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Exploring the Los Angeles real estate market, one question often arises: How much commission does a realtor make in Los Angeles California?
With commission rates generally at 5% to 6%, these figures are pivotal to both agents and clients in the transaction process. This article aims to unpack the determining factors behind these numbers, without spilling all the details upfront.
Average Realtor Commission in Los Angeles
Real estate transactions are a daily occurrence in Los Angeles, the bustling heart of California. A major part of these transactions is the realtor commission, which is typically a percentage of the property’s sale price. The average realtor commission in Los Angeles falls within the 5%-6% range, which is a significant chunk of the property’s value. Factors such as the property’s sale price and the agents involved influence this commission; it isn’t a random number.
Interestingly, it’s the seller who foots the bill for this commission, which covers both the listing and buyer agent’s fees. This is not a Los Angeles quirk; it’s a common practice among real estate brokers in the city and elsewhere. The rationale behind this practice is that it incentivizes buyer’s agents to show their clients the seller’s house, effectively acting as a marketing tool for the seller.
Comparison to California State Average
Shifting our view to a broader perspective, let’s compare Los Angeles to the rest of California. The average realtor commission in Los Angeles aligns closely with the California state average of 4.91%. This figure is not static, however. Over the past five years, the average real estate agent fee in California, as reported by California agents, has oscillated between 4.91% and 5.14% of the final sale price.
Where does Los Angeles fit into this statewide context? The prevailing average realtor commission rate in the city is 5.50% of the final sale price. This rate applies to all real estate brokers and agents involved in the transaction.
Comparison to National Average
Los Angeles fares slightly better when juxtaposed with the national average. The current national average for realtor commissions is 5.49%, while in Los Angeles, realtor commissions can be slightly higher. This difference is not accidental but is influenced by factors like high property demand and market competitiveness.
Factors Affecting Realtor Commission Rates in Los Angeles
Although the average commission rates paint a broad picture, these rates aren’t set in stone. They are influenced by a variety of factors, including:
- Property value
- Location
- Market conditions
- Agent experience
These variables create a dynamic landscape, with commission rates fluctuating in response.
For instance, market conditions such as market trends and competition can significantly impact realtor commission rates in Los Angeles. Likewise, the experience and reputation of agents can influence their commission rates, with highly regarded agents often able to command higher fees.
Property Value
Examining property value more closely, one can observe that higher property values in Los Angeles often lead to lower commission rates. This is because agents tend to prioritize high-value listings, which despite having lower commission percentages, still result in substantial payouts due to the high sale price.
This relationship between property value and realtor commission rates is reflected in the average total real estate agent commission rate of the final sale price in Los Angeles.
Location
Like many aspects of real estate, location plays a crucial role. Commission rates in Los Angeles CA can differ based on the specific area within the city. More competitive areas may have lower rates due to the high volume of transactions.
However, it’s worth noting that the desirability of a neighborhood does not directly impact realtor commissions.
Market Conditions
The real estate market is a delicate ecosystem, responding to a variety of stimuli. In Los Angeles, these market conditions can significantly influence commission rates. Some factors that can affect commission rates include:
- The level of demand and supply in the real estate market
- The average selling price of homes in the area
- The competition among real estate agents
- The services and expertise offered by the agent
All of these factors can play a role in determining how much homeowners are willing to pay in commissions.
For instance, in a seller’s market—where high demand and low inventory are the norms—commission rates can be impacted by the type and price of the property.
Conversely, in a buyer’s market characterized by sluggish home sales and decreasing home prices, houses might stay on the market for extended periods before attracting offers, potentially influencing commission rates based on sale proceeds.
Agent Experience
The experience of an agent can also significantly influence their commission rates. More experienced agents often base their fees on their expertise and track record, which can command higher commission rates.
In Los Angeles, experienced real estate agents generally charge an average commission rate of 5%-6%. In contrast, new agents usually have a 50/50 commission split with their broker, while experienced agents may have a more favorable split, such as 70/30 or 80/20, reflecting their expertise.
How Realtor Commissions are Split in Los Angeles
The realtor commission, also known as realtor fees or real estate agent commissions, is not pocketed by a single individual. Instead, it’s usually divided equally between the listing agent and buyer’s agent, with each party typically receiving 2.5%-3% of the total commission from the property sale.
Additionally, brokerage firms also receive a share of the commission earned by their agents, usually around 50% of the earnings shared with the broker as a real estate brokerage fee, which includes real estate agent fees.
Listing Agent’s Share
The listing agent, the real estate professional who lists the property for sale, typically receives 2.5%-3% of the commission. This share is usually determined by dividing the total commission on the sale between the listing agent and the buyer’s agent. In Los Angeles, it’s common practice to split the commission 50/50 between the two agents.
However, the commission rate of a listing agent in Los Angeles can be influenced by various factors such as:
- Economic conditions
- Interest rates
- Housing supply and demand
- Property location, type, and value
- Market conditions
- The experience of the real estate agent
- The range of services provided by the agent
Buyer’s Agent’s Share
On the other side of the transaction, the buyer’s agent commission is typically a share of 2.5%-3%. This commission is calculated as a percentage of the sale price, much like the seller’s agent commission. As a buyer’s agent, their primary responsibility is to represent the interests of the buyer in the real estate transaction. Working with experienced buyer’s agents can make a significant difference in the home buying process.
It’s important to note that while the commission rate is generally split equally between the listing and buyer’s agent, the specific percentage can vary based on negotiation and the specifics of the transaction.
Brokerage Share
Beyond the agents involved in the transaction, the brokerages also receive a cut of the commission. In Los Angeles, commission splits between agents and brokerages can vary. While a 50-50 split is common, there are also splits of 60/40 and even 80/20 in favor of the agent, particularly for new agents.
These splits are influenced by factors such as the agent’s experience, negotiation within the brokerage, and occasionally market-specific agreements. Changes in the brokerage share can significantly impact a realtor’s earnings. For example, if the brokerage’s share were to decrease by 30%, it would lead to substantial savings for sellers and a corresponding decrease in earnings for agents.
Tips for Negotiating Realtor Commissions in Los Angeles
Having gained an understanding of how realtor commissions are determined and divided, we can now delve into some strategies for negotiating these rates. You may be surprised to learn that real estate commissions in Los Angeles are open to negotiation, providing ample opportunity for educated sellers and buyers to engage in productive discussions with their realtors.
Research Local Agents
Understanding your counterparty is a fundamental step in negotiation. Here, that would involve researching local agents. Consider researching top agencies such as:
- Josh Altman
- Matt Altman
- Cindy Ambuehl
- Santiago Arana
- Rochelle Atlas Maize
- Berkshire Hathaway HomeServices
- Smith & Berg Partners
to find those with competitive commission rates and strong track records.
You can assess a realtor’s track record by reviewing their history of sold properties and examining their current listings. Platforms like Zillow and Rate My Agent are good sources for finding online reviews of Los Angeles real estate agents, offering valuable feedback from previous clients.
Be Prepared to Negotiate
Being well-prepared holds significance in any negotiation scenario, including those concerning realtor commissions. The property value can significantly influence the negotiation of Realtor commissions in Los Angeles. Realtors may be more willing to accept lower commissions for homes with higher values, as the total commission earned on more expensive homes may still be substantial due to the higher sale price, despite a lower percentage.
While it’s hard to pin down an exact success rate for commission negotiations, it’s important to approach these discussions with confidence and a clear understanding of your desired outcome.
Consider Alternative Commission Structures
As part of your negotiation strategy, consider exploring alternative commission structures. Rather than sticking to the traditional percentage-based model, you may find that a flat-fee model or another alternative commission structure may offer savings.
In a flat-fee commission structure, the listing agent earns a fixed rate instead of a percentage-based commission, while the seller remains responsible for paying the customary buyer’s agent commission of approximately 3%. Opting for such an alternative structure can effectively reduce the listing fee compared to the traditional commission method and lead to substantial savings for sellers.
Real Estate Agent Salary in Los Angeles
After discussing commissions at length, you might be curious about the ultimate takeaway: the real estate agent’s salary. In Los Angeles, the average annual income for a real estate agent is ~$112,000. This number can vary greatly depending on experience, location, etc.
Factors Affecting Agent Salaries
Similar to commission rates, a variety of factors also influence real estate agent salaries. The number of sales has a direct impact on a real estate agent’s earnings. Typically, agents make around 12 sales annually, and more sales usually result in greater income due to higher commission earnings.
Other factors that play a significant role in real estate agent earnings include:
- Property values: Higher property values result in larger commission payouts, allowing real estate agents to earn higher salaries.
- Location: Prime locations with higher transaction volumes and property values often yield higher earnings for agents in those areas.
- Agent experience: Experienced agents who have built a strong network and reputation in the industry are more likely to earn higher incomes.
These factors, along with others, contribute to the overall earnings of real estate agents involved in the industry, who possess a real estate license.
BIO
Sam Everett is the Founder of Evolved Agents–a real estate mastermind that helps agents sell more homes using online ads and a virtual assistant. He provides free training through his YouTube channel, TikTok, and Facebook Page.
