New Rules for Home Buyers Are Here. ‘There’s Going to Be a Lot of Confusion.’

Two big changes in how real estate agents work with clients and get paid took effect in mid-August. Home buyers and sellers should expect more paperwork, better fee transparency—and some confusion.

The revisions, announced in March, are the result of a settlement between the National Association of Realtors and home sellers, who won a landmark $1.8 billion federal jury verdict against the group and several large brokerages on their claims that the trade group’s rules helped keep agent commissions inflated. The changes apply to most of the trade group’s 1.5 million members.

Total agent commissions could eventually shrink from the typical 5% to 6% range, with one consumer advocate suggesting that buyers and sellers separately negotiate their agent commissions to 2% or lower.

Buyers now sign contracts outlining their agents’ services and fees from the start, something many didn’t have to do before. Another change shakes up how homes are marketed. A seller’s agent can no longer advertise the commission their client is willing to pay to a buyer’s agent on the multiple listing service, or MLS, the network of home listings agents use to communicate with each other.

The National Association of Realtors published new guides for buyers and sellers. The changes “further empower consumers, promote choice, and encourage transparency by requiring written buyer agreements—which clearly disclose that commissions aren’t set by law and are fully negotiable,” a spokesperson said in a statement to Barron’s.

The revised rules make buyers more aware of the cost of their agents’ services, and put less pressure on sellers to agree up front to an amount to pay the buyer’s representative. Beyond that, it’s largely up to buyers and sellers to decide how agents and commissions fit into the process. For many, that choice begins with picking an agent—and could be fraught as agents and brokerages adapt in different ways.

“There’s going to be a lot of confusion,” said Stephen Brobeck, a senior fellow at the Consumer Federation of America who has advocated for changes to agent commission practices.

Among his suggestions for buyers and sellers: negotiate an agent’s fee, in dollar terms, to 2% each of the transaction size or less. The typical buyer’s agent earned a 2.6% commission as of mid-July, according to Redfin. The overall commission, which includes payment for both sides of the transaction, is about 5.5%, according to a Clever survey.

“Sellers should not agree upfront to provide any buyer agent compensation but should wait for buyer offers,” Brobeck wrote in a tipsheet for consumers. “And if buyers need help compensating their agents, they should make that request in offers on properties.”

Such a scenario would allow sellers to accept the best net offer, inclusive of requests for buyers’ agent commission. This could, over time, become the preferred method for the industry, says BTIG analyst Soham Bhonsle, who covers real estate brokerages. Not every agent will do it this way, especially at first. The typical agent has “been doing this for a very long time, so they’re stuck in their ways,” said Bhonsle. “But maybe the market forces their hand.”

Some agents might prefer a process that involves sharing offers of compensation ahead of an offer—just not on the listings services. That could mean a buyer’s agent calls a seller’s representative to learn how much compensation their client is willing to offer. Or a seller’s agent suggests their client decide before listing the amount they’re willing to pay for the buyer’s agent.

The industry’s structure adds more complexity. The terms of the settlement broadly cover members of the trade group and listing services operated by them. Some nonmember listing services have opted out of the settlement, meaning different rules could apply to agents using these services. Buyer contracts and guidelines for agents will vary by brokerage and location.

With so much variation, buyers and sellers searching for representation should ask ahead of time how the agent handles compensation. Barron’s has outlined how consumers should navigate the new landscape.

“Everybody here is going to have to make a choice coming up,” Ed Zorn, the vice president and general counsel of California Regional MLS, said to agents at an industry conference. “Are you going to choose the route of staying with the old commission sharing model, or are you going to look at the changes that are coming up and look at opportunities to enhance your role in the real estate industry?”

The changes have been a hot topic on social media and at industry conferences. Wall Street analysts have taken sides on how the updated rules will impact everything from brokerages, home search portals, and agent head count. The settlement has been a target of debate for agents, lawyers, and industry commentators who have taken to platforms like TikTok, YouTube, Reddit, and X.

Even the potential impact on agents has been scrutinized, with analysts expecting lower commissions and agent attrition.

“I think it’s great,” said Dan Beer, a San Diego-based agent with eXp Realty.

Agents who don’t adapt will leave the profession, allowing better prepared agents to capture more business and earn more commission, he said.

During the housing market’s not-so-distant boom, some agents were able to do the bare minimum: “opening the door” and collecting a commission, he said. Now, “it’s that moment that we’ve always wanted—where being a real estate agent actually starts to mean something.”

Write to Shaina Mishkin at [email protected]