“Don’t wait to buy real estate. Buy real estate and wait.”
There’s no question that California real estate is expensive. San Diego is no different. Housing prices continue to soar, as realtors collect massive commissions when they help buy or sell a house. Even when out-of-state shoppers purchase a vacation home in San Diego, a realtor collects a huge fee.
Today, we unpack the mystery of how much commission realtors make in San Diego CA.
Calculating San Diego Realtor Commissions
If you’re trying to sell a home in San Diego CA worth a million dollars, your realtor won’t pocket that entire lump sum. On a home sale, a realtor’s pay is tied to a percentage of the home’s final sale price. Typically, real estate agent commission percentages range from 5-6% across the United States
This includes both the buyer’s and the seller’s agent’s commission. Remember, both sides of the deal have agents, and both want a piece of the commission pie. The commission split between the two agents is usually cut in half evenly.
A San Diego realtor normally makes 2% – 2.5% from the sale of a property. However, if the property is lower in value, it’s common to see the realtor earning higher commissions. For example, if you are buying a condo, your real estate agent will likely 2.5% – 3% in commission from the transaction. Expensive homes in La Jolla don’t see as high commission percentages because the payouts are already so large.
Realtor Commission Earned: Example
For a home in sunny San Diego, the commission works out similarly. Say you’re purchasing a home for $800,000 in San Diego, California. This would be considered a fair value for a property along the coast. If we apply the average commission rate of 5.45%, that’s $43,200 that’ll be split between the buyer’s and seller’s agents.
From here, that is split evenly (usually) between the buyer’s agent and seller’s agent. Then the realtor must pay out his/her broker. It’s not always a 50/50 split. Sometimes, real estate agents can split their commission 60/40 or 70/30 with their broker. 70/30 is a common brokerage split for San Diego realtors. Finally, the realtor will put aside money for taxes (25% is common).
Here’s the final calculation of how much commission a San Diego realtor makes:
- $800,000 x 5.45% = $43,200
- $43,200 / 2 = $21,600
- $21,600 x 70% = $15,120
- $15,120 x 75% = $11,340
- TOTAL COMMISSION = $11,340
Then the realtor must account for any expenses that they paid to make the sale of the home happen. This can include expenses like staging, cleaning, photography, flyers, and other marketing materials.
Variables of Realtor Commission Earnings
Yes, the above numbers sound tantalizing. However, these are averages. Actual commissions can vary based on numerous factors. The state of the market, the selling price of the property, the negotiation skills of the realtor, and even the type of property can impact the final commission figures.
In fact, in a buyer’s market, commission rates may trend higher to incentivize realtors to sell a difficult property. On the other hand, in a seller’s market, competition among realtors might lead to slightly lower commission rates. California realtor commissions vary because each city has different demand from buyers. San Diego typically has a high demand for housing, which causes realtor commissions to vary.
It’s Not All Roses and Rainbows
Before you rush off to get your real estate license, captivated by the siren call of these commission checks, remember one key fact:
- Realtors often have to pay their own business expenses
These can include marketing, office rent, licensing fees, and more. That shiny $11,340 commission can quickly dwindle once these costs are accounted for.
San Diego vs. California: Realtor Commission Comparison
Now that we’ve unraveled the mystery of real estate commissions in San Diego, let’s zoom out a little. How does San Diego stack up against California as a whole? California is an expansive state with a real estate market as diverse as its landscape. The Golden State has some of the most expensive zip codes in the country. This causes the average home prices to be significantly higher versus San Diego.
The median home price in California is $743,000, which is less than the city of San Diego. Based on the home values, San Diego realtors make more money in fees vs most other cities in CA. However, California is a big state! In areas like San Francisco or Los Angeles, the median home price can easily surpass $1 million. What does this mean? Heftier commission checks for realtors.
However, keep in mind that a higher commission doesn’t always mean a bigger payday for the realtor. Homes in higher-cost areas might take longer to sell. Plus, the increased competition among realtors in these lucrative markets can drive up business expenses. It’s not uncommon for a seller to fire an agent when a home doesn’t sell quickly. Even after the agent spends thousands of dollars in marketing, it sometimes still doesn’t work out.
At the end of the day, whether you’re looking at San Diego or California as a whole, realtor commissions are just one piece of the complex real estate puzzle. Nevertheless, understanding these commissions can give you a more detailed view of the picture. If you’re on the fence about buying or selling a home, this can help you decide what to do.
Understanding Realtor Commissions in California
Real estate commission is a crucial part of the home buying and selling process. While it can seem like realtors are raking in substantial amounts with each transaction, remember the costs they bear. They spend time and effort in real estate deals that sometimes don’t even pan out. Learning how much commission a realtor in San Diego, California makes is enlightening. Understanding the ins and outs of commission can give you an edge – and hopefully save you a bit of cash or earn you a few extra bucks.