Most people don’t realize this, but over the past several years there have been multiple national lawsuits centered around how real estate agent commissions are paid. Those cases have created a lot of discussion within the industry, and for many consumers, a lot of confusion.

At the core of that confusion is one consistent issue: a lack of clear, straightforward communication about commissions—specifically how they work, who pays them, and what buyers and sellers are actually agreeing to.

Rather than getting into the legal side of those cases, which continues to evolve, the goal here is much simpler. This is meant to be a transparent, practical explanation of how real estate agent commissions actually work in today’s market, so you can make informed decisions whether you are buying or selling.

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A Commitment to Transparency

Before getting into the details, it’s important to explain the perspective behind this.

The role of a real estate agent, at its core, is to guide people through one of the largest financial decisions they will ever make. That responsibility goes beyond marketing or negotiating. It requires clarity, honesty, and a willingness to explain the parts of the process that are often overlooked or simplified.

Commissions tend to be one of those areas.

In many cases, agents either gloss over the details or present them in a way that feels easier in the moment but leaves clients with an incomplete understanding. The problem with that approach is that these details almost always surface later, and when they do, it can create mistrust that could have been avoided with a more straightforward explanation from the beginning.

For that reason, the goal here is simple: explain how commissions work in a way that is complete, accurate, and easy to follow.

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Agent Commissions Are Always Negotiable

The most important concept to understand is that real estate commissions are not fixed.

There is no universal rate that all agents charge, and there is no rule that says a commission must be structured a certain way. Every aspect of it—how much is paid, who pays it, and how it is split—is negotiable between the agent and their client.

Some agents or brokerages may choose not to adjust their fee, and that is within their discretion. However, that does not change the fact that commissions as a whole are negotiable within the industry. If one agent’s structure does not align with your expectations, you always have the ability to ask questions, negotiate terms, or explore other options.

If an agent ever tries to tell you that commissions are set by some larger entity or some state or federal law, they are lying. Most likely in order to cover up an exorbitant fee.

Understanding that commissions are negotiable upfront is important, because it sets the foundation for everything else that follows.

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How Real Estate Agent Commissions Are Structured

In a typical transaction, commissions are agreed upon at the beginning of the relationship between a client and their agent. For sellers, this happens in the listing agreement. For buyers, it is outlined in the buyer/broker agreement.

Commissions are only paid if a transaction successfully closes, which means agents are compensated based on performance rather than upfront fees. Once a sale is completed, the agreed-upon commission is distributed through the brokerages involved and then to the agents, based on their internal arrangements.

While many people are familiar with the idea of a total commission being split between a listing agent and a buyer’s agent, it is important to recognize that this is simply one common structure—not a requirement. The specifics of how a commission is handled can vary depending on what is negotiated at the start of the transaction.

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Who Pays the Commission—and How That Has Evolved

One of the most common questions is who actually pays the commission.

Historically, it has been typical for the seller to pay both their own agent and the buyer’s agent out of the proceeds of the sale. This structure is still widely used today, but it is important to understand that it has always been a choice, not a rule.

Recent changes in the industry have brought more attention to this distinction. Buyers are now more directly involved in negotiating and agreeing to their agent’s compensation through buyer representation agreements. At the same time, sellers are not obligated to offer compensation to a buyer’s agent, although many still choose to do so.

This shift does not necessarily change the mechanics of a transaction as much as it changes the level of awareness and negotiation involved. Instead of assuming a standard structure, both parties now need to more clearly understand and agree to how commissions will be handled.

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Why Sellers Often Choose to Offer Buyer Agent Commissions

Even though it is negotiable, many sellers continue to offer agent commissions to a buyer’s agent, and there are practical reasons for that.

When a home is listed, the goal is to generate as much demand as possible. The more buyers who are both interested in and able to purchase the home, the stronger the seller’s position becomes.

Buyers, however, are typically managing significant upfront costs. Between down payments, lender fees, and other closing expenses, most buyers are already stretching their finances to complete a purchase. If they are also required to pay their agent’s commission out of pocket, it can limit their ability to move forward or reduce what they are able to offer.

As a result, when a seller chooses to offer buyer agent compensation, it often makes the property more accessible to a larger pool of buyers. That increased accessibility can translate into more showings, more offers, and ultimately stronger negotiating leverage for the seller.

For this reason, offering compensation is often less about tradition and more about strategy.

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What This Means From the Buyer’s Side

For buyers, the key document to understand is the buyer/broker agreement. This agreement outlines the relationship with the agent, including how the agent will be compensated.

Within that agreement, there is typically a defined commission rate as well as an explanation of what happens if a seller offers less than that amount or nothing at all. Depending on how the agreement is written, the buyer may be responsible for covering the difference.

This is an area where many buyers run into issues—not because anything is being done incorrectly, but because the details were not fully discussed or understood upfront.

The important takeaway is that these terms are negotiable before the agreement is signed. Buyers should take the time to review and discuss the structure with their agent so they are clear on their responsibilities in different scenarios. Don’t be one of those buyers that sits down at the closing table, reviews the settlement statement with all of their closing costs, and only then realizes their agent is charging them thousands of dollars.

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A Practical Perspective for Sellers and Buyers

When looking at agent commissions from a broader perspective, it is helpful to recognize that most people participate in both sides of the market over time. A seller today is often a buyer tomorrow, and vice versa.

So, while you may be paying two agents when you sell, you’ll most likely not be paying any agents, even your own, when you buy.

Many of the costs and benefits associated with commissions tend to balance out over the course of multiple transactions. While the structure of a single deal may vary, the overall system often functions as a shared framework that supports both sides of the process.

More importantly, focusing solely on commission without considering the full financial outcome can be misleading. The effectiveness of pricing, marketing, negotiation, and deal management often has a much greater impact on the final result than the specific percentage paid in commission.

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Final Thoughts

Real estate commissions are often talked about, but not always fully explained. That lack of clarity is what leads to confusion and, in some cases, mistrust.

When you break it down, the concept itself is not overly complicated. Agent commissions are negotiated agreements between clients and their agents, structured in a way that compensates professionals for successfully guiding a transaction from start to finish.

The key is understanding how those agreements work, what options are available, and how different choices can affect the outcome of a deal.

Whether you are buying or selling, having that understanding puts you in a stronger position to make decisions that align with your goals—not just in terms of cost, but in terms of the overall result.

If questions come up as you think through your situation, having a clear conversation early on can make a significant difference. The more informed you are at the start, the more confident you can be in the decisions that follow.

Key Takeaway’s

1. Agent commissions are always 100% negotiable between buyers or sellers and their agents/brokerages.
2. Buyers and sellers need to be aware of what their agent charges. Buyers especially need to negotiate what will happen if a seller doesn’t offer doesn’t cover your agents’ full fee. This should all be negotiated and agreed to before signing your buyer/seller agreement with your agent.
3. Sellers most often offer to pay the buyer’s agent commission in order to expose their listing to the most buyers. It’s best to think of this practice as offering to pay someone a finder’s fee for bringing a serious and able buyer.
4. Remember that it’s really a wash at the end of the day when you as a seller pays a buyer’s agent commission and then become a buyer yourself and the seller of the home you purchase pays your agent’s commission.