Most people know real estate commissions are big. Fewer know how they're split, who actually keeps the money, or what changed after the NAR settlement. If you're buying or selling, you should know what you're paying, who you're paying, and what you get for it.
How commissions work now
For decades, the seller paid a total commission, often 5 to 6 percent, split between the listing agent and the buyer's agent. The buyer's share was posted on the MLS.
Since the NAR settlement took effect in August 2024:
- Buyer-agent pay is no longer offered on the MLS. It's negotiated separately, often in the offer.
- Buyers sign a written agreement with their agent before touring homes. It sets what the agent gets paid.
- Sellers aren't required to pay the buyer's agent. Many still do, because it helps attract buyers. If the seller won't, the buyer owes whatever their agreement says.
The percentages themselves haven't moved much. Most agents still quote 2 to 3 percent per side.
Where the money goes
Here's a $1 million sale with 2.5 percent to each side:
| Amount | |
|---|---|
| Listing side (2.5%) | $25,000 |
| Buyer side (2.5%) | $25,000 |
| Total commission | $50,000 |
Each agent then splits their side with their brokerage. Depending on the brokerage and the agent's deal, the agent commonly keeps somewhere between half and most of it, before referral fees, marketing costs, and their own expenses.
So the client pays $50,000, and each agent might take home a fraction of their $25,000. That's why so many agents chase volume.
Why the percentage model is the problem
The issue isn't the size of the check. It's what the percentage rewards.
- A higher price means a bigger paycheck. A buyer's agent who negotiates the price down is cutting their own pay.
- Speed pays better than strategy. A quick close at a so-so price beats a long negotiation for a better one.
- The work doesn't scale with the price. Selling a $1.5 million home isn't two and a half times the work of selling a $600,000 one. The fee is.
- Volume beats attention. Agents with thin margins take on more clients than they can serve well.
The traditional model isn't broken because agents are bad. It's broken because the incentives are.
What a flat fee changes
At Arrivva, buyers pay $9,750 and sellers pay $15,750. Full service, same fee at any price.
- Buyers get the buyer-broker fee minus our $9,750 back as a rebate at closing. On a $1.2 million purchase with a 2.5 percent buyer-broker fee, that's $30,000 minus $9,750, or $20,250 back to the buyer.
- Sellers pay $15,750 instead of 2.5 percent. On a $1.5 million home, that's $21,750 less than a typical listing fee, before deciding what, if anything, to offer a buyer's agent.
- Nobody is paid more for a higher price, so the advice is about your deal, not our check.
The bottom line
When you hire an agent, ask two questions: how exactly do you get paid, and what do you earn if I pay more? The answers tell you who they're working for.
For the full picture of how the model works, read Flat Fee Real Estate: The Future of Buying and Selling Homes.