Realtor commission changes: buy or sell? Lawsuit Settlement Changes Commission Structure: A lawsuit settlement eliminated the National Association of Realtors’ (NAR) cooperative compensation policy, which mandated seller payment of buyer’s agent commissions. Now, buyer’s agent commissions are the buyer’s responsibility, though the buyer can request the seller to pay via a Seller Payment to Broker Compensation (SPBB) form. Buyer Representation Agreements (BRBCs) Now Required: Buyers must sign a Buyer Representation Broker Compensation Agreement (BRBC) before viewing a property (excluding open houses) to outline commission details and payment arrangements. Negotiable Commissions: Buyer and seller commissions are now fully negotiable, increasing transparency and allowing buyers to potentially lower costs. However, the BRBC outlines the agreed-upon fee which is binding unless amended. Increased Uncertainty and Agent Adaptation: The changes have caused uncertainty, with some agents unprepared or unaware of the new rules. Successful agents are adapting by focusing on client needs, clearly explaining the new system, and negotiating effectively. Potential for Agent Attrition: The changes are expected to result in some agents leaving the industry due to inability to adapt to the new system, and adapt to the new reality of negotiable commissions. Hidden Fees from Online Portals: Online real estate portals often receive a significant portion (30-50%) of agent commissions, a fact often unknown to buyers. This reduces the agent’s compensation further. Enforcement and Penalties: Strict enforcement measures are in place, with significant fines levied against agents violating the settlement agreement’s guidelines. The MLS may even remove listings of repeat offenders. Shift in Industry Values: The changes are pushing the industry toward a more values-driven approach, prioritizing consumer needs and transparency over solely transactional relationships. Recommendations for Unrepresented Buyers: Buyers choosing not to use an agent are advised to hire a real estate transactional attorney for legal guidance and to educate themselves on the complexities of real estate transactions in their jurisdiction. Current Market Conditions Favor Buyers: Increased housing inventory and potentially decreasing interest rates create a favorable buying market for consumers, offering more choice and potentially lower prices. Historic Changes: The settlement marks the most significant changes in the real estate industry in over 100 years.

Buying or Selling Homes? What You Need to Know About Realtor Commission Changes in 2025

If you’re planning to buy or sell a home in California—or anywhere in the U.S.—it’s critical to understand the recent groundbreaking changes to realtor commissions. These changes stem from a landmark lawsuit settlement that is reshaping how buyer’s agents get paid. This article breaks down what happened, why it matters, and how it impacts buyers, sellers, and real estate agents alike.

The Traditional Realtor Commission Model

For over 50 years, real estate transactions in the U.S. have operated under a system called the Cooperative Commission Policy managed by the National Association of Realtors (NAR). Here’s how it worked:

The seller pays the entire commission, which is split between the listing agent (seller’s agent) and the buyer’s agent.
The commission rates were typically predetermined and displayed in the Multiple Listing Service (MLS), usually around 5-6% of the home’s sale price, split equally between listing and buyer’s agents.
While commissions were technically negotiable, in practice, the buyer’s agent commission was often fixed and paid by the seller.

This system was widely accepted and rarely questioned for decades, but it recently faced legal scrutiny on antitrust grounds.

The Lawsuit That Changed Everything: Sitzer vs. National Association of Realtors

In October 2023, a jury in Kansas City, Missouri reached a unanimous verdict in the class-action lawsuit Sitzer et al. v. National Association of Realtors, ruling that the cooperative commission policy constituted an antitrust violation.

What Was the Lawsuit About?

The plaintiffs argued that the NAR’s practice of requiring sellers to pay buyer’s agent commissions artificially inflated home prices and restricted competition by fixing commission fees. Essentially, the claim was that:

Sellers were forced to pay buyer’s agents even though the buyer’s agent works for the buyer.
This system discouraged negotiation and kept commissions high.
It potentially incentivized buyer’s agents to encourage buyers to pay more since the seller, not the buyer, was paying the commission.

The jury agreed, ruling that the policy was anti-competitive and ordered that the requirement for sellers to pay buyer’s agent commissions be eliminated.

Settlement and Financial Impact

Following the verdict:

The National Association of Realtors agreed to a $488 million settlement, covering most member agents nationwide.
Other large brokerages, including Century 21, Coldwell Banker, and Better Homes and Gardens, collectively paid over $730 million in settlements.
The lawsuit triggered a class-action lawsuit involving thousands of agents and brokerages, reshaping the real estate commission landscape.

What Does the New Commission Structure Mean?

Buyers Now Pay Their Own Agent

The most significant change is that buyers are now responsible for paying their buyer’s agent’s commission directly, rather than it being paid by the seller.

This means:

Buyer’s agent commissions are no longer predetermined or automatically paid by sellers.
Buyers must agree to pay their agent upfront, typically between 2-3% of the home’s purchase price.
Buyer’s agents and buyers sign a Buyer Representation Broker Compensation Agreement (BRBC) before touring homes.

Sellers Are No Longer Obligated to Pay Buyer’s Agents

Sellers can:

Opt to pay the buyer’s agent commission voluntarily, but it’s no longer mandatory.
Negotiate commissions directly with their listing agent.

Impacts on Buyers and Sellers

Buyers may face challenges if they must come up with down payments plus pay their agent’s commission.
Sellers could save thousands by not paying buyer agent commissions.
Real estate agents must be transparent about fees, and all commissions are now fully negotiable.

How Does This Affect Home Buyers?

Signing a Buyer Representation Agreement

Before viewing properties, buyers must sign the BRBC agreement outlining their commitment to pay their agent. This agreement can be:

Exclusive or non-exclusive
Limited to a specific property or a time frame (not exceeding three months)

Financing Agent Commissions

Buyers who struggle to pay both down payments and commissions have options:

They can negotiate with sellers to pay the buyer’s agent commission using a form called the Seller Payment to Broker Compensation (SPBB).
If sellers refuse, agents can choose to either represent the buyer at no cost or withdraw.

Risks of Going Unrepresented

Some buyers might try to buy without an agent to avoid paying commissions. However:

Navigating paperwork and timelines alone can be complex.
Sellers’ agents cannot advise or assist buyers without fiduciary conflicts, limiting support.
Buyers risk missing critical disclosures or deadlines.

How Does This Affect Sellers?

Potential Cost Savings

Sellers no longer have to pay buyer agent commissions by default. This can reduce their transaction costs significantly.

Negotiating Commissions

Sellers now negotiate directly with their listing agents on commission fees. Transparency and negotiation are key.

How Does This Affect Real Estate Agents?

New Challenges and Opportunities

Agents must clearly explain commission structures to buyers and sellers.
They need to build trust and demonstrate value since buyers pay their commissions directly.
Some agents may find it harder to secure buyers without upfront commission agreements.

Adapting to the New Norm

Top brokerages have trained their teams since early 2023 to prepare for these changes, focusing on transparency and consumer education.

What’s Next for Real Estate Transactions?

The commission changes, effective August 17, 2024, mark the biggest shift in real estate in a century. Buyers and sellers must adapt by:

Understanding new commission payment responsibilities.
Negotiating commissions openly.
Seeking education on the process, whether represented or unrepresented.

The National Association of Realtors’ old commission policy was ruled illegal in the Sitzer vs. NAR lawsuit.
Buyers now pay their buyer agent commissions directly, changing the traditional seller-pays model.
Sellers are no longer required to pay buyer’s agent commissions, potentially reducing seller costs.
Buyers must sign agreements upfront and may negotiate seller payments or pay commissions themselves.
Agents must adapt by emphasizing transparency, education, and customer-first service.
The real estate industry is undergoing its most historic transformation in decades.
Buyers going unrepresented face significant paperwork and legal challenges.
All commissions are now fully negotiable, providing more flexibility but requiring awareness.
Settlements totaled over $730 million, with major brokerages paying large sums to resolve lawsuits.
This new model could influence home prices, affordability, and commission structures nationwide.

These changes require everyone involved in real estate to rethink how transactions happen. Whether you’re a buyer, seller, or agent, understanding your rights and responsibilities under the new commission rules will empower you to make smarter decisions.

If you’re considering buying or selling a home, consult a knowledgeable agent or real estate attorney to navigate the evolving landscape smoothly. For buyers, getting educated and understanding commission agreements will be critical in the coming years.