Commission is one of the least understood parts of a real estate transaction, partly because it’s negotiable rather than fixed, and partly because the rules around it changed in recent years. Here’s how it actually works now.
Commission Has Always Been Negotiable
There’s no set or standard commission rate in California or anywhere else. It’s negotiated between you and your agent, and it can vary based on the scope of services, the property, and the market. Historically, total commission (covering both the listing side and the buyer’s side) has often landed somewhere in the 5-6% range, but that was always a market norm, not a rule, and individual agreements have varied above and below it. Any agent should be willing to explain exactly what you’re paying for and how the number was arrived at before you sign a listing agreement.
How the Commission Split Typically Works
In a traditional structure, total commission has been split between the listing agent’s side and the buyer’s agent’s side, with each side’s brokerage then taking its own cut before the individual agent is paid. So a homeowner paying a combined commission is often, in effect, paying for both their own representation and the buyer’s agent’s representation. That structure is exactly what changed with the 2024 NAR settlement.
What the 2024 NAR Settlement Actually Changed
The National Association of Realtors settled a set of lawsuits in 2024 that changed some long-standing industry practices, most notably around how buyer-agent compensation is offered and disclosed. Two practical changes have mattered most for sellers and buyers since then. First, listings no longer automatically advertise buyer-agent compensation on the MLS the way they once commonly did, compensation offered to a buyer’s agent is now a separate conversation rather than a built-in field on the listing. Second, buyers are now generally required to sign a written agreement with their own agent before touring homes, spelling out how that agent is compensated, which didn’t used to be standard practice for most buyers.
What This Means for You as a Seller, Practically
You can still choose to offer compensation to a buyer’s agent as part of your marketing strategy, many sellers do, since it can make a listing more attractive to agents bringing buyers, but it’s no longer an assumed default baked silently into the transaction. It’s now a specific decision you make with your agent: whether to offer buyer-agent compensation, how much, and how that’s structured in your listing and any offers you receive. Total commission is more visibly a set of separate, explicit decisions than it may have felt like before, rather than one number that was simply expected.
What This Means for Buyers, and Why It Affects You Too as a Seller
Because buyers now typically sign a written agreement with their agent upfront, more buyers are directly negotiating or discussing compensation with their own agent before they ever tour a home. Some buyers ask sellers to cover some or all of that cost as part of their offer, which is a negotiable term of the offer itself now, rather than an assumption. Understanding this matters for sellers because offers may come in with specific requests around buyer-agent compensation attached, and knowing how to evaluate that as part of the overall offer, not as a separate surprise, is part of negotiating well in the current environment.
Negotiating Realtor Commission
Because commission has never been fixed, it’s always been open to discussion, and that hasn’t changed. What’s worth negotiating on, and how hard, depends on factors like the scope of marketing and service you’re getting, whether you’re also buying your next home through the same agent, the price point of your home, and the local market’s current conditions. A lower commission isn’t automatically the better deal if it comes with reduced marketing effort or a less experienced agent representing a transaction that’s likely the largest financial event of your year. It’s worth having a direct conversation with any agent about exactly what’s included at the rate they’re proposing, and comparing that against what you’d get elsewhere, rather than negotiating on the number alone.
The Practical Takeaway
Commission structures are more explicit and more negotiated now than they were before 2024, which is generally good for transparency, but it also means sellers and buyers both need to ask more direct questions than they may have in the past, since less is simply assumed by default. Ask your agent directly how they’re compensated, whether you’re offering buyer-agent compensation and why, and how that fits into your overall net proceeds picture, since this is one of the areas where continuing changes in practice mean it’s worth confirming the current landscape rather than relying on how things worked in the past.
If you want a clear, specific breakdown of commission and net proceeds for your situation, get in touch and Efrat can walk through the numbers with you directly.