How Real Estate Commissions Work in California

By Matthew Martinez, Founder, CEO & Managing Broker, Diamond Real Estate Group. California DRE #01869679.

No law in California sets real estate commissions. Every fee is negotiated between you and your broker, and the California Department of Real Estate (DRE) warns consumers that a "standard" rate is a red flag. Since 2025, a buyer’s agent must also have a written agreement with the buyer that states the agent’s pay. Sellers no longer set the buyer agent’s compensation through the MLS, though a seller can still agree to cover some or all of it in the deal.

This guide explains what changed after the 2024 national settlement, what California law adds on top of it, and how commissions show up on your closing numbers. It’s general information, not legal advice. Your listing or buyer agreement controls your own deal.

The short version: four rules that shape every California commission

Rule	What it says	Who it covers	Source
Commissions aren’t fixed by law	Listing and buyer forms for 1–4 unit homes and mobilehomes must say, in at least 10-point bold, that the amount or rate isn’t fixed by law and may be negotiable	Printed or form agreements for 1–4 unit residential property and mobilehomes	Bus. & Prof. Code §10147.5
Written buyer agreement	A buyer-broker agreement must be signed as soon as practicable, and no later than when the buyer signs an offer. It must cover compensation, services, when pay is due, and termination	Buyers working with a broker, effective January 1, 2025 (AB 2992)	Civil Code §1670.50; DRE advisory
Three-month limit	A buyer agreement can’t run more than three months from signing. Automatic renewals are banned, and a renewal must be written, dated and signed	Individual buyers. The limit doesn’t apply to corporations, LLCs or partnerships	Civil Code §1670.50(d)
No MLS offers of compensation	Listing brokers can’t post an offer to pay the buyer’s broker on an MLS. Offers can still be made off the MLS	MLS participants, from August 17, 2024 (trade-association rule from the settlement, not state law)	NAR settlement facts (context)

Commissions are negotiable, and the forms have to say so

The DRE’s consumer alert on representation changes is direct about this: commissions are fully negotiable under California law. The DRE tells buyers not to feel pressured into a set percentage. It also lists claims of a "standard" commission among the red flags of a problem agent.

The Business and Professions Code section 10147.5 puts that rule into the paperwork. Any printed or form agreement that creates a right to compensation on a 1–4 unit home or mobilehome must carry a notice, right before the pay clause, saying the amount or rate isn’t fixed by law. The current text also covers buyer agreements and bars printing a rate or amount into the form ahead of time. The number is filled in for your deal.

What that means in practice:

Every number is a negotiation. That includes the listing broker’s fee, any amount offered toward a buyer’s broker, flat fees, and tiered fees tied to price or timing.
Ask what the fee covers. Marketing, staging, photography, open houses, transaction coordination and post-closing help vary from firm to firm. Our listing agreement guide walks through the clauses that matter.
Changes go in writing. The DRE advisory tells licensees that any change to a compensation agreement should be written and agreed to by both parties, not handled by text or a quick email.

Commercial and multifamily properties with five or more units fall outside the section 10147.5 notice requirement, but the fees are still negotiated, not fixed.

What changed after the 2024 national settlement

In 2024, the National Association of REALTORS® settled class-action antitrust lawsuits over how buyer-agent pay was set. The DRE’s alert summarizes the old model. The seller and listing agent set pay for both sides when the listing was signed, and the buyer had no part in that decision.

Under the practice changes that took effect August 17, 2024:

No offers of buyer-broker compensation on the MLS. NAR’s settlement explainer says these offers can no longer appear on MLSs, but sellers can still offer compensation through other channels. (NAR is a trade association, so this is context, not state law.)
Written agreement before touring. Under the settlement, buyers working with an MLS-participant agent sign a written agreement before touring a home.
The agreed amount is a ceiling. The DRE explains that the compensation in the buyer agreement is the most the buyer’s agent can receive for that representation from any source.

The DRE notes it doesn’t enforce the settlement itself. It does enforce California’s own buyer-agreement law and the Real Estate Law’s conduct rules.

California’s written buyer-representation agreement (AB 2992)

California went a step further than the settlement. Assembly Bill 2992, signed September 24, 2024 and effective January 1, 2025, added Civil Code section 1670.50. Under it:

Timing. The buyer-broker agreement must be signed as soon as practicable, and no later than when the buyer signs an offer. The DRE notes this deadline differs from the trade-association rule, which ties the agreement to the first tour.
Required terms. At minimum, the agreement must address the broker’s compensation, the services provided, when compensation is due, and how the contract ends. The DRE also says the agreement must state an expiration date.
Agency disclosure first. Before signing, the agent must give the buyer the agency disclosure required by Civil Code section 2079.14.
Three-month cap. The agreement can’t exceed three months from signing. Renewals can’t be automatic, and each renewal is capped at three months. An agreement that breaks these rules is void and unenforceable.
Entity buyers. The three-month limit doesn’t apply when the buyer is a corporation, LLC or partnership. Many of our investor clients buy that way.

For the details on signing one, read our buyer-broker agreement guide.

What sellers can still do about buyer-agent pay

Sellers can still help pay the buyer’s broker. It just isn’t advertised on the MLS anymore. The DRE describes the main paths:

Buyer asks for a seller concession. A buyer can ask, in the offer, that you cover some or all of their agent’s compensation. You can accept, reject or counter, as with any other term. If you say no, the buyer still owes their agent under their agreement if they go forward.
Seller offers it up front. You and your listing broker can decide to offer compensation toward a buyer’s broker and communicate it off the MLS, for example in conversations between agents or in your own marketing.
Nothing at all. You can decline to pay any buyer-side compensation. Buyers then pay their agent directly, which may affect how much they can offer.

Price, terms and buyer-agent pay now get weighed together. A higher offer that asks for a large concession can net you less than a lower offer with no concession. Our guides to seller concessions and comparing multiple offers show how to line them up.

Lender rules on seller-paid buyer-agent pay. Buyers often worry that a seller-paid buyer-agent fee will count against their loan’s concession limits. Fannie Mae’s April 15, 2024 Selling Notice says seller-paid buyer-agent commissions paid under local custom aren’t counted toward interested-party contribution limits. HUD’s March 27, 2024 statement says the same for FHA loans when local law or custom calls for it and the amount is reasonable. How the credit is worded in the contract can still matter, so the buyer’s lender should review it before you sign.

How commission appears on your seller net sheet

Commission is paid out of your proceeds in escrow, along with your other selling costs. On a seller net sheet, it typically shows as:

Net sheet line	What goes in it	Where the number comes from
Listing broker compensation	The fee you negotiated with your broker	Your listing agreement
Buyer-broker compensation paid by seller	Any amount you agreed to pay toward the buyer’s broker	Your listing agreement, a separate compensation agreement, or the purchase contract
Seller credit to buyer	A credit the buyer can use for closing costs or agent pay	The purchase contract and counteroffers
Other closing costs	Escrow, title, transfer tax, HOA and payoff items	Escrow estimate and transfer tax rules

Two tips for a cleaner estimate:

Run the net sheet for each offer. Two offers at the same price can produce different net proceeds once buyer-agent pay and credits are included.
Confirm the math in escrow instructions. The amounts in the final closing statement come from the signed agreements. If a number is wrong, fix it in writing before closing, not at the signing table.

You can request a home valuation to get a sense of price, then build the net sheet from that range.

How we handle compensation at Diamond

We put compensation in writing at the start. Fees, what they cover, and how buyer-side pay will be handled are all in the listing agreement. We don’t quote a "standard" rate, because there isn’t one. For buyers, we explain the buyer agreement, its three-month term and its exit terms before you sign. Estate and trust sales have their own approval steps, which our probate and trust sales team handles separately.

Ready to talk through your sale? See how we approach selling your home or contact us.

Questions people ask

Is there a standard real estate commission in California?

No. The DRE says commissions are fully negotiable and that an agent who claims a "standard" rate is misrepresenting the law. Section 10147.5 also requires residential listing and buyer forms to state that the amount isn’t fixed by law.

Does the seller still pay the buyer’s agent in California?

Only if the seller agrees to. After August 17, 2024, those offers can’t appear on the MLS. A seller can still offer to pay a buyer’s broker off the MLS, or agree to pay it as a concession in the purchase contract. Otherwise the buyer pays their agent under their own agreement.

When does a buyer have to sign a buyer-broker agreement in California?

Under Civil Code section 1670.50, no later than when the buyer signs an offer, and as soon as practicable before that. Agents who are MLS participants may ask for it earlier, before touring, because of the national settlement’s rules.

How long can a California buyer-broker agreement last?

No more than three months from signing for an individual buyer. It can’t renew automatically. A renewal must be in writing, dated and signed, and is also capped at three months. The limit doesn’t apply when the buyer is a corporation, LLC or partnership.

Can I negotiate my listing commission after I sign?

You can ask, and the broker can agree, but any change should be in writing and signed by both of you. The DRE advises against handling changes informally by text or email. Watch the listing agreement’s term and cancellation clauses too.

Will a seller-paid buyer-agent fee hurt the buyer’s loan?

Usually not by itself. Fannie Mae and HUD both said in 2024 that seller-paid buyer-agent commissions paid under local custom aren’t counted as interested-party contributions. Credits worded as general closing-cost credits can be treated differently, so the buyer’s lender should review the contract terms.

Are commissions different for commercial or 5+ unit properties?

The section 10147.5 notice applies only to 1–4 unit residential property and mobilehomes. Fees on commercial and larger multifamily deals are still negotiated, and the three-month buyer-agreement cap doesn’t apply to buyers that are corporations, LLCs or partnerships.

Sources & notes

California DRE, Consumer Alert: Changes to Real Estate Representation (amended December 12, 2024): commissions negotiable, red flags, seller-concession options.
California DRE, Licensee Advisory on Buyer Representation: AB 2992 effective January 1, 2025, required terms, three-month expiration.
Civil Code §1670.50: buyer-broker agreement timing, terms, three-month cap, renewals, entity exception. Text reviewed through a public statute mirror.
Business and Professions Code §10147.5: "not fixed by law" notice for 1–4 unit residential and mobilehome agreements. The current text includes the buyer-agreement notice. Text reviewed through a public statute mirror.
Civil Code §2079.14: agency disclosure form.
AB 2992 (2023–2024): bill page.
Fannie Mae Selling Notice, Real Estate Commissions and Interested Party Contributions (April 15, 2024).
HUD News Release No. 24-063 (March 27, 2024): FHA treatment of seller-paid buyer-agent commissions.
Context only: National Association of REALTORS®, What the NAR Settlement Means for Home Buyers and Sellers: August 17, 2024 practice changes. These are trade-association and MLS rules, not California law. Check your local MLS’s current rules.

General information, not legal, tax or lending advice. Updated November 2026. Primary sources are linked in this guide.

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