Impacts of the 2024 Real Estate Commission Changes

Nerre Shuriah

JD, LLM, CM&AA | Senior Director of Wealth Planning

Bobby Maloney

Private Banker

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In late August 2024, the National Association of Realtors, or NAR, made several changes to real estate agent commissions and disclosures to make realtor compensation more equitable and transparent for home buyers and sellers. These changes will affect transaction costs, compensation structures and business models in the residential real estate industry.

Who is impacted

Prior to the 2024 NAR changes, home sellers were responsible for sales commissions for both seller and buyer agents. Under the previous regulations, the buyer agent's commission was also published in each Multiple Listing Service, or MLS, property listing.

Under the NAR's new rules, home buyers are now responsible for paying their agent's fees and must sign a written contract with their agent that stipulates their commission prior to shopping for a home.

Since sales commissions are negotiable, buyer agent's commissions are no longer published in the MLS listing. Buyer agent's commissions may be negotiated as a percentage of the home's sale price, a flat rate or even an hourly fee.

What is impacted

The new commission rules impact many aspects of residential real estate sales in the US.

• The working relationship between buyers and their agents, including the negotiation of fees with buyer agents separately from seller agents
• An increase in competition between buyer agents, potentially resulting in lower sales commissions
• Updates to real estate companies' business models and marketing communications to adhere to the new rules
• Revisions by investors buying and selling homes to their financial criteria to build in the new commission structures

Impact on mortgages

Currently, buyers aren't allowed to roll in the cost of their agent's commissions into their mortgages. However, the Federal Housing Finance Agency may allow the commissions to be included in Freddie Mac and Fannie Mae mortgages in the future.

What action is required—and when

Since the NAR's changes went into effect in August 2024, all US home purchases and sales from this point forward will need to factor in the new regulations. If you're planning a home purchase or sale, consider the following actions.

Home buyers

• Study the new commission rates to determine the impact on the total purchase cost of each home you're considering. The good news is the new regulations may lower your costs.
• Research, interview and compare several buyer agents to find one who provides services aligned with your budget, circumstances and real estate market experience—such as first-time home buyer or seasoned investor.
• Thoroughly read all contracts signed throughout the purchase process to be sure you're aware of your costs and payment responsibilities.

Home sellers

• Familiarize yourself with the nuances of the latest commission structures so you can properly negotiate with both buyer and seller agents.
• Compare potential listing agents' commission rates to determine if they're competitive with local market rates and adhere to the latest NAR regulations.
• Examine additional sales models, such as flat-fee or discount brokerages options, which may become more widespread as the industry adapts to the NAR changes.

Who should you talk to now

To fully understand the new realtor regulations' impact on an upcoming real estate transaction, it's prudent to have a discussion with a trusted real estate professional well before entering the market—whether you're a buyer or a seller. You may also want to speak with your financial team if the new NAR regulations impact your overall wealth strategy.