According to the Bureau of Labor and Statistics, the median real estate broker salary in the United States is $78,940. Illinois leads the country with the highest median salary for real estate brokers in 2018 of $103,430.
In this article, we’ll talk about how much a real estate broker makes in each state, as well as which cities are the best for real estate broker income. We’ll also dive into how a broker gets paid and what expenses they have to cover, as well as answer the age old question:
“How will I make more money? By being a real estate broker or being a real estate agent?”
How Much Does a Real Estate Broker Make? A State-by-State Guide
We took a close look at the Bureau of Labor and Statistics’ 2018 study of real estate broker income and broke out the median income for each state, as well as found the major metropolitan area in each state where pay is the highest. Check out the table below, find your state, and see how you compare to other places around the country.
Median Real Estate Broker Salary – State by State Guide
|District of Columbia|
In some regions, the margin of error for the study exceeded 20%, making the data unreliable and therefore unavailable.
How Are Real Estate Brokers Paid?
Now that we’ve examined what the median pay is for real estate brokers in each state, let’s dive into exactly how a real estate broker makes their money.
Like real estate agents, a real estate broker’s income depends on commissions. Rather than depending solely on their own sales, the lion’s share of a broker’s income is in the form of a percentage (or “split”) of the commissions earned by the agents the broker manages.
In order to buy or sell real estate, a real estate agent must work for a broker. In exchange for mentorship, tools and training, and oversight, the broker receives a cut from every commission their agents earn, up to a certain dollar amount per year (also known as a “cap”.)
So, for example, if you manage 15 agents, all of them with a $20,000 cap, your maximum commission income from these agents is $300,000.
Though commission splits make up the bulk of a broker’s income, there are other sources as well. For instance, some brokers charge a “desk fee”, or a monthly fee an agent pays regardless of whether they are closing transactions. Most brokers who charge a desk fee earmark this income for things like regularly occurring expenses, but it is nonetheless a source of revenue.
Also, don’t forget that as a real estate broker, you still have the option to assist your own clients in the buying and selling process. So, if you are closing deals for your clients, as a broker you would get paid a commission for those transactions as well.
Reasons a Real Estate Broker’s Earnings Are So High (or Low)
After examining the table above and learning all about the median real estate broker salary in your state, and then getting a better understanding of how a real estate broker makes their money, you might be asking yourself, “Why is there such a variance from state to state? From city to city?” Here are a couple of reasons.
Median Sale Price of Homes
Since real estate agents (and, by extension, the brokers who manage them) are paid based on the transactions they close, the median sale price of homes is going to affect the bottom line. If the median sale price of homes is low, it will take more transactions for your agents to hit their caps, therefore making it harder for those agents to meet their income potential in a given year.
High Median Sales Price vs Low Median Sales Price
|3% Gross Agent Commission|
|# of Transactions to Get to a 70/30 Split/$20,000 Cap|
On the flip side of that coin, if the median sale price is high, your agents reach their cap with fewer transactions, making them more reliable sources of income.
Competition From Other Brokerages
The more brokers there are competing in a space for business, the more challenging it becomes to be a high wage earner.
A great example of this is Green Bay, Wisconsin. In 2018, the median real estate broker salary was $110,820. The median real estate broker salary for New York City in 2018 was $115,950. The average sold price for a home in Green Bay was just over $175,000 in 2018, compared to an average sold price for NYC home of close to $950,000.
Why did Green Bay brokers have nearly the same median as New York City brokers? Competition. In Green Bay, there were 30 real estate brokers operating, compared to 1,760 in New York City.
Some Brokers Buy and Sell, Some Do Not
As we mentioned before, a real estate broker is able to represent their own clients in the purchase or sale of real estate. Some brokers choose not to do this so they can focus on running their business and managing their agents. However, other brokers choose to continue to represent clients, and these brokers tend to earn more money than the former.
It’s easy to see why too. A real estate broker who works in an area with a median home price of $250,000 can add an extra $30,000 to their gross income by representing just four clients a year in closed sales. Many brokers in high end firms don’t represent clients, choosing to instead refer that business to the agents they manage. However, in most small or medium sized operations, a lot of brokers are working with clients on a regular basis.
What Sort of Expenses Do Real Estate Brokers Carry?
As the owner and operator of a small business, there are expenses that a real estate broker has in order to make the machine run. Rent, utilities, staff, marketing, technology, lead generation, insurance, the list goes on and on. A great business plan will help nail down exactly what your costs will be year to year, an important step when income can vary seasonally.
Real Estate Broker vs Agent Salary
Who makes more: real estate brokers or real estate agents? Surprisingly, the answer is not always the same. After digging into the Department of Labor Statistics numbers for real estate agents as well as brokers in 2018, we found that in eight states (plus Puerto Rico), the average income for real estate agents actually exceeds the average income for real estate brokers.
Foregoing a real estate broker’s license can be a great move because agents carry very little risk. While you’re still paying your broker every year in exchange for doing business, you don’t have to maintain things like an office, insurance, staff and the like. Your overhead is controlled by what you want to invest in your business.
On the other hand, leveling up and becoming a broker provides you with significant opportunities to scale your business exponentially. Yes, you are responsible for paying the bills whether the market is up or down, but you also have the opportunity to create a self-sustaining brand that will make money whether you are in the office or not.
Ready to Get a Real Estate Broker’s License?
Getting a real estate broker’s license is tougher than getting a sales license for a couple of reasons. First of all, the content is more advanced, making the learning curve steeper. Also, taking your pre-license classes and studying for your test are time consuming, nearly a full time job you’ll have to balance against your already demanding real estate sales schedule.
After our exhaustive research, we found that Real Estate Express is the most affordable way to get your broker’s license. Real Estate Express offers online classes to meet your pre-license class requirements, great test prep options, all the info you need to set yourself up for success on your broker’s license test right from your living room.