12/16/2021 - California / Michigan

How Much Money Does a Real Estate Broker Earn?

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As a broker, you have several options for starting and running your business—all with different income levels. Depending on how you structure your practice and the areas you serve, your salary as a broker can vary significantly. 

What Is a Real Estate Broker? 

In California, you can earn two types of real estate licenses: Real Estate Salesperson and Real Estate Broker. Both licenses are issued through the Department of Real Estate (DRE), follow the same basic licensing process, and require Continuing Education (CE) credits to renew. 

One major difference between the two licenses is that to become a real estate broker, you’ll need to have significantly more education and experience in the industry than a real estate salesperson. Brokers must provide proof of two years’ full-time professional experience in real estate (or the equivalent), in addition to completing (and passing) eight college-level courses required by the DRE.

What Does a Real Estate Broker Do? 

In practice, real estate brokers have more options and can enjoy more benefits as part of their additional experience and expertise. For starters, brokers may also be perceived as having greater expertise, which may help you negotiate a higher commission with clients. As a bonus, some real estate brokers use this added value to negotiate with their affiliated broker and keep a greater portion of their commission. 

A licensed broker may also supervise other real estate agents and choose to take on managerial roles. This could mean building your own real estate team, or even starting your own firm and becoming a broker-owner. Both of these management options have the potential to increase both the broker’s earnings and costs significantly. 

How Much Can I Earn as a Real Estate Broker? 

The most straightforward way for a real estate broker to earn a salary is from the commission on clients’ purchase or sale of a home. In California, commission is negotiated between the home seller and their real estate agent. Generally speaking, the commission ranges from 1-6% of the home’s final sales price. This percentage is split between the seller’s agent and buyer’s agent. 

Whether you’re on the seller’s or buyer’s side, you’ll split your piece of this commission with your supervising broker or broker-owner. Depending on your experience as an agent and/or your broker’s policies, the split might mean your broker receives 20-50% of your commission. These general calculations can help estimate your overall salary as a real estate broker. 

Salary reporting websites show a wide range for California real estate brokers, with the average annual income between $68,355 and $93,057.

Of course, your actual salary as a broker is influenced by several factors: 

  • Your real estate specialties (commercial, residential, luxury properties, vacation homes, etc.) 
  • The areas you serve (city, suburbs, rural) 
  • Average transaction price (i.e., selling 10 properties for $500,000 each, versus selling 50 properties at $100,000 each)
  • Your business costs for services, marketing, staff, etc. 
  • For team leaders or broker-owners, you’ll receive a percentage of your agents’ commissions

What Does it Cost to be a Real Estate Broker? 

Part of your costs as a California real estate agent include maintaining your membership with the local real estate board and Multiple Listing Service (MLS), completing the required CE classes, and paying the DRE fees to renew your license.

As an independent business owner, you are also responsible for paying the costs of services and materials related to your business, which can vary depending on your practice. If you’re working a solo agent, your costs might include basic services, like professional home photography, staging, or closing gifts for clients. 

Brokers who start a real estate team—or even their own brokerage firm—will have higher overhead expenses, like administrative staff and supplies, marketing services, or training costs. While it’s true that you’ll receive a portion of the commission on each transaction completed by your agents, you’ll also be responsible for the larger costs of running a business. Before you jump into earning a real estate license, it’s beneficial to make a plan for your finances in advance.

Ready to Learn More? 

If you’re already a licensed agent and ready to take your career to the next level, check out our self-paced broker license program. Not yet licensed, but thinking about becoming a real estate salesperson? Find out how to earn your license in just 100 days, and try a free class with us!