Who pays real estate agent commission fees

Real Estate Commission Explained: Who Actually Pays

When you sell a home, the real estate commission — typically 5% to 6% of the sale price — gets deducted from your proceeds at closing. For decades, sellers paid both their agent and the buyer's agent, but new rules that took effect in August 2024 changed who's responsible for what.

This article walks you through who pays commission now, how the recent settlement shifted buyer and seller responsibilities, and what options exist to reduce or eliminate these costs entirely.

Who pays realtor commission today

For years, home sellers paid the real estate commission for both their own agent and the buyer's agent — usually 5% to 6% of the sale price. That changed in August 2024 when new rules from the National Association of Realtors took effect. Now, buyers can negotiate directly with their agents and may pay their own representation, though sellers can still choose to cover that cost.

Commission gets paid at closing, deducted from the seller's proceeds before money changes hands. On a $400,000 home with a 6% commission, that's $24,000 coming out of the sale price.

Buyer pays, seller pays, or shared

Three ways exist now for handling commission. First, the traditional model: the seller pays both agents' fees, and the listing agent splits the total with the buyer's agent. Second, the new option: buyers pay their own agent directly, adding that cost to their closing expenses. Third, a negotiated arrangement: sellers offer a concession that buyers use to cover their agent's fee, or both parties split costs in another way.

The big shift? Buyer agent compensation no longer appears on Multiple Listing Service (MLS) listings, so conversations about payment happen outside that system.

When the commission is collected

Commission payments happen at closing, not before. For sellers, the fee gets deducted from sale proceeds — the amount you receive after paying off your mortgage and other closing costs. For buyers paying their agent directly, that fee becomes part of their cash-to-close calculation, the total amount they bring to the closing table beyond their down payment.

This timing matters because no one writes a check to agents during the selling process. The title company distributes funds at closing, paying everyone from the transaction proceeds.

How the traditional commission model worked

For decades, sellers signed listing agreements with their agents that spelled out a total commission percentage — typically 5% to 6% of the home's sale price. The listing agent would then advertise on the MLS how much of that commission they'd share with the buyer's agent, usually splitting it 50-50.

A seller paying 6% would see 3% go to their agent and 3% to the buyer's agent. On that $400,000 home, that's $12,000 to each side before agents split with their brokerages.

Listing agreement sets total fee

When you hired a listing agent, you signed a contract that laid out the commission rate and how long the agent would represent you, usually 90 to 120 days. That rate was negotiable, though many sellers didn't realize they could discuss it. The agreement also covered what the agent would provide: professional photography, staging advice, marketing plans, and negotiation support.

The total fee covered both sides of the transaction, even though you only worked directly with your listing agent.

Listing agent split with buyer agent

Your listing agent controlled how the commission got divided. They'd typically offer the buyer's agent 2.5% to 3% of the sale price, advertising that split on the MLS to attract buyer agents and their clients.

Critics argued this system pushed buyer agents to steer clients toward homes offering higher commissions rather than the best fit for the buyer. That concern was one reason the rules changed.

What changed after the NAR settlement

A series of lawsuits challenged the traditional commission structure, arguing it inflated costs and reduced competition, resulting in a $418 million NAR settlement. The National Association of Realtors reached a settlement that changed how agent compensation works in two major ways: buyers must now sign written agreements with their agents before touring homes, and sellers can no longer advertise buyer agent compensation on the MLS.

Written buyer broker agreements

Before showing you any properties, buyer agents now present a written agreement that outlines their services and fees. The contract specifies who pays the agent and how much, giving you clarity upfront.

The agreement typically includes: The scope of services the agent will provide The commission amount or how it's calculated The length of the working relationship What happens if you buy a home

This transparency helps buyers know exactly what they're committing to before starting their home search.

Optional buyer agent compensation

Sellers can still offer to pay the buyer's agent, but it's no longer assumed or advertised on the MLS. Conversations about payment happen directly between agents or get negotiated as part of the offer. You might offer a concession in the purchase agreement that the buyer can use toward their agent's fee, or you might agree to cover it entirely to make your home more attractive to buyers who need that financial help.

The choice is yours, which gives you more control over your selling costs.

Commission math, rates, splits, and timing

Real numbers help you plan your budget and net proceeds. Most commissions fall within a predictable range, though rates vary by market, property type, and agent experience.

Typical commission percentage range

Most real estate commissions average 5.57% of the sale price. You might see rates as low as 4% or as high as 7% depending on your market and situation. Luxury homes sometimes carry lower percentage rates because the dollar amount is already substantial. Vacant land or properties that take longer to sell might have higher rates to compensate agents for extended marketing efforts.

Your agent's experience, the services they provide, and local market competition all influence the rate you'll negotiate.

How commission affects your net proceeds

Commission reduces what you walk away with from your home sale. On a $400,000 sale with a 6% commission, you'll pay $24,000 in agent fees. Add in other closing costs — title insurance, transfer taxes, attorney fees — and your total costs might reach $30,000 to $35,000.

How commission affects your closing costs

For buyers paying their agent directly, commission becomes an additional closing cost beyond your down payment, loan fees, and prepaid items like property taxes and insurance. If you're buying that $400,000 home and paying your agent 3%, that's $12,000 added to your cash-to-close.

Some lenders allow you to finance certain closing costs, but agent commissions typically come from your own funds. This expense can affect how much house you can afford, since you'll need more cash upfront.

Who pays commission when buying a house

Buyers now face a decision they didn't have to make before: how to compensate their agent. You have options, and the choice affects both your upfront costs and your negotiating position.

Out of pocket versus rolled into price

You can pay your agent directly at closing, bringing that cash to the table alongside your other closing costs. Or you can ask the seller to cover your agent's fee through a concession — essentially negotiating a higher purchase price that includes that cost.

If you're offering $400,000 on a home, you might offer $412,000 with a $12,000 seller concession toward your agent fee. The second approach means you're financing the commission through your mortgage, spreading that cost over 30 years with interest.

Impact on cash to close

Paying your agent directly increases your immediate cash needs. If you're already stretching to cover a down payment, inspection fees, and other closing costs, adding a 3% commission can create a financial hurdle.

On a $400,000 purchase, that's an extra $12,000 you'll need in your bank account. However, some buyers prefer this approach because it keeps the purchase price lower, which can help if the home barely appraises or if you're in a competitive market where every dollar of offer price matters.

Who pays commission when selling a house

As a seller, you'll pay your listing agent's commission — that hasn't changed. The question now is whether you'll also offer to cover the buyer's agent fee.

Net proceeds calculation

Your net proceeds equal your sale price minus your mortgage payoff, commission, and other closing costs. Start with your sale price, subtract what you owe on your loan, subtract the listing agent commission (typically 2.5% to 3%), subtract any buyer agent commission you agree to pay, then subtract other costs like title insurance, transfer taxes, and attorney fees.

On a $400,000 sale with a $250,000 mortgage and $30,000 in total costs, you'd net $120,000. What's left is what you'll receive at closing.

Effect on list price strategy

Some sellers price their homes slightly higher to account for commission costs, effectively passing that expense to the buyer through the purchase price. Others price at true market value and accept that commission comes out of their equity.

Your strategy depends on your market: in a hot seller's market with low inventory, you might price higher and still attract buyers. In a buyer's market, you'll likely absorb more of the costs to stay competitive.

Can you negotiate or reduce realtor fees

Commission rates aren't set in stone — they're always negotiable. However, you'll want to balance cost savings against the value your agent provides.

Lower the listing percentage

Ask your agent about reducing their commission rate—37.4% of sellers negotiated their commission—especially if your home is move-in ready, priced competitively, or in a hot market where it will likely sell quickly. An agent might accept 2% instead of 3% if they expect a fast sale with minimal marketing costs.

You can also negotiate based on the services you need: if you're handling staging and photography yourself, you might justify a lower rate. The key is having this conversation before you sign the listing agreement.

Try tiered or flat fees

Some agents offer tiered pricing based on your home's sale price, with lower percentages for higher-value properties. Others charge flat fees: you pay a set dollar amount regardless of sale price.

A $10,000 flat fee might be a great deal on a $500,000 home (2% effective rate) but expensive on a $200,000 property (5% effective rate). Alternative fee structures can work well if you know exactly what services you're getting for that fee.

Compare discount and flat fee brokers

Discount brokerages offer reduced commission rates — often 1% to 2% — in exchange for streamlined services. You might get MLS listing and basic support but handle more of the process yourself.

Flat-fee MLS services list your home for a one-time fee, giving you exposure without ongoing agent support. Options like this work best if you're comfortable managing showings, negotiations, and paperwork with minimal guidance.

Ways to save on real estate commission

Beyond negotiating with traditional agents, you have several paths to reduce or eliminate commission costs entirely.

Sell FSBO

For Sale By Owner (FSBO) means selling without a listing agent, eliminating that 2.5% to 3% commission. You'll handle pricing, marketing, showings, negotiations, and paperwork yourself.

This approach works if you have real estate knowledge, time to manage the process, and confidence in your negotiation skills. However, FSBO homes often sell for less than agent-assisted sales, and you might still pay a buyer's agent commission to attract represented buyers.

Use a limited service MLS

Limited service MLS companies list your home on the MLS for a flat fee — typically a few hundred dollars — giving you broad exposure without an agent. You'll still handle showings and negotiations, but you'll reach buyers working with agents who search the MLS.

This hybrid approach costs far less than a traditional agent while maintaining visibility in the market. You'll want to budget for professional photos and accurate listing descriptions to compete with agent-listed homes.

Choose a discount brokerage

Discount brokers provide traditional agent services at reduced rates, typically 1% to 2% instead of 3%. You'll get MLS listing, some marketing support, and guidance through the process, though the service level might be less comprehensive than full-service agents.

Discount brokerages often leverage technology to reduce costs, passing savings to you. This option balances cost savings with professional support.

Sell to a cash buyer

Cash buyers and iBuyers purchase homes directly, eliminating agent commissions entirely. Companies like Opendoor provide instant offers and handle the entire transaction, letting you close on your timeline without showings or marketing.

While the offer might be slightly below market value, you'll save on commission, avoid repair costs, and skip the uncertainty of traditional sales. Get a cash offer to see how this option compares for your home.

Selling to a cash buyer like Opendoor

Cash offers provide an alternative to the traditional commission structure entirely. Instead of paying percentage-based fees, you'll know upfront exactly what you're receiving and what the transaction will cost.

Service fee versus traditional commission

Opendoor charges a transparent service fee rather than a percentage-based commission. This fee covers the convenience of an instant offer, flexible closing timeline, and the ability to skip showings and repairs.

You'll see the fee clearly disclosed in your offer, with no surprises at closing. For many sellers, this predictability outweighs the potential of getting a slightly higher price through a traditional sale with uncertain commission costs.

Certainty and speed benefits

Beyond cost considerations, cash offers eliminate the typical sale timeline. You won't wait for buyer financing to fall through, deal with inspection negotiations, or wonder if the deal will close.

You can close in as few as 10 days or wait up to 60 days if you need time to move. This certainty matters when you're coordinating a job relocation, managing family transitions, or simply want to move forward with confidence.

Ready to move, compare your options

Knowing who pays realtor commission helps you make informed decisions about your home sale. Whether you choose a traditional agent, negotiate reduced fees, or explore cash offers, you'll want to compare your net proceeds across different approaches.

Factor in not just commission but also your timeline, stress level, and certainty of closing. Every home and situation is different, so the right choice depends on your priorities.

Get a cash offer

See what a direct sale could mean for your bottom line. Get a free, no-obligation cash offer from Opendoor and compare it with what you'd net from a traditional sale after commissions and closing costs.

FAQs about who pays realtor commission

Do buyers ever pay realtor fees directly?

Yes, under the new rules that took effect in August 2024, buyers can pay their agents directly. This adds to your closing costs but gives you control over the arrangement. Many buyers still negotiate for sellers to cover this cost through concessions, but direct payment is now a common option.

How does commission affect my mortgage approval?

If you're paying your buyer's agent directly, this becomes an additional closing cost that lenders factor into your cash-to-close requirements, which 66% of first-time buyers say they can't afford alongside other expenses. It doesn't affect your loan amount or qualification — you're still borrowing based on the purchase price. However, you'll need more cash in the bank to cover both your down payment and the agent fee.

What happens if no buyer broker agreement is signed?

Buyers cannot view homes with an agent until signing a written agreement specifying how the agent will be compensated. This protects both parties and ensures transparency. The requirement for a written agreement before showings is now standard practice across the industry.

Are commissions different in new construction deals?

New construction often involves builder-paid commissions to buyer's agents, though this varies by builder and market. Some builders include agent compensation in their pricing, while others expect buyers to handle it. Policies differ by builder and region, so clarify commission arrangements before touring model homes or making offers on new construction properties.