The real estate industry is evolving. Recent changes in commission structures, stemming from a major legal settlement, have reshaped the way real estate professionals are compensated. As a result, both buyers and sellers need to understand how these shifts may affect their transactions — especially regarding commission payments. In this article, we’ll break down how the old system worked and how the new model functions, using a real-world example.
How the Commission Model Worked Before 2024
Historically, the commission for both the listing agent and the buyer’s agent in a real estate transaction was typically paid by the seller. This usually totaled 5–6% of the home’s sale price, with 2.5% going to each agent. This meant that the buyer’s agent’s fee was already built into the seller’s proceeds, and buyers didn’t have to pay their agent directly. However, legal challenges to this model led to changes aimed at improving transparency and fairness.
The New Commission Model Post-Settlement
In 2024, a landmark settlement in the real estate industry required changes to how commission payments are handled. Under the new system, buyers are now required to enter into buyer representation agreements with their agents. Additionally, the buyer’s agent commission is no longer automatically listed in the MLS, which means buyers must negotiate their agent’s fee upfront.
However, this doesn’t mean the buyer must pay the agent directly. Sellers can still offer to cover the buyer agent’s commission, but now, it’s handled through seller-paid closing costs rather than being openly listed in the MLS. This gives both buyers and sellers more flexibility, although it may change the way they approach their transactions.
Real-World Example: Comparing the Old Way vs. the New Way
Let’s use a $400,000 purchase price as an example, with a 2.5% commission going to both the listing agent and the buyer’s agent. Here’s how both the old system and the new system compare:
| Scenario | Old Way (Pre-2024) | New Way (Post-Settlement) |
| Purchase Price | $400,000 | $400,000 |
| Total Commission (5%) | $20,000 (2.5% to each agent) | $20,000 or less, negotiable |
| Buyer Agent Fee Amount | $10,000 (2.5%) paid by seller | $10,000 — can be paid by buyer or via seller-paid closing cost credit |
| How Buyer Agent is Paid | Seller pays from proceeds | Buyer pays out-of-pocket or finances it via mortgage if seller contributes |
| Seller Net After Commissions | $380,000 | $380,000 if seller offers $10,000 toward buyer’s closing costs |
| Buyer Out-of-Pocket at Closing | Only typical buyer closing costs | $10,000 more in closing costs unless financed |
| Financing Option for Buyer Fee | Not applicable | Buyer can roll costs into mortgage if lender allows |
| Buyer Representation Agreement | Optional | Required before home tours begin |
| Commission Disclosed in MLS? | Yes | No |
| Can Seller Still Offer Buyer Agent Pay? | Yes | Yes — just not advertised through MLS |
What Does This Mean for Buyers and Sellers?
For Buyers
- Increased Financial Responsibility: While buyers may now need to pay their agent’s commission directly, this cost can potentially be financed into the mortgage. This means buyers can still manage the cost over time, rather than paying out-of-pocket at closing.
- Negotiating Power: Buyers now have more direct control over their agent’s compensation, making it easier to negotiate based on their budget and the complexity of the transaction.
- Buyer Representation Agreement: It’s important to note that, under the new system, buyers must enter into a buyer representation agreement before viewing homes. This ensures clear expectations between buyers and their agents.
For Sellers
- Strategic Commission Offers: Sellers still have the option to offer buyer agent commissions, but it will no longer be automatically included in MLS listings. This allows for more flexibility in how commissions are structured, but sellers should weigh the impact on their listing’s visibility and attractiveness.
- Closing Cost Credits: Sellers may offer credits toward the buyer’s closing costs, which can be used to cover the buyer agent’s commission. This offers a way for the seller to maintain similar financial outcomes to the old system, while also reducing their net proceeds from the sale.
- Maintaining Appeal to Buyers: Offering a buyer agent commission, even through closing cost credits, can still help sellers attract more buyers in competitive markets.
Bottom Line
The real estate commission model has changed significantly, but with careful planning, both buyers and sellers can navigate the new landscape with minimal disruption. The core financial impact remains similar — sellers can still offer commission credits, and buyers can finance their agent fees into the mortgage — but the mechanics have shifted to improve transparency and control for all parties involved.
If you’re buying or selling in the current market, it’s important to understand these changes and how they can impact your transaction. Whether you’re a first-time buyer or a seasoned seller, consulting with us at Soldsense to help ensure you make informed decisions in line with the new rules.