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New rules shake up real estate market starting Saturday: ‘We’ll see how this goes’

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HOUSTON, Texas (KTRK) — Realtors are bracing for the biggest shakeup to their business in decades. Starting Saturday, Aug. 17, their commission structure will change.

The new rules result from a settlement announced in March by the National Association of Realtors. They eliminate the long-standing 6% commission sellers pay, which could potentially lower home prices.

Before this settlement, the industry was essentially setting commission rates.

A seller’s agent typically charges the seller 6% and shares the fee with the buyer’s agent.

Starting Saturday, sellers won’t be expected to make commission offers to buyer agents. That gives them the potential to pocket more money from selling their property.

RELATED STORY: Biggest shakeup in a century set to hit real estate agents this week

Starting August 17, new rules will roll out that overhaul the way Realtors get paid to help people buy and sell their homes.

It also means home buyers will ultimately be responsible for compensating their agent.

“We’ll see how this goes,” Tricia Turner with Tricia Turner Properties said. “Right now, buyers don’t have extra money. They have to come up with their closing costs and downpayment. To stick another fee on top of that is definitely going to change things. I will tell you, homeowners already are saying, ‘No. I don’t want to pay that buyer agent’s compensation.'”

Under the new rules, home buyers will also be required to sign a representation agreement with an agent before even touring a home.

For updates on this story, follow Briana Conner on Facebook, X and Instagram.

SEE ALSO: In 22 states and DC, buyers need six-figure household income to afford a typical median-priced home

A new report finds that in nearly half of US states, buyers will need a six-figure household income to afford a median-priced home in their state.

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Real Estate Agent Fees And Realtor Commissions | Bankrate

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In this do-it-yourself digital age, home sellers and buyers alike might wonder if they need Realtors — or, more precisely, to pay Realtor fees. Just how crucial are these agents to a successful real estate transaction?

Well, a good agent is really pretty useful. Especially if you’re buying a home: Agents have access to information you don’t, and it takes time and expertise to research properties, find the best ones for you and put together a strong offer. But sellers see many benefits, too, especially when figuring out the best asking price. Your home will still need to be staged, listed on the market and shown, too. Here, we’ll take an in-depth look at how real estate agent fees work and what you get for the money.

One important note first: Changes to the way commissions work went into effect on August 17, as a result of a long legal battle settled by the National Association of Realtors and several major brokerages. The commission system, and how it has changed, is outlined below.

The NAR lawsuit

In October 2023, a federal jury found that the National Association of Realtors (NAR), along with several large brokerages, conspired to inflate Realtors’ commissions. All of the brokerages settled out of court, and as of March 15, 2024, NAR did the same.

As a result, the longstanding traditional real estate commission model — that is, sellers footing the bill for both their own agent and their buyer’s, typically totaling 5 to 6 percent of the home’s sale price — is upended. Now, sellers’ agents may no longer make offers of compensation to buyers’ agents on the MLS (multiple listing service, a vast database of for-sale homes accessible only to industry pros). Home sellers might no longer need to pay the agent who represents their buyer, which could open the door to much more competition among buyer-side agents, and even more potential for fee negotiation.

How much are Realtor commissions?

Let’s recap the traditional commission model, before the rule changes took effect.

Only a very small portion of Realtors work on salary — working on commission is much more common. For years, the typical going rate was 6 percent, split down the middle between the buyer’s agent and seller’s agent. But it began to fluctuate with the advent of discount brokers and the rise of online, publicly accessible listings.

Of course, real estate commissions can be negotiated, and nowadays they typically run somewhere closer to 5 percent of a home’s sale price. That means the means the more expensive the home, the more money the agents make. The exact terms of an agent’s commission vary from sale to sale, and can depend on the region and which firm they work for.

Let’s look at an example. A 5 percent commission on a $250,000 home sale would come to $12,500. But on a $1M sale, a commission at the same rate would come to $50,000.

Assuming a 5 percent total commission under that model, here’s roughly what sellers could expect to pay based on the price their home sells for:

Home’s sale price
Seller’s agent commission (2.5%)
Buyer’s agent commission (2.5%)
Total commission (5%)

$250,000
$6,250
$6,250
$12,500

$500,000
$12,500
$12,500
$25,000

$750,000
$18,750
$18,750
$37,500

$1,000,000
$25,000
$25,000
$50,000

Seller vs. buyer commission

Sellers sign a listing agreement with a Realtor in which they agree to pay a commission fee after the transaction closes. If it’s an “exclusive right to sell” arrangement, they pay the fee even if they found the buyer on their own.

Commissions for both Realtors in the transaction have traditionally been paid by the home seller: Both the buying and selling agents are paid with proceeds from the sale of the home. These two agents typically split the total commission — so for a 6 percent commission, the selling agent would receive 3 percent and the buying agent would receive the other 3 percent. Now that the new rules have kicked in, that is changing.

It also changes in the case of dual agency, when one agent represents both the buyer and seller in a transaction. Laws about this vary by state; in some states, dual agency is not permitted. In this type of scenario, pay particular attention to the home appraisal to ensure you’re getting a fair price. While agents have a fiduciary duty to their clients, with dual agency, the lines can get blurred.

As Samantha Fish, an agent with Wesely & Associates in Grass Valley, California, points out, agents are still required to act in their clients’ best interest. “It’s in our ethics; it’s in our contract,” she says. “If someone comes into my open house and they like it, but they don’t have an agent, at that point I can say, ‘let me get you an agent from my office’ so they feel like they’re being represented 100 percent as well.” Still, buyers working directly with a listing agent may have more room for negotiation because the seller may agree to a lower selling price if the agent agrees to lower their fee.

The brokerage’s cut

Real estate brokerages may get a cut of the commission as well. The brokerage RE/MAX, for example, has a split commission setup by which its agents receive 95 percent of the full commission from the sale, and 5 percent goes back to the company.

“The broker has to set the policy and oversee, monitor and supervise everything the agent does,” says Patrick Duffy, broker/owner of Duffy Realty in Miami. “And if the agent does something fraudulent or unprofessional, the broker gets sued.”

What do real estate agent fees cover?

You might wonder, what services does this commission fee buy me? One of the biggest ways buyers benefit from working with a Realtor is gaining access to the MLS, the database Realtors use to see and list properties for sale.

The fee compensates the agent for time spent answering questions and helping you through the process. An agent is also able to utilize their skills and contacts to negotiate, find properties and take you on tours of multiple homes.

A Realtor’s fee covers a wide range of costs for sellers as well, including marketing materials, staging and showing the property, coordinating open houses and contacting agents of potential buyers. When an offer comes in, the listing agent negotiates on behalf of the seller, often presenting one or more counteroffers. A lot goes into listing a home, such as:

Creating a comparative market analysis to establish a competitive price
Arranging for photo shoots, sometimes including aerial shots via drone
Writing descriptive listing copy to attract interest from other Realtors and potential buyers
Providing staging guidance
Showing the property multiple times to prospective buyers
Hosting open houses, often on weekends
Providing yard signage
Making sure listings are populated on all major property search websites
Helping the seller review and negotiate buyer offers

As with most of the other expenses related to real estate transactions, a Realtor’s fee isn’t paid until the sale closes.

Average real estate commissions by state

Overall, the national average Realtor commission in 2023 was 5.49 percent, according to data from Clever. In all but a few states, the average commission ranged between 5 and 6 percent.

Keep in mind, though, ​​that Realtors may accept a lower commission for high-priced homes to earn a higher amount overall: Their piece of the pie may be smaller, but it’s a richer slice. “For example, if I’m listing a $4 million home at 6 percent, that’s a lot of money,” Duffy says. “In a situation like that there is greater flexibility to negotiate the commission — if you get $100,000 or $80,000 instead of $120,000, it’s still a good payday.”

Here are the average real estate commissions by state, according to Clever:

State
Average commission rate

SOURCE: Clever

Alabama
5.45%

Alaska
6.00%

Arizona
5.44%

Arkansas
5.99%

California
5.11%

Colorado
5.62%

Connecticut
5.47%

Delaware
4.88%

District of Columbia
5.49%

Florida
5.37%

Georgia
5.81%

Hawaii
4.78%

Idaho
5.50%

Illinois
5.35%

Indiana
5.56%

Iowa
5.67%

Kansas
5.58%

Kentucky
6.00%

Louisiana
5.56%

Maine
5.17%

Maryland
5.34%

Massachusetts
5.45%

Michigan
5.92%

Minnesota
5.82%

Mississippi
6.07%

Missouri
5.58%

Montana
5.50%

Nebraska
5.25%

Nevada
5.80%

New Hampshire
5.25%

New Jersey
5.21%

New Mexico
5.90%

New York
5.39%

North Carolina
5.52%

North Dakota
5.00%

Ohio
5.99%

Oklahoma
5.95%

Oregon
5.03%

Pennsylvania
5.48%

Rhode Island
5.50%

South Carolina
5.62%

South Dakota
5.49%

Tennessee
5.58%

Texas
5.73%

Utah
4.90%

Vermont
5.49%

Virginia
5.45%

Washington
5.25%

West Virginia
6.67%

Wisconsin
5.15%

Wyoming
6.00%

How to avoid paying Realtor fees

Selling your home without the help of a real estate agent — called “for sale by owner” or FSBO for short — is certainly possible. Between July 2022 and June 2023, 7 percent of home sales were sold by owners without the help of an agent, according to NAR data. But selling without an agent’s help is a lot of work to do on your own, much of it complicated.

If you don’t want to go it alone, ask agents from the outset what their commission is and compare the terms of each person you talk to. If you think the fee is too high, talk to them about lowering it. If the transaction is being handled on both sides by agents from the same brokerage, you might have more leverage to negotiate as well.

Alternatively, you could consider working with a low-commission real estate agent, who will likely charge much less than a traditional agent would (usually 1 to 1.5 percent of your home’s sale price). However, since they’re receiving a smaller commission on each property, these agents are typically focused on volume. As a result, you might not receive as much personal attention as you would with a traditional Realtor.

There are also brokerages and agents who work on a flat-fee basis. In other words, no matter how much your home sells for, they’ll receive a set amount rather than a percentage of the sale price.

If you want to avoid Realtor fees and sell your house quickly, another option could be selling to an iBuyer or a company that buys houses for cash. Both options will allow you to finalize your home sale fast, without paying any agent commissions. But the offers from these buyers will be less than you’d likely fetch in a traditional sale, and some charge service fees that are equivalent to what you’d pay in commission anyway.

Finally, remember that even if you’re not paying Realtor fees, there are still plenty of other closing costs associated with selling your home. For instance, you may be on the hook for things like title transfer fees, attorney fees, property taxes and more. And even if you sell without an agent of your own, you may still be on the hook to pay your buyer’s agent.

FAQs

What percent commission do most real estate agents charge?

Typically, each agent involved in the transaction (one for the buyer, one for the seller) earns somewhere between 2.5 and 3 percent of the home’s sale price as their commission fee. However, the amount is negotiable — and new rules as of August 17, 2024, mean the seller may no longer be obligated to pay their buyer’s agent’s fee.

Do sellers or buyers pay fees to the real estate agent?

Traditionally, sellers have been the ones who covered real estate agent commissions — both for their own agent and for the buyer’s. That changed on August 17, 2024, as a result of the NAR lawsuit settlement. Now, buyers may (or may not) be responsible for paying their own agent directly. The details of each transaction will be different.

How much commission do you pay on a $500,000 home?

It depends on the specific terms of each agent’s commission. Commissions usually total somewhere between 5 and 6 percent of the home’s purchase price — on a $500,000 transaction, 5 percent comes out to $25,000 and 6 percent comes to $30,000.



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Will New Rules for Real Estate Commissions Lower the Cost of Selling a Home?

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Homebuyers face a changing housing market this weekend as major shifts to how real estate agents are paid take effect.

The National Association of Realtors (NAR) groundbreaking new commission-sharing agreement will end the common practice of home sellers automatically covering the fees for real estate agents on both sides of the transaction. The new rules start on Saturday.

The agreement is the result of the settlement of a series of lawsuits brought over the past few years challenging the long-held practice of splitting the sales commission between the seller and buyer agent. Plaintiffs in the legal battles, primarily home sellers who paid both agents, claimed commission sharing, also known as cooperative compensation, artificially inflated the cost of a home sale.

Although the NAR was the main defendant in several cases, other major brokerages, including Keller Williams and RE/MAX, were also named co-defendants. With the NAR settlement, however, most of these lawsuits will have been settled, clearing the way for a change in how realtor fees are negotiated.

Now, real estate agents are prohibited from advertising shared commissions on local databases, called multiple listings services (MLS), and buyers will instead have to negotiate their agent’s fees before they start viewing homes.

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How will the NAR agreement change agent commissions?

Even though these fees have always been negotiable, most homeowners entering into a listing agreement with a realtor have typically paid between 5% and 6% commission on the sales price, which was split between the agents representing the seller and buyer. The ultimate goal of the lawsuits was to reduce this percentage, thereby saving sellers money.

Since the settlement announcement in March, there has been a slight decrease in the typical percentage paid to buyers’ agents. According to a report from Redfin, the typical seller is paying the buyer’s agent a 2.55% commission through the period ending in mid-July. By comparison, the typical commission paid in January was 2.62%. The question is whether the new commission model will accelerate the decline in fees paid.

Marty Green, principal at the Texas-based law firm Polunsky, Beitel, Green, believes that once the agreement goes into effect, commission changes will remain modest — at least for now.

“It’s not likely they are going to turn a switch on August 17th, and suddenly everything’s going to be different,” Green says. The immediate effect will be more transparency between agents and their clients, emphasizing the buyer’s side of the commission discussions and whether sellers want to keep splitting commissions. Some sellers may decide to continue the practice to make their homes more attractive to buyers.

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Who benefits most from the change in how real estate agents are paid?

Although the settlement is meant to benefit all sellers and buyers, that may not be the case, according to Daniel Smith, founder of Keepingly, a home management platform. If the traditional model of commission sharing is fundamentally altered, it could simply lead to more upfront costs for buyers.

“For many consumers, particularly those with limited financial flexibility, this could make homeownership more challenging,” Smith says.

Aside from home sellers, who can decide if they want to continue footing the bill for the buyer’s agent and how much they are willing to pay, the other winners in this scenario are likely to be high-income buyers. These clients have the means to cover the costs of their own agent’s commission and may be more likely to shop around and negotiate agent fees.

On the other hand, the agreement could increase the challenges low-income and first-time buyers face in an already difficult housing market. Part of the settlement agreement includes a provision that buyers must sign a contract with their agents before touring any potential homes. That contract will likely include language that outlines how the buyer will be responsible for paying the agent’s commission if the seller decides not to.

If buyers have to pay for their agent’s representation, that cash needs to be paid upfront with the down payment and closing costs or somehow rolled into the mortgage, increasing the borrowed amount and the monthly payments along with it.

The increased cost of representation could also lead some buyers to hire an inexperienced agent or forego representation altogether, which could put them at a disadvantage when negotiating a home price or concession.

It will take time to measure exactly how much change the agreements will bring about to agent commissions. For now, it’s more important than ever that sellers and buyers understand the potential impacts of the settlement. For sellers, Green says, this means deciding whether to pay the buyer’s agent and for buyers, how to structure their offer in a way that makes financial sense.

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How new real estate rules are set to reshape home buying and selling across the U.S.

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How new real estate rules are set to reshape home buying and selling across the U.S. – CBS News

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Starting Aug. 17, new regulations will change how real estate commissions are handled, potentially lowering costs for homebuyers and sellers. Under the new rules, buyers and sellers will have the opportunity to negotiate commissions directly with their agents, a shift that could impact everyone involved in the real estate market.

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How new real estate rules will impact Minnesota Realtors, home buyers

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EDINA, Minn. — The experience of buying or selling a home is changing. A recent National Association of Realtors settlement now requires buyers and sellers to negotiate house sale commissions, including who pays and how much.

A recent overhaul changed the way realtors get paid to help people buy and sell their homes. It’s part of a $418 million settlement announced in March between a nationwide group of homeowners and the National Association of Realtors.

“For consumers, it’s going to be more transparent and it really should be a smooth process,” said Jamar Hardy, president of Minneapolis Area Realtors. “Historically, a seller’s agent charged home sellers a fee, usually 5% or 6%, which was then split with the buyer’s agent. On a $500,000 home that would be $30,000 in commission.”

Lawsuits alleged the standard practice violated antitrust laws, though the association has long argued that the commissions were always negotiable.

Moving forward, buyers who previously didn’t have to pay a commission to their realtor who helped them purchase a home will be expected to pay for the service. Sellers will have to pay for their agent but will no longer have to pay for the buyer’s agent.

Listing agents and sellers will be prohibited from including offers of compensation to buyer agents on the multiple listings services, better known as the MLS.

“If sellers aren’t offering payouts right up front, that negotiation is going to happen at a time of offer, so we’ll see a little change there because again, that offer of compensation won’t be visible to us anymore,” said Hardy.

Real estate commissions in Minneapolis have fallen minimally since March, after the announcement of the settlement. It fell from 2.6% in March to 2.56% in mid-July.

Analysts with TD Cowen expect the settlement could reduce realtor commissions by 25% to 50%. Another change requires buyers’ agents to discuss their compensation upfront.

“I think that’s going to be the biggest change for both consumers and agents. It’s not just allowing somebody to walk through that house because we have a showing, let ’em run through really quick to see things,” said Hardy.

There are 22,000 real estate agents in Minnesota. Hardy says some may leave the business because of the changes,but others will thrive.

“I think competition is going to win out in the end, and people are going to truly know what we do for a living and understand what they’re paying for,” said Hardy.

The new rule changes the National Association of Realtors agreed to as part of the settlement take effect on Saturday.

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Derek James anchors Saturday and Sunday evening newscasts and contributes stories during the week on “The 4.”



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How real estate agents get paid changes Saturday

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“If you’re a buyer, you’re likely not seeing that form,” McFall said.

Realtors aren’t the only ones paying close attention to those new forms.

Prentiss Cox, a law professor at the University of Minnesota, said it remains to be seen whether it’ll now cost less to buy and sell a home. The current commission structure, he said, has been difficult to upend in part because of what he calls persistent “collusive practices” that force buyers and sellers in the U.S. to pay 5% to 6% to sell a home, not including other fees, while the rest of the world pays roughly half that.

As of mid-July, the typical U.S. seller paid a buyer’s agent alone a 2.55% commission, according to a new Redfin analysis of MLS data. That’s down from an average of 2.62% in January. The study didn’t track commissions paid to the listing agent.

The average commission paid to a buyer’s agent in the U.S. is $15,377, up slightly from $15,124 in January. The dollar amount has increased marginally, even though the percentage has declined because of the rise in home prices.

Redfin said while it’s possible news of the NAR settlement has contributed to the recent decline by making consumers more aware they can offer any commission to a buyer’s agent or none at all, commissions were already on a gradual decline prior to the settlement. Through the past decade, the average buyer’s agent commission fell from 2.89% in 2013 to 2.66% in 2023.



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Real Estate Commission Changes Are Here For Buyers, Sellers | Bankrate

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The National Association of Realtors (NAR) agreed to new rules around real estate commissions as part of a lawsuit settlement in March. As of August 17, they’re actually rolling out — and consumers face a deluge of confusion and conflicting predictions.

One narrative predicts a coming utopia for homebuyers: A price war will erupt, and commissions will plunge amid a new wave of competition among buyers’ agents. A competing narrative goes in the opposite direction: Under the new commission structure, buyers will realize they’re on the hook for thousands and decide not to use agents at all. NAR, meanwhile, has portrayed the changes as minor tweaks rather than a major shift.

The opposing narratives underscore just how complex Realtor compensation has always been — and how much more complex it just got. Here’s a look at the new commission structure and what it could mean for both homebuyers and sellers.

How real estate commissions used to work

Traditionally, when a home seller hired a real estate agent to represent their listing, the seller agreed to pay a commission. The national average has been about 5 percent of the home’s sale price, typically split down the middle with 2.5 percent going to the listing agent and the other 2.5 percent to the buyer’s agent. (On a $400,000 home, 5 percent comes to $20,000, or $10,000 for each agent.)

Who pays?

Even this has been a bit murky. Agent fees came out of the seller’s proceeds at closing, but it’s reasonable to assume that the seller adjusted their price accordingly — the fees were baked into the home’s sale price. And so the buyer ultimately paid, just not directly to the agents: That extra 5 percent was rolled into the home’s sale price.

What’s changing?

The biggest change is that listing agents (the agents who represent home sellers) may no longer make offers of compensation to buy-side agents on any NAR-affiliated multiple listing service (MLS). In addition, a buyer’s agent must now have a written contract with a home shopper, clearly specifying their fee, before they may show that client a house. Until now, NAR encouraged but didn’t require written agreements between buy-side agents and buyers.

A federal judge gave preliminary approval to the settlement in April 2024, and the final holdout among the brokerages named in the suit — HomeServices of America, part of Warren Buffett’s Berkshire Hathaway — also settled in April. While final court approval is not expected until November, the rules took effect August 17.

Compared to the old model, the new version offers a greater level of transparency for consumers — homebuyers now will be fully aware of how much they’re paying for an agent’s services. “It’s always good when people understand what they are and are not paying for,” says David Druey, Florida regional president at Centennial Bank.

An important aspect of the new model for agents: While the new rules prevent listing agents from posting buy-side commissions on the MLS, as they used to, sellers and listing agents still can agree on the amount off the MLS. That means it’s OK to offer compensation amounts verbally, in emails or texts, and even on their brokerage’s own website, as long as it’s not done on the MLS.

“Although sellers can elect not to pay any buyer agent compensation, that doesn’t mean they will avoid the economics,” says Budge Huskey, president and chief executive of Premier Sotheby’s International Realty in Naples, Florida. “Buyers may easily write into any offer a contingency requiring that the seller cover the cost, or may request other concessions, such as closing cost assistance in the dollar amount they are paying their representative.”

Does this mean real estate commissions are now negotiable?

Technically, real estate commissions always have been negotiable — a theme NAR long has stressed. Practically, though, the picture gets complicated. In many cases, Realtors are more skilled at negotiating than their clients, so the consumer comes into the negotiation at a disadvantage. What’s more, the buyer’s agent commission was previously determined by the seller, not by the buyer. The new rules shift that responsibility to buyers, who now will discuss compensation directly with the agents representing them.

Is this good or bad for consumers?

Until we see how things shake out over time, the answer really depends on who you ask. Some foresee a near-nirvana for consumers: Vishal Garg, CEO of mortgage company Better, predicts the settlement will unleash a “buy-side price war” — buyer agents will begin competing fiercely for clients.

Others fear a darker turn. Ken H. Johnson, a real estate economist at Florida Atlantic University and a former real estate broker, says the new rules just add another layer of complexity to an already-confusing process.

“No longer advertising buyer agent commissions will only create a more confused and drawn-out transaction process as buyers, sellers and agents will have to negotiate the fee, who will pay for it and how much will be paid by each party,” Johnson says. “Due to this added level of complexity, buyers will almost certainly have to negotiate with more sellers before they find the deal they are satisfied with. Thus, the house-hunting period will extend for the average buyer.”

Concerns for first-time buyers

Many in the real estate industry worry that first-time homebuyers — those who need expert guidance the most, and who are already severely hampered by high prices and high mortgage rates — will be priced out of professional representation. If commissions no longer come out of the seller’s proceeds, the thinking goes, buyers won’t have an additional $7,500 or $10,000 to pay an agent.

“Most of those buyers are scraping the barrel to the bottom to come up with a down payment,” says Dave Liniger, chairman and co-founder of RE/MAX. (The firm was one of the large brokerages named as defendants in the suit along with NAR; RE/MAX settled last year for $55 million.)

For now, buyers can’t roll commission costs into their mortgages under the new rules. But industry players widely expect the Federal Housing Finance Agency, overseer of mortgage giants Fannie Mae and Freddie Mac, to change those rules.

“I think there’s going to be pressure on them to allow that,” Liniger says. “The industry needs first-time buyers.”

Indeed, NAR already has been attempting to nudge the mortgage industry in that direction: “We are talking with Freddie and Fannie to see what can be done,” says Lawrence Yun, NAR’s chief economist.



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The Future Of Real Estate Commissions | Bankrate

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Real estate commissions have survived the rise of the Internet and decades of attacks from disruption-minded discounters. Now, finally, they might be coming down.

A federal lawsuit has forced changes to the way consumers negotiate and pay real estate agents. In October 2023, a federal jury in Missouri found that the National Association of Realtors (NAR), along with several large brokerages, conspired to inflate Realtors’ commissions. The brokerages all settled out-of-court, and in March 2024, NAR settled as well, agreeing to pay $418 million in damages and change some of their longstanding rules. (Final court approval is expected in November.) Here’s what it means for homebuyers and sellers.

How real estate commissions are changing: A ‘price war’?

As of August 17, home sellers are no longer automatically responsible for paying both their own agent and the buyer’s agent. Instead, homebuyers who want representation may have to pay their own agents separately: Under the new system that NAR agreed to in settling the suit, when a home hits the market, listing agents will no longer specify how much the buyer’s agent will be paid. Instead, that fee will be negotiated separately between the buyer and the buyer’s agent.

Next up, perhaps: Full-throated price competition among buyers’ agents. “You’re going to see a buy-side price war by next year,” says Vishal Garg, CEO of mortgage company Better.

Technically, real estate commissions have always been negotiable. Practically, though, agents are more skilled at negotiating than their clients, and commissions have clustered in the range of 5 percent. The new rules set the stage for buyer agents to aggressively market their fees. Stephen Brobeck, senior fellow at the Consumer Federation of America, expects commissions will ultimately fall below 4 percent, maybe even to 3 percent. “Over time, more agents will feel free to offer different types of compensation, and more consumers will comparison shop and negotiate commissions in a more transparent marketplace,” he said.

A new era of competition among buyer agents is coming soon, says Garg. “In the best-case scenario, consumers are going to shop around for buy-side agents in the same way they shop around for mortgage lenders,” he says.

A financing wrinkle

There are still many details to be worked out. If the buy-side agent is no longer paid from the listing commission, then that means the buyer is responsible for paying their agent directly — a sum that would average about $10,000, based on a 2.5 percent commission and a $400,000 sale price. For now, buyers aren’t allowed to roll that amount into their mortgage to be paid over time. However, it’s possible that the Federal Housing Finance Agency will change its rules to allow Fannie Mae and Freddie Mac mortgages to include commissions. Industry experts expect federal regulators to tackle that topic in the near future.

How much do commissions cost?

Under the longtime standard, if a homeowner sold a property for $400,000, about average for existing homes in the United States, the seller paid a commission of around 5 percent, amounting to $20,000. That amount was then split between the seller’s own agent and their buyer’s agent (which hardly mattered to the seller, who still had to pay the full amount regardless).

Long ago, 6 percent was the going rate for real estate commissions; 3 percent to each agent. But after decades of competition and regulatory scrutiny, the typical commission now is slightly less than 5 percent, according to data from Anywhere Real Estate, the parent of Coldwell Banker, Century 21 and other large real estate brands. In its filings with securities regulators, publicly traded Anywhere reports that its average commission “side” — half the commission — is currently about 2.4 percent.

While commissions briefly rose during the Great Recession and again in 2023, rates in general have been falling steadily for decades. For Realtors, this decline in commission rates has been offset by rising home prices: They’re getting a smaller piece of the pie in terms of their percentage-based fee, but the pie is getting bigger.

About the NAR lawsuit

In the case that went to trial in 2023, Missouri home sellers alleged antitrust violations by NAR and four major brokerages: Keller Williams, Anywhere, RE/MAX and HomeServices of America. Anywhere and RE/MAX settled before trial — paying $83.5 million and $55 million in damages, respectively — while the other defendants opted to take their chances in the courtroom.

The jury ruled against the industry, and a judge ordered NAR and the two remaining brokerage firms to pay $1.8 billion in damages to home sellers. Keller Williams eventually settled for $70 million, and HomeServices of America, part of Warren Buffett’s Berkshire Hathaway, settled for $250 million. NAR also agreed to pay up and change its practices.

Other dramas

NAR has recently faced other headwinds in addition to the antitrust lawsuit and related cases. A sexual harassment scandal led to the resignation of the organization’s then-president in 2023, and the organization’s next president and longtime CEO then stepped down as well.

All the drama has created unease and unrest in the ranks. Redfin cut ties with the trade group, requiring many of its brokers and agents to cancel their memberships, and other brokerages have followed suit. In addition, two influential real estate agents have launched a competing trade group, known as the American Real Estate Association (AREA).

One of the new group’s cofounders, Jason Haber — a broker/agent at Compass in New York City and an outspoken NAR critic — described AREA as an alternative, not a replacement. “We’re not trying to replace NAR. We’re not trying to replicate NAR,” he said. “They have a 108-year head start.”

Competition and the MLS

The residential real estate industry has long presented a dichotomy. On the one hand, it has essentially controlled the marketing of properties for sale through a nationwide network of multiple listing services (MLSs). That reality has led to grumblings about collusion and price-fixing, along with scrutiny from the U.S. Department of Justice.

On the other hand, real estate sales is a relatively easy business to get into, as evidenced by NAR’s membership rolls of more than 1.5 million agents. To earn a real estate license, an agent typically needs to take a couple of classes and pass a state exam. No college degree is required, and the costs of entry are modest. However, the settlement is expected to thin the ranks.

Lawrence Yun, NAR’s chief economist, pointed last year to these low barriers to entry as evidence that competition is alive and well: “Real estate is a perfectly competitive industry,” Yun said during the organization’s annual conference in November.

Brobeck, the consumer advocate, disagrees with that assessment. “It’s not a free market right now,” he said. “There’s intense competition for clients. But there’s no competition on rates. In a normal marketplace, you compete based on marketing, but also on the price you charge.”

Meanwhile, the industry mantra has long held that commissions are negotiable, suggesting that sellers and buyers call the shots when it comes to how much they pay agents. In practice, though, consumers buy or sell a home only once every 5 to 10 years, if that, and many aren’t knowledgeable enough about the process to successfully negotiate the rate down.

“Consumers are at a disadvantage,” Brobeck said. “They buy and sell homes infrequently, and they’re mostly concerned about sale price and timing.”

Historically, discounters have not succeeded

For decades, detractors have predicted the demise of real estate commissions. These fees were sure to go the way of stockbrokerage commissions and travel agency fees, the naysayers said. Instead, real estate commissions have proven stubbornly resilient.

It’s not for a lack of trying. Many disruptors have seen commissions as a problem to be solved, but most have fallen short of reshaping the industry.

In the early 2000s, for instance, a splashy discounter known as YourHomeDirect (and later Foxtons) offered 2 percent commissions in New York and New Jersey. But after advertising heavily and gaining market share, it ultimately collapsed.

A decade later, London-based Purplebricks pushed into the U.S., wooing sellers with a flat fee of $3,200. It, too, overestimated demand and pulled out of the U.S. market in 2019.

One high-profile discounter, Seattle-based Redfin, has achieved greater staying power. It launched as a cheaper alternative to traditional brokers and touted listing fees of just 1 percent, although it has since shifted to focusing on 1.5 percent listing fees.

How sellers can save on real estate commissions

If you’re not keen on paying agent commissions, here are some alternative options:

Go it alone: Sell your home without an agent in a “for sale by owner” transaction. Between July 2022 and June 2023, 7 percent of home sales were sold by owners without the help of an agent, according to NAR data. But selling without professional help is a lot of work to do on your own, and it technically only saves you one agent’s commission — you may still have to pay your buyer’s agent.

Negotiate: If you don’t want to go it alone, ask agents about their commission rates upfront and compare the terms of each person you talk to. If you think the fee is too high, see if they’re willing to lower it. If both agents in the transaction are from the same brokerage, you might have more leverage to negotiate.

Hire a discount agent: A low-commission real estate agent will likely charge much less than a traditional agent would — usually 1 to 1.5 percent of your home’s sale price. (However, you might not receive the personalized attention you would with a traditional Realtor.) There are also brokerages and agents who work on a flat-fee basis, earning a preset amount on the sale rather than a percentage of the sale price.

Sell to a cash-homebuying company: These companies, which often advertise “we buy houses,” pay in cash, close quickly and typically charge no fees. However, if you sell this way you’re likely to get a lower price for your home than you would with a traditional sale.



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The NARS settlement agreement will not only affect real estate agents but also home buyers

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GAINESVILLE, Fla. (WCJB) – On August 17th policy changes are coming to people looking to buy and sell a home, as well as agents commissions.

The real estate industry is changing some of its practices and many people, including homebuyers and sellers, may not be aware of what’s in store.

“The news entails a buyer is now required to have some sort of agreement with their realtor before they start looking at homes. That’s one portion of the settlement and the other portion of it is that home sellers can no longer offer compensation to a buyer realtor in the MLS” President-Elect Gacar, Lisa Baltozer added.

This affects the buyers, to know how the market is changing. They will be responsible for paying for their agents. Sellers can negotiate the fees to both parties.

Still, agents can’t advertise for buyers’ agent’s commissions on the MLS

Some real estate agents favor the new changes, like Debra Martin-Back who is the broker of Exit Realty Producers.

“I think it’s a great thing for the industry and now it’s going to put us at a new level. Nobody works for free, nobody goes out there without telling you what they are charging. Now we are just doing it upfront and we are not relying on the seller and agents to pay us which has happened in the past. Whatever was in the MLS is what we got paid” Martin-Back added.

Others are hopeful agents will follow the rules and explain all the information to their clients upfront.

Florida realtor Zome De Las Estrellas said,

“I am a little annoyed by it because it’s a little more complicated but I’m not worried about it. I think my biggest concern would be just hoping that other agents are doing their part to explain the rules”.

Realtors say this changes the game when buying or selling a home. It’s a learning curve that everyone is learning together.

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11 Upgrades That Actually Make Your House Harder To Sell, According to Real Estate Experts

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In a competitive housing market where first impressions are everything, coming in with all the right intel on buyer psychology is key to a speedy sale. “While you only need one buyer, it’s also important that you’re putting your absolute best foot forward,” Austin-based real estate agent Emily Ross says, adding that buyers are getting pickier these days and less willing to renovate after moving in. At the risk of staging a boring home, Ross says, “When in doubt, go classic.” Above all, buyers prize neutrals, matching appliances, and open spaces that can help them envision how they want to shape the home rather than living with other people’s existing design decisions.

She, along with Opendoor head of real estate Kerry Melcher, advise looking at other listed homes in your neighborhood for context clues on what’s working and what’s not. “I often try to find a recent sale in the neighborhood that sold for an above-average price and/or quickly as an example of what to emulate,” Ross says. In other cases, having the only home on the market in your neighborhood without a renovated kitchen lets you know that you might not be getting the most competitive offers compared with the Joneses next door.

To hear more on what modern finishes and design choices are of-the-moment but not so friendly to buyers, we asked real estate agents what to avoid, along with what they recommend swapping in instead.

Related StoriesA Colorful Kitchen

Colorful hues can be a draw for individual buyers, but they won’t appeal to everyone. Take yellow, a hue that’s become a popular choice for brightening up the kitchen. “Yellow is said to symbolize energy and optimism, and I’ve often seen it used in kitchens and laundry rooms,” Melcher says. Still, she notes, the sunny hue can potentially alienate people and make dimly lit rooms appear more dingy.

Buyer-friendly alternative: Melcher suggests sticking to traditional neutrals that offer shoppers a blank slate so they can easily envision their style.

Related StoryNaked Floor-to-Ceiling Windows

Tall, open floor-to-ceiling windows without any muntins (vertical dividers) or grilles crisscrossing them are a fixture of the modern glass-house trope. They draw in lots of sunlight and offer unobscured views of the outdoors, which you might think could only be a good thing. Ross warns that this trend isn’t likely to win over buyers who prioritize privacy, energy efficiency, and security.

Buyer-friendly alternative: Ross suggests buying long, sheer curtains or remote-controlled roller blinds to soften the windows and shield the home from prying eyes.

Related StoryBlack Kitchen Cabinets

Some homeowners today are venturing off the beaten path and into moodier palettes for kitchen cabinets, opting or colors like black and dark green to play off matte appliances and finishes. The trend can be polarizing.

Buyer-friendly alternative: Ross suggests playing it safe with a clean white palette for cabinets and adding personality with new knobs and pulls. If you’re still itching to have some fun with moody or bright colors and patterns, she adds, a powder room or utility room is a great place to do that.

Related StoryA Jewel Box Ceiling

Cloaking an entire room in one hue—a paint technique also called color drenching—can heighten its coziness and make intimidatingly high ceilings feel lower and more human scale, though the jewel-box look is not a design choice for the faint of heart.

Buyer-friendly alternative: Add a slightly darker accent wall to your primary bedroom or bathroom to can break up the sea of neutrals, Ross advises.

Related StoryBold Appliances

Sometimes your appliances can be a deterrent to buyers who gravitate toward a sleek and simple aesthetic. Los Angeles–based real estate broker Casey Winchell Napolitano, founder of NDA Real Estate, says “2024 is all about bold color choices in the kitchen,” and points to black or pink statement appliances as an example. All that flair may be a fleeting trend, though.

Buyer-friendly alternative: Napolitano recommends swapping out colorful appliances for classic ones in stainless steel or panel-ready appliances that offer broader appeal when it comes time to sell. “Bonus points if you can get all the appliances to match,” Ross adds, whether that’s a suite of matching stainless steel or paneled devices.

Glass Door Refrigerators

Another appliance no-no, according to Napolitano, is glass door refrigerators, which are popular for their modern aesthetic but not so practical. “While they can certainly add a sleek, modern touch to a kitchen, they require constant upkeep to maintain their appeal,” she says. “Smudges, fingerprints, and food splatter can quickly diminish their allure.” Besides upkeep, some buyers might also be turned off by the lack of door storage that’s common among these types of fridges.

Buyer-friendly alternative: Opt for a standard door fridge. French door and bottom-freezer styles are especially popular.

Related StoryMaximalist Wallpaper and Custom Murals

In real estate, where first impressions are everything, buyers might not want to open the door to wild patterns on every wall. “If they see bold or outdated wallpaper, they immediately calculate the cost and effort of removing it, and it’s expensive,” Napolitano says. Melcher adds that the same goes for custom murals, which can potentially deter buyers by coming across as too personalized.

Buyer-friendly alternative: Neutral paint. Both Napolitano and Melcher say it presents as a clean slate that allows potential buyers to imagine their own touches, making it easier to emotionally connect with the home. According to Opendoor’s 2024 Home Decor Report, homeowners prefer beige/tan, gray, and variations of white paint for the exterior, interior, and front door of a home.

Related StoryLED Chandeliers

Beyond the much-maligned boob lighting of rental homes, more directional choices like LED chandeliers in unusual configurations are en vogue but not always well received by shoppers. Ross says that when installed over a dining table or as pendants over a kitchen island, they can feel too cold and detract from the surrounding beauty of the space.

Buyer-friendly alternative: A staircase, entryway, or other walkthrough area is a better location for making the most of these sculptural lights (and making a good first impression with buyers), Ross says.

Related StoryThe Color Pink

Barbie pink had a moment last year at the box office, in home design, and in businesses—basically everywhere except in the housing market. Opendoor data identifies pink as the least appealing color for exteriors, interiors, and front doors, Melcher says. “Pink exteriors can be overwhelming for some,” she adds.

Buyer-friendly alternative: Incorporate pink in less permanent or softer ways. “I’d advise homeowners to incorporate the color in smaller doses and in more muted tones, like dusty rose,” Melcher says.

Related StoryCollections and Displays

Anti-minimalist cluttercore enthusiasts have turned an artful obsession with nostalgia into a whole lifestyle. According to Ross, all that clutter doesn’t photograph well for a listing. “The less on the countertop, the longer and bigger it looks on camera,” she says.

Napolitano is a little sterner: “Buyers want to envision themselves in the home and if you have too much going on, it can literally make or break an opportunity for an offer,” she emphasizes.

Buyer-friendly alternative: Keep surfaces clear of personal items—and keep most of your belongings in closed storage.

Related StoryBig, Maximalist Furnishings

That same less-is-more philosophy holds true for your furniture too. Napolitano says a good edit is always necessary to open up a space, and Ross explains that the things to keep in a purge are furnishings that fit the room rather than making it appear smaller. That means losing the oversized couches, conversation pits, or otherwise maximalist-leaning designs that—while popular on Instagram—can overwhelm a tight space IRL. “Also, make sure you don’t have anything in your home that may be meaningful to you but controversial or offensive to buyers,” Napolitano adds.

Buyer-friendly alternative: Choose minimalist furniture with a sleek profile that makes your space look larger and more open.

Related Story

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