Real estate agent commissions are one of the most misunderstood aspects of buying and selling a home. In San Diego especially, I regularly meet with buyers and sellers who have questions about how commissions work, who pays whom, what is negotiable, and how the recent industry changes have affected the process.
Many consumers still assume there is some kind of “standard” commission structure dictated by the industry or MLS. There is not. Commissions have always been negotiable, and the rules surrounding how commissions are communicated and structured changed significantly beginning in 2024 following the NAR (National Association of Realtors) settlement and related industry changes.
If you are potentially selling a property, it is important to understand how commissions are currently structured and negotiated in California. The same is true for buyers, who are now much more directly involved in conversations regarding agent compensation and representation agreements. While some of the specifics below are particularly relevant to San Diego, much of this article applies throughout California and much of the United States.
Major Industry Changes (2024-2025)
Beginning in August 2024, major changes went into effect throughout the real estate industry as part of the NAR settlement. One of the most significant changes is that offers of compensation to buyer brokers may no longer be advertised within the MLS. Prior to these changes, it was common for sellers to offer buyer broker compensation directly through the MLS listing itself.
Today, buyer broker compensation is generally negotiated outside of the MLS and can be addressed through purchase contract negotiations, concessions, separate compensation agreements, or direct agreements between buyers and their agents. Importantly, sellers can still offer compensation toward a buyer’s representation, but the way that compensation is communicated and negotiated has changed substantially.
Another major change is that buyers are now generally required to sign written buyer representation agreements before touring homes with an agent. In California, these agreements outline the scope of representation and explain how the buyer’s agent will be compensated. This has created a greater emphasis on transparency and direct conversations regarding value, services, and compensation expectations between agents and consumers.
Despite widespread predictions that commissions would dramatically collapse after these industry changes, that has not broadly occurred in many markets, including San Diego. What has changed more significantly is the transparency surrounding compensation and the increased importance of buyers and sellers understanding exactly what services they are receiving and how representation is structured.
Average Real Estate Agent Commissions
The first thing to understand about real estate commissions is that they are negotiable. There is no fixed or legally mandated commission rate in California or elsewhere. With that said, many full-service residential listings in San Diego have historically fallen somewhere in the general range of 5% to 6% total compensation, though every property, brokerage, and negotiation is different.
Luxury properties, unique homes, land listings, or properties requiring extensive marketing sometimes involve different compensation structures. Likewise, discount brokerages and limited-service models may charge less, though the level of service, marketing exposure, negotiation skill, and overall representation can vary dramatically.
Historically, sellers often paid both the listing brokerage and buyer brokerage compensation as part of the transaction. While that still frequently occurs today, the process is now more flexible and more directly negotiated. Buyers may also negotiate compensation directly with their own agent depending on the circumstances of the transaction and the terms of their representation agreement.
Although offers of buyer broker compensation can no longer be displayed in the MLS, sellers still commonly offer concessions or compensation that can help buyers cover representation costs. In competitive situations, sellers may strategically choose to make their property more attractive to buyers by helping address those costs as part of the overall negotiation.
When Paying a Higher Real Estate Commission Can Net You MORE
It is easy to think of commissions as a simple zero-sum equation: pay less commission, keep more money. In reality, that mindset often overlooks the much bigger financial picture.
A highly skilled agent can often increase what you actually NET through stronger pricing strategy, better marketing exposure, superior negotiation, risk reduction, and smoother transaction management. Conversely, “saving” money on commission can become very expensive if an inexperienced or low-service agent mishandles negotiations, misses critical disclosures, poorly markets the property, or creates unnecessary liability exposure.
Real estate transactions involve substantial legal, financial, and practical risk. Most consumers only see a small percentage of what occurs behind the scenes during a transaction. Good agents are constantly managing timelines, disclosures, negotiations, inspections, contractors, lenders, escrow coordination, appraisal issues, title concerns, compliance requirements, and often high-stakes communications between parties.
In many cases, excellent representation can easily save clients five or even six figures through negotiation strategy alone. I have personally seen this happen repeatedly throughout my career. The difference between a highly competent negotiator and a weak one can dwarf whatever commission difference a seller initially focused on.
Paying a higher commission certainly does not guarantee excellent representation. However, I do believe sellers are often more likely to receive a higher level of service, marketing investment, responsiveness, and expertise from experienced full-service professionals who are confident in the value they provide.
Where Do Real Estate Agent Commissions Go?
Consumers will sometimes look at the overall commission involved in each side of a transaction and imagine that entire amount going directly into the pocket of the agent. In reality, that is rarely how it works.
In many transactions, compensation is divided between multiple brokerages and agents. In addition, most agents work under a brokerage and split a portion of their compensation with that brokerage. The percentage split varies substantially depending on the brokerage model and the individual agent’s agreement.
Even after those splits occur, agents still incur substantial business expenses and operating costs. The public often dramatically underestimates the actual overhead associated with running a professional real estate business.
Real Estate Agent Commissions – Listing Side
Skilled listing agents often invest considerable money into preparing and marketing a property before ever receiving compensation. Some common expenses can include:
- Professional photography and videography
- Drone photography and cinematic video production
- Digital advertising campaigns and social media marketing
- Print advertising and luxury marketing materials
- Staging consultations
- Transaction coordinators, assistants, or team members
- Brokerage splits, franchise fees, and administrative costs
- Licensing fees, MLS dues, insurance, and continuing education
- Taxes and general business operating expenses
Good listing agents also spend substantial time advising sellers before a property even reaches the market. Pricing strategy, pre-listing improvements, contractor coordination, staging recommendations, disclosure preparation, and marketing planning often begin weeks or months before the home is listed.
Real Estate Agent Commissions – Buyer Side
Agents representing buyers also invest heavily in marketing, lead generation, technology, licensing, and client support. However, the largest “cost” associated with buyer representation is often time.
Buyer agents may spend months or even years helping clients search for homes, tour properties, analyze disclosures, coordinate inspections, negotiate contracts, and navigate financing issues before a transaction ever closes. In many cases, buyer agents invest enormous amounts of time without any guarantee they will ultimately be compensated.
Following the industry changes implemented in 2024 and 2025, buyer representation agreements now play a much larger role in defining how buyer agents are compensated. Buyers should take the time to fully understand these agreements and evaluate the value, expertise, negotiation ability, and guidance an agent brings to the table.
Real Estate Commission Calculator
Although the math itself is relatively straightforward, you can use a real estate commission calculator here to estimate potential commission scenarios and seller net proceeds.
Why Most Agents Earn Their Commissions
While some consumers assume agents are overpaid, the reality is that most successful agents work extraordinarily hard behind the scenes.
Agents are effectively on-call for their clients. Nights, weekends, holidays, and sudden schedule changes are simply part of the business. Busy agents regularly sacrifice personal time to accommodate showings, negotiations, inspections, and urgent transaction issues.
Strong agents also spend substantial time creating marketing content, producing social media campaigns, networking with other agents, previewing properties, studying market conditions, staying current on changing laws and contracts, and continually improving their systems and expertise.
Many people also underestimate the emotional component of real estate transactions. Buying or selling a home is often one of the largest financial decisions people make in their lives. A good agent acts as strategist, advisor, negotiator, project manager, marketer, and sometimes therapist throughout the process.
Another important reality is that most agents do not close transactions constantly. Even many experienced agents can go months between closings while still paying for marketing, MLS dues, licensing, insurance, advertising, and operating expenses.
Real estate can be an incredibly demanding business, but it is also deeply rewarding. Helping clients successfully navigate major life and financial decisions is something I take seriously and genuinely enjoy. Every transaction is different, every property is unique, and every client situation presents new opportunities to solve problems and advocate for my clients’ interests.
If you are considering buying or selling a home in San Diego, please feel free to contact me for a no-cost, no-obligation consultation. I also work with and refer clients throughout California, nationwide, and internationally through the Sotheby’s International Realty network.
