2024 Changes to Real Estate Commissions Structures

One of the most sizable closing costs facing home sellers (and sometimes, buyers) has traditionally been real estate commissions: a percent of the sale paid to the agents involved. 

And while that fact isn’t necessarily changing with the 2024 changes to real estate commission structures, percentages and ways of working are shifting. 

So, if you plan on buying or selling a home, you’ll want to learn about the new rules and how they’ll affect you. Here’s everything you need to know. 

How are real estate commissions changing? 

Before exploring how commissions are changing, it’s important to understand how agent compensation has traditionally been structured. Typically, most real estate agents have been paid through commissions, which have long hovered at a rate of 5 to 6 percent of the total sale price of a property.

Buyer’s agents and seller’s agents split that total commission, and sellers were responsible for paying all real estate agents involved in a transaction—including the buyer’s agent. None of these rules or figures were set in stone; technically, consumers could always negotiate terms. But they’d become an industry standard.

With such standardized terms, agents were no longer competing on price. That is, one agent charging a seller 6 percent had no competitive price advantage over another agent charging that same amount. In turn, consumers didn’t have much choice when it came to finding a more economical representation option.

Plus, sellers who weren’t willing to pay the full commission—say, offering to pay only 3 or 4 percent, could have a hard time attracting buyers to their properties. Conversely, if a buyer’s agent stood to make a better commission by working with a high-paying seller, this realtor could exclusively show their clients homes that’d result in a lucrative commission payday—whether or not those were the right homes for that buyer. 

Now, both buyers and sellers can negotiate fee rates with their respective agents. And sellers cannot advertise what percent of a buyer’s commission they’d be willing to pay (if any) on a multiple listing service (MLS) nor can listing agents detail on this platform what the buyer’s agent will earn. The parties involved must now negotiate these terms “offline.” 

What’s more, realtors will likely have to offer or accept attractive rates to be competitive, meaning that, real estate commissions could fall across the board. Some agents might even consider alternative compensation structures. 

What spurred the change? 

Changes to the real estate commission structure are the result of legal proceedings. The National Association of Realtors (NAR) was sued and found guilty of manipulatively maintaining high commission rates. As a part of a class-action settlement agreement, the NAR committed to changing commission practices. In addition to the lawsuit, the US Department of Justice (DOJ) had held a long-standing argument that commission practices worked against healthy market competition, which these new rules should foster.

Shifts went into effect on August 17th, 2024.

How does this change affect buyers and sellers? 

According to the NAR, one of the biggest changes that buyers and sellers will experience as a result of the settlement is choice in establishing a fee structure. Buyers and sellers can now set their own terms.

Sellers who wish to make purchasing their home attractive (or, even, feasible) to a buyer can offer to pay a sizeable amount or all of the realtors’ commissions. Or sellers might offer concessions, covering some of the buyer’s closing costs. This said, sellers should no longer be assumed liable for full commissions. 

And buyers can get a leg up by being savvy in their commission negotiations. A buyer who asks a seller to pay a lower percentage of commissions may have a better shot at winning a home bid. Suppose a seller gets several offers on their home and one buyer asks the seller to cover 3 percent of the commissions while another asks for 4. It’d behoove the seller to work with the buyer asking for the lesser amount.

Another significant change is that buyers and sellers must negotiate, agree to, and clearly set commission terms. Buyers must do so in a written agreement before they tour a home they’re interested in. Their agents cannot receive any additional income that isn’t stated in writing.

Finally, with more freedom of choice, buyers and sellers can now compare and analyze before selecting an agent. While you might have once selected a realtor based on their skills or sell-through rate (STR) alone, you can now also figure price into your choice. 

Yes, it’s still smart to work with an agent

If you’re a homebuyer, you might find yourself paying commissions you’d never considered thanks to the rule changes spurred by the NAR settlement. After all, in the past, a seller would have likely covered your agent’s commissions, but now you’ll be footing that bill. So, you may be asking yourself if getting an agent is worth the expenditure. 

The short answer is “yes.” Agents are knowledgeable professionals who work hard for buyers. They find excellent properties that meet your needs and price range, arrange visits to those homes, and leverage their top-notch negotiation skills to get you a fair price. Plus, realtors are experts at completing the complex paperwork that accompanies a real estate transaction, saving you from potential legal issues. 

And if you’re a seller, there’s even less reason commission changes should deter you from working with an agent. You may even spend less to complete your sale since you’re no longer responsible for paying the buyer’s agent and can ostensibly negotiate lower listing agent commission rates more easily than before. Plus, you benefit—even profit—from working with a real estate professional. This person will take care of complicated paperwork, correctly market your home, and guide you on value-driving renovations and staging suggestions. In the end, your home can sell more quickly and at a higher price. 

Selling your home? Work with a top agent through Titus

Home sellers can move their property to an ideal buyer quickly and at top dollar by working with a Titus-affiliated agent. Titus only works with the most talented, proven players in the real estate industry, whose sell-through rate is far above the national average and who are experts at preparing homes for a successful transaction.

Titus partner agents also have exclusive access to a unique line of credit destined for a seller’s repairs and renovations. Make your property more attractive to buyers by using a closing line of credit (CLoC) to fix up your home before putting it on the market. Credits of up to $25,000 are zero-interest and you’ll owe no upfront or out-of-pocket fees. Find out how it works here.