Revolutionizing Real Estate: New Rules Shake Up How Agents Get Paid—Are Buyers and Sellers Ready?

Photo byim Watson/AFP/Getty Images

Change is rippling through the real estate world as new rules transform how agents are compensated, forcing both buyers and sellers to rethink their strategies. In a market where home prices have soared and mortgage rates remain high, these regulatory shifts are set to redefine the landscape—potentially saving consumers thousands in the process, but not without some added complexity.

A New Game Plan for Sellers

When Dana McMahan sold her home this spring, she decided to ditch the traditional full-service Realtor model. Rather than pay the typical 5-6% commission, which is usually split between the seller’s and buyer’s agents, McMahan chose to handle much of the sale herself. “I hosted an open house, took my own photos, and wrote the listing,” she said. By skipping the full-service agent, she saved a substantial amount on the sale, paying only $500 to list her property on the local MLS (Multiple Listing Service). However, to attract buyers, she still offered the standard 3% commission to the buyer’s agent.

But with the National Association of Realtors (NAR) implementing new rules as of August 17, sellers like McMahan might approach things differently next time. The revised guidelines prohibit sellers from advertising buyer agent commissions in MLS listings, aiming to curb the controversial practice of steering, where some agents would only show homes with higher commissions.

A Legal Push for Change

These changes are the result of multiple antitrust lawsuits against NAR, which accused the organization of inflating commissions by requiring sellers to pay agents on both sides of the deal. While NAR has always maintained that commissions are negotiable, the association agreed to a $418 million settlement and to implement these new rules as part of the agreement. This legal battle, which led to the rule change, underscores the growing pressure on the real estate industry to increase transparency and fairness in how agents are paid.

Navigating the New Rules

One of the most significant changes for buyers is the requirement to sign a representation agreement before viewing homes. This agreement clarifies the buyer’s responsibility to potentially pay their agent’s commission if the seller doesn’t offer one. This could lead some buyers to explore alternatives like flat-fee brokerages or customizable services that allow them to pick and choose what they pay for. But experts urge caution: before signing any legally binding agreement, buyers should fully understand the terms.

The Double-Edged Sword

However, the new rules may come with unintended consequences. In competitive markets, where bidding wars are common, buyers could feel pressured to cover their agents' fees out-of-pocket to make their offers more appealing. Bill Colson, a retired Navy veteran preparing to sell his Maryland home and buy in Georgia, has already encountered this challenge. One Realtor advised him to stick with the traditional 6% commission split, while another warned that he might need to pay his own agent directly to remain competitive. For Colson, this could mean paying commissions on both transactions, pushing his costs to as high as 9%. “Instead of making things better, it just got a lot worse,” he lamented.

A Future in Flux

As the real estate industry adapts to these changes, the impact on buyers and sellers will become clearer. Will these shifts lead to more affordable transactions and a fairer market? Or will they complicate an already daunting process? One thing is certain: this is just the beginning of a broader transformation in how homes are bought and sold in America. For those navigating this new terrain, staying informed and open to new strategies will be essential.