Chris Heller, Licensed Agent12/1/2022
We often hear about real estate being a very lucrative career field. If you want to enter the industry, there are many options as far as the career field you will choose. Brokers, for example, can make a considerable amount of money.
But how much does the average real estate broker actually make? And what are their responsibilities? This article will break it down for you so you can determine if it’s a good career choice for you.
What is the Average Real Estate Broker Salary in America?
According to popular job boards, real estate brokers make an average base salary of $68,256 a year. They make an average commission of $42,000 annually. This brings their total income up to $110,256.
However, the amount you make will vary by state. If you work in a state where properties are expensive, you will make a higher commission. That’s why it should come as no surprise that California is the leading state when it comes to broker income.
Brokers vs. Real Estate Agents
Before moving forward, it’s important to establish the difference between brokers and real estate agents.
Both brokers and agents can sell real estate. However, an agent must work for a real estate broker. Brokers typically have agents working for them, but they can also work independently.
Both brokers and agents can also become REALTORs. REALTOR is a professional designation and does not have any legal repercussions. Any salesperson can become a REALTOR by paying their annual dues and agreeing to abide by the REALTOR code of conduct.
How Much Can I Expect to Make as a Broker Where I Live?
So how much can you expect to make as a broker based on the state you live in? Here are some numbers to consider.
| State | Average Broker Salary | Base Salary + Commission |
|---|---|---|
| Alabama | $60,225 | $102,225 |
| Alaska | $65,375 | $107,375 |
| Arizona | $59,696 | $101,696 |
| Arkansas | $60,039 | $102,039 |
| California | $85,556 | $127,556 |
| Colorado | $77,926 | $119,926 |
| Connecticut | $66,918 | $108,918 |
| Delaware | $63,173 | $105,173 |
| District of Columbia | $69,434 | $110,420 |
| Florida | $78,787 | $120,787 |
| Georgia | $75,162 | $117,162 |
| Hawaii | $62,581 | $104,581 |
| Idaho | $57,841 | $99,891 |
| Illinois | $57,570 | $99,570 |
| Indiana | $60,868 | $102,868 |
| Iowa | $61,659 | $103,659 |
| Kansas | $60,580 | $102,580 |
| Kentucky | $62,732 | $101,948 |
| Louisiana | $61,018 | $103,018 |
| Maine | $36,000 | $78,000 |
| Maryland | $70,383 | $109,383 |
| Massachusetts | $64,732 | $106,732 |
| Michigan | $81,925 | $123,935 |
| Minnesota | $50,250 | $92,250 |
| Mississippi | $57,651 | $99,651 |
| Missouri | $63,733 | $105,733 |
| Montana | $58,133 | $100,133 |
| Nebraska | $60,680 | $102,680 |
| Nevada | $76,938 | $118,938 |
| New Hampshire | $60,099 | $104,099 |
| New Jersey | $67,243 | $109,243 |
| New Mexico | $70,533 | $112,533 |
| New York | $71,434 | $113,434 |
| North Carolina | $58,928 | $100,928 |
| North Dakota | $62,257 | $104,257 |
| Ohio | $62,184 | $104,184 |
| Oklahoma | $49,852 | $91,852 |
| Oregon | $57,154 | $99,154 |
| Pennsylvania | $37,400 | $79,400 |
| Rhode Island | $63,231 | $105,231 |
| South Carolina | $60,705 | $102,705 |
| South Dakota | $58,240 | $100,240 |
| Tennessee | $48,563 | $90,563 |
| Texas | $66,371 | $108,371 |
| Utah | $65,209 | $107,209 |
| Vermont | $61,111 | $103,111 |
| Virginia | $71,313 | $113,313 |
| Washington | $75,264 | $117,264 |
| West Virginia | $58,559 | $100,559 |
| Wisconsin | $48,920 | $90,920 |
| Wyoming | $60,309 | $102,309 |
How Do Brokers Earn Money?
Brokers make money off the property their agents sell as well as the commissions they bring in on their own.
When an agent sells a property, they must split the commissions with the brokerage. The commission split will vary from broker to broker. Typically commission splits are around 60/40 with 60% going to the agent and 40% going to the brokerage. But in some cases, there may be a 70/30, 80/20 or 90/10 split.
60/40 is around the average and it’s unusual for agents to make less than 60% off their sales.
Agents also typically have a cap. So if they reach a certain amount in sales a year, they will start keeping 100% of their commissions.
The money brokers make off their agent’s commission is considered a salary.
This is not to be confused with the commission brokers make off their own clients. While some brokers concentrate on running their brokerages, others actively sell to customers. The nice thing about this is, they have no brokerage to split their money with so they can keep 100% of the commission.
Brokers also typically charge realtors for things like desk fees, marketing materials, educational resources, and so on. This is another source of income for them.
How are Real Estate Commissions Distributed to Brokers?
Most real estate agents make 6% commission off a sale. 3% of this will go to the agent representing the buyer. The other 3% will be for the seller’s agent. However, this amount will have to be split with the brokers on both ends.
So if a home sells for $200,000, the 6% will equal $12,000. This means each agent gets $6000. Then they will have to split the amount with their broker.
So if each of the agents had a 70/30 split, they would keep $4800 and give the broker $1200.
The broker would then use this money to cover agent expenses like marketing materials, lockboxes, keys, educational resources, etc. They would also keep some as profit.
What Factors Play into a Brokers Earnings?
There are certain factors that play a role in how much a broker will make. Here are some things to consider:
- Home Values in the Area: if you are working in an area with expensive homes, you will make more money off your realtor’s commissions and your own commission.
- Commission Split: If you charge your realtors a high commission split, you will make more money. For example, if you enforce a 60/40 commission split and make 40% off each sale, you’ll make more than you would if you charge a 90/10 commission split and make 10% off each sale.
- Competition: Competition also plays a role in how much a broker makes. Brokers can make as much or more money in an area with low property values as a broker working in an upscale community because there may be fewer brokers in the area. This minimizes competition so the brokerages can make more money.
- Whether You Sell: Not every broker sells their own properties. But those that do can bring in a higher income.
- Size of the Company: Some brokers have a lot of agents working beneath them while some have just a few. Some may even work for themselves. The more agents you have working for you, the more money you will make.
Who Makes More Money, Realtors or Brokers?
On average, a realtor makes more money than a broker. The average real estate agent’s salary is 87,390 a year. This compares to brokers who make an average salary of $75,068 a year and a commission of $42,000. Income will vary depending on experience, geographic location, the housing market, and education level.
However, there are instances where an agent can make as much or even more than a broker. It depends on how successful each professional is in their industry.
Different Types of Brokers
There are different types of brokers, and this will come into play in how much money you make. Here are some job roles to consider.
Associate Real Estate Broker: A broker associate works under a managing broker and has many ‘agent like’ like and ‘broker like’ roles. They may act as an intermediary in the selling, buying, or rental transaction. For instance, they may make sure a potential buyer is qualified for a mortgage, or they may have to show properties and schedule appointments. They may also submit, negotiate and close a deal.
Associate brokers typically don’t make as much as actual brokers, but they will still earn a decent living. They may also work their way up to become brokers and increase their income.
Managing Real Estate Brokers: A managing real estate broker oversees the day-to-day business operations of a brokerage, but they do not own the brokerage. However, they still make a decent salary which can be close to $150,000 a year. This will vary depending on experience, education, location, and other factors.
Owner Real Estate Broker: Owner real estate brokers own their own brokerages and employ brokerage associates, managers, and real estate agents. If you are thinking about starting your own business, you’ll need to consider whether you want sole proprietorship or not. Sole Proprietorships and LLCs are very similar, but they have some key differences.
What Does a Real Estate Broker Do?
A real estate broker does more than just employ and train real estate agents. They ensure the transactions are lawful. They look over the paperwork to make sure it is complete and filled out correctly. They see to it that all transactions are recorded correctly. They take legal responsibility for their agents if any disputes arise.
Real estate brokers are basically agents that have the ability to manage their own business. they can work independently or have agents work for them.
They can also work for companies in the real estate industry. For example, many large firms have a broker who works for them and oversees a pool of agents.
Brokers can do anything an agent can do. They can market a home, create a contract, or represent a buyer or seller. But there are a few key differences as follows:
- A broker can move money in and out of escrow, an agent cannot.
- Unlike an agent, a broker can mediate conflict in a legal dispute.
- Only a broker can hire agents to work for them.
What is a Brokerage?
A brokerage can be any of the following:
- A single broker operation
- A small to midsize company that has a managing broker that employs real estate agents and associate brokers
- A large organization that employs several real estate agents, associate brokers, managing brokers and support staff.
What are Broker Requirements?
There are certain requirements that are needed to become a broker. They vary from state to state but here are some general rules.
- You must have a real estate license for a predetermined amount of time
- You must be at least 21 years old
- You must reside in the state where you are applying for your broker’s license
- You must take the required courses and pass a licensing exam
- You must take a background check to show you are free of criminal convictions
Can Agents Work for More Than One Broker?
No, agents cannot work with more than one broker. The only exception is when a broker has two or more licenses in different states. Then they can work with one broker in each state.
The reason an agent cannot work for two or more brokerages is, they must hang their license with a broker or brokerage. The license cannot be photocopied. So once the license is hung, it would be impossible to hang it in any other brokerage office.
There are a variety of employment options for people looking to enter the real estate field. Being a broker can be quite lucrative, but it comes with its share of extra responsibilities. Will you be pursuing it as a career choice?
