What’s New With Real Estate Agent Compensation?

Have you heard about the recent changes to how real estate agent compensation is handled in resale transactions. Following a landmark NAR settlement, new rules took effect August 17, 2024 that affect both buyers and sellers. Here’s what you need to know.

What Changed

Offers of compensation to buyer’s agents can no longer be advertised on the MLS. If a seller chooses to offer compensation to a buyer’s agent, it can be shared through other channels — flyers, emails, brokerage websites — but not through an MLS listing. Additionally, Realtors® working with buyers are now expected to have a written compensation agreement in place before beginning the home touring process. That agreement spells out the term of the relationship, how the agent will represent the buyer, and how much the agent will be paid.

For Sellers: Do You Have to Pay the Buyer's Agent?

No. Seller compensation to a buyer’s agent has always been negotiable and that hasn’t changed. What has changed is the old industry custom of sellers automatically covering 100% of the compensation — with little or no negotiation — is no longer the default. Sellers can still choose to offer it, and many do, but it’s now a deliberate decision rather than an assumption. The buyer and buyer’s agent may negotiate payment of the buyer’s agent compensation during the offer process specifying the amount or rate they are requesting the seller pay using the Seller Compensation Addendum. The seller can accept, counter, or decline.

For Buyers: How Will My Agent Get Paid?

There are three ways a buyer’s agent can be compensated in a transaction:

The seller pays the buyer’s agent compensation directly out of their proceeds at closing — the traditional arrangement most buyers are familiar with.
The seller offers a closing cost concession, a portion or all of which can be used toward the buyer’s agent compensation. Note that lenders often have closing cost limitations, so this option is worth discussing with your mortgage lender.
The buyer pays their agent’s compensation, which is added to closing costs. In this case, your agent can also attempt to negotiate the purchase price down to help offset that cost.

Why Having a Buyer's Agent Still Matters

The value of having a buyer’s agent hasn’t changed — only the paperwork around compensation has. There are 20-30 items a buyer’s agent must navigate just during the escrow process alone to protect your interests and keep the transaction on track. Having a knowledgeable professional in your corner — someone focused entirely on finding you the right property, negotiating the best price, and guiding you through escrow — means you’re not left navigating the competing interests of the seller and their agent on your own.

For Both Buyers and Sellers: A Note on Concessions

Sellers can offer to cover a set amount of the buyer’s closing costs as a concession — giving the buyer flexibility in how those funds are applied, which may or may not include agent compensation. Unlike offers of buyer-agent compensation, seller concessions can still be communicated on the MLS, though they cannot be tied directly to payment of a buyer’s agent.

We’re happy to answer any questions about this process. Contact us to arrange a phone consultation or in-person meeting.

Information in this article has been obtained from sources believed to be reliable but is not guaranteed.