Understanding the New Real Estate Commission Rules: What Home Buyers Need to Know
The way real estate agents get paid is changing, and if you’re planning to buy a home, you might have to pay your buyer’s agent directly—a significant shift from the traditional model.
For decades, sellers typically covered the commissions for both their listing agent and the buyer’s agent, usually totaling around 5-6% of the home's sale price. However, a recent legal battle and antitrust concerns have eliminated this long-standing practice, forcing buyers to rethink how they work with real estate agents.
So, what does this mean for you as a homebuyer? Let’s break it all down.
Why Did the Commission Structure Change?
The changes stem from a landmark lawsuit, Burnett et al. v. National Association of Realtors (NAR), in which a federal jury ruled that the NAR and major brokerages engaged in anti-competitive practices by enforcing commission-sharing rules that inflated costs for home sellers.
🔍 Key Takeaways from the Lawsuit:
✔ The NAR's cooperative compensation rule—which required sellers to offer buyer’s agent commissions when listing on the MLS—has been eliminated.
✔ The jury found that this rule artificially inflated commissions and was a form of price-fixing.
✔ NAR settled for $418 million and agreed to significant rule changes in how commissions are handled.
As a result, buyers are now responsible for paying their agent’s commission directly.
What Does This Mean for Home Buyers?
The biggest change is that you, as the buyer, will need to negotiate how your agent gets paid. Here’s how that impacts the home-buying process:
✅ 1. Buyers Must Sign a Representation Agreement
Starting mid-2024, real estate agents will be required to sign contracts with buyers before showing homes. These agreements will clearly outline:
Agent compensation (how much you will pay your agent).
Services provided (what your agent will do for you).
Length of agreement (how long they will represent you).
This means no more free house tours before committing to an agent. You will need to formally agree to pay them before you start shopping for homes.
✅ 2. Buyer’s Agent Fees Are No Longer Built Into the Sale Price
Previously, sellers factored buyer’s agent commissions into their asking price, meaning buyers indirectly paid the fee. Now, commissions are no longer included, which could mean:
✔ Home prices may decrease slightly since sellers no longer need to cover buyer agent commissions.
✔ Buyers will need to budget separately for their agent’s fees.
✅ 3. Buyers Can Negotiate Their Agent’s Commission
Since commissions are no longer standard, you now have the power to negotiate:
✔ Some agents might charge a flat fee instead of a percentage of the home price.
✔ Others may offer hourly rates or tiered service levels based on how much help you need.
✔ In some cases, sellers may still agree to cover part of your agent’s commission, but this is no longer a given.
Pro Tip: When choosing an agent, discuss their fees upfront and make sure you understand what’s included in their services.
How Can Buyers Afford Their Agent’s Fee?
Since buyers now pay their agents directly, this can add a significant cost to your home purchase. Here are some ways to handle it:
💰 1. Negotiate Seller Contributions
While sellers are not required to cover buyer’s agent fees, you can still ask for closing cost assistance in your offer. This means sellers contribute toward your closing costs, allowing you to use those savings to pay your agent.
🏦 2. Explore Lender Assistance
Some lenders may offer credits or loans to help cover buyer’s agent fees. Ask your lender if they have programs to assist with this new cost.
🤝 3. Use an Alternative Agent Model
With these changes, some agents are adopting discounted commission models, such as:
✔ Flat-fee agents – Charge a set amount for their services.
✔ Limited-service agents – Only help with specific parts of the process (e.g., paperwork, negotiations) at a lower cost.
✔ DIY home buying platforms – Some buyers may choose to go without an agent and rely on online resources, but this comes with risks.
Should Buyers Still Use a Real Estate Agent?
Absolutely! Even though buyers now must directly pay for their agent’s services, a good real estate agent provides valuable expertise and protection throughout the process.
A Buyer’s Agent Helps With:
✔ Finding homes – Many off-market or pre-market listings are only available through agents.
✔ Negotiating price & terms – Agents know how to get you the best deal possible.
✔ Home inspections & contingencies – They help protect you from buying a home with hidden issues.
✔ Handling contracts & closing details – Buying a home involves legal paperwork, and one mistake could cost you thousands.
While some buyers may consider going solo, the risk of making costly mistakes often outweighs the cost of hiring an agent.
Final Thoughts: How Buyers Should Prepare for These Changes
The shift in commission structure means that buyers need to be more proactive in understanding who pays for what and how to negotiate fees.
📌 Key Takeaways:
✔ Buyers must sign an agreement with their agent before house hunting.
✔ Buyers now pay their agent’s commission directly instead of it being covered by the seller.
✔ Agent fees are negotiable, and alternative pricing models may emerge.
✔ Home prices could slightly decrease, but buyers still need to budget for agent fees.
Thinking About Buying a Home? Let’s Talk!
Navigating these new real estate rules can be confusing, but I’m here to help! If you’re thinking about buying a home and want to discuss how these changes impact you, let’s set up a consultation.
🏡 Let’s Make Homeownership Happen! 🏡
