Buyer Agency Compensation Explained (Who Pays the Buyer’s Agent Now?)

For years, many homebuyers have been told, “Don’t worry – it doesn’t cost you anything to use a buyer’s agent.” But with recent NAR settlement changes shaking up the industry, it’s time to pull back the curtain on buyer agency compensation. In this post, we’ll explain what buyer’s agent compensation means, how it traditionally worked, and what’s changing. Real estate agents from coast to coast (regardless of state) should be ready to discuss this clearly – consider it a refresher that might even appear in online real estate CE materials as the industry adapts.

What Is “Buyer Agent Compensation,” Historically?

Simply put, buyer agent compensation is how a buyer’s representative (the buyer’s real estate agent or broker) gets paid for their services. In the traditional U.S. residential real estate model, a home seller would agree to pay a commission to their listing agent (say 5–6% of the sale price). The listing brokerage would then offer a portion of that commission to any buyer’s broker who brings a buyer and successfully closes the deal. This offer of “buyer broker compensation” is typically published in the MLS when the home is listed – e.g., “Buyer’s agent commission: 2.5%.” When the sale closes, the listing brokerage takes the full commission from the seller’s proceeds and cuts a check to the buyer’s brokerage for the offered amount. Effectively, the seller is paying both their agent and the buyer’s agent out of the sale price.

Because of this setup, buyers often hear that using a buyer’s agent is “free.” In a sense, the buyer doesn’t pay out of pocket – the fee comes from the seller’s funds. However, economists would argue the buyer indirectly pays, since a seller factors in all costs (including commissions) when deciding how much to accept for the home. Still, this commission split system was largely hidden from buyers’ view. Many only saw that the seller paid a commission, and agents and MLSs historically didn’t emphasize that “seller-paid” commission was actually compensation to the buyer’s representative.

Who Pays the Buyer’s Agent After the Settlement?

One big question agents are getting now is: “Who pays the buyer’s agent going forward?” The answer: it’s negotiable – more so than ever before. Under the recent settlement (and new NAR policy changes in 2024), sellers are no longer required to offer compensation to buyer brokers via the MLSnar.realtor. They still can if they choose (off-MLS), and in practice many likely will, but it’s not an automatic MLS feature now. This means in some transactions, a seller might not offer to pay a buyer’s agent. So, buyer and buyer’s agent must come to an agreement between themselves about payment. That agreement could result in the buyer paying the agent, the seller paying, or a combination (like the seller covering part via closing cost credit).

Here’s how it breaks down in various scenarios:

• Traditional seller-paid model (still possible): The seller and listing broker decide to offer a certain commission to buyer agents. Even though it’s not in the MLS, the buyer’s agent might learn of it through a note or by inquiring. If the buyer’s agent and buyer have a written agreement for, say, 3% and the seller is willing to pay that 3%, then the buyer might not have to personally pay their agent. The deal could be structured so the seller pays that amount at closing (just like before). Important: The buyer’s agent must disclose to the buyer what that compensation is and get the buyer’s agreement if it’s anything above what they agreed to initially stellarmls.comstellarmls.com. Transparency is key now.
• Buyer-paid model: If the seller is not offering, then the buyer is responsible for paying their agent, as specified in the buyer representation agreement they signed nar.realtornar.realtor. For example, a buyer might agree to pay their agent a 2.5% commission. This could come from the buyer’s own funds at closing. Buyers could negotiate for a lower purchase price or ask the seller to contribute to closing costs to offset this expense. In markets or situations where sellers refuse to pay a co-op commission, buyers will need to budget for their agent’s fee. (This is common in some other countries but new to many Americans.)
• Split or creative arrangements: A buyer and seller might negotiate something in the purchase offer. Under the new guidance, a buyer’s offer can request that the seller pay the buyer broker’s compensation as part of the deal nar.realtor. This effectively rolls the cost into the transaction. If the seller agrees, it becomes seller-paid; if the seller counters or refuses, the buyer might end up paying or they meet somewhere in the middle (maybe a slightly higher sale price with the seller then paying the fee). The key is, everything is negotiable now and should be spelled out clearly in contracts.

No matter the scenario, clear communication and agreement in writing are required. As of August 2024, NAR policy says a Realtor working with a buyer must have a written agreement that includes the specific amount or rate of compensation and who will pay it nar.realtornar.realtor. So, what does this mean practically? It means if you’re an agent, you need to have “the talk” with your buyer client at the outset: “Here’s how I get paid for helping you… let’s agree on the terms.”

What Does “Buyer Broker Compensation” Cover?

When discussing “what is buyer agent compensation”, it’s a good time to highlight the value behind that fee. Buyer’s agents provide a bundle of services – from searching and evaluating homes, scheduling tours, providing market analysis, negotiating offers, to guiding the buyer through inspections and closing. Traditionally, the idea was that sellers pay for these services because it encourages buyer agents to bring more buyers to the table, thus helping sell the property faster and for a good price. The cooperative compensation model arguably expanded the pool of buyers for a listing (since buyers’ agents knew they’d get paid) nar.realtornar.realtor. NAR has long argued that this system benefits consumers by making representation accessible to buyers who might not have cash to pay an agent upfront nar.realtornar.realtor.

Post-settlement, that benefit remains but with a twist: buyers might have to consciously agree to pay their agent, or at least consciously see what their agent earns. The total commission is still often coming out of the transaction proceeds one way or another. The difference is transparency. Buyers will see, for example, that their agent is earning X%, and that it’s not automatically covered by the seller. Buyers have choices: they could potentially shop around for an agent willing to take a lower rate or fee, or they might gladly pay a premium for an agent with great expertise.

For agents, this means articulating your value is more important than ever. If a client asks, “What does buyer agent compensation mean for me?”, you should be ready to explain not just the mechanics of payment but why you earn that amount. (In fact, many brokers are now training their agents with NAR settlement scripts to handle these questions – emphasizing the skills, knowledge, and negotiation prowess you bring. More on that in a moment.)

Fully Negotiable – By Law

One point to stress: Commissions have always been negotiable between parties. It’s even being baked into more state laws and disclosure forms that “broker fees are not set by law and are negotiable.” The recent settlement requires a “conspicuous statement” to this effect in the new buyer agreements nar.realtor. So whether a buyer agent makes 2%, 3%, 5%, or an hourly rate or flat fee – all that is purely determined by what the market will bear and what you negotiate with your client (and indirectly with the other side of the deal).

Keep in mind, market dynamics still play a big role. In a seller’s market, sellers might be less inclined to offer much (why pay extra when buyers are plentiful?). In a buyer’s market, offering a competitive commission to buyer agents might help a listing stand out. We’re likely to see some experimentation: some listing brokers may advertise “$X bonus if offer accepted by Y date,” etc., but they must do so off the MLS or via other channels due to the new MLS rule nar.realtor. Already, a couple months after the rules changed, agents in some areas reported that in practice many commissions haven’t dramatically changed – most sellers were still offering typical rates to keep buyers coming empirelearning.com. Early data suggested buyer agent commission averages barely budged by late 2024 empirelearning.com. But over time, as consumer awareness grows, we may see more haggling.

Bottom Line for Agents

Buyer brokerage compensation is entering a new era of transparency. The answer to “Who pays the buyer’s agent?” could now be “it depends – let’s discuss.” For agents, it’s critical to set expectations with clients upfront. Make sure your buyer understands how you get paid and agrees to it in writing. It’s not a fun chat if you leave it until the closing table! Also, brush up on your value proposition – you might need to justify your fee more explicitly than before. Think of it as an opportunity: clients who see what they’re paying will also see the worth of a great agent versus a mediocre one. By being open and knowledgeable (perhaps sharing some of the insights you’ve gleaned from real estate continuing education courses or NAR resources), you build trust.

In the end, a successful home purchase is a win-win: the buyer gets their home, the seller sells, and both agents get fair compensation for making it happen. How that compensation is arranged may be more flexible now, but professionalism and transparency will ensure all parties feel good about the process.

Sources:

• National Association of REALTORS® – Practice Changes: Quick Guide nar.realtornar.realtor
• NAR “What the Settlement Means for Home Buyers & Sellers” – Key Points nar.realtornar.realtor
• Stellar MLS – FAQ on Buyer Broker Agreements stellarmls.comstellarmls.com (on amending agreements if seller offers more)

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