How Does Real Estate Commission Work After NAR Lawsuit in 2025?

Key Highlights

Here are the main takeaways about the new real estate commission landscape:

• The NAR lawsuit settlement has fundamentally changed how real estate agent commissions are handled in real estate transactions.

• Sellers are no longer automatically required to pay the buyer’s agent commission.

• Buyers must now sign written agreements with their agents, clearly outlining agent fees and services before touring homes.

• All commission rates remain fully negotiable and are not set by law.

• These changes aim to increase transparency around agent fees and give consumers more control.

• Sellers can still offer to pay the buyer’s agent commission, but this must be negotiated outside of the MLS.

How Does Real Estate Commission Work When Selling a Home in 2025?

If you're planning to buy or sell a home, you've probably heard about major shifts in the world of real estate. Following a significant NAR settlement, the traditional rules for real estate commission payments have been rewritten. These changes affect how agents are paid and who pays them, bringing more transparency to the process.

Understanding how this new system works is crucial for navigating your next real estate transaction successfully and ensuring there are no surprises along the way.

Understanding Real Estate Commissions in 2025

Real estate commissions are the primary way agents get paid for their work. The recent changes have reshaped these payment structures, moving away from the traditional model where sellers covered all fees. Now, the responsibility for the buyer's agent commission is a key point of negotiation.

This shift means you need to be more informed than ever about how commission rates are set and who is responsible for paying them. Let's explore what a commission is, who used to pay it, and what the NAR lawsuit has changed for everyone involved.

What is a Real Estate Commission?

A real estate commission is a fee paid to a real estate agent for their services in helping you buy or sell a property. This agent's compensation is typically calculated as a percentage of the home’s final sale price. It covers the agent’s work, from marketing the property and hosting open houses to negotiating offers and guiding you through the closing process.

So, how does the process work now? When you list your home, you negotiate a commission with your listing agent. Separately, a buyer negotiates a commission with their buyer agent via a written agreement. These commission fees are then typically paid out at closing from the sale proceeds.

The money first goes to the respective brokerage firms, which then pay their agents according to their agreed-upon split. This entire structure is now more transparent, with all fees negotiated and agreed upon in writing before the transaction progresses.

Who Traditionally Pays Real Estate Commissions?

Before the recent changes, the financial responsibility for agent commissions fell almost entirely on home sellers. When a seller listed their property, they would agree to a total commission rate, usually between 5% and 6% of the home's sale price. This amount was paid from their proceeds at closing.

This total commission was then split between the seller's listing agent and the buyer’s agent. For example, on a 6% commission, the listing agent’s brokerage and the buyer’s agent’s brokerage would each receive 3%. This practice meant that the buyer’s agent commission was effectively bundled into the seller's closing costs.

While this was the standard for decades, critics argued it created a lack of transparency and put unfair pressure on sellers. The new rules have "decoupled" these commissions, leading to a significant shift in who pays for what.

Changes After the NAR Lawsuit

The NAR settlement has introduced several crucial real estate commission changes that impact both buyers and sellers. The core of these changes is to create a more transparent and competitive market for agent fees. Sellers, in particular, will notice a significant difference from previous years.

The most notable changes include:

• No More Mandatory Seller-Paid Buyer’s Agent Commission: Sellers are no longer pressured to offer payment to a buyer's agent upfront. Sellers are now primarily responsible for their own listing agent's fee.

• No Commission Offers on the MLS: Listing agents can no longer advertise offers of compensation to buyer's agents on the Multiple Listing Service (MLS). Any offer to pay the buyer's agent must be negotiated separately.

• Mandatory Written Buyer Agreements: Before touring a home, buyers must now sign a written agreement with their buyer agent that clearly states the commission rate and services provided.

These new rules mean the buyer’s agent commission is no longer a hidden cost. It's an upfront, negotiated fee, giving consumers more power to decide what they are willing to pay for an agent's services.

Overview of the NAR Lawsuit and Its Impact

The landmark NAR lawsuit was a major turning point for the real estate industry. A federal court found that the National Association of Realtors' long-standing commission rules violated antitrust laws by artificially inflating agent fees. The resulting settlement has forced a complete overhaul of how agents are compensated.

These commission changes are designed to empower consumers, whether you're buying or selling. The new system encourages direct negotiation and greater transparency, affecting everything from agent agreements to how a buyer’s agent gets paid. Let's look closer at the lawsuit and its outcomes.

Background on the NAR Lawsuit

The NAR lawsuit centered on a major antitrust case against the National Association of Realtors and several large brokerages. The plaintiffs argued that the existing real estate industry rules forced home sellers to pay inflated commission rates by requiring them to make a blanket offer of compensation to the buyer's agent to list a property on the MLS.

The court agreed, ruling that these policies stifled competition and kept commission rates artificially high. In response, the NAR reached a legal settlement valued at $418 million and agreed to change its rules nationwide. This decision has reshaped how real estate commissions are structured and negotiated when selling a home.

As of mid-2024, the new rules are in effect, creating a more transparent marketplace. The goal is to ensure that commission rates are truly negotiable and not dictated by industry-wide mandates, giving consumers more control over their expenses.

Major Outcomes for Buyers and Sellers

The new rules from the NAR settlement have brought significant changes for both home buyers and home sellers. These shifts in commission structures are designed to provide more clarity and negotiating power to everyone involved in a transaction.

For home sellers, the primary benefit is a potential reduction in costs. Key outcomes include:

• Lower Automatic Expenses: Sellers are now generally only responsible for paying their own listing agent’s fee, which is typically around 2.5% to 3%, instead of the combined 5% to 6%.

• More Negotiation Room: While not required, sellers can still offer to pay the buyer’s agent fee as an incentive to attract more potential buyers, especially in a slower market.

For home buyers, the biggest change is the new responsibility for their agent's fee. This could impact affordability, as they may need to budget for this cost separately or negotiate for the seller to cover it as part of the offer.

Regulatory Changes Affecting Commission Payments

The regulatory changes to commission payments are specific and aim to prevent the practices questioned in the lawsuit. The new industry rules have reshaped how buyer agent compensation is handled, directly impacting commission rates when selling a home.

One of the biggest rule changes is the elimination of blanket offers of compensation on the MLS. Previously, listing agents would post the percentage they would pay a buyer’s agent, a practice that is now banned. While sellers can still contribute to the buyer agent compensation, that offer must be negotiated separately, "off-MLS," or included in the purchase contract.

Another crucial change is that buyers must now sign a written representation agreement with their agent before touring any properties. This contract must clearly spell out the agent's fee and who is responsible for paying it. These new rules ensure that all parties are aware of commission payments from the very beginning.

How Real Estate Commission Structures Work Today

With the new regulations in place, understanding today’s real estate commission structures is essential for any real estate transaction. The agent's commission is no longer a single, bundled fee but is now broken down into distinct commission payments for the buyer's and seller's agents, each negotiated separately.

This new model affects how commissions are split between agents and how brokers are involved in the distribution of funds. It's a more transparent system, but it also adds new layers to the process. Let's examine how these splits work.

The Split Between Listing and Buyer Agents

In today's market, the commission split between the listing agent and the buyer’s agent is no longer automatic. Instead of a single commission that gets divided, there are two separate negotiations. The seller negotiates a fee with their listing agent, and the buyer negotiates a fee with their buyer's agent.

For example, a seller might agree to pay their listing agent a 2.8% commission. A buyer, in a separate agreement, might agree to pay their agent a 2.5% commission. While the seller can still offer to pay the buyer's agent commission as a concession, it's no longer a given.

This decoupling of agent commissions allows for more flexibility and competition.

Here is a look at a hypothetical scenario on a $500,000 home sale:

Party	Commission Rate	Commission Amount
Seller	Pays 2.8% to Listing Agent	$14,000
Buyer	Pays 2.5% to Buyer's Agent	$12,500
Total Commissions	5.3%	$26,500

Broker Involvement in Commission Distribution

It's a common misconception that a real estate agent keeps the entire commission they earn. In reality, the commission distribution process involves their real estate broker. Most agents work for brokerage firms and must share a portion of their real estate agent fees with them. This is known as a "commission split."

When a home sale closes, the commission is paid directly to the agent's brokerage. The brokerage then pays the agent their share based on their representation agreement. For new agents, a common split is 70/30, meaning the agent receives 70% of the commission, and the brokerage keeps 30%.

For instance, if an agent earns a $15,000 commission on a sale, a 70/30 split means the agent takes home $10,500 before taxes and business expenses. Experienced, high-producing agents can often negotiate more favorable splits, such as 85/15 or even 90/10.

Differences in Commission Models Across States

While the NAR settlement created a new national framework, commission models and rates can still show state differences based on the local market. For example, in a highly competitive real estate market with soaring home prices, like parts of California, agents might be more flexible on commission rates because the total dollar amount is still substantial.

In contrast, markets with lower home values might see agents holding firm on higher percentage rates to ensure they are fairly compensated for their work. The rules regarding commission sharing can also vary. California and at least 39 other states permit agents to share a portion of their commission with a client as a rebate or credit, though this practice is not allowed everywhere.

Even with the new rules, local customs and market conditions play a huge role. In New York City, for instance, where many agents belong to a different board (REBNY), sellers have largely continued to offer a commission to the buyer's agent to keep transactions flowing smoothly.

Commission Rates and Fees in 2025

As the market adapts to the new rules, what can you expect for commission rates and agent fees in 2025? While there's no "standard" real estate commission anymore, early data provides some insight into the average commission costs people are seeing. Remember, every fee is negotiable.

The key is to understand the factors that influence these rates, from regional market trends to the specifics of your property. Let's break down the typical percentages and costs you might encounter.

Typical Commission Percentages by Region

Commission rates are not uniform across the country; they often reflect regional differences in the real estate market and local market conditions. The national average total commission has reportedly slipped from around 5.6% to approximately 5.0% since the new rules took effect.

In a high-cost state like California, the average total commission rate is around 5.18%, according to 2025 data. This is often split between the listing broker (around 2.61%) and the buyer’s broker (around 2.57%). Even with a slightly lower percentage, the high property values mean the dollar amount is still significant.

In other regions, the rates might be higher or lower. Here’s a look at how hypothetical commission rates might vary by region:

Region	Typical Total Commission Rate
West Coast (e.g., California)	4.8% - 5.2%
Northeast (e.g., New York)	5.0% - 6.0%
Midwest	5.5% - 6.0%
South	5.4% - 5.8%

Average Commission Costs for Sellers

For home sellers, one of the most welcome changes is the potential for lower costs at closing. Since you are no longer automatically responsible for the buyer's agent fee, your primary commission cost is the fee you negotiate with your listing agent. This typically ranges from 2.5% to 3% of the sale price.

What does this look like in practice? Consider a $500,000 home sale. Under the old 6% model, a seller would pay $30,000 in total commissions. Under the new model, the seller may only be responsible for paying their listing agent a 3% fee; the cost is just $15,000—a savings of $15,000.

Of course, this doesn't account for situations where a seller agrees to offer a concession to the buyer to help cover their agent's fee. However, the starting point for sellers is a significantly lower commission obligation, which gives them more financial flexibility and control over their closing costs.

How Real Market Rates Are Determined

In 2025, real market rates for commissions are determined by a mix of negotiation and market dynamics—not by law or industry mandate. Your listing agreement will specify the exact fee. Several factors influence what this rate will be for your specific real estate transaction.

Key determinants include:

• The Agent's Experience and Services: A top-producing agent with a comprehensive marketing plan may command a higher rate than a newer agent or one offering limited services.

• Property Value and Type: Commissions on higher-priced homes are often a lower percentage because the dollar amount is still substantial. A unique or hard-to-sell property might require a higher rate.

• Local Market Conditions: In a hot, competitive market, agents may be more willing to negotiate a lower rate. In a slow market, sellers might offer cost assistance for the buyer's agent to attract offers.

Ultimately, the rate is what you and your agent agree upon. It's a business decision based on the value the agent provides and the realities of the market you're in.

Negotiating Real Estate Commissions

One of the biggest takeaways from the recent changes is the emphasis on commission negotiations. The new rules are designed to make it clear that agent compensation is not set in stone. As a consumer, you have the power to discuss fees with your real estate agent.

Whether you're trying to secure a lower commission with a listing agent or, as a buyer, defining your agent's fee for the first time, understanding how to approach these conversations is key.

Let's explore how you can negotiate effectively in this new environment.

Are Commissions Negotiable in 2025?

Yes, absolutely. Real estate commission rates are more negotiable in 2025 than ever before. The entire premise of the NAR settlement was to break down the perception of a "standard" fee and encourage open conversations between consumers and agents about what they are paying for.

Sellers can and should discuss the real estate commission with potential listing agents before signing a representation agreement. You can ask what services are included for their proposed fee and inquire about their flexibility. Some agents may be willing to offer lower commission rates, especially for high-value homes or in a competitive market.

For buyers, negotiation is now a mandatory part of the process. Your buyer representation agreement will explicitly state the agent's fee, and you have the right to discuss that amount before you commit. The power to negotiate is firmly in your hands.

Strategies for Buyers and Sellers to Lower Fees

Both buyers and sellers can use several strategies to try and lower agent fees without sacrificing service quality. The key is to understand the agent's value proposition and be prepared to have an open conversation.

For sellers looking to negotiate a lower commission, consider these approaches:

• Interview Multiple Agents: Compare the fees and services of at least three different agents. This gives you leverage and helps you find the best fit.

• Offer a Higher Sale Price: If an agent believes your home can sell for a higher price, they may be more willing to accept a slightly lower commission percentage.

• Propose a Tiered Commission: You could agree to a certain rate if the home sells within a specific timeframe or above a certain price.

For home buyers, you are now in the driver's seat for your agent's fee. You can negotiate the rate based on the expected amount of work. For example, if you've already found the home you want to buy, you might negotiate a lower fee since the agent's search process is eliminated.

The Rise of Flat Fee and Discount Listings

The shift in commission structures is accelerating the popularity of alternative models like flat-fee and discount listings. These options can be appealing for sellers who are comfortable handling more of the process themselves and want to achieve even lower commission rates.

A flat-fee listing service, for example, might charge a few hundred dollars to get your property on the MLS, but you would be responsible for photography, showings, and negotiations. This is becoming a more common choice for experienced sellers who don't need full-service representation. Some companies offer professional photography, for a set price for photos of $495 (depending on the home size).

Similarly, some agents are offering consultation services on an hourly basis, with rates between $75 and $150. This model works well for buyers or sellers who only need help with specific parts of the transaction, such as contract review or negotiation, rather than the entire process from start to finish.

Conclusion

In summary, understanding real estate commissions in the wake of the NAR lawsuit is crucial for both buyers and sellers navigating the market in 2025. The changes in commission structures, along with the ability to negotiate fees, have a significant impact on the overall process of buying or selling a home. Staying informed about the latest developments not only empowers you but also helps ensure that you make the most financially sound decisions during your real estate journey.

If you have questions or need personalized guidance, get in touch with us today to explore your options and better understand how these changes may affect you.

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Real Estate Agent Commission in 2025 FAQ

Can you negotiate real estate commissions with your agent in 2025?

Yes, you absolutely can. Commission negotiations are a central part of the new landscape. Both buyers and sellers should discuss agent fees with their real estate agent before signing any agreement. All commission rates are negotiable, and you have the power to seek lower commission rates.

Are there differences between buyer agent and seller agent commissions?

Yes. The buyer’s agent commission and the seller’s agent commission are now negotiated separately. The seller pays their agent's real estate commission, and the buyer is responsible for their agent's fee unless they negotiate for the seller to cover it. There is no longer a single commission split from the home's sale price.

What other closing costs should sellers expect alongside commissions?

Besides the real estate commission, home sellers should budget for other closing costs like transfer taxes, attorney fees, title insurance, and any prorated property taxes. You may also face costs for repairs or offer cost assistance to the buyer, which would be deducted from your sale price proceeds.

What is the average real estate commission rate for selling a house in California in 2025?

The average total real estate commission for California home sales in 2025 is around 5.18%. However, this is just an average, and actual commission rates are always negotiable. Your final rate will depend on your agent, the property, and local market conditions.

How much commission does a realtor make on a $500,000 house?

On a $500,000 house, if the real estate agent earns a 2.5% commission, their gross agent's commission would be $12,500. The agent then splits this amount with their brokerage. With a 70/30 split, the agent would take home $8,750 before taxes and business expenses.