Who pays the real estate agent’s fees when you buy a house, the buyer or the seller?

In the United States, the payment of real estate agent fees traditionally fell on the home seller.

Typically, the seller pays a commission fee that ranges from 5% to 6% of the home’s sale price. This commission is then split between the seller’s agent and the buyer’s agent. For example, if the commission is 6% on a $400,000 home, each agent might receive 3%, equating to $12,000 each.

However, this traditional model is changing rapidly due to recent legal and industry developments

How real estate agent’s fees are changing

New rules announced by the National Association of Realtors (NAR) and legal settlements are shifting this landscape. In October 2023, a federal jury in Missouri found that NAR, along with brokerages such as Keller Williams, Anywhere Real Estate, RE/MAX, and HomeServices of America, conspired to inflate real estate commissions. This led to a settlement where NAR agreed to pay $418 million in damages and implement changes to its longstanding rules

Since 17 August, the compensation for real estate brokers are no longer be listed on multiple listing services (MLS), and buyer-side agents will need to enter into written agreements with their clients. Homes will not be allowed to be shown unless the buyer’s fee for the realtor has been shown.

This could lead to a model where buyers pay their agents directly, rather than the seller, with realtors having to compete against one another for competitive rates. Real estate commissions are expected to fall 25% to 50% by some estimates.

“These changes help to further empower consumers with clarity and choice when buying and selling a home,” NAR’s president, Kevin Sears, said. “I am confident in our members’ abilities to prepare for and embrace this evolution of our industry and help to guide consumers in the new landscape.”

Selling a home will suddenly become a whole lot cheaper.