How Much Does a Real Estate Agent Make

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How much an real estate agent makes largely depend on the number of deal they close and the closing price of each deal. Due to the strong demand for real estate property, the real estate agents and brokers representing sellers have had a relatively easy job. The buying pressure is allowing real estate agents to sell more property units within a brief period of time, for record prices, especially in hot real estate market like Toronto and Vancouver. A study conducted by the Red Pin Realty shows 8,477 homes sold in 3 days within Toronto in 2014, the listing agents made a whopping average of $1000 an hour!

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In addition, the same study also reveals that out of those homes, 2,826 were sold in GTA within day one of the listing. The study is based on the average Toronto property value of $602,607, also assuming the listing agent gets 2.5% in commission for representing the client. Suppose the agent spend on average of 15 hours in preparing the property, including property photo-shoot, MLS listing, arrange showings, prepare documents for various purposes, and so on. At the end of day, once the deal is closed, the agent is looking to collect $15,065 in commission for this property, which translates to about $1000 per hour.

The $602,607 average property value factors in detached, semi-detached, townhouse and condo homes. The $15,065 commission income is before tax, also before any brokerage fees, real estate insurance and other deductions. As a successful real estate agent or broker, it is crucial to managed your tax expenses effectively. Here are some general tips.

Typically the seller of the property offers 5% of the closing price as commission. Once the property is sold, the 5% commission will be split 50:50 between the buyer’s agent and the seller’s agent, then the agents will give a portion of that commission to the sponsoring brokerage firm, for the administrative and marketing services. There is also a real estate licensing fee, which the amount and the payment frequency vary by province. Please be aware having a career as a real estate agent is similar to running one’s own business. Other expenses will incur such as continuing education, car maintenance, fuel, website maintenance, and other applicable industry dues.

There are hours and hours of hard work that is not counted by this simple calculation above. Most of the hard work are actually done in signing up new clients, or to convince a seller to choose you to represent him or her. The hours spent on networking and eliciting new clients is difficult to measure and vary greatly by individuals. It is also difficult for a new agent without much network to acquire new clients at the beginning, and thus won’t close as many deals in a year. That being said, it is common for an inexperienced agent to make $40,000 in his/her first year. As for the seasoned pros, after years of hard network and reputation building, referral and word-of-mouth marketing will consistently bring in new deals.

How much real estate agent makes really depends on the number of transactions they complete and the commission split structure with the sponsoring brokerage. Although landing a big client will bring in lucrative commission on a closed deal, but the agent must work hard to earn the privilege of representing such clients.

Despite the current economic uncertainty, the Canadian real estate market remains strong. Fueled by a consistent influx of immigrants and visa students, as well as a lack of alternative asset classes for investor to earn a decent return, the average property value continues to rise, and there are no signs of cooling down.​

info-graphic curtsey of Point2​