How Do Real Estate Agents Get Paid?

As I mentioned in a previous blog, real estate is a sales job, and that means you are likely 100% commission-based. So, unlike being an employee, where you typically get paid every two weeks, sales are unpredictable. It is not uncommon for agents (especially new ones) to go months without receiving a commission check. I experienced this in my first few years. Commission checks were few and far between for me. I managed to help a few people find rentals, but my first real commission check didn’t come until my third year. For context, I entered the market in 2009 during the Great Recession, when hardly anyone was buying, and especially not from a new agent. The unpredictability is one of the main reasons so many people leave the industry as fast as they enter it. But on the flip side, there is also no limit to the amount of money you can make, either. 

All that being said, talking about making money is more fun than not making it, so let me explain how this happens.

Before I do, if you want to know what things successful new agents do, check out my previous blog, How Many Sales New Real Estate Agents do Depends on the Agent HERE.

You Work for Free

One thing many new agents fail to wrap their heads around is the idea of working without being paid. This is especially true for people who come from being an employee, where they work their 40 hours and every two weeks receive a check for doing so. Since an agent is only paid when a property closes, all of the work done before is pro bono (unless, of course, you have a different agreement with your buyers or sellers). For example, early in my career, I showed a buyer over 60 places spanning three months, sent him over a dozen market analyses (to help him understand the value of the properties he was interested in), and spent countless hours searching for additional properties to send him before he finally bought one. All of the work I did was essentially on my own dime until the paperwork was signed.

When you break it down, it is not uncommon for an agent to make far less per hour working than in most other professions. According to the Bureau of Labor Statistics (BLS), in 2024, the median real estate agent made approximately $28.35 per hour. For the buyer I mentioned above, I estimate it took around 50 hours of work before I was finally paid. I don’t remember how much I got, but we use the BLS number above; my commission would have been less than $1,500 ($1,417.50). Not exactly Lambo money!

From my experience and research, most buyers need to see around 10 homes before choosing one, which roughly equates to 20 hours of work from the first meeting until close. Same for listings as well. That’s a lot of work to not get paid for!

But that’s only half of it. You also don’t get to keep all the money you earn!

The Payment Process

So you spent hours convincing a client to work with you, setting up and showing them properties, doing market analysis to make sure they are buying at market value, writing up and explaining every word of paperwork, negotiating offers to get the best “deal,” attending inspections to make sure they don’t freak out and walk away over a leaky drain pipe, attend contractor meetings to show how committed you are to providing the greatest customer service possible, communicating constantly with all parties to make sure the whole deal doesn’t fall apart from lazy people, answering countless questions at all hours to keep your client’s anxiety at bay, and attending the final walk-through just to make sure the sellers didn’t destroy the place on the way out, you finally get paid! Oh, wait, first your brokerage has to get its cut.

You see, the commission check you receive from a closing is made out to your brokerage, not you. When that check arrives in your brokerage's hands, they start tearing it apart to make sure they make their money. The first thing your brokerage is going to subtract will be any fees they charge (typically transaction and processing), then the remaining amount will be cut again for their commission percentage you agreed to when you joined (for new agents, it is typically around 50%). So that sexy number you were all excited about when you saw it on the check is now half of what it used to be.

NOTE: It is so important that you understand what to expect and look for when joining a brokerage so you make sure you are joining one that will fully support you. If you would like to know more about joining a brokerage, I encourage you to check out my book The Education of a Real Estate Agent. I have a whole chapter to guide you in making the best decision for you and your business. You can check it out HERE.

I know I just threw a lot at you, so if it helps to see how a commission check is broken down, I have an example HERE on my New Agent Resources page you can check out, along with a commission calculator to use when you are interviewing at brokerages, so you fully understand what you will be paid at each one. 

The key to earning the income you desire, despite everything I mentioned above, is to focus on generating clients. The more you have, the less everything above impacts you!

Does all of this make sense? If not, please leave a comment so I can make sure it does!

“Go confidently in the direction of your dreams. Live the life you have imagined.” —Henry David Thoreau

P.S. IF you are serious about becoming a real estate agent and want to learn how you can avoid the mistakes 87% of new agents make, I encourage you to check out the coaching program I have developed to help agents before they enter the industry. The program is designed to help you avoid the frustrations I and so many other agents felt when entering the industry, struggling to survive while clinging to the belief we will succeed. It is completely based on proven results from my experience as a top-producing agent, owning a brokerage for almost a decade (where I helped agents average 2x4 times the amount of sales and income), and from spending over 25,000 hours learning from history’s most legendary people! If this sounds like something that would benefit you, please click HERE to set up a FREE 30 Minute Virtual Call to learn more about how I can help you.