Who Pays Real Estate Agent Commissions in 2024? New Rules Explained

Real estate agent commissions are no longer a cost borne solely by the home seller. Following a landmark 2024 legal settlement involving the National Association of Realtors® (NAR), the standard practice has shifted, making home buyers responsible for negotiating and paying their own agent's compensation. This change promotes greater transparency and flexibility, fundamentally altering how real estate professionals are paid in a transaction. The traditional commission rate of 5% to 6% remains common but is now fully negotiable.

How Are Real Estate Agent Commissions Paid Now?

Under the new rules effective August 2024, the structure for paying real estate agents has been updated. Traditionally, the home seller paid the commission for both their own listing agent and the buyer’s agent from the sale proceeds. Today, the default model requires buyers to enter into a separate written agreement with their agent to define the compensation for representation.

However, sellers can still choose to offer compensation to the buyer’s agent as an incentive to attract more buyers. This potential concession must be clearly disclosed on the multiple listing service (MLS). When setting a listing price, sellers typically factor in the cost of their own listing agent’s commission, which is outlined in a listing agreement—a contract specifying the agent's duties, the commission rate, and the duration of the agreement (usually 90-120 days).

Are Real Estate Commission Fees Negotiable?

Yes, real estate commission rates are entirely negotiable. There are no federal or state laws that set a fixed percentage. While the standard full commission is often between 5% and 6% of the home’s final sale price, the actual rate depends on several factors, including the local market conditions, the property's value, and the level of service provided.

You can also explore alternative models. Some brokerages offer discounted services for a lower fee, while others provide flat-fee listing services. The key is to discuss and agree upon the commission structure before signing any representation agreement.

What Is Dual Agency and Is It Allowed?

Dual agency occurs when one real estate agent or brokerage represents both the buyer and the seller in the same transaction. Also known as acting as a transaction broker, this arrangement requires the agent to be neutral.

While some states have made dual agency illegal to avoid potential conflicts of interest, it is permitted in others under the condition that all parties provide informed, written consent. Critics advise against it, worrying that a single agent cannot fully advocate for the competing interests of both the buyer and seller.

How Do Commissions Relate to Closing Costs?

It's crucial to understand that agent commissions are separate from closing costs, which are the various fees paid at the conclusion of the real estate transaction. According to industry professionals like Leah Layman, a real estate agent in Augusta, GA, closing costs typically amount to about 3.5% of the home’s sale price but can range from 2% to 7%.

• Buyers often cover the majority of the closing costs (3% to 4%).
• Sellers are typically responsible for their agent’s commission and certain other fees (1% to 3%).

Most closing costs are negotiable. A skilled agent can help negotiate who pays for what. In some cases, a buyer may request that the seller contribute a certain amount toward their closing costs, which can be written into the purchase contract.

To avoid surprises, always review the buyer’s estimate from your lender and the detailed closing disclosure before finalizing the deal.