Land Settlement on Real Estate Regulatory Body Fails to Reduce Homebuyer Expenses
In March 2024, the National Association of Realtors (NAR) agreed to a $418 million settlement due to allegations of artificially inflated real estate commissions. As a result, new rules regarding real estate commissions went into effect on August 17, 2024.
Traditionally, real estate commissions averaged 5% to 6% of the sale price of a house, with sellers usually responsible for paying both their own agent and the buyer's agent. However, under the new rules, sellers now negotiate fees directly with their own agent and decide whether, and how much, to contribute toward the buyer's agent's fees.
One might expect this shift to drive down costs and increase transparency, but according to a Redfin analysis, average buyer's agent commissions barely changed after the new rules took effect. In October 2024, the average buyer's agent commission rate was 2.34%, nearly identical to 2.35% in August. By the first quarter of 2025, commissions had actually ticked up to 2.40%.
Homes under $500,000 saw an even bigger jump, climbing to 2.49% from 2.46% in the fourth quarter and 2.42% in the third. For sales between $500,000 and $999,999, the average buyer's agent commission rose to 2.29% in the first quarter of 2025.
The slow adoption of new approaches by real estate agents and their accustomedness to the traditional model are reasons why the settlement's policy changes haven't had much impact in practice. Buyers must now sign an agreement with their real estate agent outlining exactly how much they'll pay for the agent's services.
If you're planning to sell a house, discuss fees with your real estate agent at the beginning of the process and make sure you sign a document outlining those fees. This could mean up to $24,000 in fees on a $400,000 home, a significant amount that could be negotiated to lower transaction costs for home sales.
In conclusion, while the NAR settlement aimed to tackle inflated real estate commissions, the impact on the average commission rate has been minimal so far. However, sellers now have greater control over the negotiation of buyer’s agent commissions, enabling them to pay zero, negotiate, or offer commissions as concessions. This newfound control could potentially lead to lower transaction costs in the future as sellers and buyers become more aware of the new rules and negotiate more effectively.
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