In California, each side pays the broker it hired unless the parties agree otherwise. No state law sets a fixed commission or requires the seller to cover the buyer's broker. A broker fee here means compensation for real-estate representation in a home sale or purchase. The seller's deal with the listing broker and the buyer's deal with the buyer's broker are now separate, written agreements.
Table of Contents
- Is there a standard commission?
- Who pays the listing broker?
- Who pays the buyer's broker?
- What must the buyer agreement include?
Is there a standard commission?
No. California law does not fix real-estate commissions.
For 1-to-4 unit sale and purchase forms, the form must state in at least 10-point boldface that commissions are not fixed by law, are set individually, may be negotiable, and the rate may not be preprinted, according to the California Business and Professions Code text via FindLaw California Business and Professions Code text via FindLaw. That means any percentage you hear quoted is a proposal, not a legal default. Compare what each broker will do for the fee, then negotiate or walk away.
Who pays the listing broker?
The seller negotiates and pays only its own listing broker under their listing agreement. There is no legally required percentage or standard commission, according to the California Department of Real Estate Consumer Alert California Department of Real Estate Consumer Alert.
Read the listing agreement for the rate, when it is earned, and what happens if the listing expires. The seller does not automatically owe the buyer's broker through that listing contract.
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Who pays the buyer's broker?
The buyer now negotiates buyer-broker compensation directly with the buyer's broker in a signed representation agreement. The amount is no longer automatically set through the seller's MLS listing, according to the California Department of Real Estate Licensee Advisory California Department of Real Estate buyer-representation advisory.
Under practice changes effective Aug. 17, 2024, an MLS participant working with a buyer must have a written buyer agreement before touring a home, stating services and compensation. Offers of buyer-broker compensation are banned on the MLS, but a seller and listing broker may still offer to pay buyer-broker compensation if communicated off-MLS with seller approval.
- Ask who you would pay if the seller offers nothing toward your broker.
- Ask whether any seller contribution would reduce what you owe.
- Get the services, amount, timing, and end date in writing before touring.
What must the buyer agreement include?
California Civil Code section 1670.50, added by AB 2992 effective Jan. 1, 2025, requires execution no later than the buyer's offer. It requires terms for compensation, services, when compensation is due, and termination.
The compensation in that agreement is the maximum the buyer's agent may receive from any source for that representation. AB 2992 agreements generally cannot exceed three months or auto-renew. Keep a signed copy and check the end date before touring with a different agent.
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