It's often amusing to realize just how interconnected our professional circles can be. Among agents and investors, there's been significant discussion regarding the recent NAR commission rules. If you're not in the industry, you might be unaware of some of the internal conversations happening between licensees, and I must say, some of it has been quite entertaining. I've encountered everything from excessive confidence to complete misunderstanding about how these changes might impact people's livelihoods.
Interestingly, the general public seems largely unaware of these developments. They are not familiar with how commissions are structured, nor are they particularly concerned. Their primary focus is on buying or selling their home with the assistance they need to make that happen.
Over the past few weeks, I’ve discussed these changes with several new clients, and most of them have simply shrugged it off, stating they hadn’t heard about the changes and are willing to pay whatever fees we agree upon—just as they always expected.
What’s Happening?
For those of us in the real estate industry, you’ve likely heard discussions about changes to agent compensation. However, nearly every article, blog post, and forum I’ve seen reflects a significant misunderstanding of what’s actually changing. If you're unsure about the specifics, let me clarify.
Regarding commissions—how much they are and who pays them—there is no fundamental change. Some sellers were hopeful that they wouldn’t have to pay a buyer’s agent anymore, but the truth is, you never had to pay a buyer’s agent in the first place.
For buyers who are worried about having to pay their agent out of pocket, rest assured—this is no more true now than it was five years ago.
The only real change is in the transparency of how commission payments are disclosed to consumers.
In the past, some buyer’s agents, who didn’t add much value to their clients, would mislead them by claiming they worked for “free.” This was clearly misleading since their objective was always to get paid, and rightly so, but it wasn’t honest.
There has long been confusion about how real estate commissions work. The common narrative has been that the seller pays both agents’ commissions. This has allowed buyer’s agents to promote their services for years. However, when a property closes, who really provides the funds? Certainly not the seller.
So, who’s actually paying these commissions? These changes are designed to bring transparency to the process, clarifying where the payments come from and who is responsible for them.
What Will Change for Buyers and Sellers?
In practice, you might notice some changes in how transactions are conducted for both buyers and sellers.
For Sellers:
As a seller, your agent should never have told you that you are required to pay a buyer’s agent commission—that has never been the case. The options should be presented as follows:
You can choose to offer a set compensation for a buyer’s agent,
You can request that buyer’s agents include their compensation in their client’s offer,
Or, you can opt not to offer any compensation at all.
These options have always existed, but consumers weren’t always informed of them.
Until recently, agents could view the compensation sellers were offering. Although it's an ethical violation, it's well-known that some buyer’s agents would steer clients towards properties with higher compensation and avoid those with lower compensation.
Now, MLS systems nationwide no longer display compensation details in their listings. Buyer’s agents will need to contact the listing agent to determine what type of compensation, if any, the seller is offering.
For Buyers:
For buyers, a few changes are forthcoming. Buyer’s agents must now disclose how they will be compensated before showing any properties. Additionally, they are required to have you sign a form confirming that you understand the terms of their compensation. The methods of payment aren’t changing; what’s new is that this information must be disclosed upfront, and agents can no longer claim that the seller covers all commissions and that they work for “free.”
Don’t worry about needing to save an additional 3% to pay your agent when buying a property. The method of payment remains unchanged. You can pay them out of pocket if you choose, but that has always been an option.
You might find yourself making an offer on a property where the seller has included compensation for your agent in the price, just as before. Alternatively, you can include your agent’s commission in the offer, just as before.
I could delve into the intricacies of how real estate prices already account for commissions, but that’s unnecessary. Just know that you don’t need to come up with extra cash—simply negotiate with your agent about their compensation and proceed as you normally would.
For clarity: Your agent’s commission has always been fully negotiable. There has never been a “standard” commission structure.
You can pay your agent nothing, an hourly rate, per open house or a percentage of the sale price. You can even agree on a flat fee. This has always been the case—no changes there.
How Am I Handling This?
Honestly, I was surprised to learn that this was a significant issue in so many states. In Idaho, where I live and work, these types of disclosures have been standard in our buyer representation agreements for decades. It was surprising to discover that other states didn’t require buyer representation agreements or disclosures about agent compensation. That certainly made it easier for less diligent agents to claim their clients didn’t have to pay them.
So, how will this change my team’s day-to-day operations? The truth is, not much.
In Idaho, we’ve always been required to disclose how our commissions are paid, and our buyer representation contracts have always stated that if the seller didn’t pay us, our client would. And guess how many people have complained about this over the years and across hundreds of transactions? None. We work hard to provide real value to our clients, and your agent should too—they deserve fair compensation for their expertise.
The only functional change we’re making is the initial disclosure regarding compensation before showing a property. This is now a requirement for every Realtor in the U.S., and your buyer’s agent should be doing the same. In Idaho, we’ve always been required to disclose a consumer’s rights to representation before any significant business dealings, so now we just add a discussion about the different ways we can be compensated. It’s not a big deal.
Final Thoughts
Many agents are concerned about how these changes will affect their business, and I understand why! If all you’ve done is buy leads from Zillow and open doors for prospective buyers, you’re not adding real value to the buying experience. You should be worried because it will become much harder to justify to clients why they should pay you.
Personally, I’m excited about these changes. While I’m not thrilled about the extra paperwork, I believe this will help improve the industry. Agents who’ve coasted on superficial charm might not last much longer.
It’s going to be more important than ever to demonstrate genuine value to your clients because you’ll need to justify why they should pay you before you even show them a property. I’m confident we’ll see better service and more effort from agents in the near future.
This is good for the real estate industry and for agents as well. Just don’t expect an immediate drop in prices or think you can get an agent to work for “free.” However, I believe you can certainly expect much higher-quality experiences and significantly better service from agents in the very near future.
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