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You probably know that the real estate sales profession is mostly commission-based. You will be only get paid when a deal is closed. However, not everyone likes the unpredictability of this compensation model. After all, you have bills to take care of every month. Not knowing how much you could make could be really stressful.
So I did some research and see if there is any alternative payout structure.
Do real estate agents get a base salary? Although they mostly do not, some companies are paying their real estate agents a base salary. Rather than being independent self-employed personnel, the agents are hired as salaried employees.
In this post, you’ll find the different scenarios that a real estate agent would get a base salary. I’ll also go over the pros and cons of this compensation model.
So let’s start now and see if the base salary route is the right fit for you.
4 Scenarios that a Real Estate Agent Gets a Base Salary
Scenario#1: Hired by a Real Estate Brokerage
As mentioned before, a real estate brokerage would rarely pay their salesperson a salary. In fact, I did not come across any salaried agent until I started researching for this article.
I dug a little further and see if there’s any brokerage that would pay their agents a base salary. After hours of researching, I found a brokerage firm called Redfin. It is a Seattle-based company founded in 2004 and went public in Aug. 2017.
According to its website, Redfin employs real estate agents and compensate them with a salary and bonuses. Unlike a traditional independent contractors model, Redfin agents are employees of the company. Their salespeople can also earn premium healthcare benefits, paid time off, and parental leave.
Here are some additional benefits which may appeal to sales associates
In a traditional contractor relationship, real estate agents need to pay for their own business expenses. For example, licensing fees, association membership, MLS dues, continuing education, travel expenses, laptop and printers, and mobile service. Depending on the terms you sign up with them and your production level, Redfin may reimburse these expenses.
Altogether with the employees’ benefits and expenses reimbursement, Redfin pays an average of roughly $20,000 per agent per year. If you were a top-performing Redfin agent, you may also receive other perks, such as paying for an annual international vacation for you and a guest.
Scenario#2: Work for a Real Estate Builder
Rather than solely relying on outside brokerages in selling their properties, some real estate developers would directly employ their own sales associates. The types of project that I have seen the most are for condo units and townhouses. Sometimes, they would sell as a pre-construction property where the buyer would be a deposit for securing the deal.
As a sales associate, you could be working at a sales office. Your duties could include introducing the new development project to potential clients, explaining the terms of the purchase, responding to the inquiries, and closing the sales.
To give you a better idea, I found a job posting online. It was from a Hometown builder named Chesapeake Homes. They have been building in the Triangle region of North Carolina since 2007. Currently, they’re looking to hire a New Home Sales Consultant. Below is a screenshot their job posting.
As you could see, this job is offered with salary and benefits such as health coverage and retirement plan. But you are required to have a real estate license and at least 3 years of experience.
Scenario #3: Become a licensed assistant for another real estate salesperson
Many real estate agents or brokers are excellent at generating quality leads. However, sometimes they have too many things on their plate so they would delegate tasks to their assistant. For example, handling admin duties, marketing, open houses, paperwork, and communicating with clients.
Depending on the amount of work volume, you could be compensated by hourly pay or a salary. If you’re looking for employment like this, you could try contacting top-producing sales agents. After all, salespeople are unlikely to take on an extra employee if their business is barely surviving.
Here’s a page to the career guides of different states. In there, you’ll find some of the real estate brokerages with the top sales volume.
Scenario #4: Work for a property management company
Well, this one is technically working as a real estate agent. But in many states, you are required to have a real estate license in becoming a property manager. Especially when you are dealing with rental units.
Unless you are running your own firm, most property managers are employees of a company. They are paid a base salary and other benefits. As a property manager, you’ll be responsible for handling the tenants, maintaining the property, and resolving any issues related to the units.
What are the Benefits of being a Salaried Real Estate Agent?
1) Higher average income
According to an article on the Redfin website, the median income of their agents is 107% higher than others in the industry. Another significant earning gap of 28% can also be seen in the 85th percentile of Redfin agents and non-Redfin agents.
However, the pay difference may not be entirely attributed to the base salary model. There could be survivor bias involved.
For instance, if a firm is paying an agent a base salary, then obviously they would require a regular sales performance that could justify their investments. When a salesperson cannot meet their sales quota, then they would inevitably be laid off.
On the other hand, I know of many commissioned sales agents who are working on a part-time basis. Although they have been in the real estate industry for a long time, they only close a handy of deals every year. Their firm does not set any quota requirements for them. So some commissioned sales associates don’t mind hanging onto the real estate license as long as the commission could cover all business expenses.
2) The company pays the agent expenses
There are many expenses to be in the real estate sales profession. When you are a salaried real estate agent, most companies will pay for them. The most common expenses may include:
- License fees
- E&O premium
- Cost of the continuing Education
- Marketing & advertising,
- Laptop and phone
- MLS subscription
- CRM system fee
- Travel expenses
3) Provide with employee benefits
In addition to salary, some companies would offer health coverage to their salaried agents. This could be a major consideration for many people as the cost of prescription drugs and medical expenses could be significant financial stress.
When the health coverage is enrolled through a company, not only there could be a discount on the premium, but it also gives employees and their family access to the plan. This could be a huge benefit for those who cannot obtain individual coverage due to their health condition or pre-existing medical condition.
4) Training with a systematic approach
Many real estate brokers welcome commissioned agents to their firm because adding on more salespeople does not necessarily increase their overall expenses.
However, some are reluctant to allocate too much time and resources in training them. After all, it does not cost them financially when an agent is not producing a lot of sales. The brokers could just counter this problem by recruiting more sales associates. This is why many new agents are left hanging and unsure of how to develop their real estate practice.
On the other hand, when a firm is paying a base salary to sales associates, they have a huge incentive to ensure each one of them is meeting the performance standard.
These real estate brokerages would review what has been proven working in the sales process, and implement a systematic approach. Similar to a franchise company, these firms would teach this to their agents, so that the entire process could be replicated.
5) Getting Support from Different Professionals
As mentioned earlier, not all firms would provide adequate support to their commissioned agents. Some would just give you a bigger split of the commission so that you would handle everything on your own.
Even though you are excellent in servicing clients, many tasks could be out of your expertise. For example, setting up a website, effective marketing in generating leads, producing content for social media, installing a CRM.
Many commissioned agents are uncomfortable in outsourcing these tasks to other professionals, so they end up doing all of them. However, these diverse attention could make the business less competitive in the long run.
On the other hand, when a firm employs you to be their sales agent, they require you to focus on closing deals. They would have designated staff to handle different aspects of the business. Therefore, everyone could be laser-focused on doing things that they are good at.
6) Career advancement opportunity
Depending on the scale of the real estate firm business and your work performance, some firms may provide you with the opportunity to get promoted into senior or executive positions.
For example, I was reading the Redfin website. Some of their staff started off as a sales agent, then gradually work their way up into the corporate ladder.
Anna Nevares began as a Redfin agent in San Diego and has steadily advanced into bigger management roles. She currently oversees Redfin’s operations in Northern California, Nevada and San Diego and leads important strategic projects within the company.
Marshall Park started with Redfin as an agent in the Washington, D.C. area. His career has grown with the company and he now oversees Redfin’s field operations across the Mid-Atlantic, including Virginia, Washington, D.C., and New Jersey.
After a career as an attorney, Mia Simon made the move to real estate. She joined Redfin as an agent and has quickly progressed within the company and now leads Redfin’s team in the Bay Area.
Paul Reid spent his first few years with Redfin as a top agent in Orange County, Calif. before leading Redfin’s launch in the Inland Empire. He then developed and helped launch Redfin Now, Redfin’s experimental program that purchases homes directly from sellers. In 2017, Paul took on the new challenge of launching Redfin in Boise.
Taylor Connolly began as a Redfin agent in 2007, and progressed to team manager, then Maryland market manager, and finally to district manager overseeing Redfin’s operations across multiple states in the Northeast and South. Taylor has also served as an innovation manager for Redfin real estate operations, surfacing ideas from the field, developing new strategies and rolling out initiatives across the company.Quote from Redfin – How Much Do Redfin Agents Earn?
What are the Disadvantages for a Real Estate Salesperson with Base Salary?
1) You don’t own the business
If you own a real estate brokerage, by the time you exit the industry, you may sell the company. Many brokers would use the proceed to supplement their retirement incomes.
If you are just a salaried employee, the value of the company really doesn’t concern you because you are not the owner. (Well, unless your employer gives you stock options or have a profit-sharing plan.)
2) Job security
Getting layoff is one of the biggest concerns for most salaried agents. Even though you could be an excellent employee, if the firm discovers a more cost-effective way of bringing in business, then they would inevitably let you go.
On the other hand, if you are running your own real estate practice, then you could continue staying in the industry. You just need to make the necessary adjustment and adapt to the demand of the market. The most important is whether your clients are satisfied with your services and the price that they are paying.
3) You need to constantly prove that you worth the salary
When a company pays you a base salary, they would require you to make enough sales to justify their investments. In the first couple of months of training, some might give you a grace period on the sales quota requirement.
But if you always cannot meet the sales quota, then I’m sure they wouldn’t keep you for too long. However, some people would have a slower learning curve, or they enjoy working freely without the sales quota pressure. Therefore, being a commissioned-agents may be a more suitable choice.
Furthermore, some agents argue that if they can continuously bring in significant sales volume, they might as well become a commission-based salesperson and receive a bigger piece of the revenue pie.
Although most real estate agents are commissioned based, some firms do offer a base salary. If you enjoy being in the profession of real estate sales but feel stressful about the income uncertainty, then being a salaried agent could be a great alternative.
But keep in mind that having a base salary would mean that you do own the real estate practice. You’ll no longer have the flexibility to run the business in ways you want and having a flexible work schedule. All these are key drivers to many agents when they initially decided to enter into the real estate business.
Therefore, that’s no right or wrong choice in both career paths. But you should choose one based on your needs, expectations, and personality. So did I miss mention anything? If so, please share it with me in the comments section below.
1)How much do real estate agents make?
According to the Bureau Labor of Statistics (May 2018), real estate agents have an average income of $61,720.
2) What determine the earning potential of a real estate agent?
No doubt that your persistence, dedication, and effort you put into the business are key drivers to the success in this profession. But your experience and volume of repeat customers can also play a crucial role to your income potential.