How Agent Commission Is Set, Offered and Paid in the USA Today

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Kooky

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Until August 2024, the commission on an American home sale listed on a Realtor-owned multiple listing service usually travelled along one path. The seller agreed a fee with the listing broker, the listing broker offered a share of it to buyer brokers on the multiple listing service, and the buyer's broker collected that share at closing. The offer was a requirement of the MLS rules, and it is that requirement the settlement described below removed.

That path changed on 17 August 2024, the date the National Association of Realtors gives for the practice changes it agreed in a nationwide class settlement. The money can still flow from seller to buyer's broker, but it can no longer be advertised on the MLS, it needs the seller's written approval, and it is capped by what the buyer has agreed with their own broker. This guide follows the commission from the moment it is set to the moment it is paid: who negotiates what, what may be offered and where, how concessions differ from offers of compensation, and what one sale looks like under four different arrangements.

Amounts from the court-authorised settlement site; effective date from the National Association of Realtors.

Where the new rules come from

The rules are not a statute. They come from the settlement of a group of private lawsuits brought by home sellers. The lead case, according to the court-authorised settlement site run by the administrator JND Legal Administration, is Burnett et al. v. National Association of Realtors et al., case number 19-CV-00332-SRB, in the United States District Court for the Western District of Missouri. The site lists three related cases: Moehrl in the Northern District of Illinois, and Umpa and Gibson in the Western District of Missouri.

The same site records that a jury found for the plaintiffs in Burnett on 31 October 2023, and that the National Association of Realtors (NAR) and HomeServices had indicated they would appeal. Instead, both settled. NAR's settlement was entered on 15 March 2024 and HomeServices' on 7 August 2024. The District Court held a fairness hearing on 26 November 2024 and granted final approval of both settlements the next day, 27 November 2024. On 19 August 2026, the settlement site says, the Eighth Circuit Court of Appeals entered a judgment and opinion affirming the District Court's order.

Two things were agreed. The first is money: NAR pays US$418,000,000 and HomeServices US$250,000,000 into settlement funds, which is US$668,000,000 between the two. The second is conduct: a list of practice changes that NAR agreed to make to the rules its members and its multiple listing services work under. The money looks backwards, to sellers who paid a commission in past years. The practice changes look forwards, and they are the subject of most of this guide.

Who the rules bind, and who they do not

Because the source is a settlement and not a law, its reach follows the parties. The practice changes are written for NAR, for the multiple listing services owned by Realtor associations, and for the MLS participants who use them. The settlement site's wording is precise on this: it is "REALTOR MLSs" that must remove broker compensation fields, and MLS participants who may no longer make offers of compensation there. NAR's own list of settlement questions also refers to opt-in agreements for multiple listing services, with a deadline of 16 September 2024 to implement the changes.

Brokerages come in through the release. According to the settlement site, a brokerage that has a Realtor principal and had a residential total transaction volume of US$2 billion or less in 2022 is released from the claims if it complies with the practice changes. A brokerage with a Realtor principal above US$2 billion is released only if it agrees to the practice changes and pays an additional amount set out in the settlement agreement. For a small or mid-sized firm, in other words, following the new practices is the condition of the protection.

Two limits follow. A broker who is not a Realtor member and does not use a Realtor-owned MLS is not addressed by these rules as the sources describe them, and whether a given MLS has adopted them is a question for that MLS. And state law sits on top of everything. NAR's consumer guides repeat that practices vary by state and local law, and its member guidance tells agents to know and follow state and local rules, which may add requirements of their own. Nothing in this guide describes the law of a particular state.

How the fee itself is set

The starting point is a sentence that now has to appear in writing. Under the practice changes listed on the settlement site, listing agreements, buyer agreements and pre-closing documents must disclose that broker commissions are not set by law and are fully negotiable. NAR's REALTOR Magazine, in its quick guide of 9 August 2024, says the disclosure belongs in the listing agreement in conspicuous language, and that where a form is specified by a government body, a separate disclosure may be used.

In practice this means a sale can now carry two separately negotiated fees.

The seller negotiates with the listing broker, in the listing agreement. That agreement sets what the listing broker is paid for marketing and selling the home. The REALTOR Magazine guide says listing agreements should no longer refer to offers of compensation on the MLS, and that active agreements instructing the listing broker to make such an offer had to be amended.

The buyer negotiates with the buyer's broker, in a written buyer agreement. Written buyer agreements are the subject of a separate guide in this magazine, so only the part that touches the commission is described here. The settlement site says the agreement must state the amount or rate of compensation, and that the figure must be objectively ascertainable and not open-ended. NAR's member resource of 28 October 2024 gives the forms this can take: US$0, a flat fee, a percentage or an hourly rate. It also says what does not qualify: compensation defined as whatever the seller or the seller's agent happens to offer.

Neither the settlement site nor NAR publishes a standard rate, a ceiling or a floor. The sources opened for this guide give no average commission before or after the changes, so none is quoted here. What they do establish is the principle: each fee is whatever the client and the broker agree, in writing, before the work starts.

What an offer of compensation is

NAR's consumer guide of 11 September 2024 defines an offer of compensation as the seller, or the seller's agent, compensating another agent for bringing a buyer who successfully closes the transaction. It is the mechanism by which the seller's side pays some or all of the buyer's broker fee.

The guide is clear that making such an offer is not mandatory. The seller decides whether it suits the sale. The reason a seller might choose to, in NAR's account, is that an offer reduces the buyer's out-of-pocket costs and may therefore bring more potential buyers to the property. The guide notes that these costs can weigh most heavily on first-time buyers and on buyers with lower or middle incomes.

What the settlement removed is the requirement, and the place. The settlement site lists the elimination of any requirement that listing brokers or sellers make offers of compensation to buyer brokers, and bars rules that would require such offers to be blanket, unconditional or unilateral. It also ends rules that tie participation in an MLS to offering or accepting buyer-broker compensation. And it takes the offer off the MLS altogether.

The settlement site adds two details on the MLS side. Realtor MLSs must remove every broker compensation field and must not let offers be passed through other fields. And NAR commits not to create or support another mechanism for circulating buyer-broker offers, with exceptions the site describes for certain data feeds and for a broker's own listings.

Off the MLS, the offer survives. The settlement site says in terms that offers of compensation to buyer brokers made off the MLS are not prohibited. NAR's consumer guide lists how an approved offer can be shared: flyers, signs, brokerage websites, social media posts, a phone call or an email. Advertising it at all is optional.

The seller's written approval

The second change is about consent. Under the practice changes on the settlement site, a listing broker must disclose to the seller, in writing and in advance, any payment or offer of payment to a buyer-side representative, stating the amount or rate, and must obtain the seller's approval. NAR's consumer guide puts it from the seller's chair: the agent can offer compensation or make a payment to a buyer's agent only with the seller's written approval, and the seller signs off on the amount.

The sequence the sources describe has five stages.

The last stage deserves a word. NAR's REALTOR Magazine guide says that when a buyer and a seller agree to an offer of compensation, the listing broker and the buyer's broker may enter into a broker-to-broker agreement to record it and reduce uncertainty. The word is "may": the sources describe it as a tool, not a requirement. The same guide adds that sale contracts or offers to purchase may need revising so that a buyer can ask the seller to pay the buyer broker's compensation inside the offer itself.

What happens if the approval is missing? The sources state the rule and not the remedy. An offer or payment made without the seller's prior written approval is outside the practice changes, and a brokerage's release under the settlement depends on complying with them. The consequences between a particular seller and a particular broker would turn on their listing agreement and on state law.

Four routes open to a seller

NAR's consumer guide names the choices a seller has. They are worth setting apart, because each sends the money along a different line.

1. A flat fee paid directly to the buyer's agent. The seller agrees to pay a fixed amount to the buyer's broker. The payment is the seller's own, separate from what the listing broker earns.
2. A share of the listing broker's compensation. The seller allows the listing agent to pass part of its compensation to the buyer's agent. The seller pays one fee to the listing broker, and the listing broker pays the buyer's broker out of it, with the seller's written approval of the amount.
3. A concession to the buyer. The seller offers to cover some of the buyer's costs, such as closing costs. This is not an offer of compensation, as the next section explains.
4. No advertised offer. The seller advertises nothing and negotiates the question when a buyer writes it into the purchase agreement.

None of the four is presented by NAR as the default, and the guide does not rank them. Which is used depends on the seller, the property and the local market.

Concessions are a different thing

A concession and an offer of compensation can end up paying the same bill, but the rules treat them differently, and the difference matters most on the MLS.

NAR's consumer guide of 24 September 2024 defines a concession as a seller paying certain costs associated with purchasing a home for the buyer. Its examples are title search, loan origination, inspection, homeowners' association fees, real estate taxes, and repairs or updates to the home. The guide gives the seller's reasons as well: a concession can make a property more appealing, can lead to a better or faster offer, and can make a purchase more affordable for a buyer with limited cash.

The settlement kept concessions on the MLS. The settlement site says sellers may offer buyer concessions there, for example towards closing costs, as long as the concession is not limited to, or conditioned on, retaining or paying a cooperating broker or buyer broker. NAR's guide adds the practical rules. Not every MLS allows concessions to be advertised, and some allow only a yes or no field. Where a concession is listed, it must be written as the total sum of all concessions offered.

There are also limits on size. NAR's guide says the total value of concessions a buyer can receive depends on the terms of the buyer's lender and on state law. It then draws a distinction that is easy to miss: any payment towards the buyer's broker fee is excluded from the lender's limits. The guide does not give the limits themselves, which differ by loan type and lender, so no figure is given here.

Finally, an advertised concession is an invitation, not a promise. NAR's guide says concessions usually are not binding until they are put in a contract such as a purchase agreement. A buyer relying on one would look for it in the signed contract, not in the listing.

When the seller offers nothing

A seller who advertises no offer has not closed the question. NAR's REALTOR Magazine reported on 15 August 2024 that, where sellers have not offered compensation, buyers can request in their offer that the seller compensate the buyer's broker. The member resource of October 2024 tells agents to explain both halves of that to buyers: they can ask, and the seller may decline.

If the seller declines, the buyer's agreement governs. The same resource tells agents to confirm that buyers understand they are responsible for any compensation agreed in their buyer agreement. For a buyer, the fee then becomes a cost to be found at closing, alongside the down payment and the closing costs.

That matters because of one further point in the NAR material. REALTOR Magazine said in August 2024 that current regulation did not allow agent commissions to be financed as part of a mortgage, and the October 2024 member resource attributes the bar to Federal Housing Administration rules as they stood then. Both statements are dated 2024; this guide did not open a lender or agency page confirming the position in 2026, so it should be read as NAR's description at that time.

NAR's member resource also describes the agent's part before an offer is written. Agents are told to ask whether an offer of compensation exists on a property and to share the answer with the buyer, so that the buyer knows, before bidding, how much of the fee is likely to fall on them.

The cap on what a buyer's broker receives

Three of the practice changes limit the buyer's side directly.

The first is a ceiling. The settlement site says brokers may not receive more than the amount agreed in the buyer agreement. NAR's member resource spells it out: an agent does not accept more compensation than the buyer agreement provides, from any source, and that includes bonuses from a seller. It also says an agreement should not be amended simply to match a higher offer of compensation; any amendment needs a legal basis and a fully informed buyer.

The second is about the word "free". Under the practice changes, brokerage services may not be represented as free unless the broker receives no compensation from any source. A buyer's broker who expects to be paid by the seller's side is still being paid, and cannot describe the service as costing nothing.

The third is about which homes a buyer sees. The settlement site lists a bar on filtering or restricting MLS listings shown to clients based on the level of buyer-broker compensation. NAR's member resource says agents must not limit the properties they show, or steer clients, on the basis of offers of compensation, and that refusing to show a home because no compensation is offered is inconsistent with those principles.

Taken together, the three rules mean the buyer's broker fee is fixed by the buyer's own agreement, whoever ends up funding it.

A worked example: one sale, four routes

The figures below are illustrative. They are assumptions chosen to make the arithmetic easy to follow, not market rates, and no source in this guide publishes typical commission levels.

Assume a home sells for US$400,000. The seller's listing agreement pays the listing broker 2.5% of the price, which is US$10,000. The buyer's written agreement pays the buyer's broker 2% of the price, which is US$8,000. Other closing costs are ignored on both sides.

On the first route, the seller pays US$10,000 to the listing broker and US$8,000 to the buyer's broker, US$18,000 in all, and keeps US$382,000 of the price. On the second, the seller pays only the listing fee and keeps US$390,000, while the buyer finds US$8,000 at closing. On the third, a negotiated middle, the seller pays US$10,000 plus US$5,000, and the buyer owes the remaining US$3,000 of the US$8,000 agreed with their broker.

The fourth route shows why the first and the second options in NAR's list can produce the same result. Here the listing agreement is written differently: the seller pays the listing broker 4.5%, or US$18,000, and authorises in writing that 2%, or US$8,000, be paid on to the buyer's broker. The listing broker keeps US$10,000. The seller's outcome is the same as on the first route; what differs is whose payment it is on paper.

One more case tests the cap. Suppose the seller had approved an offer of 2.5%, or US$10,000, while the buyer's agreement stays at 2%. The buyer's broker cannot receive more than US$8,000. The sources do not say what becomes of the US$2,000 difference; that is a matter for the purchase contract between this buyer and this seller.

And all of these sums are separate from price. A buyer who must find US$8,000 may offer less for the home, and a seller who pays it may hold out for more. The example fixes the price at US$400,000 only so that the four routes can be compared.

What the settlement paid for the past

The money side of the settlement is closed to new claims. According to the settlement site, a settlement class member is a person who sold a home during the eligible date range, listed it on a multiple listing service anywhere in the United States, and paid a commission to a real estate brokerage in connection with the sale.

The eligible range depends on where the home was listed. For any MLS not otherwise named, the NAR range runs from 31 October 2019 to 17 August 2024. It starts earlier for specific services and states: 29 April 2014 for the Heartland, MARIS, Columbia Board of Realtors and Southern Missouri Regional MLSs; 6 March 2015 for Bright MLS and a list of other named services; and 17 December 2016 for MLS PIN in Massachusetts. Two groups of states have their own start dates of 31 October 2017 and 31 October 2018. Every range ends on 17 August 2024, the day the practice changes took effect.

The deadline to opt out or object was 28 October 2024, and the claim deadline for the NAR and HomeServices settlements was 9 May 2025. A later group of settlements with other brokerages had a claim deadline of 30 December 2025. All of these dates have passed.

On timing and costs, the settlement site says payments will be made after any appeals are resolved. It also says the court approved class counsel's fees at no more than one-third, or 33.33%, of the settlement fund, plus out-of-pocket expenses, paid from the fund and not by class members separately. The site does not give a payment date, and the schedule on which NAR pays its US$418,000,000 was not found on the pages read for this guide.

The release has a boundary worth knowing. As the settlement site describes it, the release covers claims relating to commissions paid in connection with a residential home sale, but it does not cover an individual's own claims against their broker or agent, such as breach of contract or breach of fiduciary duty, unless the claim is that they paid an excessive commission or home price because of the conduct alleged in the lawsuits.

The seller's offer decides who funds the buyer's broker. The buyer's own agreement decides the amount.

Kooky, from Shaka

Kooky edits Agents Estate and builds Shaka, the payment router he made for real estate professionals. One payment comes in, and every agent, agency and party in the deal receives their signed share on closing date.

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