Major Real Estate Commission Changes: How to Save More

Real estate commissions are undergoing significant changes in 2024. New rules, part of a settlement between NAR and two antitrust lawsuits, are now in effect, including:

• Buyer’s agent commissions (BAC) are no longer listed on multiple listing services (MLSs), and negotiation of BAC is now a critical part of the home-buying process.
• Buyers and sellers must now discuss and agree on BAC as part of their negotiations, which adds more flexibility and transparency to the process (and potentially more complexity).

Most agents are still paid on commission, either as a percentage of the sale price or sometimes as a flat fee. But the new rules require both parties to be more involved in determining how much is paid and who covers it.

Here's a rundown of what the big changes mean for buyers and sellers.

Real estate commission changes: Before and after

On August 17, 2024, new real estate commission changes were officially introduced across the country.

The changes are a direct result of two landmark antitrust lawsuits that were filed against the National Association of Realtors (NAR), Sitzer v. NAR^[1] and Moehrl v. NAR.^[2] The lawsuits accused NAR of conspiring to inflate real estate commissions paid specifically to buyer’s agents, which had previously been listed on MLSs (multiple listing services).

After the verdict in the Sitzer case, NAR agreed to discontinue advertising buyer’s agent commissions on MLS listings, among other changes to commission-related practices.^[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. While these agreements have been around for a long time, the new real estate commission changes include some updates.

Today, signing a buyer’s agent agreement is mandatory before a buyer can begin searching for homes with an agent. The agreement has always included agent commission rates, and that 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, it was optional before these changes took effect, and many buyers did not negotiate. The new real estate commission rules have created the expectation that buyers and agents will have a discussion about BAC before the representation agreement gets 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 is able to get their offer for a highly desirable home accepted, or at their desired price.

BAC is now also part of the purchase negotiation process

Before the new real estate commission changes, the BAC was part of the home’s listing on the MLS. In other words, the listing agent and the seller decided how much BAC to offer, then added it to the MLS listing for all agents to see.

This is no longer permitted; the field for BAC has been entirely removed from the MLS. Instead, when a buyer makes an offer on the home, the BAC could potentially be part of that offer — and like every other part of an offer, that means it’s on the table for negotiation between the buyer and the seller.

In most markets, buyers are still asking the seller to cover the BAC from the proceeds of the sale. In a buyer’s market, the sellers might be more willing to cover the BAC, but in a seller’s market, they could be more likely to either negotiate a lower BAC or to refuse to pay the BAC at all.

“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 commission to the buyer’s agent, then 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 also need to pay for closing costs and movers.

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.

Buyers are still likely to ask sellers to pay the BAC, and sellers can then decide to pay it, negotiate a lower BAC, or simply say no.

How 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 in terms of 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.

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