A lot has been discussed regarding potential changes to real estate commissions following the proposed settlement in the National Association of REALTORS® (NAR) lawsuit. If you’re considering entering the real estate field, you might be curious about how this recent lawsuit could impact your earnings. Here is an overview of real estate commissions and insights on how they might evolve.
Related Article: Understanding the NAR Lawsuit Settlement and Its Impact
Key Takeaways
- Commissions Are Negotiable: Real estate commissions remain negotiable. Despite regulatory changes affecting how buyer agent compensation is listed on MLS following the settlement, the flexibility to negotiate commissions is unchanged. The settlement does not directly impact the fees that sellers and buyers pay for services.
- Higher Home Prices Mean Higher Commissions: As home prices rise, even potential changes in commission percentages could be offset by the increasing total value of commissions.
- Most Americans Still Hire Real Estate Agents: Despite speculation about the end of traditional real estate models due to digital platforms and discounted services, the majority of U.S. home sellers continue to use agents or brokers.
What You Need to Know About Real Estate Commissions
Here’s what you need to know about U.S. real estate commissions post-settlement.
1. Real estate commissions have always been negotiable
Real estate commissions have always been and will continue to be negotiable. Typically, residential real estate commissions range from 5% to 6% of the property’s price. Traditionally, sellers paid the entire commission, which was shared among the seller’s agent, the buyer’s agent, and the respective brokerages. Before the settlement, it was common practice for the seller’s agent to share the buyer’s agent’s commission amount in the agent-only section of an MLS (multiple listing service).
Following the settlement, the seller’s agents are restricted from posting the buyer agent compensation on the MLS. However, commissions will remain negotiable. The proposed settlement does not affect the fees sellers and buyers will incur for services.
2. Commissions increase alongside home prices
While commissions have varied regionally and been negotiable over time, home prices have been rising across nearly every U.S. market.
If commission structures shift, agents may receive a smaller percentage of each sale. Nevertheless, as home prices climb, the total value of commissions is likely to increase.
3. Efforts by companies offering low-cost real estate services have generally not been successful
Despite predictions that buyer’s agents would decline with the rise of online property listings, attempts by firms like Purplebricks and Redfin to capture market share through flat fees or reduced commissions have largely failed. According to a 2024 National Association of REALTORS (NAR) study, 89% of home sellers in the U.S. engaged an agent or broker.
Predicted Changes in Real Estate Commissions After the NAR Lawsuit Settlement
The future of real estate commissions post-settlement is still uncertain. Here are some thoughts about common predictions:
Learn More: What Real Estate Professionals Need to Know About the NAR Settlement
More buyer’s agents may offer alternative payment structures
Post-settlement, it’s anticipated that buyer agents might increasingly adopt reduced commission percentages, flat fees, or hourly rates. NAR member buyer agents will need to secure written buyer agency agreements prior to providing brokerage services, leading to more upfront discussions about compensation.
The traditional commission structure may remain the norm
The longstanding commission framework may continue, with buyers and sellers accustomed to the usual 5-6% commission for a seamless transaction.
Buyer agent commissions might eventually be rolled into a mortgage
Some first-time homebuyers may struggle to save enough cash to cover the agent’s commission, the down payment, and moving expenses. For now, buyers aren’t allowed to roll buyer’s agent fees into their mortgage. However, according to NPR, a change in mortgage underwriting rules may allow this practice.
The need for smart, customer-focused real estate agents will continue post-settlement. Don’t wait to go through the licensing process. Get started today by enrolling in your pre-licensing courses with Gold Coast Schools. Gold Coast Schools offers online, livestream, and in-person Florida real estate classes. Begin your real estate career in Florida with Gold Coast today.