That’s a good question. And the short answer, for now, is that a 2024 legal settlement created sweeping change to the real estate industry, putting the protocol for paying agents in flux. Planning to buy or sell a home in the near future? You’ll want to read up so you don’t overpay.
Key Points
• Understanding new commission rules is crucial to avoid overpaying and ensure a smoother real estate transaction.
• A 2024 legal settlement with the National Association of Realtors® and brokerages resulted in a $2 billion payout and changes to commission structures.
• Conversations about commissions must now occur outside the MLS, giving sellers more control over the commission offered to the buyer’s agent.
• Average commission rates decreased from 5.64% to 4.96% in early 2025, potentially saving sellers money on a median-priced home.
• Buyers may need to pay their agent directly, either as a percentage of the home price or a flat fee, adding to their overall costs.
How Do Real Estate Agents Get Paid?
For agents — on the seller’s or buyer’s side — it’s long been business as usual to receive compensation via commission, as opposed to a set fee. Sellers typically paid commissions of 5% to 6% of a house’s price after what is known as the “closing” of a home they sold, and that money was split between the seller’s and buyer’s agents, plus other pros involved in the transaction. The higher the sales price, the more agents got paid.
But in 2024, the National Association of Realtors® (NAR), a trade association, and a number of real estate brokerages, settled a group of lawsuits. The settlements totaled nearly $2 billion. NAR paid $418 million in damages. The payout resulted from a legal filing contending that the real estate commission structure violated antitrust laws. NAR agents, it claimed, were receiving inflated commissions.
The lawsuits brought changes to the way homebuyers and sellers work with real estate agents on home purchases — and the way those agents are compensated.
Agents and Buyers or Sellers
In the lawsuit, homesellers from Missouri alleged that commission rates had been shared secretly and inappropriately among those who stood to profit. The sellers stated that the exchange of information had resulted in a lack of transparency about who homesellers were responsible for paying, and how much. They also said that this led to agents’ fees being inflated.
The lawsuits sparked NAR to revise protocols for the way homebuyers and -sellers work with real estate agents when a home goes up for sale. NAR Realtors® handle a huge percentage of U.S. home sales, so the reboot may significantly impact their transactions, and agent commissions, going forward. The changes could even save buyers and sellers money — but the details are still shaking out.
How will a Realtor you hire get paid in this new world? If you plan to buy or sell a home, it’s important to ask them, and to understand the details of compensation before entering into an agreement. Most likely, sellers will continue to pay their agents a commission for selling their house. Buyers who want to work with a buyer’s agent may have to pay for that expert’s assistance themselves, but only if the agent won’t receive any other commission.
Let’s take a closer look at how the changes affect costs for both homebuyers and sellers, beginning with examples of Realtors getting paid.
Real Estate Commission: Before the Settlement
We’ll start with how it used to work. Say a home sold for $500,000, with the commission being the formerly typical 6%:
Total commission fee: $500,000 X 6% = $30,000
The commission was generally split evenly between the two sides:
• Listing agent side = $15,000
• Buyer’s agent side = $15,000
Real estate agents also shared commissions with brokers who represented them. (A broker is an agent who has an additional license to supervise other agents.) The broker’s fee might have been 1% of the sales price, or $5,000, subtracted from the total to leave the seller’s agent with a commission of $10,000.
• Listing agent = $10,000 (2% of sales price)
• Listing agent broker = $5,000 (1% of sales price)
• Buyer agent = $10,000 (2% of sales price)
• Buyer agent broker = $5,000 (1% of sales price)
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Real Estate Commission: A Changing Approach
For a long time, agent commissions were more or less built into a home’s asking price. The seller’s agent would offer a percentage of the total commission amount to the buyer’s agent, normally mentioning it in the home listing’s fine print on the multiple listing systems (MLS). After closing, the seller’s agent would disperse the fee. That changed a little in 2024, when the court prohibited sellers’ agents from stating the buyers’ agent’s percentage share on the MLS.
The MLS comprises databases of homes for sale that only Realtors, agents, brokers, and other real estate industry people can access — and that is what caused concerns about transparency.
Now, conversations about commissions must take place outside the MLS. Sellers may offer to pay commissions to buyer’s agents, but an agent for the homebuyer may also request a percentage of the home price or a flat fee from their own client. A buyer using an agent is required to have a representation agreement with the agent, defining compensation, before touring homes.
Listing agreements now must specify the amount the seller will pay to the listing agent, as well as what the seller will pay to a buyer’s agent. With these revisions, sellers have some newfound control. They can offer equal commissions to both sides, or different amounts. A seller may decide not to offer a buyer’s agent a commission, leaving the buyer responsible for paying for their services.
An Agent’s Responsibilities
To earn a commission, real estate agents often take on a lot of tasks and responsibilities. Their duties include:
• Providing market data and helping to set a listing price
• Placing ads and putting up yard signs
• Photographing the property
• Listing the property in the MLS listings database
• Scheduling showings
• Placing lock boxes
• Guiding first-time homebuyers
• Smoothing over difficult relationships
• Navigating offers and counter offers
• Negotiating home contracts
Recommended: How to Find a Real Estate Agent
The State of Agent Commissions
Making a living through commissions can be challenging for real estate agents. But it can also be unmistakably rewarding.
With the changes, average rates of commission among Realtors and agents decreased somewhat, dropping from 5.64 percent to 4.96 percent in early 2025. This might mean a decrease in commission of a few thousand dollars for a median-priced home, according to a RISMedia survey of 1,300 agents.
Sellers’ agents may continue to receive their commissions, negotiated with the seller, who pays the real estate agent commission fee out of the payment they receive when the home sale closes. Since buyers’ agents are no longer entitled to payment from this money, homebuyers may need to negotiate with and pay their agents. This could in some cases make buying a home even more costly.
How Does It All Affect the Bottom Line?
If the sales price of a home is $500,000 and the sellers owe $250,000 on their mortgage, then the commission and other fees would be subtracted from the $250,000 that remains after the sellers pay off their mortgage.
To keep it simple, let’s say the total commission negotiated is 5%:
Total commission fee: $500,000 X 5% = $25,000
• Listing agent side = $25,000
• Buyer’s agent side = $?
Buyer’s agent commissions are simply in flux — both how much they should be and where they will come from. This agent’s commission might need to come out of the buyer’s pocket — although word on the street is that some brokers on the seller side have found workarounds.
Can a buyer come out ahead in this changed compensation structure? Maybe. A buyer’s extra costs could be compensated by lower listing prices on homes for sale. But that remains to be seen.
Can You Negotiate Who Pays the Real Estate Agent?
Yes. Realtor fees on both sides are negotiable. These ideas may help you reduce your fee if you are selling your home:
• Barter. Do you have a photographer friend who can take photos of your home? Offer up skills in exchange for a lower commission.
• Hire a newer agent. A newer agent may accept a lower commission to gain experience.
• Pay attention to market conditions. If homes aren’t moving in your market, you may be able to negotiate a lower commission.
Take time to interview potential Realtors using these suggested questions. Be sure the commission stated in the listing agreement matches what you’ve agreed on before you sign.
How Should a Buyer Agent’s Commission Be Set?
If you are in the market for a new home, you may still decide to seek a buyer’s agent to guide you through the process and represent you in closing. Their efforts may be well worth their fee.
Look for an agent with a strong network — they may hear about quiet “whisper listings” before anyone else. Once you’ve chosen someone, be sure to discuss a fee structure and payment process with them before you sign on.
Whether these real estate agents will charge for their time by the hour or bill customers a flat rate — or if some will keep working on commission that is perhaps paid by the buyer — is a developing story under the new rules. But they are quite likely to want to be paid.
In lieu of a commission, buyers’ real estate agents might charge fees for showing homes, shepherding clients through making offers, signing contracts, negotiating inspections, and more. For buyers, this would add to a home’s cost.
Of course, if agent commission fees have all along been a component of a property’s price, then buyers were already paying them. But in that scenario, buyers could cover those baked-in costs with their home mortgage loan. New fees paid by a buyer to the agent would come from the buyer’s pocket.
This switcheroo may lead some homebuyers to think about shopping for a home without an agent’s help. If you go this route, be aware that you’ll need to spend significant time researching potential properties, scheduling viewings, and self-advocating, especially if you are attempting to buy in a seller’s market.
When Do Sellers’ Agents Receive Their Commission?
Sellers’ agents usually receive their commission after the home mortgage loan has been funded and the sale closes. Their brokerage receives a wire with the funds, and the agent’s portion of the commission is released to them shortly thereafter.
What Is Dual Agency?
Dual agency is when a real estate agent represents both the seller and the buyer in a transaction. It must be disclosed to both parties because real estate agents are bound by a fiduciary duty to serve their clients. An agent who represents both seller and buyer will earn more commission.
Buyers faced with having to pay a buyer’s agent out of pocket might choose to look at properties on their own. When they find a home they would like to buy, they may decide to make an offer directly with the listing agent. In this scenario, the listing agent becomes a dual agent. They may accept a lower fee, since they are also getting a commission paid by the seller. It might appear to everyone to streamline the process. It also creates a possible conflict of interest.
Many experts discourage buyers and sellers from entering a dual-agency sale with an agent. It’s also worth noting that the practice is illegal in several states.
Is Paying a Real Estate Commission Worth It for the Seller?
Hiring an agent is not required. And for many sellers, it’s painful to look at the closing documents and see how much of the sales price goes to different agents, title insurance companies, concessions, and so forth. But a lot of sellers find it worthwhile having someone to guide them through the complexities of real estate law, and sensitive issues that the sale of a home creates.
Recommended: How to Buy a House Without a Realtor
Alternatives to a Percentage-Based Commission
There are real estate brokerages that advertise services for a flat fee. Usually, the flat fee is very low and may only include a listing on the MLS with photos. They usually don’t offer to schedule showings or manage the listing in any other way.
The Takeaway
Working with a real estate agent when you’re a buyer requires asking a lot of questions and understanding the terms of compensation before you sign on for representation. You might be tempted to go it alone, and it can be done. But having an agent on your side to help you negotiate can give you peace of mind and, in many cases, help you land a better deal.
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FAQ
Do sellers pay Realtor fees?
Yes, sellers pay Realtor fees to the seller’s agent.
How long have the new rules been in place?
The post-settlement NAR rule change became official in August 2024. While aspects of it were immediately implemented, it also left some room for interpretation. New agent practices are slowly rolling out.
How much does a new Realtor make in Illinois?
According to ZipRecruiter.com, the average pay for a real estate agent in Illinois is $83,135. Salaries can range from as low as $58,100 up to $124,519 per year.
Photo credit: iStock/RyanJLane
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