With all due respect, I disagree with John Souerbry (and I'm not trying to recruit you):
Q: What can a beginner agent expect to make first year on average assuming they are average at the job, not great not horrible just average.
A: Since you are asking about average, Iâ€™ll give you numbers based on 50% of the â€œactiveâ€ agents in Alameda County (TrendGraphix):
â€¢ Total Realtors shown as active: 8,271
â€¢ Maximum number of transactions a year for the bottom 50%: 2
â€¢ Average sale price (all types of properties) in Alameda County was $497,000 (8/2012). The average buyer side commission is 2.5%. If your split with your broker is 60%, your paycheck will be $7,455. If itâ€™s 70%, you will get $8,697.50. Multiply by 2 â€¦ your yearly income is $17,395. And thatâ€™s BEFORE you pay for your license, MLS fees, E&O insurance, desk fees, franchise fees, training, auto expenses, phone, internet, etc.
Letâ€™s assume youâ€™re NOT average and in the top 85% â€“ you will have done a maximum of 6 transactions:
â€¢ At 6 transactions, your typical income IF at a 70% split would be approximately $52,185.
â€¢ You could reasonably expect to pay fees of $7,000 for the privilege of being a Realtor. This does not include the advertising, websites, auto expenses, computer, phone, etc. and any other fees associated with related services you subscribe to. Now your income is down to $45,000 â€¦ or less.
â€¢ Most beginning realtors function on the lower end of the market, therefore the average price of $497,000 could easily be much lower. If your average sales price were to be $350,000, your subsequent net income would now be down to about $29,850.
Letâ€™s imagine youâ€™re in the top 94% - out of 8,271 Alameda County agents, only 473 sold more than 12 homes in the past 12 months â€“ 1 a month. 94% sell 12 or less a year. At that rate, your split could go to 80-90%, and your income would obviously be higher. You might, as an exceptional top-rated agent, make approximately $120,000 â€¦ BEFORE expenses. Just an aside here â€“ it takes LOTS of money in advertising, transaction costs and so on to make this level of income. A BIG chunk goes back into the business. The adage, â€œIt takes money to make moneyâ€ was never truer than in real estate.
More data for the past 12 months in Alameda County â€“ out of 8,271 agents:
â€¢ Agents who sold 24 homes or more â€“ 144 (1.74%)
â€¢ Agents who sold 30 homes or more â€“ 94 (1.14%)
â€¢ Agents who sold 36 homes or home â€“ 59 (0.71%)
â€¢ Agents who sold 42 homes or more â€“ 37 (0.45%)
â€¢ Agents who sold 48 homes or more â€“ 25 (0.3%)
â€¢ Average sales price for the top 10% - $368,647
Q: How long on average would it take for the same type of agent to see a first paycheck.
A: An absolute minimum of 2 months â€“ in most cases, itâ€™s 6 months or longer.
Q: What is considered an average % a new agent should be paid from the brokerage â€¦
A: Itâ€™s not unusual to see a new agent getting a 60-70% split from a large, well-managed and successful brokerage â€¦ but you have to realize that this really means nothing until you actually start selling homes. There are plenty of brokerages who provide a higher split, but theyâ€™ll also not provide any meaningful support or training â€¦ and youâ€™d better believe that a HIGH degree of training is required to be successful. Good training costs money. Lots of it. Larger brokerages tend to provide training free of charge â€“ this is factored into their split arrangement.
If you join a team (the approach I recommend), then your split could range from 30-50% - BUT, youâ€™d be in the middle of a successful venture and get a firsthand look at how the business really works AND, as is the case with teams like ours, a steady flow of high-quality leads to work with (Iâ€™m not recruiting). To be honest, generating quality leads is the bottom line to this business and is a very illusive target for many new agents.
Q: and what would be considered fair in terms of fees?
A: Here are some approximate numbers (and keep in mind, these need to be paid regardless of whether or not you close a single deal):
â€¢ MLS fees: $1,600-$1,850 a year.
â€¢ E&O insurance: approximately $1,500 - $1,800 a year (some brokerages deduct this from your first transactions).
â€¢ Desk fees: $100-$300 a month.
â€¢ Franchise fees: 4-6% taken off the bottom of every transaction (in addition to your split)
â€¢ Advertising/Marketing: $150 a month bare-bones minimum.
â€¢ Phone: must have a smart phone and plan to pay for unlimited voice, texting and data
â€¢ Websites: $75-150 month
â€¢ You need a decent car and have insurance so you can drive clients around.
â€¢ And so on â€¦ to be honest, the sky is the limit depending on how much social media you do and what types of services you pay to coordinate everything. Technical support can also add up to make sure everything works together seamlessly.
Bottom line â€“ this is not a vocation for the timid. Let me know if you have any other questions.
If anyone responds to your question with a recruiting pitch, run from them. Why would anyone try to recruit you without first seeing your resume and knowing something about you? Don't get caught by a broker playing a "numbers game" and messing with your career.
If anyone responds to your question with "average" information - discount it. Question the source. Sure, some offices keep statistics that answer your question, but the sample size of the agent population is far too small to consider accurate.
Don't worry about "averages." As I said, there are none that apply to your unique situation. There is no average agent, average income, or average brokerage split. It's all up to .... you.
Every time I run the numbers Iâ€™m astounded at how many agents in Alameda and Contra Costa counties are not making enough to survive. I can only assume that theyâ€™ve got other income coming in from somewhere else (spouse, regular job, annuity, etc.). For us full-timers, itâ€™s either produce or die.
If someone leaves a career where they had contacts with many people, they may be quite successful their first year (a new coworker just did this). Other people can spend a lot of time waiting for something to happen and never make enough money to pay their fees. Average is meaningless when talking about real estate agents.
If you are thinking about getting into real estate the key questions you must find honest answers to are:
1.) Will you constantly push yourself to find answers? YOU have to find them.
2.) Can you budget and do you have the resources to go without income for months?
3.) Will your personal life adapt to the demands of the job? Don't even think 9-5, M-F
You will probably be competing with people who love the work almost as much as they love life.
If you decide to jump in and swim in the real estate pool, I strongly recommend Keller Williams. I've worked for several real estate brokerages and recommend Keller Williams. Different brokerages have different "accounting methods" but the costs are close enough you should pick a first brokerage which has a helpful environment. KW puts effort into making their agents a family.
Juliana Lee, MBA, LLB
Top 3 agent nationwide at Keller Williams Realty
Over 1000 homes sold in the South Bay
Over 20 years experience.
RE is definitly not for the faint of heart or folks that like the comfort and security of a weekly salary. If you're concerned about a guarantee you may want to consider another area of RE i.e. escrow, title, administrative i.e. tech support for a mover and shaker that could mentor you until you are prepared to go it alone without any guarantees.
Again, thank you all for the great info, this gives me something to mull over and begin to formulate a game plan.
And Bernard, I agree... what the hell were we thinking...
Carl's answer is both very responsive to your question and generally good information to ponder regarding your possible entry into the real estate sales industry.
But there's a big gorilla in the room that should also be considered - most agents fail in their first year. Of those that make it through their 1st year, a high percentage drop out in their 2nd year. Those statistics are not presented in Carl's numbers. To make the data more applicable to your situation, you would need to parse Carl's numbers into those experienced by agents in their 1st year, 2nd year, and so on. After all, you asked "What can a beginner agent expect to make first year on average..." You didn't ask what agents with 2 or more years experience are doing....
What I believe you CAN take from Carl's numbers is that there is a huge range of income within the population of all agents. Your business plan (target market, niche focus, choice of mentor, start up capital, etc.) will greatly influence your earning potential and whether or not you will eventually contribute to raising or lowering industry averages.
If you really want to get in this business I would look into starting as a lisenced assistant or buyer's agent for a top Realtor. Most people get so caught up in splits they don't see the value in working for someone that is making it through this market and economy.
It's rough out there right now with low inventory , lending, marketing for leads , and so much more.
The education working with a "closer" "survivor" is priceless.
1. It depends. You need to choose a supportive agency with a great broker. Also having a great mentor who will get you there and support you will help a lot in your success as will if you are truly cut out for the job.
2. I saw my first pay check within a few weeks after starting. However most of it went to pay my E&O.
It took nearly 8 months to be way ahead of my last job.
3. There are a lot of hidden fees in this business so make sure your broker and mentors spell this out for you it will help as you progress. The more sales you have the better your % will be.
The market varies where you are so in theory where I live it's 'hot' if priced to sell. It's not nearly where the market was years ago but we're seeing multiple offers. I have also been very lucky and successful but I define it a lot like dating. So location and support and patience are good things to repeat.
I also think it's like starting your own business. Having a supportive family and give yourself a full year to get up and running. Patience helps in so many ways in this business. Good Luck.
Unless you are pretty good, don't expect to gross more than $50K in year 1.
Now if you are really good, the sky is the limit. Millions of dollars in income can be made if you acn survive and thrive for 5-10 years.