Real estate agents across the country are playing by new rules that split apart a 100-year-old commission playbook. In a seismic change brought on by a landmark court settlement, home sellers are no longer responsible for paying both their own agent and the buyer’s agent.
Put simply, the traditional 5%-6% commission fee structure for agents has gone away. While the playing field may be a bit wobbly at first, experts believe buyers and sellers will benefit from the shakeup through lower Realtor fees and more innovative options.
If you’re shopping for a home, you and your buyer’s agent will be the first to experience the impact of this shift. One major change you’ll notice right away is that your Realtor won’t show you a house with just hope and a handshake. You’ll need to sign some form of an agreement upfront.
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Why agent commission rules changed
In late 2023, following a series of lawsuits, a federal court determined that the long-established commission structure and mandates used by the National Association of Realtors (NAR) infringed upon antitrust laws. The old model essentially forced home sellers to pay a fee that could be paid by the buyer.
In March 2024, as part of a $418 million settlement, the NAR agreed to overhaul its rules, including decoupling seller and buyer agent compensations. The settlement put an end to mandatory commission fees and changed how listings are handled.
NAR President Kevin Sears described the new real estate commission rules and regulations as part of the evolution of the industry. “These changes help to further empower consumers with clarity and choice when buying and selling a home,” Sears said in a statement.
Two key Realtor commission changes
While the settlement’s ripple effect has created a wave of collateral changes within the real estate industry, the NAR agreed to two key rule changes: how commissions are promoted and shared and how they are negotiated and paid.
1. Offers of compensation no longer allowed on Multiple Listing Services
Historically, agents could access a centralized database called the Multiple Listing Service (MLS) to see exactly how much compensation or commission they could make if they bring a successful buyer to the closing table. Listing agents would typically enter an offer (percent sale or other amount) into the system based on what they negotiated with their seller clients.
Under the new rules, such compensation details are prohibited on the MLS. This is one way the NAR agreed to take steps to decouple buyer and seller commissions that were previously mandated by the association. It also addresses one layer of the original lawsuit that alleged many buyer’s agents were only searching for homes that would make them the most money, a practice critics called “steering.”
Commission and compensation offers can still be shared from agent to agent through discussions, phone calls, emails, or advertising outside of the MLS. As the Aug. 17 change date approached, numerous off-MLS online portals and private social media groups were created where agents post compensation details about the properties they are listing.
2. Written buyer agreements are needed before touring a property
If you are working with a buyer’s agent, you must now enter into a written agreement before touring a property together. This will be a legally binding contract that outlines exactly how much the agent will get paid for the transaction.
This formal, upfront agreement represents a major goal of the settlement. It is designed to inform buyers that they are responsible for paying their own agents if a seller chooses not to cover the cost of the commission. In short, this change puts the agent fee dealmaking into the buyers’ hands.
While a written agreement before you shop may seem like a jarring adjustment for buyers, it was already a requirement in 18 states. In states where they were not required in advance, buyer-broker employment agreements have been a common practice for decades. The difference is that they were not a prerequisite before a showing or tour.
The new rule does not dictate the terms of buyer agreements.
Written buyer agreements can be flexible
Most agents want a long client relationship commitment (60-90 days or more), but term lengths on buyer agreements are negotiable — and always have been.
It’s important to remember that agents dedicate a lot of time and effort to helping their clients. Under the new real estate commission rules and regulations, they will want to make certain the work they do will be compensated fairly. But agents also know that they need to earn your trust and business, so they’re offering flexible ways to comply with the new mandates.
Legally speaking, there is no minimum length of time required for a written buyer agreement with an agent. So a hesitant or less committed home shopper and their agent can negotiate any length of time they determine is mutually acceptable.
Another option many buyer’s agents are offering is a separate property-showing or touring agreement that can be signed upfront. These, as well as traditional buyer-broker employment agreements, can be modified so they do not establish an exclusive relationship with an agent. An agreement can also be modified to only apply to one specific property. Some agencies have created what could be called a 111 contract — one-day, one-property, one-page buyer agreement.
In other words, a browsing buyer can enter into numerous non-exclusive agreements and will only be responsible for compensating the agent who successfully sees a purchase offer through to closing. Of course, if you prefer, you can enter into an exclusive buyer-broker agreement, which can come with added benefits.
Many real estate companies are incorporating “buyer-broker agreement to show property” forms into their websites and mobile app features. This allows real estate agents to offer these contracts to potential buyers as online forms. However, it’s important to carefully read the terms of any agreement before signing.
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