The History and Future of Realtor Commissions: What’s Actually Changed?

Over the last year I have had many conversations that have become somewhat repetitive around consumers (home buyers and sellers) being misinformed about real estate agent commissions. This is a conversation that should be much more public, and I’d like to see if I can at least help someone better understand how to start conversations that they may have been avoiding out of simple confusion.

The way real estate commissions work has been a topic of debate for a long time, but recent legal changes are making a direct impact on how buyers and sellers navigate them. Here’s a breakdown of where things started, how the system evolved, and what’s different now.

How Realtor Commissions Started

In the early days of real estate, one agent acted as a match maker and represented both the buyer and seller—a practice called dual agency. The seller paid the agent’s commission, and that agent handled the entire transaction. This is still very common in most markets

Over time, buyers wanted their own representation, leading to the rise of buyer’s agents (actually referred to as “selling agents”, which can cause confusion). These agents exclusively help buyers in navigating and negotiating. To make this work, commissions began splitting between the seller’s agent and the buyer’s agent, with the seller still covering the total fee.

While commissions have always been negotiable, they became fairly standardized over time, typically ranging from 5% to 6% of the sale price, split between both agents in some way.

What’s Actually Changing?

A recent legal ruling determined that some past commission practices resembled price-fixing, leading to two major changes:

1. Seller-Paid Commissions Can No Longer Be Advertised in the MLS

Previously: The amount a seller was offering to pay a buyer’s agent was displayed in the Multiple Listing Service (MLS)—the database Realtors use to find and market properties. This was only seen by Realtors.

Now: That information can no longer be shown on the MLS, but is typically allowed to be shown on an agent’s personal website. While sellers can still offer to cover a buyer’s agent’s commission, it is no longer a pre-set expectation that buyers’ agents will be compensated a certain way.

This is an interesting shift—while each deal will now have more transparency, the overall market becomes less transparent, since buyers and agents can no longer easily compare commission offerings across listings.

2. Buyers Must Sign a Broker Service Agreement Before Seeing Homes

Previously: Buyers and agents often worked together informally, with commission details left open-ended. Agents could accept whatever commission was being offered by the seller at closing.

Now: Before a buyer’s agent can show homes, they must sign a Buyer Broker Service Agreement with the buyer that states:

• How long the agreement will last.

• What the agent’s commission rate will be.

Important: This rate can be negotiated down but not up once the agreement is signed. The document no longer allows for an agent to simply accept whatever the seller offers.

What happens if the seller isn’t offering enough commission to match the agreement?

• The buyer can cover the difference out of pocket.

• The agent can agree to work for less than the agreed-upon rate.

• The buyer can try to negotiate with the seller to cover the full amount.

Most offers now still include an intended commission for the buyer’s agent, but this process makes it a more direct conversation instead of an assumed standard.

What This Means for Buyers and Sellers

For Sellers

• You are no longer required (or even able) to publicly advertise what you’re offering a buyer’s agent.
• You can still offer a buyer’s agent commission, but it’s now a more private part of negotiations.
• Your home may still attract more buyers if you offer a commission, since many buyers will struggle to pay their agent out of pocket.

For Buyers

• You must sign an agreement with your agent before they start showing homes, clarifying their compensation.
• You may need to pay your agent directly if the seller doesn’t cover the full commission amount.
• You now have more control and transparency in negotiating your agent’s fee upfront.

What’s Next?

While the goal of these changes was to increase transparency and competition in real estate that seems to be halfway successful. Each deal is more transparent, and I think that is a good thing, while the market overall is far less transparent as the commission are not tracked through the database any longer. I think that this creates a vacuum that big tech is likely to fill, and they will gain more control over the industry and consumers as innovation comes. I think that there will be good changes, don’t be surprised when they capture even more power by this blockbuster move.

In addition, some believe this will lower costs for buyers and sellers, while others think it may make home buying harder for those who can’t afford to pay an agent out of pocket. We will see how things change over time. There are agents who promise to do as much as teams like mine for less compensation, and I spend more on my listings than they make per deal - these two things are at odds. I do think that the market will continue to see changes, and that will be true in regard to commissions, as well as with services offers. Technology will increasingly fill some voids, and in some ways it won’t. Our business model is very service focused, which has allowed us to be nearly 100% repeat and sphere referral fueled - which fits me personally, I hate pushing anyone to do something that they may or may not want to do.

However things change, commissions are now front and center in each deal, rather than assumed as a standard. In many ways I like and appreciate this - it gives me a chance to show my value that I believe that my team and I have, and that goes for so many great people in my industry.

If you have questions about how this affects you as a buyer or seller, let me know, there is not a good reason to feel left in the dark on the largest transaction that most people will ever make in their lives, and it’s important to know who is in your corner! You can call, text, or email with any question you would like. Have a great day, and Thunder Up!

Peace & Joy,

Grady Kent Carter