How Much Do Real Estate Agents Make in California?

CEO Khai Intela
If you're curious about the earning potential of real estate agents in California, you've come to the right place. While the average annual salary for California agents stands at $91,363, there's much more to the...

If you're curious about the earning potential of real estate agents in California, you've come to the right place. While the average annual salary for California agents stands at $91,363, there's much more to the story. The range of real estate agent salaries nationwide is quite substantial, with the bottom 10th percentile earning around $28,270 and the top 10th percentile reaching $102,170. So, why is there such a significant gap in pay? Let's delve deeper into the factors that contribute to these variations in earnings.

Making Money in the Metros: Real Estate Agent Earnings in California

As anyone residing in California knows, there is a notable difference between Northern and Southern California. Similarly, the life and earnings of real estate agents in larger metropolitan areas vary significantly from those in more rural locations. To provide some insight, here's what real estate agents are making in the ten largest cities in California, based on Indeed.com's research from Fall 2022:

How much do real estate agents make in California graphic Image Source: saigonintela.vn

How Do Agent Commission Splits Work in California?

Now, let's take a closer look at how real estate agent commission splits function in California. After each successful closing, agents must consider a few different commission splits.

Firstly, there's the total commission paid by the seller, which typically ranges from 1% to 6% of the sales price. Although the standard commission falls within the 5-6% range, high-priced properties might have a commission closer to 4-5%. The exact amount is negotiated between the seller and the listing agent before signing a contract.

The next factor to consider is the commission split between the listing and buyer agents. Typically, this split is done evenly at 50/50. However, there may be occasional instances where a listing offers a higher split to the buyer agent in an effort to attract more leads. Conversely, a listing agent might opt to take 3.5% and offer just 2.5% to the buyer agent, offsetting the expenses of selling the property.

Dual agency is another possibility. If the listing agent ends up finding the buyer and representing both parties, they receive the full commission.

Lastly, there's the commission split between the agent and broker. The broker receives the proceeds from a sale and then pays the agent their agreed-upon cut. The commission split can differ between agents, even within the same brokerage. New agents might start with a 50/50 split, while more seasoned agents can negotiate for higher splits, such as 70/30 or 80/20.

Additionally, there are two other commission scenarios to consider. Some agents may pay a monthly broker fee and keep 100% of the commission, while others may have a sliding scale commission split. In the latter case, the commission starts lower, around 40/50 or 50/50, and becomes more favorable as the agent sells more properties. It's important to be aware that there may also be additional broker fees per sale, month, or year.

Do California Real Estate Agents Pay Their Own Taxes?

Last but not least, let's talk about the tax factor. California is notorious for having high taxes, and real estate agents are responsible for deducting taxes each time they receive a commission check since the broker does not deduct anything.

As independent contractors, real estate agents must pay estimated taxes to the IRS every quarter. These estimated taxes include income tax and the self-employment tax, which covers Medicare and Social Security taxes. It is essential to reference the latest tax brackets to determine the appropriate amount to be paid each quarter.

California also has its own state income tax system, with the highest state income tax bracket at 12.3%. However, this only applies to individual income over $625,370 or married-filing-jointly income over $1,250,739. California agents and brokers will typically pay anywhere between 0% and 9.3%.

In conclusion, real estate is a profession where salaries are not set in stone. By setting your sights high and putting in the necessary effort, you have the potential to become one of the best-paid agents in the country. So, if you're considering a career in real estate in California, keep these factors in mind and aim for success!

Note: The information and statistics provided in this article are based on research conducted by Indeed.com in Fall 2022.

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