How the Real Estate Agent Commission Landscape Has Changed in California

Intro

For decades, real estate agent commissions were treated as fixed, customary, and largely unquestioned. Buyers and sellers were often told that commissions were “standard” and non-negotiable, even though the amounts were rarely discussed in a way that invited meaningful dialogue. Recent class action litigation has disrupted that assumption. In California, the legal and practical landscape surrounding agent commissions has shifted, making negotiation not only permissible but increasingly expected. Presidio Law Firm LLP advises clients navigating real estate disputes and transactions in this evolving environment, where old conventions no longer govern unquestioned outcomes.

The Historical Commission Structure

Traditionally, residential real estate transactions operated under a commission model in which the seller agreed to pay a total commission, typically divided between the listing agent and the buyer’s agent. Although no California statute ever mandated a specific percentage, industry practice created the widespread impression that commissions were uniform and non-negotiable.

This structure discouraged discussion. Buyers rarely addressed compensation directly with their agents, and sellers were often told that deviation from customary rates could impair exposure or transaction success. Over time, practice hardened into expectation.

The Class Action Litigation That Changed the Conversation

Recent nationwide class action litigation challenged long-standing commission practices, alleging that certain industry structures discouraged price competition and transparency. While the litigation did not eliminate agent commissions, it forced renewed scrutiny of how compensation arrangements were presented, communicated, and enforced.

The most significant impact was not a statutory change, but a shift in expectations. Practices that were once treated as customary are now openly examined, and assumptions that went unquestioned are increasingly challenged.

Importantly, the practical effects of the litigation are not uniform across all transactions or brokerages. Some firms adopted revised disclosure and compensation practices quickly, while others adjusted more gradually. The result is a transitional landscape in which expectations and documentation may vary depending on the parties and structure of the transaction.

Are Real Estate Agent Commissions Now Negotiable in California?

Yes—and they always were. What has changed is not the legal ability to negotiate commissions, but the industry’s willingness to acknowledge and document that reality openly.

California law has never fixed agent compensation by statute. Commissions are governed by contract between the client and the agent. Buyers and sellers should understand that compensation terms are not dictated by custom and that negotiation is lawful, permissible, and increasingly transparent.

Greater Transparency in Buyer Representation

Buyers are increasingly required to address how their agents are compensated through express written agreements rather than assumption or industry custom. Instead of relying on seller-paid compensation as a default, buyers may now be asked to agree to specific fee arrangements with their agents.

This shift encourages meaningful discussion about scope of services, value, and expectations—conversations that were often avoided in prior transactions.

Implications for Sellers

Sellers now operate in an environment where commission structures may vary more widely based on services provided, market conditions, and negotiation. Some sellers may agree to contribute to buyer-agent compensation, while others may not.

This flexibility allows for strategic structuring of transactions, but it also places greater importance on clear documentation. Misunderstandings about who pays what—and under what circumstances—can lead to disputes if expectations are not aligned from the outset.

Why “Standard Commission” Language Is Increasingly Risky

Describing commissions as “standard” or “non-negotiable” is now fraught with risk. Such language can create false expectations and expose agents or brokers to claims if clients later learn that alternative arrangements were available but discouraged or not disclosed.

Clarity and accuracy in describing compensation terms are no longer optional. They are essential to managing risk in modern transactions.

Disputes Emerging in the New Commission Landscape

As commission practices evolve, new disputes are beginning to surface. Buyers may challenge compensation obligations they did not fully understand. Sellers may contest commission claims where services differed from expectations. Agents may find themselves defending practices that were once commonplace but are now scrutinized.

These disputes often turn on contract language, disclosures, and whether compensation terms were clearly explained and agreed upon.

What Clients Should Understand Going Forward

Clients should approach commission discussions with the understanding that compensation is contractual, not automatic. Negotiation does not signal distrust; it reflects informed participation in a transaction involving significant financial stakes.

Clear, written agreements at the outset reduce the likelihood of later conflict and create alignment among all parties involved.

The Role of Legal Review in Commission Disputes

Legal analysis of commission disputes focuses on what was promised, how compensation was described, and whether disclosures were accurate and complete. Courts examine whether clients were misled or deprived of meaningful choice when agreeing to compensation terms.

As industry practices adjust, documentation and communication matter more than ever.

A Lasting Shift, Not a Temporary One

The class action litigation has accelerated changes that are unlikely to reverse. Increased transparency and negotiation around agent compensation are becoming normalized rather than exceptional.

Participants who continue to rely on outdated assumptions risk exposure in a market that now expects openness and informed agreement.

Closing

The real estate commission landscape in California has changed—not because commissions disappeared, but because unquestioned practices have given way to transparency and negotiation. Presidio Law Firm LLP works with clients navigating this evolving environment, whether addressing disputes, reviewing agreements, or assessing exposure created by outdated assumptions. Understanding how commissions now function is essential to protecting both financial and legal interests in modern real estate transactions.