Buyer’s Agent Commissions Hold Steady Despite Recent Real Estate Industry Shift

Following years of litigation, the National Association of Realtors (NAR) agreed to pay $418 million to settle a series of high-profile antitrust lawsuits filed in 2019 on behalf of home sellers. Although the settlement is subject to final court approval, with a final hearing scheduled for November 26, 2024, NAR introduced the new rules required by the settlement on August 17, 2024.

Many buyer’s agents feared these changes could negatively impact their commission earnings. However, according to discount real estate brokerage Redfin, early findings reveal that buyer’s agent commissions have remained stable despite the shifts.

Real Estate Agent Commission Trends

Until this change, the typical commission ranged from 5% to 6% of a home’s sale price, with the buyer’s agent traditionally receiving a portion of the listing agent’s total commission. The average buyer’s commission was 2.43% on January 1, 2024, falling to 2.35% at the beginning of August 2024 (before the implementation of the new rules).

Since then, overall buyer’s agent commissions haven’t changed much. The average commission was 2.34% as of October 1, 2024, according to Redfin’s analysis of October home sales or scheduled closings from its agents, partner agents and Redfin-owned Bay Equity Home Loans. This is a dip from the same time a year ago, which had an average of 2.45%.

In fact, years before the settlement rules took effect, buyer’s agent commissions were already trending downward. Since January 2023, average commissions have fallen 17 basis points (or 0.17%). A basis point is one one-hundredth of a percentage point.

Changes Based on Home Price

Despite the modest overall decrease in commission rates between August and October 2024, there were more noticeable differences based on home price.

For example, buyer agents working with homes priced under $500,000 experienced an average commission increase from 2.41% to 2.43%. Those working with homes between $500,000 and $1 million had a slight commission decrease from 2.25% to 2.24%. In contrast, for homes above $1 million, the average commission fell from 2.24% to 2.11%.

Meanwhile, the real estate industry is watching closely to see if these initial trends hold.

Learn more: How do realtors and real estate agents get paid?

What Sparked the Commissions Lawsuits?

It has been standard practice for decades for home sellers to cover broker commissions for buyers. Additionally, commissions offers have been included on the multiple listing services (MLS). These are private databases where information about residential property listings is published and shared by local real estate brokers.

But the commission lawsuit plaintiffs contended that this was a collusion scheme to maximize the earnings of real estate agents. They argued that they as sellers were required by NAR and other real estate brokerages to pay buyer broker commissions when listing homes on the MLS, which added hefty amounts to the sellers’ costs. In turn, the settlement rule change now prohibits broker compensation offers being included on the MLS.

Key Changes Impacting Buyers and Sellers

NAR denies any wrongdoing related to the MLS cooperative compensation model rule targeted by the litigation. The organization has pointed out that it has never dictated commissions and that commissions have always been negotiable.

Nonetheless, the real estate industry trade group expects the required practice changes to benefit “both consumers and agents by clarifying the financial aspects of real estate transactions.”

Changes for Buyers

• Before touring any homes, buyers must enter a written agreement with any agent who uses an MLS.
• Buyers can negotiate the commission amount that their agent or broker will receive and the services it covers.
• The written agreement must include how much the buyer will pay their representative, the specific dollar amount or percentage of the compensation and confirmation that the buyer’s representative can’t receive more compensation than specified in the agreement.

Changes for Sellers

• Sellers can negotiate with their listing broker how much they’ll pay in commissions and what services they cover.
• Sellers can have their listing broker advertise cooperative compensation to buyer brokers off the MLS through other avenues, such as fliers, websites, social media, emails and phone calls.
• Sellers can also offer concessions to buyers on the MLS if they’re unrelated to payment for the buyer’s representative.

Note that home shoppers are still able to request information on properties, attend open houses and contact listing brokers on their own, according to an NAR spokesperson.

What Are Buyer Agents Saying About the New Rules?

Here’s how some buyer agents have reacted to the new rules:

More About Educating Clients

According to the Redfin study, the most notable change since the new requirements went into effect has been educating clients on the new rules rather than drops in commission.

Traci Kuther, principal broker at Traci Kuther Real Estate in New York City, agrees.

“I’ve had well-educated professionals, including [vice presidents] in finance, tech [executives] and doctors who’ve attended some of my open houses, [who] were all confused how the NAR rules might affect the purchase prices of an apartment,” Kuther tells Forbes Advisor. “A few of my open houses resembled mini training seminars because these customers had a lot of misinformation.”

Agents like Kuther say they’ve been transparent with their clients for years. If anything, agents say the new rules prompt them to reinforce the practices they already have in place.

Helping To Improve Service and Trust In the Industry

“With these new rules, I’ve doubled down on making sure buyers understand what a buyer-broker agreement means for them,” says Josh Jarboe, principal broker-owner of RE/MAX Empire and co-founder of Motto Mortgage A2Z in Mount Washington, Kentucky. “It’s an opportunity to highlight the benefits of full representation—how we advocate for their best interests, provide market insights and ensure they’re fully protected throughout the transaction.”

Jarboe tells clients that being legally bound to an agent representative is to their advantage, “[setting] the stage for a stronger, more successful partnership.”

“Many buyers are used to simply stepping into homes, touring them with an agent and getting offers written—without necessarily considering the agency aspect or knowing that commissions are negotiable,” Jarboe says. “Overall, it’s enhancing the level of service and trust within the industry by clarifying the expectations on both sides.”

How Are the New Rules Impacting Buyer Broker Commissions?

Kuther says she has yet to feel an impact on her commissions, and she doesn’t expect them to decline. She notes that she’ll continue making concessions when it’s in the best interest of her buyer clients.

“It makes for a much smoother process and absolutely comes back tenfold in appreciation and repeat business,” she says.

Jarboe says that the greater transparency around negotiating commissions has actually helped to increase his commissions since the new rules went into effect.

“Not all agents bring the same value to the table, and I’m up front about how working with a cut-rate agency may seem like a way to reduce costs,” Jarboe says. “But more often than not, it ends up costing clients more in the long run. With buyers now more aware that commissions are negotiable, we’re able to have open conversations about the level of service they’re receiving.”

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How To Negotiate Commissions and Concessions

Now that many buyers must pay an agent when shopping for a home, here are some strategies that can help keep costs down:

• Look at the big picture. “The key is to look at the big picture,” Kuther says. “Don’t get fixated on getting the ‘lowest price or ‘lowest commission.’” For example, Kuther often negotiates deals where the seller agrees to pay certain transaction costs.
• Focus on concessions that offset out-of-pocket expenses. “Asking for things like seller-paid closing costs or credit for repairs can go a long way,” Jarboe says. “I also advise looking into whether the seller can cover certain warranties or even buy down interest rates, which can lead to significant savings over the life of a (home) loan.”
• Ask questions and state your goals when negotiating with an agent on commissions and terms. “When buyers negotiate a contract and commission rate, it’s all about open communication,” Jarboe says. “I work with each client to develop a customized approach that makes sense for their unique situation, ensuring all fees are clearly communicated upfront to eliminate any surprises.”