When a home is sold using real estate agents, those agents are paid through a commission — a fee calculated as a percentage of the sale price. Understanding how real estate commission works, who pays it, and how the rules around it have recently changed helps buyers and sellers enter transactions with an accurate picture of the costs involved.
What a real estate commission is
A real estate commission is compensation paid to one or more licensed real estate agents or brokers for services rendered in connection with the sale of a property. Commissions are not set by law. They are negotiated between the agent and the party they represent, and the rate can vary.
Commissions are typically expressed as a percentage of the final sale price of the property. They are paid at closing and are deducted from the proceeds of the sale before the seller receives their net payment.
How real estate commission has traditionally been structured
For most of the past several decades, the standard commission structure in residential real estate worked as follows.
When a seller listed a home with a real estate agent, the listing agreement between the seller and the listing agent specified a total commission rate — historically averaging 5 to 6 percent of the sale price. That total commission was typically split between two agents: the listing agent, who represented the seller, and the buyer’s agent, who represented the buyer.
Under this structure, each agent commonly received 2.5 to 3 percent of the sale price. On a $400,000 home with a 6 percent total commission, that would be $24,000 split between the two agents, or $12,000 to each.
The seller paid the total commission from the sale proceeds at closing. Buyers in this structure were generally not paying their agent directly out of pocket. However, it is important to understand that the seller covering the buyer’s agent compensation was never required by law. It was a convention enforced by MLS rules that required sellers to offer buyer-agent compensation as a condition of listing on the MLS. That requirement effectively made it the default in most transactions, but it was not a legal obligation. The 2024 NAR settlement made this distinction consequential by eliminating the MLS requirement and bringing the underlying negotiability of compensation into plain view.
What changed in 2024
In March 2024, the National Association of Realtors — commonly referred to as NAR — agreed to a $418 million settlement in a series of antitrust lawsuits. The lawsuits alleged that the existing commission structure, specifically the requirement to offer buyer-agent compensation through the Multiple Listing Service, reduced competition and kept commissions artificially high.
As part of the settlement, two significant rule changes took effect on August 17, 2024.
First, compensation offers to buyer’s agents can no longer be displayed in MLS listings. Prior to the settlement, sellers were required to offer a specific buyer-agent commission in the MLS as a condition of listing. That requirement has been eliminated. Sellers can still choose to offer compensation to a buyer’s agent, but that offer must be negotiated outside of the MLS listing itself.
Second, buyers who choose to work with a real estate agent are now required to sign a written Buyer Representation Agreement before the agent can show them homes. This agreement must specify the agent’s compensation — the amount, the method of calculation, and who is responsible for paying it. The purpose of this requirement is to ensure buyers understand how their agent is being paid before the relationship begins.
All commission rates remain fully negotiable. No law sets a minimum or maximum commission rate, and the settlement did not change that. What changed is how compensation is disclosed and where it can be advertised.
How commissions work after the 2024 changes
What the NAR settlement made explicit is something that was technically true all along: who pays the buyer’s agent is a negotiable term of the transaction, not a fixed rule. The settlement eliminated the mechanism that had made the seller-pays-both convention feel mandatory: the MLS compensation requirement.
Under the current structure, buyer-agent compensation is negotiated directly between a buyer and their agent through the Buyer Representation Agreement, and separately between the buyer and seller as part of the purchase contract if the seller is being asked to contribute toward that cost.
A seller may choose to offer compensation to the buyer’s agent as part of their terms, either as a fixed dollar amount or a percentage of the sale price, outside of the MLS listing. Offering buyer-agent compensation can be a strategic decision, as some buyers may not have funds available to pay their agent separately and may therefore focus on homes where the seller has offered to cover that cost.
A seller may also choose not to offer buyer-agent compensation at all. In that case, the buyer is responsible for compensating their own agent according to the terms of their Buyer Representation Agreement.
A buyer whose agent’s compensation is not covered by the seller can also negotiate with the seller to include a concession in the purchase contract — a credit toward the buyer’s closing costs — that the buyer then uses to pay their agent. Whether a lender will allow that concession to be applied toward agent compensation depends on the loan type and lender guidelines.
The practical result is that compensation is now a negotiated line item in every transaction rather than a default that one party automatically absorbs. According to data published by Redfin, average buyer-agent commission rates nationally remained near 2.37 to 2.49 percent through the first quarter of 2025 — close to pre-settlement levels — indicating that while the rules changed, the broader market has shifted more gradually.
What a commission covers
A real estate agent’s commission is intended to compensate them for the services they provide throughout the transaction. The scope of those services varies depending on the agent, the brokerage, and the agreement reached with the client.
For a listing agent representing a seller, services commonly include advising on pricing, marketing the property, coordinating showings, negotiating offers, and managing the transaction through closing.
For a buyer’s agent representing a buyer, services commonly include helping identify properties, arranging showings, advising on offers, negotiating with the seller, and coordinating the buyer’s side of the transaction through closing.
The commission compensates the agent for all of this work regardless of how long the process takes. Agents generally do not charge by the hour — they are paid only when the transaction closes.
How commissions are paid
Commissions are paid at closing. The escrow company deducts the agreed commission from the seller’s proceeds and distributes it to the appropriate brokerages according to the terms of the listing agreement and any buyer representation agreement. The individual agents then receive their portion from their brokerage according to their own compensation agreement with the brokerage.
Neither buyers nor sellers write a separate check to an agent at closing. The commission is handled through the escrow and closing process as a line item on the settlement statement.
For a full explanation of what the settlement statement covers and how funds are distributed at closing, see our guide: What is a real estate closing?
Commission versus flat-fee models
Not all real estate transactions involve a percentage-based commission. An alternative model is the flat-fee arrangement, in which a buyer or seller pays a fixed dollar amount for real estate services rather than a percentage of the sale price.
Flat-fee models can take several forms, from basic listing services to full-service platforms that provide transaction documents, guidance, and tools for a fixed cost. For a full explanation of how flat-fee real estate works and how it differs from the traditional commission model, see our guide: What is a flat-fee real estate platform?
Frequently asked questions
How does real estate commission work when there is no buyer’s agent? If the buyer does not use an agent, the question of buyer-agent compensation does not apply. In that case, the seller may still have a listing agent whose commission is governed by the listing agreement. The structure of that commission is negotiable between the seller and their agent. In a transaction where neither party uses an agent, no commission is owed to any agent.
Are real estate commissions negotiable in Arizona? Yes. Commission rates are fully negotiable in Arizona and are not set by law. The rate a seller pays their listing agent is determined by the listing agreement the seller signs with that agent. Buyers negotiating compensation with their agent do so through the Buyer Representation Agreement.
Is real estate commission included in the purchase price? No. The commission is not added to the purchase price. It is paid from the seller’s proceeds at closing. On a $400,000 home, if the seller has agreed to pay a 3 percent listing commission and offer 2.5 percent to the buyer’s agent, the total commission of $22,000 is deducted from the seller’s proceeds. The buyer still pays $400,000.
Do cash buyers have to pay real estate commission? No commission is automatically owed in any transaction. Whether commission is paid, and by whom, depends entirely on whether the buyer and seller are using agents and what agreements those agents have with their clients. A cash buyer who does not use an agent owes no agent commission.
Qilo is a flat-fee real estate marketplace for buyers and sellers in Arizona. Buyers and sellers on the platform receive legally compliant transaction documents, listing tools, and step-by-step guidance through every stage of the process described above.