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 regularly rake in tens of thousands on the homes they renovate, but how does the average California agent compare?
How Much Do Real Estate Agents Make in California?
Ask California agents how much they make and you’ll hear a lot of different numbers. If you’re looking for an average, the Bureau of Labor Statistics (BLS) has calculated it for you. According to their research, in 2017 the average annual salary for California agents was $68,860. California brokers earned slightly more with an annual salary of $80,820. That puts California in the highest paid category.
California has the 6th highest annual average salary in the U.S. But that’s not the whole story. Salaries range from $24,970 for the bottom 10th percentile up to $123,700 in the top 10th percentile. California’s top earners rank 4th in the country.
Why the nearly $100,000 difference? How much you work is going to affect how much you earn. Location also makes a difference. In the Santa Maria-Santa Barbara area, the average salary is over $82,000. Go further inland to Portsville and the average is just over $43,500.
How Do Agent Commission Splits Work 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.
Do California Real Estate Agents Pay Their Own Taxes?
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 an independent contractor, 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 13.3%. But that only applies to income over $1 million. 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.