Summary

This guide explains how real estate agents are paid, what changed under the August 2024 commission rules, who can pay the buyer’s agent, and low-commission alternatives like discount brokerages and selling your home yourself. You’ll learn how commissions are negotiated on both sides of the deal, how those negotiations can be structured in an offer, and practical ways to control costs while still getting the expertise you need.

---

🧮 How Real Estate Commissions Work Today

For years, the “typical” total commission on a home sale hovered around 5% to 6% of the sale price—roughly $20,000 to $24,000 on a $400,000 home—with the seller paying a single fee that the listing agent split with the buyer’s agent. In August 2024, a new approach took hold: sellers and buyers now each negotiate commissions with their own agents. Practically, this means the seller still negotiates a fee with the listing agent before going on the market, while the buyer separately negotiates compensation with their buyer’s agent before making offers. Because both sides set their own terms, market “norms” may shift over time as agents compete on service, price, and expertise; it could take months or years before a new average settles. The bottom line is that commissions are no longer assumed or baked in at fixed percentages—each side has meaningful flexibility to tailor costs to their needs and budget.

Takeaways:

• Historic totals were ~5%–6%, but the post-2024 system separates seller and buyer negotiations.

• Buyers now agree directly with their agent on how and how much they’ll pay (percentage, flat fee, or hourly).

• Expect more price and service competition—and evolving “typical” rates.

Key Terms

• Listing Agent: The agent representing the seller and marketing the property.

• Buyer’s Agent: The agent representing the purchaser’s interests.

• Commission: Compensation for agents, structured as a percentage, flat fee, or hourly rate.

---

🤝 Who Pays the Buyer’s Agent?

Under the new system, payment of the buyer’s agent is negotiable between the parties to the sale. After a buyer and their agent agree on compensation, the buyer and seller can allocate that cost in the purchase offer. The seller might cover the buyer’s agent fee from sale proceeds, the buyer might pay it directly out of pocket, or both sides could share it. Buyers who can’t or prefer not to pay cash can structure their offer to reflect the cost—for example, by increasing the offer price to offset the commission or by requesting the seller to contribute at closing. Where permitted, buyers might also use eligible down payment assistance programs to help offset the expense. On the other side, sellers often consider anticipated commission costs when setting their list price, just as they do with repairs or concessions.

Takeaways:

• Buyers negotiate their agent’s pay up front, then negotiate who covers it in the offer.

• The seller can pay, the buyer can pay, or the parties can split the cost.

• Buyers may roll costs into the offer price or request seller-paid contributions; out-of-pocket payment is also possible.

Key Terms

• Seller Concession: A closing-cost credit or payment a seller agrees to make on the buyer’s behalf.

• Offer Price Structuring: Adjusting price and terms to allocate costs like commissions.

---

🧩 How Buyers and Sellers Negotiate

Both sides benefit from clarity and documentation. Sellers should confirm, in writing, the listing agent’s scope of services (pricing strategy, staging advice, marketing plan, open houses, negotiation, transaction coordination) and the exact fee structure. Buyers should similarly formalize their agent agreement—percentage, flat fee, or hourly—plus what’s included (home search, showings, comps, negotiation, inspection strategy). When drafting an offer, the buyer and seller can treat the buyer’s agent compensation like any other negotiable term, alongside price, closing date, inspection timelines, and concessions. Because the commission is now separated into two agreements, you can trade across the deal: for instance, a slightly higher price with a seller credit toward the buyer’s agent fee, or a tighter closing timeline in exchange for the seller covering the fee directly. The aim is transparency: who does what, for how much, and how it’s reflected at closing.

Takeaways:

• Put agent services and pricing in writing on both sides.

• Treat buyer’s agent compensation as a negotiable term within the offer.

• Use trade-offs (price, credits, timelines) to reach a win-win allocation.

Key Terms

• Buyer Representation Agreement: Contract outlining a buyer’s agent duties and pay.

• Listing Agreement: Contract defining the listing agent’s services, term, and fee.

---

💸 Alternatives to Traditional Commissions

If you want to reduce costs or take a different route, you have options. Discount real estate brokerages can lower the price of selling by charging reduced percentages or flat fees. Some match you with independent agents and pre-negotiate lower rates, while others employ in-house agents and offer tiered service levels. Because pricing and services vary—marketing exposure, professional photography, negotiations, contract and closing support—shop carefully and compare the total value. Another path is selling “for sale by owner” (FSBO). This can cut listing-agent costs, but you’ll take on the workload of pricing, marketing, showings, offer review, negotiation, disclosures, and legal compliance. FSBO can be rewarding if you have the time, comfort with paperwork, and negotiation skills; otherwise, the savings may be offset by a narrower buyer pool or missteps in the process. In either case, clarity on what’s included—and what you’ll still need to pay for à la carte—helps you avoid surprises.

Takeaways:

• Discount brokerages may charge flat or reduced fees with varying service levels.

• FSBO can halve commission but demands significant time, marketing, and legal know-how.

• Compare total value, not just the headline rate; ensure you know what’s included.

Key Terms

• Discount Brokerage: A firm offering reduced-fee or flat-fee listing services.

• FSBO (For Sale By Owner): Selling a home without hiring a listing agent.

---

🧭 Practical Tips to Keep Costs in Check

Start early by interviewing multiple agents on both sides. Ask for itemized services and a clear explanation of how they justify their fee—market analysis, marketing reach, negotiation track record, and transaction management. If you’re a buyer, decide whether a percentage, flat fee, or hourly model best fits your search timeline and complexity, and get the agreement in writing. When you write or receive offers, think holistically: the allocation of the buyer’s agent fee, price, and concessions all interact with loan limits, appraisal risk, and cash needed at closing. If you’re cash-constrained, consider structuring the offer so that the seller contributes at closing or so that the commission cost is reflected in the price (subject to lender and appraisal realities). Finally, recognize that agents are competing more directly now—use that competition to align service, price, and outcomes with your goals.

Takeaways:

• Interview and compare agents; document services and pricing.

• Choose a compensation model that matches your situation (percent, flat, hourly).

• Structure offers to balance cash, price, concessions, and appraisal considerations.

Key Terms

• Appraisal Risk: The possibility that a home appraises below the contract price, affecting financing.

• Closing Costs: Fees paid at settlement, potentially including negotiated agent compensation.

---

Conclusion

Commissions are more flexible than ever. Sellers and buyers now tailor how—and how much—they pay their respective agents, and they can negotiate who ultimately covers the buyer’s agent fee within the offer. By clarifying services, comparing options like discount brokerages or FSBO, and structuring the deal thoughtfully, you can control costs without sacrificing a smooth closing.