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How Much Money Real Estate Agents Make – If you’ve ever watched HGTV, you already know that there are many shows featuring California real estate professionals. With 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 of homes they renovated during the 10 years their reality TV series aired, but how does the average California realtor compare?
How Much Money Real Estate Agents Make
If you’re looking for an average, Indeed.com has calculated it for you. According to their research, as of fall 2022, the average annual salary for California agents was $91,363.
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But that is not the whole story. Nationwide, real estate agent salaries range from an average of $28,270 for the bottom 10th percentile to $102,170 in the top 10th percentile. Why is there such a huge wage gap? How hard you work will affect how much you earn and location also makes a difference. And you’ll find that this is as true of California as it is of the entire country.
As anyone who lives in California knows, there is a big difference between Northern California and Southern California. Likewise, life and earnings for real estate agents in larger metropolitan areas will be significantly different from those 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 Get After Each Closing? There are several commission breakdowns to consider.
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First is the total commission paid by the seller. In California, it ranges anywhere from 1-6% of the sale price. The standard is 5-6%, but for high priced properties (ie $1+ million) the commission can be more like 4-5%. The amount is negotiated between the seller and the listing agent before a contract is signed.
Next comes the commission split between the listing agent and the buyer. Typically, the commission is split 50/50. Every now and then you may see a listing that offers the buyer’s agent a larger split in hopes of attracting more leads. It can also be the opposite. The listing agent may take 3.5% to offset the costs of selling the property and offer only 2.5% to the buyer’s agent.
Dual agency is another possibility. If the listing agent ends up finding the buyer and representing both, then they get the full commission.
Finally, the commission was split between the agent and the broker. The broker will receive the proceeds from a sale, then pay the agent their cut. The agreed commission split may vary from agent to agent even within the same brokerage. New agents can get a 50/50 split while experienced agents can get over 70/30 or 80/20.
Too Many New Real Estate Agents Can Make Housing Downturns Worse
There are also two other possible commission scenarios. You can pay a monthly brokerage 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 gets more favorable the more you sell.
Last but not least is the tax factor. California is known for high taxes and the broker is not deducting anything when they pay an agent their share of the commission. This means the agent must deduct taxes every time they receive a commission check.
As an independent contractor, real estate agents must pay estimated taxes to the IRS quarterly. Estimated taxes include income tax and self-employment tax, which covers Medicare and Social Security taxes. You will need to refer to the most recent 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 rate 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 charge anywhere between 0-9.3%.
Ways To Make Money As A Real Estate Agent Key Real Estate Resources
After all, real estate is a profession where your salary is not set in stone. Set your sights high and you could be one of the highest paid agents in the country.
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Sorry, Microsoft no longer actively supports your browser. Ready to become a real estate agent? Call our friendly experts with questions: 855-637-1886. Real estate agents can make a lot of money! I have been a real estate agent and broker for over 15 years and have done very well. However, most agents make salaries similar to other industries. The average gross income for real estate agents is between $40,000 and $50,000 according to most sources. However, this number can be misleading because many agents must pay a commission split to their broker and many other insurance, MLS and education expenses that most employees do not pay. While most agents don’t make a staggering amount of money, agents who work more hours or have been in the business routinely make more than $100,000 a year!
Average and median incomes can be much higher for real estate agents, but many agents only work part-time, many agents have no idea what they are doing, and many agents lack the discipline to motivate themselves. I have been an agent and broker since 2002. I have seen many agents make over $300,000 a year and many other agents struggle. I wouldn’t judge what you can make as an agent on the average salary because there are so many variables involved.
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The National Association of Realtors (NAR) usually has some great salary data, but these are listed on their site now:
Not sure how much I trust their stats! I found some other resources that seem to be much better!
“In real estate, longer hours usually mean higher profits. Agents who work 40 to 50 hours a week can expect to earn around $68,000, according to our survey. Agents who work 51 to 59 hours per week can expect to earn around $85,000. It is important to note that these are only estimates and many factors can affect these numbers.”
The longer you go in your career the more money you make too! Agents in their first year were said to make around $20,000 a year, while agents in business for more than 10 years tend to make more than $100,000 a year!
Do Real Estate Agents Get You More Money Than Going Fsbo?
More than 21 percent of realtors make over $100,000 a year, which shows that realtors can make a lot of money when they work full-time and have a plan. You need a plan, you need goals, and you need to be able to run your business in order to succeed in real estate. If you can become a successful agent, money and freedom can’t be beat!
Real estate agents make a commission on every home they sell. Commissions are always negotiable, but HUD pays listing agents three percent and buyers’ agents up to three percent, so I’ll use three percent as an example commission. Real estate agents usually represent one side of a transaction; buyer or seller. Each side of that transaction can get three percent, but again that’s negotiable. In bank owner listings sometimes the listing agent gets a smaller percentage than the buyer’s agent. Commissions can be four percent in some cases or one percent as with some REO auctions. If you sell a $100,000 home, a three percent commission would equal $3,000 to an agent, but the agent doesn’t always get to keep the entire commission. Most real estate agents only get paid when they sell a home, unless they are working in a team or a commercial real estate agent.
When you become a real estate agent, you must first work under a broker. You do not have to work with that broker, but you must hang your license with the broker. Different agents offer different levels of support ranging from nothing to intensive training programs and mentors. The more training, staff support and office space you get, the smaller the commission portion to keep. Commission splits can range from 50/50 to 100 percent with a small transaction fee paid to the broker. Remember, a lower commission split isn’t helpful if you never sell any homes. I think new agents should go with a broker that offers the best training, not the highest split.
If you sell a house for $100,000, make a three percent commission, and have to give 40 percent to your broker, you’ll keep $1,800. You will have more costs that we need to understand as well, but $100,000 in sales is also pretty low in many areas of the country.
How To Make Money As A Real Estate Agent?
In addition to paying your broker a share of your commissions, other costs come from being a real estate agent. Many of these costs will vary greatly depending on your marketing and the agreement with your broker.
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