Commissions: How They Work and Who Sets Them

In California, no law sets a real estate commission. Each broker sets its own, and the amount is agreed in writing: the seller and the listing broker agree it in the listing agreement, and the buyer and the buyer's broker agree it in a buyer-broker representation agreement, which state law has required since January 1, 2025. The commission is paid at closing through escrow, usually out of the sale proceeds. The exceptions are court-confirmed probate sales, where the court approves the commission, and direct sales with no agent on either side, where there is none.

This article is part of the seller costs, net and California rules section. It states no typical rate, because there is none to state: the number is whatever the agreement says.

How do real estate commissions work in California?

The chain is short. A broker and a client sign an agreement that says what the broker will be paid and when. If the sale closes, escrow pays the broker from the funds it holds, as the escrow instructions direct. The broker then pays the agent who worked the file. A licensed salesperson cannot take compensation for licensed work from anyone except the broker they are licensed under (Business and Professions Code 10137), which is why the check goes to the brokerage, not to the agent you met.

On the seller's settlement statement, the commission shows as a line on the debit side, next to escrow, title and the transfer tax. It comes out before you see a dollar, which is why it belongs on every net sheet you build; see net sheet vs. offer price.

Who sets the commission?

The broker sets its own terms, and you negotiate them. California requires every printed or form listing agreement for a house of one to four units to carry this notice in bold type (Business and Professions Code 10147.5):

The amount or rate of real estate commissions is not fixed by law. They are set by each broker individually and may be negotiable between the seller and broker.

That sentence answers most of the question. The state does not set the figure, the Department of Real Estate does not set it, and no association or listing service sets it. The parts a seller can discuss before signing include:

• The amount and how it is figured: a rate of the price, a flat amount, or a structure that changes with the price.
• What the broker does for it: preparation, photography, showings, negotiation, managing escrow.
• The term: how long the agreement runs, and what happens if you cancel.
• Any payment toward a buyer's agent: whether you are willing to offer one, and on what terms.

Who pays the buyer's agent?

Since January 1, 2025, a broker representing a buyer must have a written buyer-broker representation agreement, signed as soon as practicable and no later than the buyer's offer (Civil Code 1670.50). The statute caps the term at three months, which the Department of Real Estate's regulations define as 90 calendar days (the cap does not apply to buyers that are corporations, LLCs or partnerships). The regulations add that the agreement does not renew automatically, and that it is presumed practicable to sign it before the agent shows the buyer a property in person or virtually. That agreement states what the buyer's broker is paid.

For a seller, the practical result is this: the buyer's agent's pay is the buyer's agreement, and a buyer who wants help with it asks for it in the purchase offer. You can say yes, say no, or counter, and the request belongs on the net sheet for that offer like any other credit. For how the two agents' roles differ, from an agent's side, Mr. Claremont, the site of Anthony Grynchal, a licensed California agent in Claremont, explains buyer's agents and listing agents in Claremont and how each one's compensation is agreed in writing.

Who sets the commission on a probate sale?

A probate sale that goes to court confirmation is the one place where the agreement is not the last word. The court approves the agent's compensation as part of confirming the sale, and when an overbid wins in the courtroom, the Probate Code decides how compensation is divided between the listing broker and the broker who brought the winning bidder (Probate Code 10160 and following). A sale under full authority with a notice of proposed action skips court approval of the commission, along with the confirmation hearing; that track is explained in notice of proposed action: how many probate sales skip the hearing. The rules are the same whether the estate's house is in Claremont, where the estate is handled in Los Angeles County, or in Upland, where it is handled in San Bernardino County. How a specific estate should handle it is a question for the estate's attorney.

Is there a commission on a cash sale?

On a direct sale to a cash buyer, with no agent for either side, there is no commission line. That is one reason a cash offer can be lower and still leave a seller closer to the listing net than the gap in prices suggests. Three cautions:

• A listing you already signed. An exclusive right to sell usually pays the broker if the house sells during the term, whoever finds the buyer. Read the agreement before you accept a direct offer.
• A buyer with an agent. If the cash buyer is represented, that agent's pay is set by the buyer's own agreement; check whether the offer asks you to cover any of it.
• A wholesaler. An assignment fee is not a commission and never appears as one. It sits inside the spread between your price and the end buyer's; see wholesaling explained for sellers.

Should you use a realtor to sell your home?

It depends on what the house and the deadline allow, and the commission is only one line in that answer. Listing usually nets more when the house can be financed as it is, shows well with little work, and you have the time and cash to carry it through a market period: the larger pool of financed owner-occupant buyers tends to pay more than the commission and carrying costs take away. A direct cash sale tends to come out ahead when repairs, a clean-out, tenants, a court date or a trustee sale date would eat the difference. A cash offer is generally below what the open market would bring, so the only fair test is both nets on paper.

That is the comparison Mr. Cali Offers puts in writing: an as-is cash offer and an open-market read on the same house, with commissions on the listing column and none on the direct column. When listing wins, the written recommendation says so, and you are introduced to a designated local expert, an independently licensed California agent who works your neighborhood, to agree terms directly with you. Mr. Cali Offers never lists a house. The open-market read is a preliminary estimate, not an appraisal, and it is not a listing agent's CMA. The method is on the cash offer vs. listing page, and every other cost on the sheet is in what selling a house costs in Southern California, and what you net and escrow and title fees: what sellers usually pay.

How to check the agent and the agreement

• Look up the license. The Department of Real Estate's public lookup shows whether the person is licensed, as a salesperson or a broker, and which broker they work under.
• Read the term and the cancellation clause. Know when the agreement ends and what you owe if you end it early.
• Find the protection clause. Many listing agreements pay the broker if you sell, after the term ends, to a buyer the broker introduced. Know who is on that list.
• Get every change in writing. A spoken reduction is not an amendment.

A dispute over a commission is a contract question. A real estate attorney can read the agreement; the Department of Real Estate handles complaints about a licensee's conduct.

What this looks like in practice

These are the kinds of files that come in, described without names or figures.

• A Pomona owner with a listing that had expired and a cash offer in hand, who needed to know whether the old agreement's protection clause reached that buyer. The agreement answered it.
• A La Verne seller weighing a financed offer that asked the seller to cover the buyer's agent against a direct cash offer. On one net sheet, the gap was narrower than the prices suggested, and listing still came out ahead on that house.
• An administrator on a Claremont estate who asked how the commission would be set at a confirmation hearing, and was pointed to the estate's attorney.

Next step

Send the address or call (909) 498-3977. You get a written as-is cash offer and an open-market read on the same house, each with the comps, the deductions and the net, so the commission is a line you can see rather than a figure you guess. There is no cost and no obligation to get the two numbers and the written report.

Sources

• California Business and Professions Code 10147.5 (commission notice in listing agreements): leginfo.legislature.ca.gov, accessed November 6, 2026
• California Business and Professions Code 10137 (salesperson compensation through the employing broker): leginfo.legislature.ca.gov, accessed November 6, 2026
• California Civil Code 1670.50 (buyer-broker representation agreements): leginfo.legislature.ca.gov, accessed November 6, 2026
• California Department of Real Estate, adopted regulations implementing AB 2992, California Code of Regulations Title 10, sections 2906.1 to 2906.3: dre.ca.gov, accessed November 6, 2026
• California Probate Code 10160 (compensation of agent or broker on a sale): leginfo.legislature.ca.gov, accessed November 6, 2026
• California Probate Code 10503 (sales under full authority without court approval): leginfo.legislature.ca.gov, accessed November 6, 2026
• California Department of Real Estate, public license lookup: dre.ca.gov, accessed November 6, 2026

Mr. Cali Offers is not a law firm and does not list houses. Cash offers come from independent buyers and investors who buy for their own account and may resell for profit; a cash offer is generally below what the open market would bring. Any value shown is a preliminary estimate, not an appraisal. Nothing here is legal, tax or financial advice.