Real Estate Agents Prepare for Historic Commission Shakeup

Realtors across the United States are bracing for a seismic shift in the industry as new rules are set to transform how agents are compensated. Starting August 17, the changes—stemming from a $418 million settlement announced in March by the National Association of Realtors (NAR)—will overhaul the traditional payment structure, where home sellers typically footed the bill for commissions.

For decades, home sellers have been expected to pay a 5% to 6% commission, usually split between their agent and the agent representing the buyer. With the new rules, this practice will be upended. Realtors have spent the months since the settlement announcement preparing for these changes, attending trainings, and studying the details of new contracts they must sign with prospective homebuyers.

Understanding the Changes

Traditionally, a seller’s agent charged a commission fee of 5% or 6% of the home’s purchase price, shared with the buyer’s agent. This could mean significant costs for home sellers. For example, a seller of a $1 million home might pay $60,000 in commissions. Some experts have argued that these fees inflated home listing prices, leading to higher costs for buyers.

The NAR has long defended the commission structure, claiming the fees were negotiable. However, a series of lawsuits alleged that this standard practice violated antitrust laws. The settlement includes two key rule changes, which take effect on August 17 and aim to disrupt the traditional commission structure.

Key Rule Changes

The first change prohibits agents’ compensation details from being included on multiple listing services (MLS), the centralized databases Realtors use to share information about homes for sale. While compensation can still be advertised or communicated directly, the change aims to increase transparency.

The second change requires buyers’ agents to discuss their compensation upfront. Agents must now enter into a written buyer agreement before touring a property with a prospective buyer. This agreement informs buyers they may need to cover their realtor’s fees if the seller does not.

Although these changes may seem daunting, many realtors are already familiar with similar agreements, as 18 states require realtors to sign buyer agency agreements.

Sarah Hill, Broker In Charge/Owner of 864 Realty LLC, explained, “Commission has always been negotiable. South Carolina was already among one of the  states with language in our forms on how commissions were to be paid, but now they have been updated making things clearer for consumers. The biggest change is that realtor compensation can no longer be placed in MLS, To advertise compensation to cooperative brokers in our marketplace. starting the 17th, you’ll need a written agreement with a realtor before seeing a house, whether in person or virtually. We strive to continue be the best advocates for our buyers and sellers.”

Implications for the Industry

The upcoming changes have sparked varied reactions among realtors. As the real estate industry prepares for this significant change, the focus remains on ensuring transparency and fairness in agent compensation. With a final approval hearing scheduled for November 26, Realtors and homebuyers alike will be watching closely to see how these new rules reshape the real estate landscape.