Real Estate Commission Rules Have Changed: What Sellers Need to Know

This guide is part of our Home Selling Resources, where we walk through every step of selling your home with or without an agent.

What Is a Real Estate Commission and How Does It Work?

A real estate commission is the fee paid to real estate agents for facilitating a home sale. Typically, this fee is a percentage of the home’s sale price, with 5-6% being the industry standard. The commission is usually split between:

• The seller’s listing agent (who markets the home and negotiates offers).
• The buyer’s agent (who represents the buyer and helps them navigate the transaction).

Historically, sellers were required to offer a commission to the buyer’s agent in order to list their property on the Multiple Listing Service (MLS), the main platform for real estate listings. However, as of 2024, that rule has changed.

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How the NAR Lawsuit Changed Real Estate Commissions in 2024

What Was the NAR Lawsuit About?

The National Association of REALTORS (NAR) settlement stemmed from lawsuits alleging that traditional commission structures were inflating home prices. Critics argued that requiring sellers to pay a buyer’s agent commission was unfair and limited competition.

The Key Changes for Sellers:

1. Sellers Can No Longer Advertise Buyer Agent Commissions in the MLS
   • Previously, sellers often offered 2.5-3% commission to buyer agents in MLS listings. Now, commissions can no longer be displayed in MLS listings.
2. Buyers Must Sign a Written Agreement With Their Agent
   • Instead of assuming sellers will cover their agent’s fee, buyers must negotiate compensation directly with their agent before home shopping.
3. Sellers Are Not Required to Pay the Buyer’s Agent
   • Sellers can choose whether or not to offer compensation to the buyer’s agent, and if they do, it must be negotiated outside the MLS.

These changes mean that home sellers have more flexibility but also face new challenges when attracting buyers.

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How Sellers Can Minimize Sell-Side Commission Fees

With these new rules, sellers have more control over their costs. Here are some strategies to minimize real estate commission fees:

1. Sell Your Home FSBO (For Sale By Owner)

2. Use Flat-Fee MLS and Discount Brokerages

If you don’t want to go fully FSBO, you can use flat-fee MLS services that list your home on the MLS without charging a full commission. Some discount brokerages also offer lower-cost listing services while still providing marketing and negotiation support. See this article to learn more about how flat-fee MLS service providers work.

3. List on Popular Home-Search Websites

FSBO sellers can maximize exposure by listing their home on major home-search platforms, such as:

4. Negotiate Lower Listing Agent Fees

Real estate agents may now be more open to lower commission structures, such as:

• Tiered commissions, for example, lower fees if the home sells quickly.
• Flat fees instead of percentage-based commissions.
• Limited-service packages where the agent handles only certain aspects of the sale.

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How Sellers Can Minimize Buy-Side Commission Fees

Since buyer agent commissions are no longer mandatory, sellers must carefully consider how to handle this aspect. Here are a few approaches:

1. Negotiating on a Case-by-Case Basis

Instead of setting a firm commission offer upfront, sellers can negotiate buyer agent fees when receiving offers. If a strong buyer requests commission assistance, sellers can decide whether to accommodate or hold firm.

2. Offering Partial Buyer Agent Compensation

Some sellers are still offering to cover part of the buyer’s agent fee up-front as a negotiation tactic. For example:

• Offering to pay half the commission, say, up to 1%, or some other amount.
• Capping the commission at a flat dollar amount, such as $5,000.
• Rolling buyer agent compensation into seller concessions, such as covering Closing Costs instead.

3. Requesting Lender Credits to Cover Commission Costs

Some buyers may request lender credits to help cover their agent’s commission. In this scenario:

• The lender offers a credit at closing to help offset the commission fee.
• In exchange, the buyer accepts a slightly higher Mortgage Interest Rate to compensate.
• For example, if a buyer needs to cover a $8,000 commission, they may agree to a 0.25% higher interest rate to absorb the cost.
• This allows buyers to pay their agent without needing extra upfront cash and keeps the transaction moving forward.

4. Buyer Agent Commission Structures May Change

With these new rules, buyer agent commission structures are expected to evolve. Changes may include:

• Flat-fee or hourly-based services instead of a percentage of the home price.
• Increased competition among buyer agents, leading to more varied pricing models.
• Buyers negotiating lower commission rates with their agents, now that they bear the cost directly.

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What’s Next for Real Estate Commissions?

The real estate industry is still adjusting to these changes, and more shifts may come in the future. Here’s what sellers should watch for:

While traditional commission structures are changing, sellers still have many ways to market their homes effectively and minimize costs today.

Further Reading & Official Resources

For more details on the recent real estate commission changes, check out these official resources:

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Wrap Up

The new real estate commission rules give home sellers more control over costs, but also introduce new challenges when attracting buyers. By understanding these changes and exploring alternative selling strategies, you can maximize your profit potential.

Next Steps

If you want to take advantage of the new commission rules (instead of being caught off guard by them), these guides will help you plan smarter and protect your bottom line:

FAQs

This article is for education only. Our goal is to give you the tools to handle your own transaction. Whether you choose to involve an agent or attorney is always up to you.