bedroom.
Now, of course, we’ve sold things that are much, much more expensive. We just sold a three-bedroom for $36 million. And we’ve also sold things that are much less expensive, but on average, that’s how it works. In the rest of the U.S., the average home sale price is just under $300,000, so commission amounts vary greatly. You need to sell a lot more in other places to make what NYC agents make.
Keep in mind, the splits in New York are a lot lower than what you’ll find in the rest of the country—and for good reason. The cost of living and operating a business in NYC is very, very expensive.
Breaking Down Real Estate Commissions
For those not yet in the real estate business and who might be nervous because there are no salaries—everything is commission-based—I want to walk you through the numbers.
Let’s say you sell a property for $1 million. The average commission in the U.S., including New York, is 2.5%. Now, sometimes if you represent both sides of the deal, you might get 5%, or 4%, or 3%—depending on what you’ve negotiated. But most of the time, the seller is paying a pre-negotiated commission to their agent, who then lists the property for sale on the MLS (by the way, in New York, there’s no MLS, which is crazy!).
So, let’s say you bring the buyer for a $1 million deal. The commission is 2.5%, which equals $25,000. If you’re a brand new agent, most brokerages will start you on a 50/50 split. This means for every dollar you bring in, the brokerage gets half because they’re helping you, training you, providing leads, and giving you resources so you don’t have to pay out of pocket.
So, from that $25,000 commission, your cut is $12,500.
Costs and expenses
But hold up—if there were marketing costs or fees, they’ll be deducted. Maybe you had to pay for a taxi or other small expenses that your brokerage covered for you. Some brokerages even have desk fees or lead generation fees, so make sure you know upfront what fees and expenses you’re responsible for.
I get messages every day from agents who got into the business because of me (thank you, I’m flattered!) saying, “Hey, I just sold my first place. I was supposed to get $3,000, but I only got $2,252—what’s up with that?” Well, welcome to real estate—this is how the business works.
If you’ve only sold one place for $1 million and you’re a brand new agent on a 50/50 split, the most you’ll make is $12,500. If you don’t have any marketing expenses, great! Your check will be for $12,500. Boom—models and bottles!
But hold the phone—there’s still taxes.
Taxes: Living in the Net
One of the big things new agents and independent contractors forget is net income after taxes. You live in the net, not the gross. My first commission check was for $24,000, and I thought, “I’m rich!” But then the tax accountant says, “Hey, we need X amount of dollars,” and I’m like, “From where?” And they’re like, “From you.” If you’re in New York, taxes can be up to 50%. Make sure you know what your income tax liability is in every state.
Take Control of Your Success
The good news is that in real estate, everything is in your control. The more homes you sell, the more you earn. No one will ever say, “You’ve sold too much real estate!” To hit big numbers, it’s not about selling one home—it’s about selling lots of homes.
Let’s say your goal is to make $100,000 in income by year two or three. How do we do that? Let’s break it down. The average home price in the U.S. is $300,000, and the average commission is 2.5%. That’s $7,500 in commission. To make $100,000, you’d need to sell just over two homes per month. The more people who know you as a real estate agent, the more leads you’ll generate. That’s the business!
There’s a whole lot more that goes into it, but this is a solid start. If you like this style of blog, let me know in the comments, and maybe we’ll do more. If you don’t like it, also let me know—I like constructive criticism!
If you’re new to the business, tell me your income goals in the comments, and I’ll be rooting for you. If you’re still trying to figure out how to sell, check out my Sell Like Serhant sales course on my website. Don’t forget to pre-order Big Money Energy, and remember: above all, the key to being a successful entrepreneur is discipline—not just making big money.