Real estate commissions underwent significant changes beginning August 17, 2024, when new rules from a landmark antitrust settlement with the National Association of Realtors (NAR) took effect. Key changes include:
- Buyer’s agent commissions are no longer displayed on MLSs. Any compensation offers must now be made off-MLS, shifting the negotiation into private discussions.
- Sellers are no longer required to offer buyer’s agent compensation. They can still choose to do so, and many continue to cover the cost.
- Buyers must sign a written agreement with their agent before touring homes. These contracts clarify what services the buyer’s agent will provide and how they’ll be paid.
Most agents are still paid on commission, typically a percentage of the sale price or sometimes a flat fee. But under the new rules, both buyers and sellers are more involved in determining compensation.
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Real estate commission changes: Before and after
| Commission practice | Before | After |
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| Buyer agreement (before tours) |
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| MLS display of BAC |
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| Who pays buyer’s agent? |
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| How BAC is negotiated |
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| Typical BAC amount |
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On August 17, 2024, new real estate commission changes were officially introduced nationwide.
These changes stem from two landmark antitrust lawsuits against the National Association of Realtors (NAR): Sitzer v. NAR[1] and Moehrl v. NAR.[2] Both cases alleged that NAR conspired to keep commissions artificially high, particularly by requiring home sellers to offer compensation to buyer’s agents through MLSs (multiple listing services).
After the verdict in the Sitzer case, NAR reached a settlement requiring it to end the practice of displaying buyer’s agent compensation on MLSs and adopt other commission-related reforms.[3] (Moehrl v. NAR is still pending resolution.)
Key real estate commission changes for buyers
Buyer’s agent agreements
A buyer’s agent agreement (also known as a buyer's agency or buyer-broker agreement) is a contract between a buyer and their real estate agent. These contracts have been around for decades, but signing one is mandatory before touring homes with an agent under the new rules.
Today, signing a buyer’s agent agreement is mandatory before a buyer can tour properties with an agent. The agreement has always included agent commission rates, which remains the same: Buyers should see documentation outlining their agent’s commission as a percentage of the sales price or the amount.
Buyers can (and should) negotiate commission directly with agents
While BAC has always been negotiable between a buyer and their agent, many buyers accepted the “standard” 2.5–3% rate without discussion. The new rules create a stronger expectation that buyers and agents will negotiate compensation before the agreement is signed.
Instead of going with the standard 2.5-3% commission rate, buyers can negotiate a lower commission percentage for their agents (or shop around for lower rates). This could potentially influence an agent’s performance or willingness to work with certain buyers.
Buyers can also tie their agent’s performance to the commission rate or fee. For example, buyers could stipulate in the agent agreement that they'll pay more if their agent can get their offer for a highly desirable home accepted, or at their desired price.
BAC is now also part of the purchase negotiation process
Previously, the listing agent and seller set the buyer’s agent commission (BAC) and published it on the MLS. Now, MLSs can't display BAC at all.
Instead, BAC can be addressed in the purchase offer. Buyers may request that the seller cover their agent’s fee, just as they might negotiate for repairs or closing cost credits.
- In a buyer’s market, sellers may be more willing to pay the BAC.
- In a seller’s market, sellers may push for buyers to cover some or all of their own agent’s fee.
“We’re definitely seeing on the seller part more questions around, ‘Do I have to offer commission, and what should I offer?’” said Ryan Dossey, co-founder at SoldFast. “The general recommendation on our end for sellers is that we do want to have the ability to pay it should we need to, but we’re going to do everything we can to get it as low as possible or get it paid by the buyer.”
What happens if the seller won’t pay the BAC?
If the seller declines to pay the buyer’s agent commission, the BAC becomes the buyer’s full responsibility.
Buyers have a few different options for how to pay the BAC.
- They can ask for a seller credit. Rather than asking the seller to pay the BAC directly, a seller credit reduces the amount of the home’s sales price.
- They can try to finance the BAC. This could be done by either increasing the amount of the mortgage loan to accommodate the BAC, or by taking out a second loan, which could be either a personal loan or a second mortgage on the home. Financing the BAC might change the loan-to-value ratio of the house, and if the loan-to-value exceeds 80%, then the buyer will likely have to pay mortgage insurance on the loan.
- They can pay out-of-pocket. This might not be feasible for many buyers; scraping together an extra $10,000 or thereabouts, depending on the home price and commission rate, can be especially difficult when buyers have already saved up for a down payment and must pay for closing costs and movers.
Ultimately, the new rules shift more responsibility to buyers to plan ahead and understand how their agent will be compensated before making an offer.
Key real estate commission changes for sellers
BAC is no longer part of the MLS listing
Advertising BAC on the MLS listing was a significant component of the Sitzer v. NAR lawsuit. While listings offering higher BACs could (and likely did) attract more buyers, this practice set the BAC before the home sales negotiation process began, and buyers were often unaware of it.
BAC is on the offer negotiation table
Before the settlement, BAC was more or less a “set and forget” component of the listing for sellers. Now that sellers are not determining the BAC before they list the house, BAC has become part of the offer negotiation process.
Most buyers will still ask the seller to cover their agent’s fee, but sellers now have options: they can agree to pay it, negotiate a smaller amount, or decline to pay it altogether.
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Compare agents & saveHow to save on commissions post-NAR settlement
For sellers
Sellers who want to save money on real estate commissions have a couple of options:
- Work with a company or an agent offering to list homes for lower-than-standard commission rates. Clever Real Estate is a great example of an organization that saves sellers money on commission rates, as its agents charge 1.5% vs. the typical listing agent fee of 2.5-3%.
- Negotiate a lower BAC rate or decline to pay the BAC. Deciding not to pay the BAC could mean tanking an otherwise good deal if the buyer can’t afford to pay the BAC themselves.
- Find and compare realtors to see rates and services. Check out our guide on how to find a realtor to compare services and rates in your area.
For buyers
Buyers who want to save money on real estate commissions also have options:
- Work with a low commission realtor. Clever Real Estate also provides services for buyers and is well worth exploring.
- Negotiate a lower BAC with the buyer’s agent when signing the buyer’s agent agreement.
- Offer to pay the buyer’s agent a flat rate instead of paying a percentage-based commission.
The bottom line
BAC is negotiable not just between buyers and their agents, but also as part of the home purchase negotiation.
Both buyers and sellers should evaluate how flexible they can be regarding BAC. Buyers should be prepared to pay BAC, and they should consider how agent performance might factor into the BAC and potentially offer BAC-linked incentives for high performance in the buyer’s agent agreement.
As everyone involved in the deal becomes more comfortable with discussing and negotiating BAC, this change could result in more transparent real estate transactions.
FAQ
What are the NAR lawsuits about?
There are two relevant class-action lawsuits, Sitzer v. NAR and Moehrl v. NAR. Both lawsuits allege that NAR, alongside franchisors also named in the lawsuits, conspired to inflate commissions by requiring listing brokers to pay buyer brokers.
The allegation is essentially that NAR and brokerage franchisors were behind two practices that stifled competition and violated antitrust laws:
- Listing BAC on the MLS, which can only be fully accessed by NAR members in many markets
- Requiring listing brokers to compensate buyer brokers
In October 2023, a federal jury found NAR and the franchisors guilty and awarded $1.785 billion to plaintiffs in the case. The Moehrl lawsuit is still pending.
How can I get compensated if I think my sale was part of this settlement?
Homeowners who sold a home listed in an MLS after October 19, 2019, could be eligible for compensation through the settlement. These homeowners should submit a form online at www.realestatecommissionlitigation.com, email a claim form to info@realestatecommissionlitigation.com, or print a claim form and mail it to Burnett et al. v. the National Association of Realtors et. al, c/o JND Legal Administration, PO Box 91479, Seattle, WA, 98111.
How is commission split between agents and brokers?
The commission split between agents and brokers depends on the individual agents and brokers, the brokerage itself, and the level of experience that the agent has. A typical split might be 50/50, with 50% of the commission going to the agent and 50% to the broker. More experienced agents will likely keep more of the commission.
Do I have to offer BAC as a seller?
No, sellers do not have to offer BAC. Many buyers will ask the seller to pay for the BAC, so they should be prepared to have that discussion with prospective buyers, and sellers might want to consider how much commission they are willing to pay before entering negotiations with a serious buyer.
