The Change in Real Estate Commissions. Who pays who?

Now more than ever, it’s crucial for buyers to understand upfront how their agent will be compensated. It’s no longer a given that their commission will be paid entirely by the seller—if at all. If you’re the buyer, this could mean thousands of dollars in agent compensation may become your responsibility, and the agent you hire is required to have a signed compensation agreement in place before showing you a house.

As a result of a 2023 real estate class-action settlement, the industry agreed to pay hundreds of millions of dollars in damages to sellers who argued they were unfairly required to pay real estate commissions to brokers/agents representing homebuyers. The settlement also introduced new rules for residential real estate commissions across the United States. These rules clarify that all real estate commissions are negotiable and that there is no “standard commission.” Additionally, the real estate broker/agent representing the seller cannot force sellers to offer commission to the buyer’s agent. If you’re selling property and being told these changes don’t apply to you, that’s simply not accurate.

So, who pays who now? That’s a good question—and one that may have nuanced answers with some lingering confusion.

Who pays the listing agent?

The listing agent, who represents the seller, is still paid by the seller. Under the old system, the listing agent would negotiate the total commission amount with the seller and then decide which portion of that commission (usually half) to offer the buyer’s agent. That is no longer allowed.

Who pays the buyer’s agent?

Now that the buyer is responsible for compensating their agent, the seller cannot be forced to pay the buyer’s agent compensation. However, the seller may:

Voluntarily offer to pay the buyer’s agent a commission.
Negotiate with the buyer, as part of the agreement, an amount they’re willing to contribute toward their agent’s compensation.
Offer nothing to the buyer’s agent, in which case the buyer will need to pay their agent.

This “new way” isn't new at all.

It’s not like this sales model, where the buyer and seller negotiate commissions, is untested. This is how commercial real estate transactions have worked for as long as I can remember. The seller pays their agent, and the buyer's agent commission is negotiated between seller and buyer along with the other terms of the agreement of sale.

What to keep in mind when negotiating with an agent:

Agents may claim their broker has a minimum commission rate, but that doesn’t mean you have to pay it. If the agent won’t negotiate, you may need to find someone more flexible.
Compensation doesn’t have to follow the traditional percentages (e.g., 2%, 2.5%, or 3%). You can negotiate a flat dollar amount with your agent instead.
Negotiating in dollar terms instead of percentages can make sense. For instance, offering 1.5% to 2% of the sales price might get some pushback, but if that translates to $8,000 to $10,000, it’s harder to call that unreasonable.
Don’t feel pressured. Whether you’re a buyer or seller, your agent works for you. If you’re offering what you believe to be fair compensation and the agent won’t accept it, move on and find someone better aligned with your needs.

A Final Word

Selling or buying a home is emotional enough. Approach the process with a clear plan and treat your agent’s compensation as a business decision. If you can’t reach an agreement with one agent, talking to others can help you determine whether your expectations are reasonable.

Just because something is “standard” for one agent doesn’t mean another agent won’t be open to negotiating. The last thing you want is to miss out on your dream house—or risk a sale as the seller—because of disagreements over commissions. Everybody deserves to earn a living and with open communication and fair negotiations, everyone can get what they need.