Buying a home these days is a lot different than it was…just earlier this month. On August 17, new rules from the National Association of Realtors (NAR) settlement went into effect that will change the way people buy and sell homes, specifically when it comes to how commissions will be paid out to Realtors. (Realtors is a copyrighted term for real estate agents who are members of the NAR and subscribe to its code of ethics.)
In the past, when you bought a home in the United States, you probably didn’t pay your real estate agent’s commission. It’s long been common practice for the seller to pick up the tab for that in addition to paying their own agent’s commission. While there’s no official standard for commissions, this cost usually amounts to somewhere between 5 to 6 percent of a home’s selling price. So, for example, on a home that sells for $500,000, the buyer’s and seller’s agents would split about $25,000 to $30,000 in commissions. This standard practice has provided financial relief to buyers because it meant they didn’t need to bring extra cash to the closing table to cover their agent’s commission on top of all the other expenses they’re responsible for, like a downpayment and closing costs.
Back in March 2024, NAR agreed to pay $418 million to settle antitrust lawsuits alleging it conspired to inflate agents’ commissions, which, in turn, has been artificially driving up the cost of homes. Under the newly enacted rules, sellers will no longer be able to advertise buyer’s agent commissions on the multiple listing services (or MLS), the database agents use for listings. (Think of it as a professional, subscriber-only version of Zillow.) With this change, some sellers may still be willing to pay the buyer agent’s commission, but it will take a little more investigating to find out.
The new rules are intended to prevent agents from searching the MLS for listings offering higher commissions and avoiding showing their clients homes advertising lower ones—an unethical practice known as “steering.” Theoretically, this change should open up more homes for buyers to see, although with most homes posted on sites like Zillow as well, savvy buyers probably already had a short list of homes they’d like to tour and would catch on if they noticed their agent holding any of them back.
Keep reading to learn more about the new real estate commission rules and how they might affect your home-buying process or future sale.
What Exactly Is Changing?
In addition to preventing “steering,” the new rules resulting from the NAR settlement are expected to change the home-buying process in three main ways, although time and individual market conditions will tell how much of an impact they really have. In some cases, the new rules merely standardize practices that are already commonplace.
Who Pays Agents’ Commission Fees
There’s been speculation that the new rules will put an end to the age-old practice of sellers covering the commissions for buyers’ agents, but that’s not necessarily the case—especially in markets that are tipping in favor of buyers or are more neutral.
In a sluggish market, sellers will absolutely still want to sweeten the deal for buyers, and that’s often done by providing credits or concessions—which is money in buyers’ pockets that they can use to, say, replace carpet, make fixes found in an inspection report, temporarily cover an interest rate buydown, or pay their agent’s commission.
“When it’s harder for a seller to sell a property, they will be more incentivized to offer these concessions or credits to the buyer,” Chris Heller, president of Movoto.com, a residential home search website, explains. Whether the buyer then uses those funds to pay their agent, fix up the property, cover closing costs, or a combination of all of the above is now up to the buyer, he explains.
How Buyers Work with Agents
Another change resulting from the lawsuit requires buyers to enter into a representation agreement with their agent before touring homes. During this initial phase, the buyer and agent negotiate commission rates. Agents may have done this in the past, but now it’s a requirement. Some agents might be open to charging a flat fee or to à la carte pricing for their services ($100 bucks for a showing, $300 to write an offer, and so on) instead of taking a percentage of the sale price for a commission. Other agents may begin advertising their commission rates on their websites, leaving it up to the buyer to negotiate anything lower.
How Agents Work With Each Other
The new rules resulting from the settlement eliminate commission advertisem*nts, making it a guessing game as to which sellers will pay commissions to buyers’ agents and if the incentives they’re willing to put forth will be enough to cover the agent’s agreed-upon commission.
“Because [commissions] can no longer be included on the MLS, it has become more complicated for a listing agent to communicate and a buyer’s agent to discover how much, if anything, sellers are willing to pay a buyer’s agent,” Claudia Stallings, CEO of Wallace Real Estate in Knoxville, Tennessee, explains.
Going forward, buyers’ agents will need to contact listing agents directly to determine what, if any, compensation is being offered for a particular listing, Jared Antin, managing director at Elegran Forbes Global Properties, explains.
“While these rules aim to prevent ‘steering’, they can also reduce transparency between agents within the industry,” Antin says.
In other words, agents are now responsible for investigating compensation details for each listing their buyers are interested in, he says, and then communicating that information back to their buyers so that they are informed about any potential commission they, as buyers, need to cover to adhere to the the buyer representation agreement.
What the New Rules Mean for Buyers
While sellers have traditionally paid for a buyer’s agent, some economists argue the price was baked into the home’s list price, which, when you think of it that way, means buyers were essentially paying those commissions all along. That means the compensation structure may not be the biggest change potential buyers feel as a result of the new rules.
Here’s one that might be: Buyers won’t be able to even tour a home with a Realtor before signing a legally binding representation contract now that the new NAR settlement rules are in place. This means buyers will need to commit to one agent, though this is something most agents were likely already requiring early on because they don’t want to waste their time showing a potential buyer several homes only for that buyer to go with another agent. It has also been commonplace in many states prior to the new rules.
Establishing a buyer’s agreement upfront will likely cause more buyers to “interview and vet agents up front, in a similar way that sellers do,” says Brandon Bogard, a licensed associate real estate broker and the cofounder of The Bogard New York Team at Serhant who has appeared on the Netflix show Owning Manhattan.
These agreements are intended to clearly communicate to buyers that commissions are negotiable and to spell out how the buyer’s agent will get paid. If the seller doesn’t cover the commission, the buyer will likely need to pick up the tab. The agreements will also make clear the agent’s responsibilities.
If you, the buyer, end up being responsible for paying your agent because it’s not something the seller will cover, it will likely mean you’ll need to bring more cash to the closing table. This could be a strain for first-time homebuyers who don’t have equity from the sale of a previous home and have already stretched their budget to cover a downpayment.
Think you can roll your Realtor’s commission into your loan? Not so fast. Fannie Mae and Freddie Mac, the government-sponsored enterprises that guarantee most mortgages in the U.S., will not allow buyers’ brokers’ commissions to be added to the purchase price and be financed, Melissa Cohn, regional vice president at William Raveis Mortgage, explains.
One more thing to note during this transition: Buyers who went under contract before the rules were implemented but who have not yet closed will not be affected by these most recent changes.
“The transaction will proceed based on the terms and conditions outlined in the signed contract of sale,” Antin says.
What the New Rules Mean for Sellers
As a seller, your listing agent will no longer be able to advertise on the MLS any information about commissions you’re willing to pay to the buyer’s agent. You could opt against paying the buyer’s agent’s commission altogether, but this strategy might deter buyers unless you’re in a strong seller’s market or your home is priced competitively and you’re expecting to receive multiple offers. If your home has been sitting on the market for several weeks and you’re not getting a lot of showings, stripping away the buyer’s agent commission probably isn’t a good idea, especially if other sellers in your area are still paying these commissions.
Listing Your Home in a Seller’s Market
While we’re no longer in the midst of a home-buying frenzy like we were a few years ago when interest rates dipped under 3 percent, some markets still tip in the favor of sellers. In those markets, buyers are more likely to have to cover their agents’ commissions.
This is similar to other trends we’ve seen in sellers’ markets: When sellers had high demand for their homes in 2021, receiving multiple offers and lines for open houses, many buyers weren’t even asking for fixes that came up on inspection reports because they didn’t want to lose out on the home to a backup offer.
If you’re expecting multiple offers, you might choose to play it closer to the vest about what you’re willing to do for buyers or even advertise that you’re not willing to offer concessions, Katie Wethman, a Realtor licensed in Virginia, Washington D.C., and Maryland with My Move DMV, says. “As always, it comes down to supply versus demand and good negotiation skills,” Wethman says.
To put in another way: If interest rates drop and more buyers come off the sidelines, driving up demand, it’s likely that sellers will once again have the upper hand and be less willing to give credits or cover commissions.
How the New Rules Will Play Out in Real Life
A buyer signs a legally binding contract with the Realtor who will represent them in their home search and purchase, agreeing to negotiated terms that will cover, say, a 2.5 percent commission for the Realtor.
The buyer tours a number of homes and narrows the search down to four that are all listed at about $500,000, which would entitle the buyer’s agent to a $12,500 commission. The agent will need to suss out with the listing agents of each home whether the seller will cover a buyer agent’s fee. Meanwhile, more all-encompassing “buyer credits” can be advertised on the MLS, along with other sites where buyers get information, like Zillow.
Here are some potential scenarios:
House 1: The seller isn’t willing to offer any credits or commissions. The buyer will need to cover the full cost of the commission they agreed upon in the contract with their agent, which in this case would be around $12,500. This approach might work in a seller’s market, but overall it would deter first-time buyers who don’t have the extra cash to pay their Realtor.
House 2: The seller won’t pay a buyer’s agent’s commission but is willing to offer $10,000 in credits. The credit could be used to cover a portion of the agreed-upon commission for the buyer’s agent, but the buyer would need to shore up another $2,500 to fully cover the agreed-upon commission.
House 3: While it’s not allowed to be advertised on the MLS, it’s revealed in a conversation between the buyer’s agent and the listing agent that the seller is willing to cover a 2.5 percent commission for the buyer’s agent. The buyer is off the hook for paying their agent’s commission.
House 4: The seller isn’t offering to pay any commissions but is offering an all-encompassing $15,000 buyer credit. The buyer could use this to pay the $12,500 commission they’ve negotiated with their agent and put the remaining $2,500 toward an update in the home, like new carpet in a bedroom.
If the homes are similar in features and listed at the same price point, the buyer will likely lean in favor of House 3 or 4 since they offer the best incentives.
One interesting caveat of the rules: If the buyer and the buyer’s agent agreed to a specific commission—let’s say 2.5 percent—regardless of what the seller offers, the buyer’s agent is capped at the agreed-upon commission, Justin A. Meyer, an Orlando-based attorney who practices real estate law, says. If the buyer’s agent wants to take a higher commission from a seller who, it turns out, is offering a 3 percent commission, they will need a signed agreement from the buyer in order to do so.
Am I Eligible for Compensation Under the NAR Settlement If I Recently Sold a Home?
As we mentioned above, in addition to the rule changes surrounding commissions, NAR also agreed to pay $418 million to settle antitrust lawsuits, though it claimed no wrongdoing. If you’re a seller who sold a home as far back as 2014 and who paid commissions, you may be eligible to receive compensation from the NAR settlement. The class-action pot of money has now reached more than $980 million. You can find out if you’re eligible for compensation and file a claim online.
