How does real estate commission work?
Commission is the fee that compensates the agents in a transaction, almost always calculated as a percentage of the final sale price and paid from the sale proceeds at closing rather than as a separate bill. Traditionally the total was set in the listing agreement between the seller and the listing agent, then split between the listing side and the agent who brought the buyer.
The 2024 NAR settlement changed how the buyer's side is handled: buyer-agent compensation is now negotiated up front in a written agreement between the buyer and their agent, not advertised in the MLS.
Who pays the real estate agent's commission?
It is paid from the sale proceeds at closing, which historically meant the seller funded both sides through the listing agreement. After the settlement, who pays the buyer's agent is explicitly negotiable.
Sellers can still offer to cover the buyer's agent fee as a concession, and many continue to, especially on entry-level homes, because it helps attract buyers. If the seller does not, the buyer may be responsible for their own agent's fee under the written buyer agreement. This is exactly why you clarify the fee in writing before you start touring.
How much is real estate commission?
There is no standard, set, or legally fixed commission rate. Any agent or website that calls a number standard is mistaken; commission is negotiable and varies by agent, market, and what you agree to.
That said, the practical ranges are public. Through 2025, buyer-agent compensation has averaged around 2.4 percent to 2.7 percent, and combined buyer-and-seller commissions have stayed in the mid-5 percent range. Treat those as reference points, not quotes, and as a starting line for negotiation rather than a rule.
How did the 2024 settlement change commissions?
The settlement, effective August 17, 2024, stopped buyer-agent compensation from being advertised in the MLS and required written buyer agreements before touring. Commissions are now explicitly negotiable and disclosed up front rather than assumed. In practice, total commissions have not dropped much yet, so the clearest change for buyers is transparency and leverage.
Go deeper: The NAR Settlement, Explained .
How does a seller-paid agent commission affect your financing?
Good news, and it holds across the five major loan programs: when the seller pays the buyer's agent commission in line with local custom, it is generally not counted against the program's seller-concession or interested-party-contribution (IPC) cap. In plain terms, a seller covering your agent's fee does not eat into the other closing-cost help a seller can give you, as long as the commission is reasonable and customary for your market.
The caps still apply to ordinary concessions. Here is how they line up, with the seller-paid-commission carve-out noted for each.
| Program | Concession / IPC cap | Seller-paid buyer-agent commission, per local custom |
|---|---|---|
| Conventional (Fannie Mae / Freddie Mac) | 2% to 9% of value, by occupancy and LTV | Not counted toward the IPC cap (clarified April 15, 2024) |
| FHA | 6% | Not treated as an interested-party contribution when reasonable and customary |
| USDA | 6% | Excluded from the IPC limit (codified in HB-1-3555, Chapter 6) |
| VA | 4% in seller concessions* | Does not count against the 4% cap |
Source: Fannie Mae and Freddie Mac (April 15, 2024 clarification); HUD/FHA; USDA Rural Development HB-1-3555; VA (as of 2026).
* The VA 4% cap covers only certain seller concessions, not every cost. What the VA 4% covers →
Can a veteran pay their own agent on a VA loan?
This is the one place the buyer-paid side has its own rules. Historically, veterans could not pay buyer-broker fees at all. Under VA Circular 26-24-14, effective August 10, 2024, the VA introduced a temporary local variance that allows a veteran to pay certain buyer-broker charges. When the veteran pays, the fee must be reasonable and customary for the local market, a written buyer-broker agreement must be in the loan file, and the fee cannot be financed into the loan.
One correction worth knowing, because several secondary sites get it wrong: H.R. 1815, the VA Home Loan Program Reform Act signed in 2025, did not make the veteran-paid allowance permanent. Per the Congressional Research Service summary, the law creates a partial-claim foreclosure-prevention program and directs the VA to report to Congress on protecting veterans' access to representation. That is a report-to-Congress directive, not codification of the fee rule. As of 2026 the operative authority is still the temporary circular, with permanent guidance expected through formal rulemaking, so confirm the current status with your lender, since this is actively evolving.
How do you negotiate agent commission?
Start by treating it as negotiable, because it is. Ask each agent how they are compensated and what you would owe if the seller does not cover their fee. You can negotiate the percentage, the structure, and the length and scope of the buyer agreement.
You can also have your agent request seller-paid compensation as part of your offer. The point is not to nickel-and-dime a good agent; it is to understand the fee, confirm it in writing, and make sure it fits your budget and your financing.
Key terms, quickly defined
- Commission
- The fee paid to the agents in a sale, usually a percentage of the price, taken from the sale proceeds at closing. There is no standard rate; it is negotiable.
- Listing agreement
- The contract between a seller and the listing agent that sets the total commission the seller agrees to pay, then split between the listing and buyer sides.
- Cooperative compensation
- Compensation offered to the agent who brings the buyer. Since the 2024 settlement it can no longer be advertised in the MLS, but it can still be negotiated.
- Seller concession
- An amount a seller agrees to pay toward the buyer's costs, which can include the buyer's agent fee, negotiated as part of the offer and subject to loan-program limits.
- Buyer-broker agreement
- The written contract, required before touring since August 2024, that sets a buyer's agent's services and how the agent is paid.
- Dual agency
- One agent or brokerage representing both buyer and seller; allowed in some states, restricted in others, and always disclosed.
Frequently asked questions
More in this series
How to Choose a Real Estate Agent
The pillar guide: what to look for, buyer's agent vs listing agent, the 2024 rule change, red flags, and when to start.
Read guide →Questions to Ask a Real Estate Agent
The interview checklist: track record, communication, the buyer agreement, the fee, and references, before you sign.
Read guide →The NAR Settlement, Explained
What the 2024 settlement changed, why you now sign a written agreement before touring, and what it means for buyers.
Read guide →Sources
- National Association of Realtors: facts about the practice changes (August 17, 2024)
- National Association of Realtors: 2025 Profile of Home Buyers and Sellers (Highlights)
- Fannie Mae: Selling Notice on seller-paid real estate agent commissions (April 15, 2024); Selling Guide B3-4.1-02
- Freddie Mac: Single-Family Seller/Servicer Guide (parallel commission clarification, April 15, 2024)
- HUD/FHA: FAQ on seller-paid real estate commissions and the NAR settlement
- USDA Rural Development: HB-1-3555, Chapter 6, Paragraph 6.2 (revised May 5, 2025, PN 640)
- VA: Circular 26-24-14, temporary buyer-broker fee variance (effective August 10, 2024)
- U.S. Congress: H.R. 1815, VA Home Loan Program Reform Act, Pub. L. 119-31 (CRS summary)