How much commission do real estate brokers in California charge typically?
That depends on a couple of factors. The commission is negotiated on every transaction. Some agent charge 6%, some agents will do it for less, maybe 5%. But remember, the difference between 6 and 5 percent is one percent to the seller, but represents a huge reduction to the REALTOR® The difference between 6 and 5 % to the listing agent is actually a 16 2/3 % reduction in gross commission.
Figure it thsi way, on a $400,000 property, 5% commission is $20,000. While a 6% commission on the same $400,000 property is $24,000. 24,000 minus 16.66% is 20,000. So if we’re listing your $400,000 property and you ask me to list it at 5%, I’m going to ask you if selling your home for $333,600 would make you happy, because it’s the same thing, a 16% reduction in price.
Lastly, most sales involve two agents, the listing agent, (the person with the seller) and the selling agent , (the agent with the buyer). Both of these two agents usually split the gross commission, each side getting 3% and then they have to split that portion with the broker. This split might be 50/50 if you’re new, or as high as 80/20 to the agent if you’re experienced. So in other words, if I’m a new agent, I’m only getting 50% of the 3%. Using this example of the $400,000 listing, that represents $6,000 to me, not $24,000 like some people assume. Out of that I have to pay my own expenses, my own car, health/life insurance, my self-employment taxes, and my own retirement. One $400,000 sale per month would give me an income, before taxes and expenses, of about $72,000. In our market, about 60% of REALTORS® make about half of this.