On a land sale, the seller usually pays the commission for both the listing agent and the buyer’s agent, and the fee comes out of the sale proceeds at closing rather than from the seller’s pocket. That has been the default for decades, and it is still the most common arrangement. Since August 2024, though, the rules changed enough that the question of who pays commission on a land sale is now genuinely negotiable: buyers sign written agreements with their own agents up front, and sellers are no longer expected to broadcast a buyer-agent fee through the MLS.
How the Seller-Paid Default Works
When a seller signs a listing agreement, that document sets the total commission the listing broker will earn and typically authorizes the listing broker to share a portion with whichever cooperating broker brings the buyer. Nothing is owed until the transaction closes. At closing, the settlement agent or title company subtracts the commission from the seller’s gross proceeds before releasing the balance.
The amounts appear as line items on the Closing Disclosure or ALTA Settlement Statement, which itemizes every fee charged to both sides.1American Land Title Association. ALTA Settlement Statements Because the money is deducted from the sale price rather than written as a check, many sellers don’t fully register the cost until they see the final numbers. On a $300,000 parcel with an 8 percent total commission, that’s $24,000 the seller never touches.
What the 2024 NAR Settlement Changed
The NAR settlement took effect on August 17, 2024, and it rewrote how buyer-agent compensation gets communicated and agreed to. Two pieces matter if you’re trying to figure out who pays.
Listing brokers can no longer advertise offers of buyer-agent compensation on any REALTOR-owned MLS. Before the settlement, a listing might read “3% offered to buyer’s agent,” visible to every agent searching the system. That’s gone. Sellers and their brokers can still offer to pay the buyer’s agent, but the offer has to be communicated off the MLS, through direct negotiation, marketing materials, or broker-to-broker conversation.2National Association of REALTORS®. NAR Settlement FAQs
Any agent working with a buyer must now enter into a written buyer-broker agreement before touring properties together, and that agreement has to state the compensation the buyer’s agent will receive. It cannot be left open-ended.3National Association of REALTORS®. Consumer Guide to Written Buyer Agreements Buyers now know exactly what their agent costs before they ever make an offer, and that number gets negotiated up front rather than buried in the seller’s listing.
For land specifically, vacant parcels were already less likely to appear on the MLS than homes. Many land brokers market through auction platforms, agricultural publications, or specialty websites, so the MLS compensation ban has less direct effect on those channels. The written buyer agreement requirement still applies to any REALTOR-affiliated agent working with a land buyer.
How Much Commission Is Actually in Play
Land commissions generally run higher than the 5 to 6 percent common in residential sales. Rates of 8 to 10 percent are standard for vacant land, and some transactions go higher on low-value parcels. The markup reflects real differences in the work. A house markets itself to a degree with photos, open houses, and neighborhood appeal. Raw land requires the broker to explain soil percolation results, demonstrate utility access, identify easement boundaries, and often educate buyers who have never purchased undeveloped property before. Listing durations are also significantly longer, meaning the broker carries marketing costs for months or years before closing.
Brokers use three common fee structures. A straight percentage applies a single rate to the final sale price and is the most common and simplest. A flat fee sets a fixed dollar amount regardless of the sale price and is often used on lower-value parcels where a percentage wouldn’t justify the broker’s time. A tiered percentage decreases as the price climbs past set thresholds; a broker might charge 10 percent on the first $200,000 and 6 percent on anything above that, a structure that shows up most often on high-value agricultural or commercial parcels.
All commission rates are negotiable. No law or industry rule sets a minimum or maximum, and the NAR has consistently stated that commissions are determined between the broker and client at the start of the relationship.4National Association of REALTORS®. Compensation, Commission and Concessions If a broker quotes you 10 percent on a parcel likely to sell quickly, you have every right to push back.
Shifting Who Pays in the Purchase Agreement
The listing agreement sets the total commission the listing side has agreed to. The purchase and sale agreement is where buyer and seller actually negotiate who covers each piece. A few arrangements have become common.
Seller-paid commission. The traditional structure. The seller’s proceeds absorb the full commission for both agents, and the buyer’s out-of-pocket costs stay lower. Sellers who want the broadest pool of buyers still frequently offer this, especially on land that’s been sitting.
Buyer-paid commission. The buyer pays their own agent directly, either at closing or through a separate arrangement. This has become more common since the settlement because buyers now carry a written agreement specifying their agent’s compensation. A buyer-paid structure effectively reduces the seller’s closing costs, which can translate into a lower purchase price or more room for other concessions.4National Association of REALTORS®. Compensation, Commission and Concessions
Seller concession for the buyer’s agent fee. Rather than paying the buyer’s agent directly, the seller agrees to a closing cost credit the buyer then uses to cover their agent. The economics are nearly identical to a seller-paid commission, but the money flows differently on the settlement statement. This structure has become a popular workaround since the MLS compensation ban, because the concession is negotiated inside the purchase agreement rather than advertised on the listing.2National Association of REALTORS®. NAR Settlement FAQs
Split commission. The buyer and seller each pay a portion of the total brokerage fees. This compromise shows up most often when the agreed sale price is being adjusted significantly, perhaps after an environmental assessment reveals unexpected remediation costs, and neither side wants to absorb the full commission on top of the price change.
Whatever structure you land on, write it explicitly into the purchase agreement. Verbal understandings about who pays which fees are a reliable source of closing-day disputes.
If You’re Selling the Land Yourself
Selling land without a listing agent eliminates the seller’s side of the commission, but most for-sale-by-owner sellers still encounter a buyer who has professional representation. When that happens, somebody still needs to pay the buyer’s agent.
The usual solution is a one-time compensation agreement between the FSBO seller and the buyer’s broker. This is not a full listing agreement. It simply commits the seller to pay a specified commission, either a percentage or a flat dollar amount, to the buyer’s agent for this one transaction. The commission comes out of the seller’s proceeds at closing, just like in a traditional sale.
If the seller refuses to sign any compensation agreement, the buyer’s own written broker agreement kicks in. Since August 2024, those agreements have to spell out the agent’s compensation, and many state that if the seller doesn’t offer a commission, the buyer is responsible for paying their agent directly.3National Association of REALTORS®. Consumer Guide to Written Buyer Agreements That payment then shows up as a debit to the buyer on the settlement statement rather than to the seller.
FSBO sellers sometimes underestimate this dynamic. Refusing to offer any buyer-agent compensation doesn’t eliminate the cost from the transaction. It shifts the cost to the buyer, who may then lower their offer price to compensate. The net financial effect on the seller can end up roughly the same.
How the Commission Affects Taxes
Whoever actually pays the commission gets some tax recognition for it, but the treatment is different on each side.
For the Seller
Real estate commissions are treated as selling expenses that reduce the amount you realized from the sale. The IRS computes gain or loss by subtracting your adjusted basis from the amount realized, and the amount realized is the sale price minus selling expenses like brokerage commissions.5Internal Revenue Service. Publication 544 – Sales and Other Dispositions of Assets If you sell a parcel for $400,000 and pay $32,000 in commissions, your amount realized is $368,000, and your taxable gain is based on that reduced figure.
For land held as a personal residence, the Section 121 exclusion may apply, letting individuals exclude up to $250,000 of gain ($500,000 for married couples filing jointly) from the sale of a primary home. Most vacant land sales involve investment property, where no such exclusion applies. You’ll report the gain on Schedule D and potentially Form 4797 if the land was used in a business.6Internal Revenue Service. Publication 523 – Selling Your Home
For the Buyer
A buyer who pays a commission, whether to their own agent or to the seller’s agent as part of the deal, can generally add that amount to the cost basis of the property. The IRS allows settlement fees and closing costs connected to buying property to be included in basis, and that list specifically includes sales commissions.7Internal Revenue Service. Publication 551 – Basis of Assets A higher basis means a smaller taxable gain whenever you sell the land later, so keep records of any commission you paid at purchase.
Get the Payment Terms in Writing
One rule applies no matter which side you’re on and no matter how the fee gets split: most states require any commission arrangement to be in writing and signed by the party who owes it. An oral promise to pay a commission is essentially unenforceable in most jurisdictions. Before signing a listing agreement, a buyer-broker agreement, or a purchase agreement that touches commission, read exactly what each party is agreeing to pay and when. That is where the real answer to who pays lives.