In most home sales, the seller still pays both the listing agent and the buyer’s agent out of the sale proceeds at closing. That is the default, not a rule — since August 17, 2024, who pays realtor fees is a negotiated term in every transaction, and buyers can end up paying their own agent directly if the seller declines to cover it. Total commissions average around 5.4% of the sale price nationally, and how that cost is split now has to be spelled out in writing before anyone tours a home.
The Default: Seller Pays, But Nothing Is Automatic
For decades, the seller signed a listing agreement setting a total commission, usually 5% to 6% of the sale price, and the listing brokerage split that with whichever agent brought the buyer. The seller never wrote a separate check. The commission came out of the sale proceeds at closing, which meant the buyer was effectively funding it through the purchase price without ever seeing a line item until closing day.
That arrangement still happens in the majority of deals. What’s changed is that it’s no longer presumed. The seller has to affirmatively agree to cover the buyer’s agent, the buyer has to have a signed agreement with their own agent stating what that agent will be paid, and the two numbers have to match up for the seller’s offer to fully cover the buyer’s cost. If they don’t match, the buyer pays the difference.
What Changed in August 2024
The National Association of Realtors settled antitrust claims against the old commission structure, and the resulting rule changes took effect on August 17, 2024.1National Association of REALTORS®. National Association of REALTORS® Reminds Members and Consumers of Real Estate Practice Change Two things changed for anyone buying or selling a home.
First, listing agents can no longer advertise buyer-agent compensation on the MLS. A seller can still agree to pay the buyer’s agent, but that offer has to be communicated off the MLS — through direct contact, email, or the brokerage’s website. Sellers can still advertise buyer concessions (a credit toward the buyer’s closing costs, which the buyer can apply to their agent’s fee) on the MLS; what’s prohibited is a direct compensation offer to the buyer’s agent through the listing.2National Association of REALTORS®. What the NAR Settlement Means for Home Buyers and Sellers
Second, buyers must sign a written representation agreement with their agent before touring any home, including live virtual tours. The agreement has to state a specific, objective compensation figure: a dollar amount, flat fee, percentage, or hourly rate. Vague or open-ended terms like “whatever the seller offers” are not allowed.2National Association of REALTORS®. What the NAR Settlement Means for Home Buyers and Sellers
The practical consequence of these two changes is that commission is now a deal point. The seller decides whether and how much to contribute. The buyer commits in writing to a figure before shopping. If the seller’s contribution falls short, the buyer owes the gap.
Why Sellers Still Usually Pay
Even without the old MLS mechanism, most sellers choose to cover the buyer’s agent fee through a concession. The reason is competitive: a buyer who knows the seller will handle their agent’s compensation is more likely to make an offer than one facing an unexpected out-of-pocket cost on top of their down payment. First-time buyers with tight cash reserves are especially sensitive to this, and in markets with heavy inventory, offering the concession can be the difference between a quick sale and a listing that goes stale.
From the seller’s side, the economics are often identical to the old system. The money still comes out of the sale proceeds at closing. The difference is that both parties now explicitly agree to the arrangement in writing instead of absorbing it as an industry default.
When the Buyer Has to Pay
If the seller refuses to offer a concession, or the concession doesn’t fully cover what the buyer owes under the representation agreement, the buyer pays the shortfall. The written agreement makes this legally binding. Once you sign it, you owe your agent the stated compensation regardless of what the seller does.2National Association of REALTORS®. What the NAR Settlement Means for Home Buyers and Sellers
The cash-flow problem is real. On a $400,000 home with a 2.5% buyer-agent fee, that’s $10,000 on top of the down payment and other closing costs. None of the major loan programs — Fannie Mae, Freddie Mac, FHA, or VA — allow you to roll agent commissions into the mortgage balance. The money has to come from savings or other liquid funds. Paying it separately also pulls down the cash available for your down payment, which can push your loan-to-value ratio higher and trigger higher mortgage insurance premiums or a slightly higher interest rate.
Before making an offer, ask whether the seller is willing to contribute toward your agent’s fee. If not, budget the full amount separately.
Lock in the Terms Before You Sign
Every term in the buyer representation agreement is negotiable, and NAR’s own consumer guidance says so plainly.3National Association of REALTORS®. Consumer Guide to Written Buyer Agreements Three terms matter most for who ends up paying.
- Compensation. You can negotiate the percentage down, propose a flat dollar amount, or agree to an hourly rate. The figure has to be specific, not a range.
- Duration. Most agreements run 30 to 90 days. Some agents push for six months or longer. Shorter terms give you more flexibility. California caps the initial term at three months for individual buyers. Insist on a defined expiration date.
- Exit clause. Ask what happens if you want to end the relationship early. Some agreements include cancellation provisions; others lock you in until the term expires. If early termination isn’t addressed, negotiate it in before signing.
You can also mutually agree to amend the terms later if your search or budget shifts. Read the document before signing, not after you’ve found a house and feel pressured to close.
How Your Loan Type Limits What the Seller Can Pay
Even when a seller is willing to cover your agent’s fee, your mortgage program may cap how much they’re allowed to contribute. These limits can force you back into paying part of the fee yourself.
Conventional Loans
Fannie Mae treats seller-paid real estate agent fees as interested party contributions, subject to caps based on your down payment.4Fannie Mae. Selling Notice – Real Estate Commissions and Interested Party Contributions If the seller’s total contributions — buyer’s agent fee, repair credits, and other concessions combined — exceed the allowed percentage, the excess is deducted from the sale price before calculating your loan-to-value ratio. That can shrink your effective loan amount or require more cash down.
FHA Loans
FHA caps total seller concessions at 6% of the sale price. Any seller contribution beyond that threshold reduces the mortgage amount dollar for dollar. On a $300,000 home, the seller can contribute up to $18,000 toward closing costs and agent fees combined. If you’re already receiving credits for repairs or prepaid taxes, the commission has to fit inside that same 6% envelope.
VA Loans
VA loans have historically been the most restrictive. The VA limits seller concessions to 4% of the home’s reasonable value, and veterans were previously barred from paying buyer-agent commissions directly.5Veterans Affairs. VA Funding Fee and Loan Closing Costs After the NAR settlement, that created a problem: if a seller refused to pay and the VA buyer couldn’t, the buyer effectively lost access to representation. A temporary rule change effective August 10, 2026, now allows VA buyers to pay their agent directly.
Tax Treatment
Commissions affect taxes differently depending on which side of the deal you’re on.
If You’re Selling
Any commission you pay — your listing agent, the buyer’s agent, or both — counts as a selling expense that reduces your taxable gain. The IRS subtracts selling expenses from the sale price to arrive at your amount realized, then subtracts your adjusted basis to compute gain.6Internal Revenue Service. Selling Your Home On a $500,000 sale with $27,000 in total commissions, your amount realized is $473,000 before the home sale exclusion. If you qualify for the $250,000 exclusion ($500,000 for married couples filing jointly), the tax savings from commissions may be modest. For sellers with large gains or investment properties, it matters more.
If You’re Buying
If you pay your agent’s commission yourself, that cost is added to your cost basis in the home. The IRS treats commissions paid in connection with purchasing property as a settlement cost that increases basis.7Internal Revenue Service. Basis of Assets A higher basis means a smaller taxable gain when you eventually sell. On a personal residence, you won’t feel the benefit unless your eventual gain exceeds the home sale exclusion. On an investment or rental property, the higher basis reduces capital gains directly. Buyer-paid commissions on a personal residence are not deductible in the year paid.
FSBO and Dual Agency
Selling without a listing agent saves you that side of the commission, roughly 2.5% to 3% of the sale price. But most FSBO sellers still encounter buyers who have agents, and those agents expect to be paid. You can agree to cover the buyer’s agent fee through a separate compensation agreement signed before the offer is finalized, you can refuse, or you can negotiate a reduced fee. Refusing outright risks a smaller buyer pool — agents generally won’t show homes where their compensation is uncertain, and represented buyers know they’d be paying out of pocket.
Dual agency, where one agent or brokerage represents both sides, usually means the seller pays the full commission to a single brokerage. The total fee may be lower because there’s no outside split. Under NAR’s updated ethics rules, agents cannot accept compensation from more than one party in the same transaction without disclosing it and obtaining informed consent.8National Association of REALTORS®. 2026 Summary of Key Professional Standards Changes Several states restrict or ban dual agency; check your local rules first.
What Appears on the Closing Disclosure
Every dollar of commission, no matter who pays, has to be itemized on the Closing Disclosure. The TILA-RESPA Integrated Disclosure framework requires all real estate brokerage fees to be listed as costs incurred in connection with the transaction.9Consumer Financial Protection Bureau. TILA-RESPA Integrated Disclosure FAQs The underlying statute requires uniform settlement statements that conspicuously itemize all charges imposed on both the borrower and the seller.10Office of the Law Revision Counsel. 12 USC 2603 – Uniform Settlement Statement
If the seller is paying the buyer’s agent fee, you’ll see the deduction on the seller’s side. If the buyer is paying, it appears in the buyer’s closing costs. When both parties split the cost, each share shows up in the respective column. Review the disclosure carefully before signing. It’s your last chance to catch a discrepancy in who’s paying what.