Understanding New Real Estate Commission Changes and What Buyers Need to Know

Have you heard people talking about changes in real estate commissions and wondered if this affects you as a buyer? You’re not imagining things. A significant change is coming, but it’s not a new law, and it’s not something to panic about. This change stems from a National Association of Realtors (NAR) settlement finalized in 2024, with new rules taking effect in August 2024.

This post explains what buyers need to understand about these changes and how to prepare for them.

Sellers No Longer Automatically Pay the Buyer’s Agent

For decades, buyers rarely saw or negotiated their agent’s fee. Typically, the seller paid the buyer’s agent through the listing agreement. This practice made the buyer’s agent commission invisible to most buyers.

That is no longer the case.

Now, buyers and their agents must discuss compensation upfront. This fee can take different forms:

• A percentage of the home price

• A flat fee

• Other negotiated arrangements

  
  

Buyers should expect to have a clear conversation about how much they will pay their agent and when. This change means buyers will have more control but also more responsibility in understanding agent fees.

Example:

If you are working with an agent, you might agree on a flat fee of $5,000 instead of a percentage. Or, you might negotiate a 2% commission based on the final sale price. This agreement will be part of your contract with the agent.

Buyer Representation Agreements Are Now Required

Before you start touring homes, you must sign a Buyer Representation Agreement. This document clearly outlines:

• The services your agent will provide

• How your agent will be compensated

• When and how that compensation will be paid

  
  

This adds transparency to the process. Buyers should carefully read and understand this agreement before signing. It ensures both you and your agent have clear expectations.

What you can do:

Ask questions early. A good agent will explain your options and make sure you understand the agreement before you start viewing homes. This step helps avoid surprises later.

Buyer and agent reviewing Buyer Representation Agreement

Sellers Can Still Help, But Differently

Sellers are no longer required to pay the buyer’s agent commission automatically. However, they can still offer compensation, just in a different way.

Here’s how it works now:

• The commission is no longer advertised on the MLS (Multiple Listing Service)

• It is negotiated as part of the offer

• It may be structured as a seller concession or closing cost credit

  
  

Buyers should understand this change because it affects how offers are made, especially in competitive markets.

Example:

If you want the seller to help with your agent’s commission, you might include a seller concession in your offer. This means the seller agrees to cover part of your agent’s fee or closing costs, but it must be negotiated upfront.

Commissions Are Now Openly Negotiable

One of the biggest shifts is that buyer-agent commissions are now openly negotiable. This means:

• Buyers and agents can discuss and agree on fees that work for both

• There is no fixed or standard commission rate anymore

• You can negotiate based on the services you need and your budget

  
  

This change encourages transparency and flexibility but requires buyers to be proactive.

Tips for buyers:

• Don’t hesitate to ask your agent about their fees and services

• Compare offers from different agents

• Consider what services you really need and what you are willing to pay for

  
  

How Buyers Can Prepare for These Changes

These new rules mean buyers have more responsibility but also more control. Here are practical steps to prepare:

• Understand your budget: Know how much you can afford to pay your agent’s fee.

• Ask questions early: Before signing any agreement, clarify fees, services, and payment terms.

• Read agreements carefully: Buyer Representation Agreements are legally binding. Make sure you understand them.

• Negotiate wisely: If you want seller help with commissions, include it in your offer strategically.

• Choose the right agent: Find an agent who communicates clearly and is transparent about fees.

  
  

What This Means for the Future of Home Buying

These changes aim to make real estate transactions more transparent and fair. Buyers will no longer be surprised by hidden fees, and agents will have clearer agreements with their clients.

While this may feel like a big shift, it can lead to better communication and stronger relationships between buyers and agents. Buyers who prepare and ask the right questions will benefit the most.

Real estate commissions are no longer a hidden part of the process. Buyers now have a direct role in discussing and agreeing on agent fees. By understanding these changes and preparing accordingly, you can navigate the home buying process with confidence and clarity.