Following the National Association of Realtors (NAR) settlement, which went into effect on August 17, 2024, the common practices for how buyer’s agents in California earn their commissions have shifted due to new rules around transparency and negotiation. The settlement stemmed from antitrust lawsuits (e.g., Sitzer/Burnett) alleging that NAR and brokerages conspired to keep commissions artificially high, particularly through the practice of requiring sellers to offer compensation to buyer’s agents via the Multiple Listing Service (MLS). Here’s how it’s playing out in California as of March 25, 2025, based on current trends and industry adjustments:

Key Changes from the NAR Ruling

1. No Compensation Offers on MLS: Sellers can no longer list a blanket offer of compensation to buyer’s agents on the MLS. This removes the traditional expectation that sellers automatically pay the buyer’s agent a set percentage (e.g., 2.5%–3%).

2. Buyer Representation Agreements: Before touring homes, buyer’s agents must have a signed written agreement with their clients outlining services and compensation. This is mandatory for agents affiliated with NAR or MLS systems under the settlement.

3. Negotiation Flexibility: Commissions are now explicitly negotiable between buyers and their agents, and separately between sellers and their agents. Sellers can still offer to pay buyer’s agent commissions, but it’s not required and must be arranged outside the MLS (e.g., via direct negotiation, marketing materials, or purchase contracts).

Common Practices for Buyer’s Agents in California

Based on current industry reports, real estate practices in California have adapted as follows:

1. Buyer Paying Directly:

   - In some cases, buyers are now directly responsible for paying their agent’s commission out of pocket. This happens when the seller opts not to offer any compensation to the buyer’s agent.

   - The buyer and their agent agree on a fee upfront in the buyer representation agreement—typically a percentage (e.g., 2%–3%) or a flat fee. For example, on a $1 million home, a 2% commission would be $20,000, paid by the buyer at closing if the seller doesn’t cover it.

   - This is more common in competitive markets or with cash buyers who can afford the extra cost, but it’s less frequent because it adds to the buyer’s upfront expenses (down payment, closing costs, etc.), which many can’t easily absorb.

2. Added to the Offer Letter:

   - The more prevalent practice in California is for buyers to negotiate seller concessions in their offer to cover the buyer’s agent commission indirectly. Here’s how it works:

     - The buyer’s agent specifies their commission in the buyer representation agreement (e.g., 2.5%).

     - In the purchase offer, the buyer requests that the seller pay this amount as a “seller concession” or “credit toward buyer’s agent compensation.” For instance, an offer might read: “Seller to pay 2.5% of the purchase price to buyer’s broker at closing.”

     - If the seller agrees, the commission is effectively rolled into the transaction, paid from the seller’s proceeds at closing, much like the old system—except now it’s explicitly negotiated per deal rather than assumed via MLS.

   - This approach is popular because it keeps the buyer’s out-of-pocket costs lower and leverages California’s high-demand market, where sellers may still offer concessions to attract buyers. Data from Redfin (February 2025) suggests buyer-agent commissions have only “barely budged” since August 2024, indicating sellers are often still covering these fees to stay competitive.

What’s Happening in Practice

- Seller Behavior: Many sellers in California, especially in premium markets like Carmel Valley (92130) or Poway (92064), continue offering to pay buyer’s agent commissions (e.g., 2%–3%) to make their listings appealing. Posts on X and industry insights (e.g., California Association of Realtors guidance) note that sellers often see this as a way to draw more offers, even though they’re not obligated to pay anything. For example, a seller might list a home at $1.5 million and agree to a 2% ($30,000) buyer’s agent fee in the contract rather than lose a deal.

- Buyer Behavior: Buyers, especially first-timers, prefer offers where the seller pays the commission, as they’re already stretched by high home prices (e.g., $1.3M median in 92130, $1.7M in 92064). When sellers refuse, buyers may walk away or negotiate a lower purchase price to offset their agent’s fee, though this is less common in hot markets.

- Agent Adjustments: Buyer’s agents are adapting by marketing their value more aggressively (e.g., off-market access, negotiation skills) to justify their fees to buyers directly. Some offer flat fees or hourly rates, but percentage-based commissions remain the norm.

Is It Direct or in the Offer?

- Most Common: It’s typically added to the offer letter. Sellers in California’s competitive market (low inventory, high demand) often agree to pay the buyer’s agent commission as a concession, negotiated case-by-case. The California Association of Realtors (CAR) confirms this in their Q&A, noting that purchase agreements can request seller payment up to the amount in the buyer’s contract with their agent.

- Direct Payment: Buyers paying out of pocket happens less often, usually when sellers flat-out refuse compensation (e.g., in a buyer-heavy market or with a stubborn seller). This is rarer because buyers can’t finance agent fees into their mortgage (per Fannie Mae/Freddie Mac rules), making it a cash burden many avoid.

Bottom Line

As of March 25, 2025, the common practice in California leans toward buyer’s agents earning their commission through seller concessions negotiated in the offer letter, keeping the financial structure similar to pre-NAR ruling days. Direct payment by buyers is happening but remains less frequent, especially in luxury or high-demand ZIPs, where sellers still see value in covering these costs to close deals. The market’s still adjusting, but transparency and negotiation are now front and center. If you’re a buyer or seller, expect your agent to discuss these options upfront—every deal’s a custom negotiation now!