Commission Rules Change and its Impact

On August 17, 2024 new rules governing half of real estate commissions changed.  The rule change was the result of a settlement from an earlier lawsuit where a group of sellers prevailed over some real estate brokerages and the National Association of Realtors. 

Commissions are always negotiable both before and after the rule change.  But real estate practice for decades was for the seller to bear the burden of commissions for both buyer and seller.  Now the practice is to address compensation to the buyer’s brokerage in the purchase agreement instead of in the listing agreement.

The seller always pays the commission for their own listing brokerage.  But after August of 2024, any brokerages representing buyers must have a representation agreement which address payment of a buyer’s brokerage commission.  Nationally, the MLS no longer offers compensation to the buyer’s realtor coupled with the listing data itself.

What does this mean to sellers and buyers?  For real estate sellers, watch the purchase agreement for any term requiring payment to another real estate brokerage, most often that compensation is still paid by the seller. 

For buyers, there is more structure to the buyer representation agreement.  Buyers should understand they may be responsible for a sizeable commission to their own agent, under a buyer brokerage agreement.  That commission could become the seller’s cost if the purchase agreement so states.  The net result is that this, like any term, is negotiable.