What’s the difference between commission and salary?

So, you’ve decided to become a real estate agent and you’re trying to figure out how you’ll get paid? You’re not alone! We receive this question from prospective agents all the time, and we want to help you find the answer that’s right for you. A lot of people think there’s only one way real estate agents get paid – commission – but that isn’t true at all! In fact, there are five different ways that real estate agents can earn money through their job – three of which are commission-based and two of which are salary-based.

1) Commission

A real estate agent’s pay is entirely based on their sales volume. On average, agents can make between 18 to 30 percent of each sale. So, if they close $500,000 in home sales in a year, they’ll bring home $90,000 to $150,000 or more.

2) Salary

As a real estate agent, you’re paid a set wage for a given time period, say every month. Most companies choose to pay on a semi-monthly basis, but some also offer quarterly payments. If you’re salaried, your paycheck is guaranteed as long as you perform well in your position. In most cases, it’s calculated as an hourly rate plus benefits.

Many professionals in white-collar occupations receive a set amount of money for each week or month that they work. This is known as a salary, and can be paid by an employer on a regular basis (for example, every two weeks) or at one time (like once per year). Those who receive salaries are considered salaried employees. However, even if your company calls you a salaried employee, you could also have income from any number of other sources. For example, you might own a percentage of your company’s stock or have options to buy more shares at certain prices in the future.

3) Other Types of Compensation

Real estate agents in larger markets are typically paid in one of two ways: either with a base salary or on a commission-only basis. As in most industries, commissions often allow real estate agents to earn more than their base salaries, but they also carry more risk. On one hand, if you’re selling properties that cost $1 million or more, then making 6% is certainly better than $60,000 per year.

Most real estate agents earn a two-fold income: commissions on their deals, and a draw or salary from their broker. A draw is money paid in advance, based on expected commissions; it’s not tied to any actual deals closed (so if no deals close, no more draw). Salaries are typically higher than draws—most agents with salaried positions only take draws when they want to top up income for specific reasons. Like draws, however, they’re not directly tied to actual deals or commissions. Many agencies will also offer benefits such as health insurance and 401(k) plans. Most people with salaried positions don’t work on commission at all; they focus solely on supervising others who do.

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