How much do real estate agents make in California?

Salaries by years of experience in California

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3 to 5 years
6 to 9 years
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How Much is the Real Estate Commission in California?

Alright, so how much is the real estate commission in California? The answer isn’t so black and white.

First, there are the commission costs between the agent and the seller. As a real estate agent, you’ll be negotiating the final amount with the seller until you come to an agreement.

In California, the percentage of commission can range from 1-6% of the final sale. On average, the total amount paid to real estate agents in the US is between 5-6% of the final sale price. However, in California, more expensive properties will pay out a commission of 4-5%. That’s surprisingly lower than the national average!

This commission is for both real estate agents, the buyer’s agent and the seller’s agent. It is generally split between both agents equally meaning that each is paid a total of 2-3% on average.

California Commission Splits for Agents

It’s also essential to grasp various commission splits when discovering how much California real estate agents take home after each transaction. These are some of them:

The seller’s entire commission payment

This might be anything from 1-6 percent of the sales price in California. The industry typical is 5-6 percent. However, commissions for high-priced homes (i.e., $1 million or more) maybe 4-5 percent.

Before a contract is signed, the seller and agent will bargain regarding the price. The commission distribution between the listing and buyer agents follows next. The commission is usually shared 50/50.

Occasionally, a listing may offer a more significant split to the buyer agent to garner more leads. It’s equally a possibility that the contrary is true. To mitigate the costs of selling the property, the listing agent may take 3.5 percent and provide just 2.5 percent to the buying agent.

Another option is dual agency

If the listing agent successfully locates a buyer and serves both parties, the commission gets paid in full. The commission distribution between the agent and the broker comes next. After receiving the profits from a sale, the broker will pay the commission to the agent.

The accepted commission rate can vary from one agent to the other. This is valid even within the same niche. Also, new agents may earn a 50/50 share, while experienced agents may receive 70/30 or 80/20 splits.

 Two more circumstances might result in a commission. 

Furthermore, the broker may also provide a commission split on a sliding basis. In this situation, the commission starts off low, approximately 40/50 or 50/50, and gradually improves as you sell more. Extra broker costs may apply to each sale, month, or year.

The tax issue

California is known for its excessive taxes, and when a broker pays an agent half of the fee, they don’t deduct anything. This implies that when an agent receives a commission check, they must deduct taxes.

Real estate agents must pay estimated taxes to the IRS every quarter as independent contractors. Income and identity tax, including Medicare and Social Security taxes, are included in the projected taxes.

See the most recent tax brackets to discover how much you must pay each quarter.

There is also a state income tax in California. This means there are ten different income tax bands, the nation’s most. Sadly, the state is also famous for having the top tax bracket, at 13.3 percent.

However, this only applies to those with a household income of more than $1 million. Agents and brokers in California will pay a fee ranging from 0% to 9.3%. Property investment is a field where your earnings aren’t guaranteed.

Set your ambitions high and you may be one of the country’s highest-paid agents.

How much should you be earning?

Get an estimated calculation of how much you should be earning and insight into your career options. See more details

What is the New York real estate agent salary average?

According to Indeed, the average salary for a real estate agent in New York is $86,353, considerably lower than the figure for California. Keep in mind that this can vary significantly depending on which market you're serving, with luxury agents in New York City earning far more than agents in less affluent areas upstate.

Commercial vs. Residential Real Estate Agent Salaries in California 

Commercial real estate and residential real estate are akin to baseball and cricket. Both require a similar skill set, but they’re ultimately different games. Not surprisingly, the respective average salaries of these real estate focuses also varies. 

Real Estate Career 

Average Salary in California 

Commercial Real Estate Agent

$98,825

Residential Real Estate Agent 

$97,243

How Does the Real Estate Commission Get Split?

However, 6% is split between the seller’s agent and the buyer’s agent. That amount is then shared with the agent’s broker, usually at a ratio of 60/40 in the broker’s favor.

Let’s say an agent successfully sells a home for $1M. The breakdown would look something like this:

  • 6% total commission on the sale ($60,000)
  • split between the listing agent and buyer’s agent 50/50 ($30,000) 
  • 60/40 split between agent and broker ($12,000)

Often, these numbers change with experience, particularly the ratio of the split that an agent shares with their sponsoring broker. Over time, the split may shift in the agent’s favor, or the agent may become a licensed real estate broker themselves and make additional money sponsoring others.

How Commission Gets Split Between Real Estate Agents

The commission is split between the seller’s agent and buyer’s agent right down the middle. Usually, the commission is paid directly to the brokerage, who distributes it to the agent.

How Commission Gets Split with the Broker

The typical commission split between an agent and broker is 60/40 in the agent’s favor. Over time, however,  the brokerage fee may decrease depending on an agent’s productivity and experience. Still, the agent will always pay a brokerage fee, even if it’s just 20% of their half.

Can Real Estate Agents Negotiate a Higher Commission Split?

An agent can negotiate a higher commission split with a brokerage the same way they would ask for a raise in a more traditional job. Performance, experience, productivity, and even better offers from other firms are solid arguments for negotiating a higher commission split.

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Factors Affecting How Much A Real Estate Agent Makes

Let’s take a closer look at some other important factors which may affect how much a realtor in California makes. They include:

Location

The State of California is quite large. It is the third-largest state in the Union, with an estimated total area of 163,696 square miles. This area has urban, rural, residential, commercial, private, and public properties. So it’s expected that all these properties will have different prices based on various factors such as access to basic amenities, transportation, business environment, safety, and so on. 

So why does this matter to us? Well, real estate agents are paid on a commission basis. This means that the higher the property’s value, the more you stand to gain as the realtor who facilitated the deal. Real estate agents who are more active in high-value areas are therefore in a better position to make more than their colleagues who operate in areas with a lower average property value.

Your Qualifications

The real estate industry in California is undoubtedly cutthroat. Realtors have to do their very best to compete with their colleagues. This involves being better qualified and possessing more high-quality certifications, which puts their services in high demand. Some key areas you may want to look at include property management, commercial property investment, and land consultancy are just a few of the many areas realtors can specialize in.

These qualifications build your reputation, increase your expertise and allow you to provide better quality service to your clientele. Most of these can be taken as post-licensing educational courses, which are usually organized by the real estate governing body in charge of the state.

Your Agency

Choosing the right agency might be one of the most critical decisions a real estate agent makes in his entire career, superseded (arguably) only by choosing a spouse. Your agency does more than determine the type of deals you may be exposed to, and they also affect how much you stand to make. They can help increase your popularity, get better deals, and expose you to much-needed hands-on training.

Usually, the commission from a real estate deal is split between the real estate agent and their agency according to a predetermined ratio known as the commission split. Some other things your agency may offer include bonuses you’re eligible to receive for hitting specific targets, and promotional material. In some rare cases, they may even provide a fixed salary structure.

Years of Experience

A study carried out between 2019 and 2020 showed that the average income of a realtor more than tripled after the first year. The same survey also showed agents with 4-10 years of experience had an average income of $63,595. Also, those with over 10 years of experience earned over $100,000 a year.

If you’re wondering why the results of the study showed such a skewed result between the income of novice agents and those with longer experience, it can be broken down to a few simple reasons. The most important of these factors include the fact that real estate agents who have been active participants in the industry for a long period of time have built up a strong professional network, learned the intricacies of the business, and have the leverage to negotiate better deals than their less experienced counterparts.

The Economy

The economy affects the housing market on a local, state, and national scale. The pandemic illustrated this point clearly with its effect on the housing market. Statistics showed a drop in new home listings by over 40%, a 25% increase in delistings, and a fall in queries for agents, online search activity, and offers made -which are all essential measures of demand in the housing market- during the height of the lockdown.

During times when home sales have been at their lowest – such as the 2008 housing market crash – the average salaries of realtors fell nationwide. So when the economy struggles or the housing market stagnates, it is natural that realtors should notice a dip in their income. This also means that realtors operating in cities with thriving economies are more likely to earn a higher annual salary.

Area of Specialization

This factor is somewhat related to location but on another scale. Realtors may specialize in residential properties, commercial properties, or other specialized areas of real estate. With each niche comes its respective skills and peculiarities. However, each of these may affect how much real estate agents within the state make.

Commercial properties are, on average, are more valuable than residential properties. This means that on average, realtors who specialize in commercial properties make more than those who specialize in residential properties. Of course, this does not mean that residential properties are not profitable sales.

Local and Federal Policies

California homeowner policies have famously been touted for years as one of the reasons for the ridiculously high property values in the state. Government policies on a local, state and national level also significantly impact the housing market. Policies encouraging property buying, such as low-interest rate mortgages and Government Sponsored Enterprises, stimulate the housing market.

Bank interest rates and loan qualifying criteria largely determine the ease at which buyers can access the loans they need to purchase a property. Policies like restricting access to private mortgage insurance and increased interest rates restrict the housing market.

Related: How To Prepare for Your California Real Estate Exam

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