Homebuyers navigate new rules for signing commission agreements with Realtors

Nic Van Horn is in the middle of finding a new Chicago home for his family, and new rules on real estate agent commissions are adding some stress — even though they're are intended to help consumers.

In August, the National Association of Realtors implemented two major changes as part of a $418 million antitrust settlement. The changes are described by some housing experts as the industry’s largest shift in homebuying, upending the traditional model of sellers paying both parties' broker commissions:

• Buyers and real estate agents now sign a contract disclosing the broker's commission before the buyer is shown homes.
• Broker commissions are no longer displayed on the multiple listing service, the database licensed brokers and agents use to share information about properties for sale as well as commissions. That practice was effectively enabling brokers and agents to collude on commission rates, since they could see what their competitors were charging.

Historically, only sellers signed a contract with an agent and paid broker commissions, baking both the seller's and buyer's fee into the sale price. The seller’s agent usually agreed to split the commission with the buyer’s agent. That meant homebuyers often didn't incur a direct cost when working with a real estate agent.

The shared commission usually ranged from 5% to 6%.

Now, buyers and sellers set commissions through separate negotiation with real estate professionals, according to NAR, which says broker commissions have always been negotiable.

Van Horn was aware of the NAR settlement and its implications before his family started house hunting. It’s made him more aware of his options, but it also unleashes anxiety about what the end of the homebuying process will look like.

“It's increased some uncertainty just around like, ‘Okay, are we going to be able to get the buyer’s agent commission covered by the seller, or are we going to have to do something else?’” Van Horn said. “We haven't gotten to a point where we've been putting in offers, so I'm kind of more curious to see how that's going to go once we get to that point, and what the negotiation is going to be like.”

Not every buyer is like Van Horn. Despite implementation months ago, agents and brokers say consumer awareness about the settlement is lagging. The real estate professionals are worried about where commissions are headed, and October data did show a dip in Illinois, but it's too soon to say whether that's significant.

Awareness ‘runs the gamut’

Van Horn says he’s clear on the three paths for paying his Realtor, Grigory Pekarsky at boutique firm Vesta Preferred: Either his family or the seller pays Pekarsky’s buyer commission directly, or the Van Horns bake the commission into their offer on the home.

“One way or another, we’re going to have to work it out,” Van Horn said. “The agent has to get paid.”

Many buyers still have not heard about the settlement and the series of class-action lawsuits filed by homeowners that led to it, Pekarsky said. “I think it's gonna take at least 12 months — probably more like 24 months — to really see the true impacts of how the settlement’s gonna shake out."

Awareness of the settlement “runs the gamut” with buyers at real estate brokerage Baird & Warner, said Laura Ellis, an executive at the firm. The brokerage did a big push to train its agents for the changes.

Some potential buyers have reached out to the brokerage to ask what the new changes are — and what it means for them, Ellis said.

“The single biggest fear that the buyers have is that they are going to have to come up with a significant amount of extra money, and they may not be able to afford it — and that's just not the case,” Ellis said. “We have very few buyers that are paying cash for the services of their agent. It's still being done through the transaction.”

Too early to assess commission dip

Realtors have been concerned about how they might be affected by the settlement, including fewer sales for some agents, agents fleeing the industry and lower commissions.

In Illinois, the average commission was 5.07% in August, according to a report from real estate data company Clever. That's down from 5.35% in 2023. But factors other than the change in the rule could be affecting that drop, and agents interviewed for this story said they haven't noticed a change.

At Baird & Warner, commission rates have either held or gone up a bit, Ellis said, though she noted it's only been a few months, and the industry still needs to see how it levels out.

“What we're seeing is that the really skilled, professional agents have gotten better at articulating their value than they even were before,” she said.

Tommy Choi, president of the Illinois Realtors association and a member of NAR’s board of directors, said he also hasn’t witnessed a shift in commissions. NAR says commissions have always been negotiable and has denied any wrongdoing throughout the settlement process.

Choi, co-founder and owner of Weinberg Choi Residential at Keller Williams ONEChicago, has said his personal commission rates haven’t changed much either. “It feels pretty consistent to what our business standards are and how we negotiate that with the clients that we work with.”

There were some fears from the real estate industry that the settlement could lead to agents exiting the industry, including some hobbyists who sell only a few homes a year, primarily to family or friends.

That hasn’t been the case so far, Choi said. Many buyers, like Van Horn, are continuing to rely on real estate agents for their market expertise.

“The consumer is basically screaming that, 'Hey, this is the largest investment I'm making in my lifetime. … I don't want to navigate these waters by myself,’” Choi said.

The practice changes have been in place about four months, so many of the impacts are still being realized. But empowering consumers in a deal is always a good thing, said Jerrold Bregman, partner at California-based BG Law.

“With buyers and sellers having increased bargaining power, these changes will likely lead to lower negotiated fixed commission rates,” Bregman said. “This will likely spur activity once interest rates drop enough to entice homeowners with ‘golden handcuffs’ to bring their homes to market.”

Buyers, beware

Illinois real estate laws will change in 2025 to require signed buyer-broker agreements, which NAR members already use because of the settlement.

Sammy Lubeck, a Realtor at Baird & Warner, said he’s seen some hesitancy from people to sign a contract before even seeing a house. Others appreciate how more conversations at the beginning of the homebuying process increase transparency and help build trust with their agent.

“In the past, when the buyer-broker agreement was not required, many agents shied away from it,” Lubeck said. “It's a positive for the industry, because the buyers are going to know who they can truly rely on to guide them through the process. The agents, since they have that signed buyer-broker agreement with their clients, it gives them a lot more confidence that the buyers are going to stay loyal to them and not just go to another agent to show them a house.”

Pekarsky advises buyers to “run the other way” if a buyer-broker contract includes a cancellation fee. Buying a home is a huge investment, and potential buyers should feel comfortable working with their real estate agent — even if they have to walk away from the contract.

Pekarsky and Lubeck suggest buyers interview multiple real estate agents before signing an agreement with anyone.

“Look at the contracts, and make sure you choose the broker that jives perfectly well with what you're looking to accomplish,” Pekarsky said. “It's a time to make sure that you can financially get ahead and use real estate for what it is — which is wealth building — and you can only do that with proper representation.”

Van Horn’s family is looking to move back to Chicago around the mid-summertime, once the school year has wrapped up for his kids in Michigan. Having a Realtor guide him through the process has been valuable, he said. The next home he’s seeing is one Pekarsky put on his radar — and being off-market, it isn’t one Van Horn could’ve found himself.

“He does a really good job of bringing things to us proactively that we're not necessarily looking at,” Van Horn said.