I still remember the first time someone asked me, “So, who actually pays your commission?”
It was a sweet first-time buyer, genuinely curious—not confrontational, just confused. And to be honest, in those early years, I gave the kind of vague, awkward answer that didn’t help either of us: “Well, it kind of comes out of the sale… but not really… it’s built into the price…” Not exactly confidence-inspiring.
Since then, I’ve answered that question hundreds of times. And in the last year, it’s come up more than ever—especially with the recent NAR settlement that’s changing how commissions are handled and disclosed. More than ever, clients are asking smart, detailed questions. And as agents, we can’t afford to give fuzzy answers.
In this post, I’ll break it all down—from how commission is calculated and who pays it, to how splits typically work between brokerages and agents. I’ll also unpack what’s shifting post-settlement, especially in terms of buyer agent compensation and transparency. Plus, I’ll share how I’m talking about it with clients in a way that builds trust, not tension.
What’s Changing Regarding Real Estate Sales Commission Post-NAR Settlement
As of the 2024 NAR settlement, the way real estate commissions are handled—especially buyer agent commissions—is shifting significantly. This isn’t just a small tweak in how we market listings; it’s a fundamental change in how agents get paid and how clients are educated about the process.
Here’s what’s different now:
- Buyer’s agents are no longer guaranteed payment from the seller’s side.
Buyers are now responsible for covering their agent’s commission directly—or negotiating for the seller to cover it as part of the deal.
- Buyer agency agreements are now required before showing homes.
Agents must have a signed agreement in place that spells out what they charge, how they’ll be paid, and what services they provide. This is a major shift—no more casually opening doors without first having a clear compensation discussion.
- Compensation is no longer listed on the MLS.
Agents will have to discuss commission offline, and it’s likely we’ll start seeing creative deal structures where buyers include their agent’s fee as part of the offer—or opt to pay out of pocket.
What this means in practice: we as agents now have to get really good at explaining our value—not just to sellers, but to buyers who might be writing checks for our services directly.
The idea that the seller always “covers” commission is no longer standard. In this new landscape, buyers and their agents will need to have open, strategic conversations about fees—and build that into the offer from the very beginning.
Real Estate Commission Structures: Listing, Buyer, Referral & Commercial Deals
Now that we’ve covered how real estate commissions are paid—and how that’s shifting under the NAR settlement—it’s worth breaking down how compensation typically works across different deal types. These structures affect how you negotiate, how you explain your value to clients, and how you plan your income.
Listing Agent Commission Structure
As a listing agent, your commission is negotiated directly with the seller—typically as a percentage of the home’s sale price. In the past, this amount often included compensation for both the listing agent and the buyer’s agent (commonly totaling 5% to 6%).
But under the new NAR settlement rules, that structure is no longer assumed.
Here’s what’s different now:
- Your commission as the listing agent is negotiated solely with the seller.
- Whether or not the seller offers compensation to the buyer’s agent is now a separate discussion—handled off-MLS, in writing.
- There is no longer an assumed “total commission” split. The seller is no longer automatically covering both sides.
If the seller chooses to offer compensation to a buyer’s agent, it must be:
- Agreed upon up front
- Not communicated through the MLS
- Fully disclosed in writing and approved by the seller
This means you’ll need to be ready to explain the pros and cons of offering buyer agent compensation—and how it may impact offer volume or buyer participation.
Buyer Agent Commission Structure
For buyer agents, this is where things are evolving the most. Under the new rules, you must:
- Have a signed buyer agency agreement before showing homes
- Clearly state your compensation—percentage or flat fee
- Disclose that commissions are negotiable and not set by law
That means you’ll be negotiating compensation with buyers directly in some cases.
This adds a new layer of financial planning and upfront conversations. You’ll need to:
- Demonstrate your value clearly (before any homes are shown)
- Be flexible in how you structure your fee
- Educate buyers on how they can finance your fee—some lenders are starting to allow buyer agent compensation as a closing cost
Referral Commission Structures
Referral fees are still alive and well—and often underutilized. Whether you’re sending or receiving, the typical referral fee is:
- 25% of the gross commission earned
- Paid to the referring broker, who then splits it with the referring agent
This applies across residential, commercial, and relocation deals. Always have a written referral agreement in place, including:
- Parties involved
- Fee structure
- Scope of referral (client name, service area, timeframe)
In a shifting market, your referral network can become a steady stream of income if you treat it like a real pipeline—not an afterthought.
How Much Is Real Estate Sales Commission?
Real estate commission isn’t a fixed number—it depends on the deal type, location, market conditions, and now, more than ever, negotiation. Here’s a quick breakdown of what commission looks like in various real estate scenarios.
Standard Residential Listing
Most listing agents charge between 2.5% and 3% of the home’s final sale price. This is negotiated directly with the seller in the listing agreement and may or may not include compensation for the buyer’s agent post-NAR settlement.
Buyer Agent Commission (Post-Settlement)
Buyer agents typically request 2% to 3%, either paid directly by the buyer or negotiated as part of the purchase contract. This rate is no longer guaranteed from the seller side, so it’s essential to define it upfront in a signed buyer agency agreement.
Total Commission on Residential Sales
Pre-settlement, most transactions included a combined 5% to 6% total commission, split between the listing and buyer agents. Now, this structure varies, as sellers aren’t required to offer buyer agent compensation, and buyers may pay out of pocket.
New Construction Sales
Builder commissions are often 2% to 4% to buyer agents and built into the pricing. However, rates vary widely and are not always advertised publicly—agents should confirm before showing.
Referral Agreements
Referral agents typically earn 20% to 30% of the receiving agent’s commission. The standard is 25%, but this is always negotiable and should be outlined in a written referral agreement before the client is handed off.
Commercial Real Estate Commissions
Commissions in commercial real estate vary based on lease type or sale value. For sales, agents generally earn 1% to 3% of the total transaction value. Lease commissions may range from 3% to 6% of the first year’s rent (or more), depending on lease length and local norms.
How to Explain Real Estate Commission to Clients (Without Confusion or Drama)
In this new post-settlement landscape, commission conversations aren’t optional—they’re front and center. Whether you’re working with a buyer or a seller, your ability to explain how commissions work (and who’s paying for what) is now one of the most important parts of the relationship.
And here’s the truth: if you’re confident and clear, clients respond with trust. If you’re vague or defensive, they get nervous.
Let’s walk through how I’ve been breaking it down for both sides of the table:
How I Explain Commission to Sellers
I start with this:
“My compensation is negotiated between you and me, just like always. What’s different now is how we handle buyer agent commission—it’s no longer expected, but it can still be offered if it helps attract stronger offers.”
Then I walk them through their options:
- Offer buyer agent compensation as a seller-paid cost
- Decline to offer it, and let buyers handle their agent fees
- Leave room for negotiation depending on the strength of the offer
And then I shift the conversation to strategy:
“In today’s market, offering buyer agent compensation is about visibility and leverage. It’s not required, but in some cases, it can lead to more offers and a smoother deal.”
I let their market conditions guide the conversation, but I make sure they understand: there’s no longer a standard split—and it’s 100% their call.
How I Explain Commission to Buyers
This conversation looks completely different now. Here’s how I open it:
“In the past, most buyers didn’t pay their agent directly—commissions were baked into the sale and paid by the seller. With the new rules, that’s changed. We now discuss and agree on my compensation before we start seeing homes.”
Then I explain their options:
- Pay the agent fee out of pocket
- Request seller-paid buyer agent compensation as part of the offer
- Use closing cost credits (if allowed by their lender) to help offset the cost
I also make sure they understand what they’re getting:
“You’re not just paying for access to listings. You’re paying for strategy, negotiation, protection, and guidance. I’ll walk you through every step and help you make smart, confident decisions.”
The key is to get that agreement signed early, build value into every step, and normalize the conversation. Buyers aren’t used to paying out-of-pocket for agents—but they are used to paying professionals for expertise. The more clearly you present that value, the easier this conversation gets.
How to Set Your Commission Expectations with Buyers (Scripts + Tactics)
If you’ve never had to talk directly with a buyer about how and how much you get paid—welcome to the new market. This is where your ability to confidently communicate your value becomes non-negotiable.
The good news? When you handle this upfront, clearly and without apology, it doesn’t just protect your paycheck—it builds trust. Buyers don’t get frustrated by clarity. They get frustrated by surprises.
Here’s how I coach agents (and what I do in my own business) to make this conversation easy, natural, and professional.
1. Set the Tone Early—Before You Ever Tour a Home
I don’t wait until they’re emotionally attached to a property. I bring up the buyer agreement—and my commission—before we step into a showing. Usually during the initial consultation, I say:
“Just like you’d hire a lawyer or financial advisor, I work under a written agreement that outlines exactly what I do for you and how I get paid. This keeps everything transparent, and makes sure we’re on the same page from the beginning.”
Then I walk them through the buyer agreement—line by line.
2. Scripts for Handling Buyer Pushback
When buyers ask:
“Wait, I have to pay you?”
“Not always. In some cases, the seller may still offer compensation, and we can negotiate that into the deal. But since the rules have changed, we plan for the possibility that you might cover that fee directly. I’ll always explain your options before you make an offer.”
If they ask:
“Can’t I just use the listing agent?”
“You can—but just like you wouldn’t want the other party’s attorney negotiating your case, you don’t want the seller’s agent negotiating for you. My job is to protect your interests, from pricing to inspections to closing. And I’m accountable only to you.”
3. Tie Compensation to Outcomes (Not Just Tasks)
You’re not being paid to open doors or submit contracts. You’re being paid to:
- Save buyers from overpaying
- Prevent legal issues
- Spot deal-breaker red flags
- Win the home in competitive offers
- Negotiate terms that save thousands
What I say:
“My goal isn’t just to get you into a house—it’s to help you make the smartest possible decision. That means protecting your investment, finding the right property, and guiding you through every detail with no surprises.”
4. Use Visual Tools to Reinforce Value
When I sit down with buyers, I don’t just talk—I show. I use a Highnote buyer presentation that outlines:
- The buying process
- My services and timeline
- How I’m compensated
- Testimonials and past success stories
Bonus tip: Include a “What I Do For You” checklist so they see the full scope. A one-pager goes a long way.
5. How to Structure a Clear, Confident Buyer Agreement
When presenting a buyer agreement, I do three things:
- Pre-fill the compensation amount (e.g., 2.5% or a flat fee)
- Include an explanation of who pays it and that it’s negotiable
- Give buyers time to ask questions—don’t rush it
How to Justify Your Worth as an Agent—Without Apologizing for It
One of the most powerful shifts you can make in your business right now is moving from defending your fee… to owning your value. Because if you sound hesitant when talking about your commission, clients will mirror that uncertainty.
But when you speak about what you offer with clarity and confidence—not arrogance, just truth—you position yourself as the pro they want to hire.
Here’s how I’ve learned to do that in a way that feels authentic, not salesy.
Reframe the Conversation from “Cost” to “Value”
If a buyer says:
“Why do you charge 2.5%?”
Don’t go on the defensive. Don’t say, “That’s standard” or “That’s what everyone does.” Instead, lean into what they get for that investment.
“That covers everything I do to protect your money, your time, and your peace of mind. From search strategy to inspections to final walkthrough, I’m making sure you don’t overpay, don’t get burned, and don’t miss critical details that could cost you down the line.”
It’s not about what you charge. It’s about what they get back for that fee—time saved, stress avoided, deals won, and problems prevented.
The Real Work Agents Do That Clients Never See
Clients often think your job starts when the showing begins and ends at the closing table. That’s 20% of what you do. The most important work happens behind the scenes.
Here’s how I explain it:
“Most of the value I bring happens before you even make an offer—and long after it’s accepted. Negotiation, risk management, timelines, lender and escrow coordination—there are dozens of moving parts that I quarterback so you don’t have to worry about any of them.”
Checklist: What Justifies a Full Commission
This is the kind of visual I include in buyer presentations or emails—feel free to repurpose this into your own Highnote or buyer packet.
Service | Value to Client |
Local market insight | Helps buyers understand pricing, trends, and timing |
Strategic home search | Saves hours, filters poor fits, surfaces off-market options |
Showing coordination | Smooths access, avoids missed opportunities |
Offer strategy + negotiation | Wins the deal without overpaying |
Inspection guidance | Protects against costly issues and weak terms |
Vendor coordination (lenders, etc.) | Streamlines the transaction and reduces errors |
Contract management | Keeps deadlines on track, avoids legal or funding delays |
Emotional support + decision clarity | Helps clients stay focused and confident throughout |
Most clients never think of these things. When you lay them out clearly, your commission stops feeling like a fee—and starts feeling like insurance.
