NAR Says Commissions Paid from Seller Proceeds
Home sellers in California often hear that commissions come from seller proceeds. According to the National Association of Realtors, this is the standard structure in most U.S. residential transactions. The listing agent and buyer’s agent split the fee deducted at closing.
Yet the full story includes how money actually moves. The buyer supplies the funds that cover the entire purchase price, including every commission. On paper the seller pays, but economically the buyer finances the deal. Both statements are accurate, yet each one alone feels incomplete.
This structure shapes California real estate every day. When one seller sold their home as a For Sale By Owner,they I negotiated the buyer agent commission from 2.4 percent to 2 percent. The buyer increased their offer by 1 percent. The commission still appeared to come fully from the seller's proceeds, yet the buyer contributed directly through the higher price. That moment showed how the system works in practice.
Research adds nuance. A study in the American Economic Review found agent incentives can influence pricing, but it does not prove commissions are always built into home values. Marketing Science research showed increased commission competition sometimes reduced listing prices by 2 to 3 percent under certain conditions.
Appraisers use Fannie Mae guidelines to review comparable sales and adjust for concessions when data exists. After 2024 changes, commission offers no longer show in MLS systems. Appraisers see sale prices but often lack details on how commissions or concessions affected them.
Some buyer-side experiences after the rule changes confirm the gap. Several agents will decline to negotiate commissions and present only X percent agreements upfront. Some agents suggest renegotiating in later talks if the seller offers less. Others will only show homes where their full commission is know ahead of time. (In my opinion this a reiteration of a lost lawsuit - not showing because of commission amount.)
From the seller side, a few agents will hesitate to present a FSBO listing without a specific buyer-agent fee. These moments highlight how commission expectations can quietly shape access and negotiations. Using experienced agents can mitigate this because the experienced agents know how to ask about commissions and how to negotiate them.
The system remains a negotiated exchange. Sellers see the deduction from proceeds, yet buyers fund the transaction. Understanding both sides helps California families make clearer choices.
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