If you’ve ever watched HGTV you already know there are plenty of shows featuring California real estate professionals. With the sky-high home prices, it’s easy to imagine that California real estate agents can make a good living.
The Flip or Flop duo may have taken in tens of thousands on the homes they renovated over the 10 years their reality TV series aired, but how does the average California agent compare?
What is the Cost of a Real Estate License in California?
Learn about all the fees and costs you will have to pay to get your California real estate license.
If you’re looking for an average, Indeed.com has calculated it for you. According to their research, as of the fall of 2022, the average annual salary for California agents was $91,363.
But that’s not the whole story. Nationwide, real estate agent salaries range from an average of $28,270 for the bottom 10th percentile up to $102,170 in the top 10th percentile. Why is there such a huge gap in pay? How much you work is going to affect how much you earn, and location also makes a difference. And you’ll find this is as true for California as it is across the country.
As anyone who lives in California knows, there’s a big difference between Northern California and Southern California. Likewise, life and earnings for real estate agents in the bigger metropolitan areas will be significantly different than it will be for those located in more rural areas.
According to Indeed.com (Fall 2022), here’s what real estate agents are making in the 10 largest cities in California:
How much do California real estate agents take home after each close? There are a few commission splits to consider.
First is the total commission paid by the seller. In California, it ranges anywhere from 1-6% of the sales price. The standard is 5-6%, but for high-priced properties (i.e. $1+ million) the commission may be more like 4-5%. The amount is negotiated between the seller and listing agent before a contract is signed.
Next comes the commission split between the listing and buyer agent. Typically, the commission is split 50/50. Every now and then you may see a listing that offers the buyer agent a higher split in hopes of attracting more leads. The opposite can also be true. The listing agent may take 3.5% to offset the expenses of selling the property and offer just 2.5% to the buyer agent.
Dual agency is another possibility. If the listing agent ends up finding the buyer and representing both then they receive the full commission.
Finally, the commission split between agent and broker. The broker will receive the proceeds from a sale, then pay the agent their cut. The agreed upon commission split can differ from agent to agent even within the same brokerage. New agents may receive a 50/50 split while seasoned agents can get upwards of 70/30 or 80/20.
There are also two other possible commission scenarios. You may pay a monthly broker fee and keep 100% of the commission. The broker may also offer a sliding scale commission split. In this case, the commission starts low around 40/50 or 50/50 and becomes more advantageous the more you sell.
Be aware there could also be additional broker fees per sale, month or year.
Last but not least is the tax factor. California is notorious for having high taxes, and the broker isn’t deducting anything when they pay an agent their share of the commission. That means the agent must subtract taxes each time they receive a commission check.
As independent contractors, real estate agents must pay the IRS estimated taxes every quarter. The estimated taxes include income tax and the self-employment tax, which covers Medicare and Social Security taxes. You’ll need to reference the latest tax brackets to determine how much should be paid each quarter.
California also has a state income tax. California has 10 income tax brackets - the most in the country. Unfortunately, the state is also known for having the highest state income tax bracket at 12.3%. But that only applies to individual income over $625,370 or married-filing-jointly income over $1,250,739. California agents and brokers will pay anywhere between 0-9.3%.
At the end of the day, real estate is a profession where your salary isn’t set in stone. Set your sights high and you could be one of the best-paid agents in the country.
Learn more about our courses and get exclusive offers