House of Questions

Buying and selling houses isn't the easiest business in the world, especially in a competitive market like California.

But recently, new California regulations pose additional challenges for residential real estate that are expected to impact realtors as well as folks looking to buy or sell a home.

The new shift in real estate practice originates with a 2023 legal decision having to do with how realtors are compensated. Until recently, when a house was sold, a commission of 5 to 6 percent, typically, was paid by the seller, then divided between the buyer's agent and seller's agent.

A lawsuit alleged that commissions within that structure were higher than they needed to be, and that sellers should not be required to compensate realtors who represented buyers. With the recent California rule change, the focus is now on the seller to decide whether or not to compensate a buyer's agent, and determine exactly what that compensation dollar/percent amount, if any, should be.

To gain a greater understanding of these changes, we consulted two Eichler Network-affiliated Northern California real estate professionals who specialize in Eichler, Streng, and other architectural properties: Andy Falk with Coldwell Banker, based in San Rafael; and Paloma Begin, with Compass in the Sacramento area.

What is the current range of compensation for the buyer’s agent, and what variables in the sale impact that compensation?

Falk: "In the past, buyer's agents have generally received 2.5 to 3 percent from sellers. Today, the vast majority of sellers are still offering buyer’s agents between 2 to 3 percent commission…I don't think commissions in the 1's will be common, because it's just too hard to make a living at those rates of compensation.

"What I'm hearing from my transaction coordinators is that, depending on the offer prices, some sellers are negotiating commissions at different rates…It's no longer a straightforward process, and the main variables are the asking price, negotiated sales price, the buyer broker agreement, and the seller's listing agreement declaring how much they are willing to pay."

Begin: "The range of compensation has always varied. I don't know that the sale has any variables that relate to that. I know people believe that a double‐ended sale [a realtor who represents both seller and buyer in a single transaction] is 'easier,' but it poses much more risk for the agent, both with the relationships the agent has with their clients as well as possible liability issues.

"I think that sellers will ultimately be the ones paying the commissions through escrow, and I don't think good buyer's agents are going to work for 1 percent. The seller pays for the commission in escrow, but ultimately the buyer is the one paying for the commission, and has always paid for it, since they're the ones bringing the monies to the transaction."