The recent changes in how Realtors are paid, starting August 17, 2024, have brought significant disruption to the real estate industry. These changes, part of a $418 million settlement from the National Association of Realtors (NAR), have dismantled the traditional commission structure where sellers typically covered a 5-6% commission split between their agent and the buyer’s agent.
Since the settlement was announced, both buyer and seller agents have felt the pressure. I believe these new rules will pave the way for different business models and may push many full-service Realtors out of the industry. By late September, we’ve seen listed homes sitting on the market for much longer, leading to price reductions and growing uncertainty. Although interest rates have slightly decreased and housing shortages persist in some areas, homes aren’t moving as quickly as expected. While the upcoming elections play a role, I think the issue runs deeper.
Industry experts claim this is the biggest shake-up in the U.S. real estate market, but I disagree. Though these changes bring more attention to commissions, experienced agents know that buyer agent commissions have always been negotiable. If a buyer’s agent brings real value, they’ll still earn their full commission. This situation reminds me of when flat-fee real estate companies entered the market, refusing to pay buyer agents’ commissions. Most of them failed, and both buyers and sellers missed out on potential savings or profits.
Recent transactions show that buyer agents are slightly reducing their rates, from 2.5% to around 2%. The NAR’s settlement also included two key rule changes, which took effect on August 17, designed to shake up how commissions are handled. First, agents’ compensation can no longer be included on MLS listings, though it can be shared elsewhere. Second, buyer agents must now sign a written agreement with clients before showing properties, making buyers responsible for paying their agent if the seller doesn’t cover the cost.
These changes open the door for newer business models, where buyer agents might charge per showing or per accepted offer. According to TD Cowen Insights, commissions could fall by 25% to 50%, giving alternative models like flat-fee brokerages an opportunity to thrive—if they’re executed correctly.
Many Realtors believe these rules will benefit more experienced agents while making it harder for newer agents to succeed, as buyers might hesitate to sign agreements with less-experienced agents. We’ll see how this plays out, but it’s clear that the real estate landscape is evolving quickly, and only those who can adapt and provide value will succeed in the long term.
