If you’ve ever watched HGTV, you’re aware that there are numerous shows that feature California real estate professionals. With California’s sky-high home prices, it’s easy to imagine that real estate agents can make a good living.
The Flip or Flop duo may have made tens of thousands of dollars on the homes they renovated over the course of their reality TV show’s ten-year run, but how does the average California agent fare?
How Much Do Real Estate Agents Make in California?
Indeed.com has calculated an average for you. According to their research, the average annual salary for California agents was $91,363 as of the fall of 2022.
But that’s not the whole story. Real estate agent salaries in the United States range from $28,270 in the lowest 10% to $102,170 in the highest 10%. Why is there such a wide disparity in pay? How much you work will influence how much you earn, as will your location. This is true for California as it is for the rest of the country.
Making Money in the Metros: Real Estate Agent Earnings in California
Anyone who lives in California knows that there is a significant difference between Northern and Southern California. Similarly, life and earnings for real estate agents in major metropolitan areas will differ significantly from those in more rural areas.
How Do Agent Commission Splits Work in California?
How much do California real estate agents make per closing? There are a few commission splits to think about.
The first is the seller’s total commission. It varies from 1-6% of the sales price in California. The standard commission is 5-6%, but for high-priced properties (i.e. $1 million or more), the commission may be closer to 4-5%. Before a contract is signed, the seller and listing agent negotiate the price.
The commission split between the listing and buyer agents is next. The commission is usually split 50/50. Occasionally, a listing will offer a higher split to the buyer agent in the hopes of attracting more leads. The inverse can also be true. The listing agent may charge 3.5% to cover the costs of selling the property while only offering 2.5% to the buyer agent.
Another possibility is dual agency. If the listing agent finds the buyer and represents both parties, they will receive the full commission.
Finally, the commission is divided between the agent and the broker. The broker will receive the sale proceeds and then pay the agent their commission. Even within the same brokerage, the agreed-upon commission split can differ from agent to agent. New agents may be paid 50/50, while experienced agents may be paid 70/30 or 80/20.
There are two additional commission scenarios. You can pay a monthly broker fee while keeping the entire commission. A sliding scale commission split may also be offered by the broker. In this case, the commission starts low, around 40/50 or 50/50, and gets better as you sell more.
Do California Real Estate Agents Pay Their Own Taxes?
Last but not least is the tax consideration. California is notorious for having high taxes, and when a broker pays an agent their share of the commission, they are not deducting anything. This means that the agent must deduct taxes from each commission check.
Real estate agents must pay estimated taxes to the IRS as an independent contractor every quarter. Income tax and the self-employment tax, which includes Medicare and Social Security taxes, are included in the estimated taxes. To determine how much should be paid each quarter, consult the most recent tax brackets.
California also has a state income tax. California has ten 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%. However, that only applies to individuals earning more than $625,370 or married couples earning more than $1,250,739. Agents and brokers in California will be paid between 0% and 9.3%.
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