At a time of high home prices, agent fees can add up to tens of thousands of dollars on just one sale.
Buyers must sign an agreement with their agent establishing how their agent will be paid — including the possibility that if the seller won’t pay the buyer’s agent, the buyer will do so.
The buyer’s agent might typically pocket a commission of 2.5%, or $255,000, on that sale.
But traditional commission-based real estate agents say their higher fee is worth it, because they provide a level of service and localized expertise the flat-fee brokers don’t offer.
Among higher-priced homes, though, buyer’s agent commissions have dipped.
purchasing and selling a home in the United States for a long time. S. typically proceeded as follows: The seller would pay a commission, which would be divided between the buyer’s and seller’s agents. This commission would typically amount to 5–6% of the sale price.
The cost of that structure’s predictability was high fees for the agents involved in each transaction. Agent fees can reach tens of thousands of dollars for a single sale during a period of high home prices.
That was excessive for individuals such as Jim Xiao. “It appeared that the realtor fees had always been a set, anticipated sum. He claims that when he attempted to negotiate, he was essentially told, “Nope, that’s our rate.”.
But after the influential National Association of Realtors agreed to new rules regarding agent compensation in August, the rules of the game have changed. A group of Missouri home sellers filed the lawsuit, claiming that the association’s regulations required them to pay exorbitant dues.
In 2023, Xiao says he assisted his parents in purchasing two homes in Augusta, Georgia, and witnessed firsthand the annoyance of the previous regulations. without the use of a buyer’s agent. Since he wasn’t using a buyer’s agent, Xiao attempted to negotiate a credit equal to the 2 percent that typically goes to the buyer’s agent for the new construction homes. The listing agent kept the entire five percent commission, though, to no avail.
According to Xiao, a lawyer, the commission system provides the buyer’s agent with the incorrect incentive: the higher the price, the more money they make. Xiao remarks, “That just seems totally backwards.”. “Your agent ought to act as your advocate and work to negotiate the best price for you. “.”.
In order to buy a new home for his family, Xiao made a different decision last year when it came time to sell his condo. He located an agent who agreed to sell his condo for a commission of 1 percent and give him $10,000 to help him purchase a new house.
New regulations may weaken the hold that realtors have on the commission structure.
The new regulations may bring about some significant changes across the country, which could lead to more agreements like Xiao’s.
These include: Agents are required to disclose to buyers and sellers that their fees are negotiable.
Buyers must sign a contract with their agent outlining the terms of payment, including the clause that the buyer may pay the agent if the seller declines to do so.
Finally, the online databases used to list homes, known as multiple listing services, or MLS, are no longer allowed to display offers of agent compensation.
Brokerages that charge a fixed fee now have an opportunity thanks to these new regulations.
According to Rob Luecke, CEO of ShopProp Realty, a flat-fee brokerage with offices in nine states, “home buyers and sellers almost feel like they’re trapped into using agents, rather than they’re hiring agents at a reasonable fee.”.
According to Luecke, he wants to do away with commissions, or at the very least drastically reduce them, “and return the power to the home buyer and seller where it truly belongs.”. “..”.
The potential savings for upscale residences are staggering. ShopProp acted as the buyer’s agent for a buyer who bought a $10 million house in Atherton, California, the most expensive zip code by far.
In a typical transaction, the buyer’s agent may receive a commission of 2 percent, or $255,000. Instead, he paid ShopProp a flat fee of $7,995 and received the majority of the money back as a $247,000 rebate.
“That client was so happy,” Luecke says, that he gave ShopProp a $1,000 bonus for the transaction.
Flat fee vs. agents who are paid on commission.
According to Luecke, ShopProp’s business has been expanding by roughly 26% annually on average.
Their business is focused on volume because ShopProp makes a lot less money on each individual sale than a traditional brokerage. Its “full service” package for home sellers only includes two open houses, so there are some restrictions. A dedicated agent can arrange for repairs, staging, and cleaning as part of a more expensive “concierge” service. Additionally, ShopProp provides certain services—such as an MLS listing—for free.
However, traditional commission-based real estate brokers claim that their higher fees are justified because they offer a level of localized knowledge and service that flat-fee brokers do not. Additionally, they must give their brokerage firm a portion of their fee, which lowers their personal profits.
“If you move half a mile away, it’s a totally different market,” shares Leanne Liang, a Redfin agent in the East Bay area outside of San Francisco, where there are numerous housing “micro markets” even within a single municipality. Therefore, I believe that buyers can gain a lot from agents who have local knowledge. “..”.
In order to determine what feels comfortable, she advises prospective buyers and sellers to speak with agents at both traditional and flat-fee brokerages.
“It’s not just putting a house on the MLS and then just waiting for the offers to come in,” she says of selling a home in the complex market of today. I believe that, in a market that is difficult, agents truly work for their pay. “.
Broker fees have not changed much thus far.
The settlement went into effect nine months ago, but commissions haven’t changed much despite the new regulations. In the first quarter of this year, buyer’s agent commissions averaged 23.4 percent, according to new data from Redfin based on thousands of transactions. This is marginally lower than a year ago but slightly higher than when the new regulations went into effect. The data is based on sales of listings from Redfin agents, as well as transactions that were referred to partner agents or in which a buyer used Redfin-owned Bay Equity Home Loans. ).
However, commissions for buyer’s agents have decreased for more expensive homes. The average commissions for homes priced between $500,000 and $999,999 went from 2point 42 percent in the first quarter of 2023 to 2point 29 percent in the same period this year. The decline is even greater for homes valued at more than $1 million, going from 2.36 percent in the first quarter of 2023 to 2.17 percent in the same period of 2025.
Xiao acknowledges the worry that a cheap agent might only perform the bare minimum if you hire them. He describes the realtor he worked with, who runs her own brokerage, as “great throughout the process.”. “Compared to previous realtors, she went above and beyond what they had done. “.
Additionally, he saved $14,000 when he purchased his house by paying his agent a flat fee; this money could be used for closing expenses.
“I think it really takes all consumers being actually informed and having the confidence to say, ‘Hey, there are other options.'” Xiao says that you don’t have to be a lawyer like him in order to get a better deal. ‘”.
