You’ve seen the successes; you’ve heard the stories—real estate agents are one of the highest-paid professions in Australia. It’s widely accepted that a sizable portion of their huge earnings comes from commissions, but how much do they really get from selling property?
As the premier institution for real estate education in Australia, we know a thing or two about the earning potential of a real estate agent! In this article, we’ll unravel the earning structure of real estate agents as well as the various factors that influence commissions.
How do real estate commissions work?
Real estate agent commissions hold immense importance in the buying and selling of properties. When an agent successfully sells a property, they receive a bonus amount of money (commission) as payment for the services they provided during the transaction.
This service extends beyond simply being the liaison between the seller and buyer — agents invest significant amounts of time, effort, and resources into marketing properties, arranging viewings, negotiating deals, and guiding clients through the intricate procedures of the real estate process. As a result of their expertise and offered assistance, agents receive financial recognition through this commission once the sale is completed.
Factors influencing real estate agent commissions
Location
The compensation received by real estate agents is significantly influenced by various factors specific to the location. These factors include the dynamic nature of the regional real estate market, the balance between property demand and supply, the overall state of the local economy, ongoing trends in the housing market, and even the competitiveness among industry professionals. In markets that are thriving with high demand but limited inventory, agents may have more leverage in negotiating higher commissions.
Moreover, locations with a predominance of high-priced properties, like luxury markets, can provide agents with increased potential for earnings. By comprehending these location-dependent influences, real estate professionals gain knowledge that empowers them to make well-informed decisions and adapt their strategies effectively so as to maximise their financial gains within specific markets.
Experience and expertise
Experience and expertise are another factor influencing the compensation that real estate agents earn. Agents who have been in the business longer tend to have a more profound understanding of the market and better negotiation skills, which plays well into closing more sales.
Clients are also more willing to pay more generous commissions to experienced agents because they trust their judgment and expect a good outcome. Additionally, agents with specialised knowledge in specific markets or property types can position themselves as authorities in the industry, which justifies requesting higher commission percentages.
Agency policies
Commission structures form an integral part of how much aspiring agents and property sellers can earn from property sales. Different agencies have varying commission structures and fee arrangements for their agents.
Not all commission structures are fixed, either. Some agencies might offer tiered commission plans based on an agent’s sales performance or seniority, allowing high-achieving agents to get access to larger commission shares.
Average real estate agent commissions in Australia
The average real estate agent commissions in Australia typically range from 1% to 4% of the property’s sale price. To give you a picture of how much a real estate can earn through commissions, let’s use a single sale as an example. A real estate agent makes a successful sale of a property at $500,000. With a rate of 3%, they can expect to earn a nice commission bonus of $15,000 from just that sale.
Here’s a table with a variation of sale prices and commission rates to give you more examples of how much can be earned:
| Property sale price | Commission rate | Commission earned |
|---|---|---|
| $500,000 | 1% | $5000 |
| $500,000 | 4% | $20,000 |
| $1,000,000 | 1% | $10,000 |
| $1,000,000 | 4% | $40,000 |
Additional income sources for real estate agents
As mentioned before, commissions form a big part of the income for these professionals. But what if they aren’t able to make sales, be it due to market conditions or personal ability? Thankfully, real estate agents are also paid a base salary, though this is usually not a high amount.
Beyond that, some real estate agents take up rental property management as an additional income source to give themselves a more stable source of income, allowing them to support themselves in periods where they are unable to earn commissions.
Final thoughts
The potential for real estate agents to earn staggering amounts through commissions has certainly been proven, but this is not to say that there is no risk involved in such a variable form of remuneration. Commissions are a great way to build wealth quickly, but a lot of work goes into being able to do so.
If you are considering a career as a real estate agent, you should be aware that there are strict requirements for having the right accreditation before you can start working as one. At Entry Education, we work with students, both young and old and equip them with the skills and knowledge they need to conquer the real estate landscape. Check out our comprehensive real estate training courses online today and get started on your real estate journey with us!
