As you are considering a career in the real estate field, it is important to understand how commissions work. Most real estate agents are paid commissions for their services rather than a fixed rate salary. Some real estate brokerage firms are however adopting a salary based structure. According to salarieshub.com, a real estate agent makes an average annual salary of $55,705, which translates to about $22.87 hourly rate. Therefore, as you are considering getting into the real estate field it is necessary to understand the important commission split to be able to know how to charge your clients.

Real Estate Commission Splits

As soon as you sign on a real estate brokerage firm, you will be required to sign a commission split agreement. Some brokerage firms have a standard commission split while others you will need to negotiate the split upon joining the firm. This split, however, increases with a gain in experience. A commission split is usually a percentage of the property sold that is shared between the brokerage firm and you the agent, and if you are representing the buyer, it is split between the agent and the buyer. For instance, if the agent sells a property worth $600,000 and the average agent commission in the area is 5%, then the buying agent get 2.5% and the selling agent gets 2.5%.  If the agent is representing both the buyer and seller, the agent gets the full amount. Since the agent is an independent contractor, he is required to handle his own pre-tax and pre-expenses from the commission given, unlike salaried employees.

Factors Affecting a Realtors Commission

In the US, a realtor’s commission ranges from 5% to 6% regulated by the National Association of Realtors, which is split equally between a buyer’s agent and a seller’s agent. The real estate broker should charge the property seller the commission fee; therefore, it should be incorporated into the selling price of the property.   Most real estate agents work for a given real estate brokerage, this requires them to submit 30 to 50 percent of the commission back to the brokerage firm. Individual real estate agents are also required to submit a given amount of their commission when they make a deal with a given real estate brokerage. Realtor’s commissions are affected by the following factors

• Experience helps one earn higher in the real estate business. This is necessitated by the comprehensive perspective of the real estate market that is gained with the time that enables them to effectively deliver services to their clients.
• The number of sales made by the realtor per month or per year will also determine the realtor’s salary. The type, location and worth of property sold will also determine the amount made by the realtor. Normally agents in large metropolitan areas make higher salaries because they make more high priced sales.

However as population increases, and people become financially independent, more people shift from renting and leasing towards owning property, making the real estate market a stable industry.