Buying or selling a home is one of the biggest financial decisions most people will make in their lifetime, and understanding who pays the real estate agent can save you thousands of dollars. With recent industry changes shaking up traditional commission structures, both buyers and sellers need to be well-informed about their options.
The real estate landscape has undergone a dramatic transformation since 2025, thanks to new regulations from the National Association of Realtors (NAR). These changes have shifted the power dynamics in commission negotiations, giving consumers more control and transparency than ever before. Whether you’re a first-time homebuyer or an experienced seller, knowing how real estate commissions work can significantly impact your bottom line.
Understanding Real Estate Commissions
A real estate commission is the fee paid to agents for their professional services in facilitating property transactions. This payment typically represents a percentage of the final sale price and covers the extensive work agents perform throughout the buying or selling process.
Real estate agents provide valuable services that justify their compensation, including:
- Market analysis and pricing strategy
- Professional photography and marketing materials
- Listing the property on multiple platforms
- Coordinating showings and open houses
- Negotiating offers and counteroffers
- Managing paperwork and legal requirements
- Coordinating with lenders, inspectors, and title companies
The commission structure typically involves two agents: the listing agent who represents the seller, and the buyer’s agent who helps the purchaser find and secure a property. Both agents work hard to ensure a smooth transaction, though their responsibilities differ based on which party they represent.
The Traditional Commission Model: Pre-2025
Before the 2025 NAR settlement, the real estate industry operated under a well-established system where sellers typically paid the commissions for both agents involved in the transaction. This traditional model had been in place for decades and followed a predictable pattern.
Under the old system, sellers would agree to pay a total commission of 5-6% of the sale price, which would then be split evenly between the listing agent and the buyer’s agent. This arrangement had several implications:
- Sellers factored commission costs into their pricing strategy
- Buyers received representation without direct out-of-pocket expenses
- Commission rates were often standardized within local markets
- Limited negotiation opportunities existed for consumers
While this system worked for many years, it faced criticism for lacking transparency and limiting consumer choice. The 2025 NAR settlement addressed these concerns by implementing significant changes to how commissions are handled.
The New Commission Landscape: Post-2025 Changes
The 2025 NAR settlement introduced fundamental changes to real estate commission structures, creating a more transparent and consumer-friendly environment. These changes represent the most significant shift in real estate compensation practices in decades.
Key Changes in Commission Structure
The new regulations have transformed how commissions are negotiated and disclosed:
- Written Buyer Agreements Required: Buyers must now sign written agreements with their agents before touring properties, clearly outlining the commission structure and payment terms.
- Increased Transparency: All commission arrangements must be fully disclosed in writing, eliminating hidden fees or surprise costs.
- Negotiation Freedom: Commission rates are no longer standardized, allowing buyers and sellers to negotiate fees that work for their specific situations.
- Seller Flexibility: Sellers are no longer required to offer compensation to buyer’s agents through the MLS, though they can still choose to do so as a negotiation strategy.
These changes empower consumers to make more informed decisions about their real estate representation and costs.
Who Pays the Real Estate Agent Now?
The answer to “who pays the real estate agent” has become more nuanced following the 2025 changes. While the traditional model placed the burden primarily on sellers, the new landscape offers more flexibility and negotiation opportunities for both parties.
Seller’s Perspective
Sellers still have the option to cover both agents’ commissions, but they now have more control over these decisions. Key considerations for sellers include:
- Strategic Commission Offers: Sellers can choose whether to offer compensation to buyer’s agents and at what rate
- Market Competition: Offering buyer’s agent compensation can make a listing more attractive in competitive markets
- Pricing Strategy: Commission costs should be factored into the asking price and negotiation strategy
- Negotiation Leverage: Sellers can use commission offers as bargaining chips during offer negotiations
Buyer’s Perspective
Buyers now have more responsibility and control over their agent compensation:
- Direct Payment Responsibility: Buyers are responsible for confirming and agreeing to their agent’s fee structure
- Negotiation Opportunities: Buyers can negotiate commission rates with their chosen agent
- Seller Contribution Requests: Buyers can still ask sellers to cover their agent’s commission as part of the offer
- Budget Planning: Commission costs should be included in the overall homebuying budget
Negotiating Real Estate Commissions
One of the most significant benefits of the new commission landscape is the increased opportunity for negotiation. Both buyers and sellers can now discuss commission rates more openly and find arrangements that work for their specific situations.
Tips for Sellers Negotiating Commissions
Sellers can use several strategies to negotiate favorable commission terms:
- Compare Multiple Agents: Interview several listing agents and compare their commission structures and services
- Understand Local Market Rates: Research typical commission rates in your area to establish reasonable expectations
- Consider Property Value: Higher-priced properties may warrant lower percentage commissions due to the larger absolute dollar amount
- Evaluate Agent Services: Ensure the commission rate reflects the quality and extent of services provided
- Discuss Performance Incentives: Consider tying part of the commission to specific performance metrics, such as selling price or time on market
Tips for Buyers Negotiating Commissions
Buyers now have more leverage in commission negotiations than ever before:
- Shop Around: Interview multiple buyer’s agents and compare their fee structures
- Understand Your Needs: Consider what level of service you require and negotiate accordingly
- Discuss Payment Options: Explore different payment structures, such as flat fees or tiered percentages
- Consider Market Conditions: In slower markets, agents may be more willing to negotiate rates
- Review the Written Agreement Carefully: Ensure all terms are clearly outlined before signing
Why Sellers Might Still Choose to Pay Buyer’s Agent Commissions
Despite the new flexibility, many sellers continue to offer compensation to buyer’s agents for strategic reasons. Understanding these incentives can help sellers make informed decisions about their commission strategy.
Benefits of Paying Buyer’s Agent Commissions
Sellers who choose to cover buyer’s agent commissions often enjoy several advantages:
- Increased Buyer Interest: Properties that offer buyer’s agent compensation tend to attract more serious buyers
- Faster Sales: Agents may prioritize showing properties that guarantee their compensation
- Higher Offers: Buyers who don’t have to pay their agent directly may have more flexibility in their offer price
- Competitive Advantage: In markets with similar properties, commission offers can differentiate your listing
- Smoother Negotiations: Clear commission arrangements can streamline the offer and acceptance process
Understanding Closing Costs vs. Commissions
It’s important to distinguish between real estate commissions and closing costs, as these represent separate expenses in a property transaction. Understanding both can help buyers and sellers budget accurately.
Seller’s Closing Costs
Sellers typically face several closing costs in addition to agent commissions:
- Transfer taxes and recording fees
- Title insurance premiums
- Attorney fees
- Outstanding property taxes and HOA fees
- Home warranty costs (if offered)
- Prepayment penalties on existing mortgages
Total seller closing costs typically range from 6-10% of the sale price when including commissions.
Buyer’s Closing Costs
Buyers also face various closing expenses separate from any agent commissions they might pay:
- Loan origination fees and points
- Appraisal and inspection fees
- Title search and insurance
- Homeowners insurance premiums
- Property taxes and escrow deposits
- Recording fees and transfer taxes
Buyer closing costs typically range from 2-5% of the purchase price.
Alternative Commission Models
The changing commission landscape has given rise to several alternative models that consumers can consider. Understanding these options can help you choose the approach that best fits your needs and budget.
Discount Brokerages
Companies like Redfin have pioneered alternative commission structures that offer significant savings:
- Lower Listing Fees: Some discount brokers charge as little as 1% for listing services
- Transparent Pricing: Upfront fee disclosure eliminates surprises
- Technology-Driven Services: Many use technology to reduce costs while maintaining service quality
- Flexible Options: Various service levels allow customers to choose what they need
Flat-Fee Services
Some agents and brokerages now offer flat-fee services instead of percentage-based commissions:
- Predictable Costs: Fixed fees make budgeting easier
- Value-Based Pricing: Costs reflect services provided rather than property value
- Menu Options: Customers can select specific services they need
- Ideal for Certain Situations: Particularly beneficial for high-value properties or experienced sellers
Hybrid Models
Many traditional agents now offer hybrid approaches that combine elements of different models:
- Tiered Service Levels: Different commission rates for different service packages
- Performance-Based Fees: Commissions tied to specific outcomes
- Unbundled Services: Customers pay only for the services they use
- Technology Integration: Combining personal service with cost-saving technology
Practical Tips for Managing Commission Costs
Whether you’re buying or selling, these practical strategies can help you manage commission costs effectively:
For Sellers
- Prepare Your Home: Well-maintained homes often sell faster, potentially justifying lower commission rates
- Time Your Sale: Consider market conditions when negotiating commissions
- Understand Local Customs: Research what’s typical in your specific market
- Evaluate Agent Value: Consider the agent’s experience, marketing plan, and track record
- Negotiate Smartly: Focus on the total package of services rather than just the commission percentage
For Buyers
- Budget for Commissions: Include potential agent fees in your overall homebuying budget
- Compare Agent Services: Look beyond commission rates to the value provided
- Understand Your Agreement: Read buyer agency agreements carefully before signing
- Consider Your Timeline: If you plan to look for several months, negotiate accordingly
- Ask About Rebates: Some agents offer commission rebates in certain states
The Future of Real Estate Commissions
The real estate commission landscape continues to evolve, with several trends likely to shape future practices:
- Increased Transparency: Consumers will continue to demand clearer fee structures
- More Competition: Alternative models will pressure traditional commission rates
- Technology Integration: Digital tools will enable more efficient service delivery
- Customized Solutions: Consumers will seek personalized commission arrangements
- Regulatory Changes: Additional regulations may further impact commission practices
FAQ
Who typically pays the real estate commission?
Traditionally, sellers paid both agents’ commissions, but since the 2025 NAR settlement, commission arrangements have become more flexible. Both buyers and sellers can now negotiate who pays what, with written agreements required before property tours.
Are real estate commissions negotiable?
Yes, commissions are fully negotiable. The 2025 changes specifically emphasize that commission rates are not fixed and can be discussed between consumers and their agents. Both buyers and sellers have more power to negotiate favorable terms.
What are typical commission rates?
Traditional commission rates ranged from 5-6% of the sale price, split between listing and buyer’s agents. However, rates now vary significantly based on market conditions, property value, services provided, and negotiation. Many alternative models offer rates as low as 1-3%.
How does the NAR settlement affect commissions?
The 2025 NAR settlement introduced mandatory written agreements, increased transparency requirements, and eliminated the practice of requiring sellers to offer buyer’s agent compensation through MLS. These changes give consumers more control and information when negotiating commissions.
Can buyers avoid paying commission fees?
Buyers can negotiate commission arrangements with their agents, seek sellers who offer to cover buyer’s agent fees, or work with discount brokers. However, quality representation typically involves some cost, so focus on value rather than just avoiding fees.
Do sellers always pay the buyer’s agent commission?
No, this is no longer automatic. Sellers can choose whether to offer buyer’s agent compensation as part of their marketing strategy. The decision depends on market conditions, property type, and negotiation preferences.
What should I look for in a commission agreement?
Look for clear terms regarding services provided, payment structure, duration of the agreement, termination conditions, and any performance guarantees. Ensure everything is in writing and understand your obligations before signing.
How can I save money on real estate commissions?
Consider negotiating rates, comparing multiple agents, exploring alternative brokerage models, timing your transaction strategically, and ensuring you’re getting value for the services provided. Don’t automatically choose the lowest rate—consider the overall value proposition.
The real estate commission landscape has changed dramatically, offering both challenges and opportunities for buyers and sellers. By understanding the new rules, negotiating strategically, and focusing on value rather than just cost, you can navigate commission arrangements successfully. Remember that quality representation can ultimately save you money by ensuring the best possible outcome for your transaction.