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For years, most homebuyers didn't have to pay their real estate agent for helping them find and buy a home. Instead, sellers paid their agents around 5% to 6% of the home sale price, and the seller's agent split that with the buyer's agent.
But a landmark case against the National Association of Realtors (NAR) has resulted in changes to how agent commissions are handled. As of August 2024, the long-standing precedent that sellers pay both the buyer's and seller's agents have shifted. New rules could impact how agent fees are negotiated—and who pays what.
It's too early to say exactly how the new NAR rules will impact buyers and sellers, and the impact may depend on your market. Here's a breakdown of how real estate commission fees have changed, plus how it could affect you.
How the Traditional Agent Commission Model Worked
There have always been negotiations and non-standard deals in real estate transactions, but here's how things have generally worked until now:
- The home seller pays their real estate agent a commission based on the sale price.
- The seller's agent dictates how the fee gets split with the buyer's agent—a 50-50 split is fairly common.
- The seller's agent lists that split on a multiple listing service (MLS), a database that real estate agents can access.
- The buyer's agent's cut may be listed in the contract when you make an offer on a home.
Example: A listing might offer the buyer's agent 3% of the sale price. If you buy the home for $400,000 and your agent receives a 3% cut, they'll get $12,000 from the seller's agent. However, your agent may also have to split their portion with their brokerage.
Even if they don't pay the fee in cash, that doesn't necessarily mean buyers don't pay anything. The pricing structure could lead the seller to increase their listing price, which effectively passes on some of the cost to buyers.
Critics of the system also highlighted that home sellers shouldn't have to pay the buyer's agent, and that the percentage-based compensation might lead buyers' agents to steer clients toward more expensive homes or homes that offer a higher commission.
Real Estate Listing and Commission Standards Shift
On March 15, 2024, the National Association of Realtors (NAR) proposed a set of major rule changes to settle a handful of lawsuits over real estate commissions. That came months after a jury in October found the NAR and other real estate organizations guilty in a related class action lawsuit.
Then, in August 2024, a judge granted preliminary approval to the NAR's new set of rules. A final approval hearing was scheduled for November 26, 2024.
The NAR rule changes are as follows:
- Buyers' commissions won't be listed. Sellers' agents will no longer be allowed to publish compensation offers for the buyer's agent on the MLS.
- Buyers' agents will require a contract. Buyers' agents who have access to the MLS will need a signed buyer representation agreement with the homebuyer. The agreement might require you to work exclusively with the agent for a specific period or home search and describe your agent's compensation.
Because these changes are relatively new, it will take a while to see how things ultimately shake out. Some predict the long-term impact could be a shift in how commissions are negotiated and how much agents get paid.
Who Pays Agent Fees Now?
Although the new rules don't prohibit the seller's agent from splitting their commission with the buyer's agent, commission splits are now required to be negotiated off the MLS. In practice, this could lead to decoupling, where the seller and buyer each pay their respective agents.
Here's a key thing to keep in mind: While the new rules do change how agent commissions are disclosed and negotiated, on a practical level, some buyers may not notice a big difference. Some agents report that in their local markets, sellers continue to cover buyers' commissions as part of their concessions.
On the other hand, in some competitive or high-priced markets, negotiations over buyer agent commissions are becoming more common. It may be beneficial to connect with a real estate agent in your area for a localized perspective on market trends.
Potential Agent Commission Fee Scenarios
The new rules open the door to agent fees being determined in several possible ways:
- Percentage of the sale price: Buyers might pay a percentage of the sale price or negotiate an arrangement that aligns their goal of paying a low price with the agent's commission.
- Flat fee: Buyers pay a flat amount to an agent to help them with the entire process.
- A la carte fees: Buyers pay a fee to one or more agents to help with different parts of the process, such as seeing a home, preparing an offer and receiving assistance with the closing process.
- Seller concessions: Although MLS won't advertise the buyer's agent commission, sellers can offer concessions on the MLS. Similar to how a seller might agree to pay certain closing costs as a concession, they might offer to cover some or all of the buyer's agent's fee.
Learn more >> Can You Negotiate Closing Costs?
Will New Agent Commission Rules Lower Home Prices?
How all these changes will affect the cost of buying a home aren't completely clear.
It's possible that fee negotiations on both sides could lead to lower commissions and home prices. And a February 2024 report from the Federal Reserve Bank of Richmond found that switching to a la carte pricing might save homebuyers over $30 billion per year.
But critics point out that buyers could have to come up with extra cash for their agent, and the upfront costs could make it more difficult for first-time, low-income and underrepresented buyers to purchase a home.
Do You Need a Real Estate Agent to Buy a House?
You don't necessarily need a real estate agent to buy a home. Just as sellers can list their home as for sale by owner (FSBO), buyers may be able to find and make an offer on their own. However, most buyers will still need or want to hire a real estate attorney to review the contract.
Even if you could buy a home largely on your own, it's not a common approach. According to the NAR's 2024 Profile of Home Buyers and Sellers, 90% of buyers used an agent.
Many people want an agent who can help them find a home, understand the process and negotiate the price and offer. When choosing a real estate agent, you may want to ask about their process, experience with the area and type of home you want and their compensation.
Learn more >> How to Buy a House: Step-by-Step Guide
Preparing to Buy a Home
Finding an agent is only part of the homebuying process. And regardless of whether you'll pay the agent, you need to prepare for other upfront closing costs and the ongoing monthly cost of having a mortgage.
Your credit history and scores could play an important role in your mortgage options and costs. Check your Experian credit report for free and learn about the various steps you can take to improve your credit before buying a home.