The National Association of Realtors (NAR) agreed to new rules around real estate agent commissions as part of a landmark lawsuit settlement in March 2024. The new rules rolled out in August — along with a deluge of confusion and conflicting predictions.
One narrative predicts a utopia for homebuyers: A price war will erupt, and commissions will plunge amid a new wave of competition among buyers’ agents. A competing narrative goes in the opposite direction: Under the new commission structure, buyers will realize they’re on the hook for thousands and decide not to use agents at all. NAR, meanwhile, has portrayed the changes as minor tweaks rather than a major shift.
The opposing narratives underscore just how complex Realtor compensation has always been — and how much more complex it has now gotten.
But as of early 2025, the effects look muted. “Overall buyer-agent commissions have barely budged since new real estate commission rules went into effect on Aug. 17, though they have come down a bit since the rules were announced nearly a year ago,” national brokerage Redfin reports.
The average buyer’s agent commission was 2.37 percent for homes sold in the fourth quarter, per Redfin’s data. That was up ever so slightly from 2.36 percent in the third quarter, but down from 2.45 percent a year earlier, before the new rules were unveiled.
Here’s a look at the new commission structure, what changed and what it could mean for both homebuyers and sellers.
How real estate commissions used to work
Traditionally, when a home seller hired a real estate agent to represent their listing, the seller agreed to pay a commission. The national average was about 5 percent of the home’s sale price, typically split down the middle with about 2.5 percent going to the listing agent and the other 2.5 percent to the buyer’s agent. (On a $400,000 home, 5 percent comes to $20,000, or $10,000 for each agent.)
Who paid this fee was a bit murky. Agent fees came out of the seller’s proceeds at closing, so technically, the seller paid. But it’s reasonable to assume that the seller adjusted their price accordingly — the fees were often baked into the home’s sale price. And so the buyer ultimately paid, just not directly to the agents: That extra 5 percent was rolled into the home’s sale price.
New Realtor commission laws: What changed?
The new rules took effect August 17, and final court approval was granted November 26. The biggest change is that listing agents (the agents who represent home sellers) may no longer make offers of compensation to buy-side agents on any NAR-affiliated multiple listing service (MLS). In addition, a buyer’s agent must now have a written contract with a home shopper, clearly specifying their fee, before they may show that client a house. Until now, NAR encouraged but didn’t require written agreements between buy-side agents and buyers.
An important aspect of the new model for agents: While the new rules prevent listing agents from posting buy-side commissions on the MLS, as they used to, sellers and listing agents still can agree on the amount off the MLS. That means it’s OK to offer compensation amounts verbally, in emails or texts, and even on their brokerage’s own website, as long as it’s not done on the MLS.
For consumers, the new structure offers a greater level of transparency compared to the old model — homebuyers now will be fully aware of how much they’re paying for an agent’s services. “It’s always good when people understand what they are and are not paying for,” says David Druey, Florida regional president at Centennial Bank.
Home sellers can still offer to pay the buyer’s agent’s fee, as in the old model, but they are not required to. “Although sellers can elect not to pay any buyer agent compensation, that doesn’t mean they will avoid the economics,” says Budge Huskey, president and chief executive of Premier Sotheby’s International Realty in Naples, Florida. “Buyers may easily write into any offer a contingency requiring that the seller cover the cost, or may request other concessions, such as closing cost assistance in the dollar amount they are paying their representative.”
Does this mean real estate commissions are now negotiable?
Well, technically, real estate commissions always have been negotiable — a theme NAR long has stressed. Practically, though, the picture gets complicated. In many cases, Realtors are more skilled at negotiating than their clients, so the consumer comes into the negotiation at something of a disadvantage. What’s more, the buyer’s agent commission was previously determined by the seller, not by the buyer. The new rules shift that responsibility to buyers, who now will discuss compensation directly with the agents representing them. Both buyers and sellers must now negotiate and agree upon a commission fee with their own agent upfront.
Are the new rules good or bad for consumers?
Until we see how things shake out over time, the answer really depends on who you ask. Some foresee a near-nirvana for consumers: Vishal Garg, CEO of mortgage company Better, predicts the settlement will ultimately unleash a “buy-side price war” — buyer agents will begin competing fiercely for clients. “In the best-case scenario, consumers are going to shop around for buy-side agents in the same way they shop around for mortgage lenders,” he says.
Others fear a darker turn. Ken H. Johnson, a real estate economist at the University of Mississippi and a former real estate broker, says the new rules add another layer of complication to an already-confusing process.
“No longer advertising buyer-agent commissions will only create a more confused and drawn-out transaction process, as buyers, sellers and agents will have to negotiate the fee, who will pay for it and how much will be paid by each party,” Johnson says. “Due to this added level of complexity, buyers will almost certainly have to negotiate with more sellers before they find the deal they are satisfied with. Thus, the house-hunting period will extend for the average buyer.”
Concerns for first-time buyers
Many in the real estate industry worry that first-time homebuyers in particular — those who need expert guidance the most, and who are already severely hampered by high prices and high mortgage rates — will be priced out of professional representation. If commissions no longer come out of the seller’s proceeds, the thinking goes, buyers won’t have an additional $10,000 to pay an agent.
“Most of those buyers are scraping the barrel to the bottom to come up with a down payment,” says Dave Liniger, chairman and co-founder of RE/MAX.
For now, buyers can’t roll commission costs into their mortgages under the new rules. But industry players widely expect the Federal Housing Finance Agency, overseer of mortgage giants Fannie Mae and Freddie Mac, to change those rules.
“I think there’s going to be pressure on them to allow that,” Liniger says. “The industry needs first-time buyers.”
Indeed, NAR already has been attempting to nudge the mortgage industry in that direction: “We are talking with Freddie and Fannie to see what can be done,” says Lawrence Yun, NAR’s chief economist.
How sellers can save on real estate commissions
Most home sellers opt to pay for the services of a traditional real estate agent. But if you’re not keen to pay a commission, here are some alternative options:
- Go it alone: Sell your home without an agent in a “for sale by owner” transaction. Between July 2023 and June 2024, 6 percent of home sales were sold by owners without the help of an agent, according to NAR data. But selling without professional help is a lot of work to do on your own, and it technically only saves you one agent’s commission — depending on the details of your deal, you may still have to pay your buyer’s agent.
- Negotiate: If you don’t want to go it alone, ask agents about their commission rates upfront and compare the terms of each person you talk to. If you think the fee is too high, see if they’re willing to lower it. If both agents in the transaction are from the same brokerage, you might have more leverage to negotiate.
- Hire a discount agent: A low-commission real estate agent will likely charge much less than a traditional agent would — usually 1 to 1.5 percent of your home’s sale price. (However, you might not receive the personalized attention you would with a traditional Realtor.) There are also brokerages and agents who work on a flat-fee basis, earning a preset amount on the sale rather than a percentage of the sale price.
- Sell to a cash-homebuying company: These companies, which often advertise “we buy houses,” pay in cash, close quickly and typically charge no fees. However, if you sell this way you’re likely to get a lower price for your home than you would with a traditional sale.
Read the full article here
