Who Pays the Real Estate Agent Commission?

Are you buying or selling a home? Then you might be wondering: “Who pays the real estate agent?” Traditionally, this cost has been shouldered by the seller, but recent changes have brought new dynamics into play. 

The National Association of Realtors (NAR) and Multiple Listing Service (MLS) have implemented new rules about how real estate agents communicate about real estate fees. These changes went into effect on August 17th, 2024, and are intended to provide greater transparency and competition around fees. 

In this Redfin article, you’ll learn everything you need to know about who pays the real estate agent, agent commissions, and the recent changes affecting them. 

What is a real estate commission?

A real estate commission is a payment the homebuyer or seller makes to their agent(s) for their services in helping them purchase or sell a home. The commission is often a percentage of the final home sale price and is exchanged during the final transaction at closing. 

Who pays the real estate agent?

Sellers have historically paid both the buyer and seller’s agent fees from the proceeds of the sale. But as of August 17, 2024, buyers will now agree to their agent’s fee in writing before touring. Buyers can still ask the seller to cover the buyer’s agent fee when they make an offer. 

Because of this change, the amount the seller has to pay a buyer’s agent varies from buyer to buyer. Redfin expects that sellers will continue to cover the buyer’s agent commission fee in many transactions, but increasingly, these fees will be negotiated as part of the offer. 

Here are two options for how a seller might navigate the new commission process: 

The seller can leave it open-ended and ask buyers to make their best offers, which may include buyer agent compensation, and then negotiate from there.
Sellers can proactively offer a commission or a concession that the buyer could use to pay their agent as part of their home’s marketing strategy. They can still communicate this to buyers and agents when a buyer’s agent contacts the listing agent to schedule a showing.

Why would a seller pay the buyer’s agent commission?

Whether to offer any buyer agent commission, or how much, is part of an overall marketing strategy geared towards attracting buyers and achieving the sellers’ goals. 

Instead of authorizing their agent to advertise a selling office commission (which must now be off the MLS in most markets), a seller may choose to offer the buyer a concession that the buyer can choose to use as they see fit. Or, they could instruct their agent to tell the buyer that they’re open to offers. That then puts the ball in the buyer’s court to decide if they want to request any concessions from the seller, or if they want to pay their agent directly.

How did the NAR settlement affect agent commissions?

Prior to the NAR settlement, the commission amount that the seller was willing to provide was advertised in the MLS, so that buyer agents would know in advance what a seller was offering to them if they brought a buyer for that listing. Some MLSs required that the listing make an offer of commission to buyers’ agents. Commissions were always negotiable, but were rarely negotiated in practice. Following the settlement, we’re seeing an increase in how often commissions are negotiated. 

The NAR settlement also established rules designed to help make real estate fees more transparent and competitive. For example, agents must now provide a written agreement to homebuyers that explains their fees before touring. These agreements must also include a statement that all commissions are fully negotiable. 

Some brokerages now require a full buyer agency agreement that requires the customer to commit to that agent exclusively before touring. Redfin does not. Redfin believes that we should earn a customer’s business. This is why Redfin discloses our fee upfront, but does not require a customer to exclusively commit to us in order to tour a home. 

Unless otherwise specified by state law, a buyer doesn’t need to sign an exclusive, binding agency agreement to tour a home. 

Can you negotiate real estate agent commissions?

Yes, you can negotiate real estate agent commissions. Commissions are not set by law and are fully negotiable. The commission rates many brokerages charge often vary from area to area, and there are no laws or industry rules that set commission rates.

How is Redfin different when it comes to commissions? 

At Redfin, we’ve always believed that consumers should get the best deal. That’s why we charge sellers a listing fee as low as 1%.* 

Our fees when serving buyers vary by market, but are competitive because we know they could make the difference in your winning or losing an offer. All things equal, a seller will prioritize the offer that is asking them to pay a lower buyer agent fee. 

We also offer additional savings for buyers who make a commitment to hire us after the first tour. With our Sign & Save program, if you commit to hiring your Redfin agent before the second tour, we’ll reduce our fee by 0.25%. We earn customers’ business by providing the best service and value.

Final thoughts

The real estate commission landscape has shifted, offering more transparency and flexibility for buyers and sellers – goals that Redfin has always supported. Whether you’re searching for your dream home or looking to relocate, understanding these new rules can help you make smarter decisions and potentially save money in the process. 

You can learn more about the NAR settlement here, and how Redfin has embraced this change and always championed better deals for the customer here. You can also connect with a Redfin agent to learn everything you need to know – regardless if you’re buying or selling. 

The NAR settlement primarily applies to listings on an MLS, and MLS rules may vary. Rules regarding listings not on an MLS also vary widely from state to state. Talk to your agent to learn more. 

*Listing fee subject to change, minimums apply. Any buyer’s agent fee the seller chooses to cover not included. Listing fee increased by 1% of sale price if buyer is unrepresented. Sell for a 1% listing fee only if you also buy with Redfin within 365 days of closing on your Redfin listing. We will charge a 1.5% listing fee, then send you a check for the 0.5% difference after you buy your next home with us. Learn more here.

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