What’s the Average California Real Estate Commission Rate?

Does the agent get to keep the full commission?

Although the seller pays the entire commission, the listing agent, who is representing the seller in a transaction, doesn’t keep it all. Part of their commission will go toward marketing your property with professional photography, open houses, offline marketing, and more.

“A huge amount of our commission pays for marketing expenses,” Medford explains. “In our market, we are expected to pay for staging and a full photography package which is pretty expensive.”

Moreover, both the listing agent and the buyer’s agent share a percentage of their commission with their sponsoring broker.

These split rates can vary. However, it’s common for the listing agent to give their broker anywhere from 30% to 50% of their commission, depending on the agent’s level of experience, market size, and brokerage agreement.

How is the commission divided between agents?

As mentioned, historically, sellers usually paid commissions for both the listing agent and the buyer’s agent. Under the new rules, buyers must now negotiate and cover their own agent fees unless they arrange for the seller to contribute. Sellers are only obligated to pay their listing agent’s commission, reducing their overall costs from the typical 5% to 6%% to around 2.5% to 3%.

However, some sellers feel the need to cover the buyer’s agent fee in order to attract more buyers, as some may be hesitant or unable to pay their agent’s commission upfront, potentially reducing the number of interested buyers. Moreover, offering to pay the buyer’s agent fee can provide a competitive edge in slower markets, helping your home stand out in a buyer’s market.

Let’s say you sell your California home for $840,000, and you agree to cover the buyer’s agent fee, bringing the rate to a 6% commission. You pay a commission of $50,400, and each agent has a 70/30 split agreement with their brokerage. Here’s how that might look:

• Listing agent: $17,640 (70% of their $25,200 commission share)
• Listing broker: $7,560 (30% of their $25,200 commission share)
• Buyer’s agent: $17,640 (70% of their $25,200 commission share)
• Buyer’s broker: $7,560 (30% of their $25,200 commission share)

In addition to agent compensation, a portion of the commission covers the fee for the transaction coordinator. 

This professional manages the administrative and paperwork aspects of a real estate transaction, ensuring all documents are properly completed, deadlines are met, and communication flows smoothly between agents, lenders, escrow officers, and other involved parties. They typically receive a flat fee of $300 to $600, which is often deducted from the agent’s commission.

Are California commission rates negotiable?

Yes, you can negotiate real estate agent commission rates. Approximately 31% of homebuyers and sellers have tried to negotiate real estate agent commission and 64% of those who did successfully secured a lower rate. However, don’t be surprised if some agents refuse to reduce their fees.

One reason agents often don’t lower their rate is that it may reduce their ability to negotiate a higher sale price for the seller. An agent’s services often include photography and pricing analysis, so a lower commission could also translate into a smaller marketing budget for your property, an inaccurate list price, fewer home promotions, and a lower likelihood of selling.

Exceptions can occur if you’ve already found a buyer. Let’s say you’re selling your home to a friend, or have decided to sell to a family member. In that case, the agent would likely be willing to play the role of transaction coordinator and independent go-between for a reduced commission rate.

Overall, commissions in California are negotiable but do your research first. When asking an agent to lower their pay, you’re limiting the pool of agents willing to work with you. Moreover, the downsides to working with a low-commission agent can be steep. Without a top California agent in your corner, you could dramatically undersell your home, have a rough selling experience, or fail to sell the home at all.

What is included in a real estate agent’s commission?

A full-service real estate agent in California will provide a high level of offerings to ensure a smooth selling experience and boost exposure to your home.

An agent’s services fall into a few main categories:

Guidance on pre-sale improvements

Agents see a lot of houses in their California markets. They will have an eye for the small but impactful improvements you could make to help it sell for more. The best agents will go above and beyond to help their clients get the job done.

Pricing strategy

An agent will put together a comparative market analysis (CMA) in the form of a thick packet featuring charts, facts, figures, and photographs of houses. The analysis will show you what your home is worth based on comparable sales in the neighborhood, market trends, and local price per square foot. This key tool helps you set a realistic price that can attract offers right off the bat in a fraction of the time it would take a non-professional to determine.

Marketing services

As part of their commission, at a minimum, California agents should offer expert home prep and staging, professional photography, marketing flyers and pamphlets, direct mail, automatic postings of your listing on major home search sites, local advertisements, exclusive previews for other brokers, and open house coordination. Advanced agents may also offer the development of a virtual tour.

Offer management and negotiations

When you receive one or multiple offers, an agent will help you determine the strength of the offer and work with you to proceed with responding to buyers. They’ll advise on whether to accept, reject, or make a counteroffer while putting together offer spreadsheets to identify the best offer in bidding war situations.

If a buyer requests repairs after the inspection, an agent will help you push back where appropriate and advise on when to accommodate demands. Should the appraised value be lower than the contract price, an agent can help you determine whether to ask the buyer to make up the difference or lower your price.

Market knowledge and neighborhood expertise

Great California real estate agents know what local buyers seek in homes and which of your home’s attributes to highlight. An agent will skillfully incorporate key features into your home’s listing description and immediately be able to recognize what makes your house or the surrounding area special.

What is a fair real estate commission in California?

As noted above, the average commission rate in most California markets is 7% to hire a full-service real estate agent. This rate should mean you have an agent who is dedicated to selling your home for the best possible price, available and communicative, and willing to shepherd the transaction from start to finish.

If an agent isn’t willing to offer all or the majority of services listed above, you should interview more candidates.

“It totally depends on what kind of services the agent is going to provide,” says Medford. It’s also important to remember, “When you’re negotiating a commission, you’re always negotiating two sides,” Medford explains.

Ideally, a California buyer’s agent looks to make at least a 2.5% commission. “If you go lower than that, there’s a danger a buyer’s agent might try to avoid showing a listing,” says Medford. “That’s not ethical; but, it does happen.”

On the seller’s side, you may be able to find a listing agent who charges as little as .05% to enter the listing on the MLS — if the seller provides all the data and photos, and manages all other aspects of the sale.

“Sometimes, agents might even charge a flat fee — maybe $2,500 — for listing,” Medford says.  “It’s completely flexible.”

What if my California house doesn’t sell?

Real estate agents only get paid commissions if and when your home sells successfully. Most real estate contracts include an exclusive right to sell, which gives the agent the sole right to market the property, list it on the MLS, and receive the commission if the sale closes in a determined time frame. 

If your house remains on the market beyond the time period outlined in the listing agreement, you are not obligated to pay your agent.

However, keep in mind that your listing agreement may contain a protection clause, also known as a “brokerage protection clause,” “safety clause,” “extension clause,” or “tail provision.” The protection clause states that if a buyer who the listing agent introduced to the property purchases the property after the listing agreement expires, the seller still must pay the agent a commission.

Many California agents’ contracts have an easy-out policy. If the seller decides to terminate the contract before it expires, Medford says, “There may be a stipulation in the listing agreement that the seller pays for the basic marketing expenses such as staging, photography, etc.”

The contract may also have a clause requiring the seller to pay a full commission if the agent’s efforts yielded a buyer under certain conditions.

For example, if Medford’s firm can document its relationship with the buyers who place an offer within 60 days of the listing’s termination, the seller must pay the firm’s commission.

Within three days of the contract’s termination, Medford’s team provides the seller with a comprehensive list of people who actually came through and who might qualify under this arrangement.

How can you avoid paying Realtor fees?

There are two main ways to avoid paying Realtor fees. You can either sell your California home without an agent’s help or sell it directly to a cash buyer without ever going on the market.

For Sale By Owner

Without a real estate agent, you’re responsible for preparing your home for sale, marketing, negotiating, and navigating legal and financial documents. When selling a house on your own, you’ll need to hire an attorney, at a minimum, to make sure the paperwork is right.

Typically, For Sale By Owner (FSBO) makes the most sense if you already have a buyer. About 38% of FSBO sellers in 2023 chose this route because they sold to a relative, friend, or neighbor.

This indicates that while the FSBO route is rare, making up just 6% of sellers, it’s even more rare to forgo a real estate agent’s help when you don’t already have a buyer lined up and ready to go.

In addition, according to the NAR, FSBO homes had a median selling price of $380,000 in 2023, as compared to $435,000 for agent-assisted home sales. That’s a significant loss of proceeds in an effort to save on commissions.

“We actively go looking for FSBO to explain the value we add,” he says. “We pick up a lot of clients that way.”

Recognizing commission avoidance drives many sellers to FSBO, Medford says, “Our team has created a commission menu, which delineates a tiered level of service and commission.”

Undoubtedly, all NAR-member agents are bound by a code of ethics to provide their clients with competent representation as defined by the terms of their contract. However, full-service commission contracts allow agents to marshal more resources, time, and effort into marketing the home.

“There’s a lot more work and effort that goes into full commission listing,” Medford explains, “than a cut-rate, discounted commission.”

If the seller has a low-percentage commission in mind, Medford explains the services available at that rate versus full-commission packages that include staging, professional photo packages, and extensive marketing.

While every Realtor is different in what they offer, “Agents typically provide more than a seller can typically do by themselves,” says Medford, who has more than 20 years of experience in real estate.

Sell to a cash buyer

Cash buyers — including iBuyers, investors, and house-buying companies — are individuals or entities that purchase your home outright, without the need for lender financing. These buyers typically make off-market purchases and can provide speed and convenience to sellers.

Just be aware that the price offered by most cash buyers may be significantly lower than what you could receive on the open market with the help of a top agent.

If you’re interested in a cash sale, you can receive a no-obligation offer through HomeLight’s Simple Sale platform in as little as 24 hours, with no hidden fees or agent commission. It connects you to one of the largest networks of cash buyers in the U.S. and helps you close in as little as 10 days.

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Now you know how California agent commissions work

Sellers pay real estate commissions in exchange for an agent’s expertise and services throughout the sale process. If you’re worried about the cost of the commission, consider that targeted upgrades, stellar marketing, and savvy negotiations can help you maximize your sale price. With a performance-proven California agent to guide you, you also avoid the stress of navigating this complex process without professional oversight.

The key is finding a quality agent who provides the highest amount of value for their commission fee. Our transaction data shows that the top 5% of agents in California sell homes for as much as 10% more than the average agent.

HomeLight can connect you with top California agents who have experience tailored to your needs. Whenever you’re ready to get started, HomeLight would be happy to put your commission worries to rest by introducing you to several agents in your area who are well worth it.

Remember, California commissions are negotiable. However, “At the end of the day, you really get what you pay for,” Medford concludes. “Those sellers who lowball listing agents to save some money are being penny wise and pound foolish.”

Writer McCoy Worthington contributed to this story.

Header Image Source: (Andrea Joshua Qoqonga/ Unsplash)