Real Estate Commission Rules Just Changed: What They Mean for Homebuyers and Sellers

In March, the National Association of Realtors (NAR) agreed to new rules on real estate commissions as part of a lawsuit settlement. These changes were rolled out starting August 17, but they’ve left consumers grappling with confusion and conflicting predictions.

One view anticipates a positive shift for homebuyers: a competitive price war will drive commissions down as buyers’ agents face more competition. On the flip side, some experts predict that buyers will be shocked by the new costs and may choose not to hire agents at all. NAR, however, has framed the changes as minor adjustments rather than a significant overhaul.

These differing viewpoints highlight the complexity of real estate agent compensation and how much more complicated it’s become. Let’s break down the new commission structure and what it means for both buyers and sellers.

The Previous Commission Structure

Traditionally, when a home seller hired an agent to list their property, they agreed to pay a commission—typically around 5% of the sale price. This fee was usually split equally between the listing agent and the buyer’s agent. For example, on a $400,000 sale, the total commission of $20,000 would be split, with $10,000 going to each agent.

Who Pays the Commission?

While the seller paid the commission directly, it was often assumed that the seller factored the agent fees into the home’s asking price. So, although the seller technically paid, the buyer indirectly covered those fees through the higher sale price.

What’s Changing?

The most significant change is that listing agents can no longer offer to pay buyer’s agents through NAR-affiliated Multiple Listing Services (MLS). Additionally, buyer’s agents must now have a written agreement with their clients, detailing their fees, before showing them homes. Previously, NAR only encouraged such agreements, rather than requiring them.

These changes, part of a settlement approved in April 2024 and finalized in November 2024, went into effect on August 17.

One of the advantages of the new system is greater transparency for consumers—homebuyers will now know exactly how much they are paying for their agent’s services. "It’s always helpful when people understand exactly what they’re paying for," says David Druey, Florida regional president at Centennial Bank.

For agents, a key point is that while listing agents can no longer publish commission offers on the MLS, they can still negotiate compensation directly with buyers and sellers outside of the MLS. These agreements can be made verbally, by email, or on the brokerage’s website, as long as they don’t appear on the MLS.

Budge Huskey, president and CEO of Premier Sotheby’s International Realty, explains: “While sellers can choose not to pay a buyer’s agent commission, that doesn’t mean they avoid the financial impact. Buyers could include a contingency in their offer requiring the seller to cover this cost, or request other concessions, such as closing cost assistance equal to what they would have paid their agent.”

Are Commissions Now Negotiable?

While commissions have always been negotiable, the new rules emphasize this point more clearly. However, the reality is still complicated. In many cases, real estate professionals are more skilled at negotiating than their clients, which can put buyers at a disadvantage. Moreover, under the old system, the seller typically determined the buyer’s agent’s commission, not the buyer. The new rules shift this responsibility to buyers, who must now negotiate compensation directly with their agents. This adds another layer of complexity to an already intricate process.

Whether the new rules are good or bad for consumers remains unclear, and much depends on who you ask. Some industry figures are optimistic, believing the changes will benefit homebuyers. Vishal Garg, CEO of the mortgage company Better, predicts that the settlement could spark a “buy-side price war,” where buyer agents compete aggressively for clients.

However, others see potential downsides. Ken H. Johnson, a real estate economist at Florida Atlantic University and former broker, warns that the new rules will add complexity to an already confusing process. “Removing advertising for buyer-agent commissions will only make transactions more complicated and drawn out,” Johnson explains. “Buyers, sellers, and agents will have to negotiate not just the fee but who will pay it and how much each party will contribute. This added complexity could mean that buyers will need to negotiate with more sellers before finding a deal they’re happy with, leading to longer house-hunting periods.”

Concerns for First-Time Buyers

There’s particular concern about the impact on first-time homebuyers—those who arguably need the most guidance through the home-buying process. With high home prices and mortgage rates already making it difficult for these buyers, many worry they won’t be able to afford professional representation. If commissions no longer come out of the seller’s proceeds, buyers may be stuck with the additional cost of hiring an agent, potentially totaling $7,500 to $10,000.

“Many of these buyers are struggling just to scrape together a down payment,” says Dave Liniger, chairman and co-founder of RE/MAX, one of the large brokerages named in the lawsuit against NAR (RE/MAX settled for $55 million last year).

Currently, buyers can’t roll agent commission fees into their mortgages under the new rules, but there’s hope that the Federal Housing Finance Agency (FHFA), which oversees Fannie Mae and Freddie Mac, may change those policies.

“There will likely be pressure on them to allow that,” says Liniger. “The industry needs first-time buyers.”

In fact, NAR has already started discussions with Freddie Mac and Fannie Mae to explore what can be done. “We’re having conversations to see if any adjustments can be made,” says Lawrence Yun, NAR’s chief economist.