REALTOR Salary: More experience means higher salary

REALTOR salaryA rebounding real estate market and rising home prices seem to have attracted more millennials and retiring Baby Boomers to become real estate agents. But with limited inventory and more newcomers to the industry, that means lower median gross income or REALTOR salary for those who receive a paycheck in addition to or instead of commission.

Still, the overall picture for REALTORS is positive, said Jessica Lautz, managing director of survey research and communication for the National Association of REALTORS,

Gross median income has been rebounding since 2012, which is causing the influx of new members, Lautz said, citing NAR research. More experienced REALTORS profited last year despite the surge in membership. But they would have seen even higher incomes if the total real estate pie didn’t have to be divided with so many newcomers, she emphasized.

“Most real estate business is based on referrals and repeat business. Those starting out don’t have that client base, so their income did not increase. As people build a client base and a niche, we do see their income increase over time as well.”

There was an equal split between those earning less than $10,000 and those earning more than $100,000, according to the NAR 2016 member profile.

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More experience means higher REALTOR salary

A little more than half the members—59 percent—have two years of less experience and made less than $10,000 compared to 36 percent of members with more than 16 years of experience who made more than $100,000 in the same period.

The medians are lower. Members with 16 years or more experience had a median gross income of $73,400 compared with those with two years or less of experience who had a median gross income of $8,500.

Those with fewer years of experience also tend to be younger. The median age of new NAR members is 43 years with 13 percent of those with two years or less of experience under age 30. Lautz attributes this trend to millennials who may see real estate as a way to “shape a business and be an entrepreneur.” She said she also heard brokerage firms like to recruit young agents.

The vast majority of agents—70 percent—receive a percentage split-commission. Most of the rest receive 100 percent commission, followed by agents receiving a commission plus a share of profit. Less common is a REALTOR salary plus a share of profits or production bonus, a straight salary or just a share of profits, according to the NAR member profile.

The best-paid agents lived near Denver and earned an annual mean wage of $170,360 and the lowest paid lived near Daytona Beach and earned a mean salary of $31,300, according to the Bureau of Labor Statistics (BLS). In general, the highest earners worked in metropolitan areas in the West and North and lower paid agents in nonmetro areas or the South.

While the median gross income of all REALTORS dropped to $39,200 from $45,800 in 2015, those figures show a rebound from the recession when the median was in the low $30,000s, NAR research shows.

The peak came in 2013 with a median income of $47,700. That’s the same level it was before the recession in 2000.

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How home prices affect real estate agent income

For several years, home prices have also been rising because of low inventory, Lautz said.

“Limited inventory continues to plague many housing markets in the U.S.,” according to the member profile. “For the fourth year, difficulty finding the right property was the most cited concern for potential clients as a lack of inventory is restricting buyers in many markets.”

Rising home prices caused the median brokerage sales volume to rise to $1.8 million last year from $1.7 million in 2014, according to the member profile. Meanwhile, the number of transactions—11—stayed the same last year. “Most membership is based on commission, so higher home prices mean more competition for the same sales,” Lautz said.

But the tide may be shifting. Proposed federal tax cuts limiting mortgage interest deductions—incentives that once encouraged homebuying—may cause home prices to drop, said George Harvey, regional vice president of NAR region XI, which includes midwest states of Arizona, Colorado, New Mexico, Nevada, Utah, and Wyoming.

Harvey fears the tax cuts could spell trouble for agents selling to first-time homebuyers in the middle-income bracket and turn off some REALTORS from the real estate market. “I’m concerned the loss of current real estate tax benefits might affect the health of the general real estate market. If financial tax incentives lessened people’s ability to buy a first home and upgrade to a second home, real estate agents might be less likely to get into the industry,” said Harvey, a seasoned REALTOR in Telluride, Colorado. “This is the most unpredictable time I’ve ever seen in my 33-year career,”

Additional key income details from the 2016 member profile:

Median gross income of REALTOR households was $98,300 in 2015, a drop from $106,800 in 2014. On a more positive note, median business expenses also dropped to $6,300 in 2015 from $6,710 in 2014. The largest expense for most REALTORS was vehicle expenses, similar to last year, which increased to $1,790 in 2015 from $1,770 in 2014.

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Article by RoniRobbins. Robbins is a 30-year journalist with business, environmental, and real estate specialties. She wrote real estate articles for Mother Nature Network, the Daily Report, and Atlanta Journal-Constitution. She also reported for the New York Daily News, WebMD, and Adweek with stories picked up by the Huffington Post, Forbes, USA Today, and CNN. Find out more about Roni here.

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