Why Are Realtor Commissions So High After the $1 Billion NAR Settlement?

In September, the typical existing home in America sold for about four hundred seventeen thousand dollars. At a combined commission of five to six percent, the agents' fee on that sale comes to roughly twenty-one to twenty-five thousand dollars. For decades, that fee was split down the middle — and the seller paid both halves, including the agent who was working for the buyer on the other side of the deal. Most people never questioned it. In twenty nineteen, a group of home sellers in Missouri did. In twenty twenty-three, a jury found that the National Association of Realtors and some of the country's biggest brokerages had conspired to keep commissions high, and awarded nearly one point eight billion dollars in damages. The rules changed in August twenty twenty-four. And a year later, the average commission for buyers' agents was right back where it started. Meanwhile, in countries like the United Kingdom and the Netherlands, sellers typically pay less than two percent. So why does selling a house in America cost so much? Who really pays that fee? And why didn't a billion-dollar lawsuit change it? Let's follow the money.

The system rested on one rule. When you list a home with an agent, it goes into a local database called the multiple listing service, which other agents use to find homes for their buyers. For years, the National Association of Realtors required sellers' agents who listed homes there to make an offer of compensation to whichever agent brought the buyer. It was called the cooperative compensation rule. In practice, it meant the seller's side set the buyer's agent's pay, before any buyer had even walked through the door. And those offers were remarkably uniform. Economists at the Federal Reserve Bank of Richmond studied listings in Houston from nineteen ninety-seven to twenty nineteen. In about ninety-six and a half percent of them, the seller's side offered the buyer's agent exactly three percent. Not two and a half. Not three and a quarter. Three. The internet made it easy to search for homes on your own, and the costs of finding a house fell. But according to a twenty twenty-four survey by the Realtors' own association, cited by those same economists, commission rates barely changed. Many people didn't even know what the going rate was. In a twenty nineteen survey for the Consumer Federation of America, only about a third of Americans knew that a typical commission was five or six percent. That's the fee almost nobody negotiates.

So where does a twenty-five-thousand-dollar commission actually go? First, it's split between two sides: the brokerage that listed the home and the brokerage that brought the buyer. Then each brokerage splits its share with the individual agent, depending on their contract. And the agent pays their own costs out of what's left: licensing, marketing, travel, association dues. That's why a big commission doesn't always mean a rich agent. And demand for agents is not the problem: in the association's twenty twenty-five survey, eighty-eight percent of buyers bought through an agent or a broker. The National Association of Realtors has about one point four four million members. In its latest member survey, the typical Realtor reported a median gross income of about fifty-nine thousand two hundred dollars, and nine transaction sides in a year. So the system has a strange shape. The fee on each sale is high, but it's spread across a huge number of agents competing for a limited number of sales. In a year when sales are slow — and right now, existing-home sales are running at under four million a year — the commission on each home stays high, but there are fewer homes to go around.

Then the system went to court. In April twenty nineteen, home sellers in Missouri filed a class-action lawsuit against the National Association of Realtors and several of the largest brokerages. Their argument was simple: forcing sellers to pay the buyer's agent, at rates that hardly ever moved, was a form of price-fixing. The case went to trial in Kansas City in October twenty twenty-three, in front of federal judge Stephen Bough. One expert witness for the sellers called the rule one of the clearest cases of price-fixing and collusion he had ever seen. On October thirty-first, the jury agreed. It found the defendants liable and awarded about one point seven eight billion dollars in damages — an amount that could have been tripled under antitrust law to more than five billion. Within months, the industry started settling. In March twenty twenty-four, the National Association of Realtors agreed to pay four hundred eighteen million dollars over four years and to change its rules. Large brokerages paid settlements of their own, from Compass to Keller Williams, bringing the total to more than one billion dollars. This August, a federal appeals court unanimously upheld the settlement.

So what actually changed? On August seventeenth, twenty twenty-four, two new rules took effect. First, offers of compensation for buyers' agents could no longer be posted on the multiple listing service. Sellers can still offer to pay a buyer's agent — but it has to be arranged some other way, and it's now openly a choice. Second, buyers working with an agent must now sign a written agreement before they tour a home. That agreement has to spell out how much the agent will be paid, and it can't be open-ended. For the first time, many buyers had to look at a document that put a number on their agent's fee. In theory, that should create real negotiation. A buyer can ask their agent to work for less. A seller can decide not to pay the buyer's side at all. Agents have to explain what they're worth. That was the promise: a market where the price of selling a home would finally be set the way most prices are — by competition, one deal at a time.

Here's what happened. According to Redfin, the average commission paid to buyers' agents dipped to two point three six percent in the third quarter of twenty twenty-four, right after the new rules began. Then it climbed back. By the third quarter of twenty twenty-five, it was two point four two percent — roughly the same level as before the rules changed. Many sellers kept offering to pay the buyer's agent anyway, worried that a home without that offer might attract fewer buyers. And many buyers, already stretched by high prices and mortgage rates, would rather not pay their own agent in cash. There are signs of movement elsewhere. One industry survey of agents found that average total commissions fell from about five point six percent to just under five percent after the settlement. But on the buyer's side, the number that was supposed to move barely did. Old habits, it turns out, can be as powerful as old rules.

So who really pays the commission? On paper, it's the seller. The money comes out of the sale proceeds at closing. But many economists argue that sellers set their asking prices with the commission in mind. If selling a home costs five or six percent, that cost tends to be built into the price buyers pay. In other words, both sides carry part of the fee — and for most families, buying and selling are two halves of the same move. On the median home, a single percentage point of commission is worth more than four thousand dollars. That matters most for the people trying to get in. In its twenty twenty-five survey, the National Association of Realtors found that first-time buyers made up just twenty-one percent of home buyers — a record low. The median first-time buyer was forty years old. Any cost that's quietly built into the price of a house makes that first step a little harder. And because commissions are a percentage, the fee rises automatically with home prices, even though showing a four-hundred-thousand-dollar house doesn't necessarily take twice the work of showing a two-hundred-thousand-dollar one.

Other countries made very different choices. According to the Richmond Fed economists, in countries such as the United Kingdom, Ireland, the Netherlands, Singapore, Sweden and Norway, the commission sellers pay is typically under two percent. In others, like Australia, Canada and Denmark, many buyers purchase homes without an agent of their own. In those markets, the buyer usually deals directly with the seller's agent, or hires help only for specific tasks, like a lawyer or an inspector. None of these systems is perfect, and the services agents provide differ from country to country, so the comparison isn't exact. But they show that the American model — a fee around five to six percent, with the seller paying both sides — isn't a law of nature. It's a business model. And for a long time, it was protected by rules that made it hard for anyone to compete on price.

So what does this mean if you're buying or selling a home in the U.S.? Here's what's worth knowing. First, commissions are negotiable. They always were. Ask what the agent charges, and ask what you get for it. Second, if you're buying, read the buyer agreement before you sign it — and before you tour homes. Know exactly what you'd owe if the seller doesn't cover your agent's fee. Third, if you're selling, offering to pay the buyer's agent is now your decision, not an automatic part of the listing. Talk through the trade-offs with your agent. Fourth, compare. Full-service, discount and flat-fee brokerages offer very different prices and very different levels of service. And fifth, look at the fee in dollars, not percentages. Two and a half percent sounds small. On a typical home, it's more than ten thousand dollars. The biggest purchase of your life comes with one of the biggest fees you'll ever pay — and for decades, almost nobody asked whether it had to be that way.

Next time on Margin, we follow the money into an app that billions of people open every day — and almost none of them pay to use. If you want to understand how money actually moves before the headlines catch up, subscribe — and follow the money.