Real estate agent commissions: How they work now

Written by Samantha SheltonNMLS 1647301Updated October 2026

This article is general information about brokerage compensation, not legal or tax advice. Commission terms are set by private contract, and agency rules vary by state. Consult a Michigan real estate attorney about your agreement and a tax professional about your proceeds.

Sellers reviewing real estate agent commissions with their agent at a dining table in a Michigan home

A real estate commission is the fee a seller or a buyer agrees to pay a brokerage for its services, written into a signed agreement as a percentage of the sale price or a flat dollar amount, and settled at closing out of the sale proceeds. What changed is where the buyer’s side gets arranged: since August 17, 2024, offers of compensation to a buyer’s agent may no longer be communicated through a multiple listing service, and an MLS-participant agent must have a written agreement with a buyer before touring a home.

Those changes came out of the Sitzer/Burnett class litigation, which the National Association of REALTORS® settled by adopting them and paying $418 million over approximately four years; the U.S. District Court for the Western District of Missouri granted final approval on November 26, 2024. Nothing in it made compensation cheaper by rule. It made compensation visible, requiring every written buyer agreement to state conspicuously that broker fees are not set by law and are fully negotiable.¹

Learn how a commission is calculated, when it is earned, who negotiates each side now, and how the fee lands on your closing statement, or start with our Selling a Home guide.

Key takeaways:

No standard rate exists, and none ever did: A 2022 Consumer Federation of America study of 17,805 home sales found buyer-agent rates between 2.5% and 3.0% in at least 88% of sales in each of 24 cities. A measurement of what markets did, not a schedule anyone is bound by.
One date split the negotiation in two: On August 17, 2024, buyer-agent compensation moved off the MLS and into a written buyer agreement that must state a specific, objectively ascertainable amount before the first showing.
Commission is one line among several on a Michigan net sheet: On a $400,000 Michigan sale the seller also owes state and county transfer tax of $8.60 per $1,000 ($3,440) plus title charges, prorated property taxes and the mortgage payoff.

What is a real estate commission, and how is it calculated?

It is a contingent fee for brokerage services, usually a percentage of the final sale price. Two things follow from contingent: the fee is customarily collected only when the sale closes (though the moment it is legally earned is a contract question, covered in the next section) and the dollars move with the price. A 2.5% fee is $6,250 on a $250,000 home and $12,500 on a $500,000 home.² The percentage applies to the sale price, not your equity, which is why the fee can eat a thin-equity seller’s proceeds. Flat, tiered and menu pricing are lawful too.

The fee is owed to the brokerage, not the person: Michigan bars a salesperson from accepting a commission for licensed activity from anyone other than the broker who employs them, so the closing pays the firm and the firm pays the agent. What the individual keeps is a separate question.
“Total commission” is really two negotiations: The listing side is set in your agreement with your brokerage; the buyer side in the buyer’s agreement with theirs. A listing agent and a buyer’s agent do not share one fee by operation of law.
Services are part of the price: Pricing analysis, photography, MLS entry, advertising, showing coverage and negotiation are what you are buying. Negotiate the number down and confirm in writing which of them survive.

When is a commission earned, and when does it get paid?

Earned and paid are different moments, and the gap is where disputes live. Traditional listing agreements say the fee is earned when the brokerage produces a buyer ready, willing and able to purchase on the seller’s stated terms, which can occur before closing, while payment is customarily made at closing from proceeds. Read your own agreement; the trigger is contractual, not statutory.

Michigan adds a formality. Under the state’s statute of frauds, an agreement to pay a commission on the sale of an interest in real estate is void unless it, or a memorandum of it, is in writing and signed by the party to be charged, and no action to enforce one may be brought against the owner or purchaser without that signed writing. Verbal commission promises are not enforceable against a Michigan property owner.

Check the protection period: Most listing agreements include a tail. A window after expiration in which the brokerage is still owed a fee if you sell to a buyer it introduced. Ask for its length and a named-buyer list.
Check cancellation and definitions: Whether you can terminate early, and whether the fee is calculated on gross price or net of concessions, is contract language.

What changed on August 17, 2024, and who negotiates each side now?

Two rules took effect that day, and both govern process rather than price. Offers of compensation may no longer be communicated through a multiple listing service. And an MLS participant working with a buyer must enter a written agreement before touring a home that specifies and conspicuously discloses the amount or rate of compensation the agent will receive.

That term must be objectively ascertainable and not open-ended. A flat fee, a percentage, an hourly rate or $0, but not “whatever the seller is offering.” The agreement must also say the agent may not receive compensation exceeding the amount agreed with the buyer, and must state conspicuously that broker commissions are not set by law and are fully negotiable. Listing agreements are less prescriptive: seller and listing broker may structure the fee as they choose, so long as it specifies the amount or rate.

Feature	Before August 17, 2024	On and after August 17, 2024
Where buyer-agent compensation was advertised	On the MLS, as an offer to cooperating brokers	Off-MLS channels only
Who effectively set the buyer-side number	The listing side, through the MLS offer	The buyer and their brokerage, in their own agreement
When the buyer sees the number	Often late, if at all	Before the first tour, in writing
How a seller can pay the buyer’s side	MLS offer of compensation	Off-MLS offer, or a purchase-agreement concession
What an MLS may still display	Offers of compensation	Seller concessions, such as buyer closing-cost credits

Notice what did not change. Sellers may still contribute to the buyer’s agent, and the fee did not become capped or standardized. Only the venue and timing moved.

Is there a standard commission rate?

No, and treating any number as standard is the most common error in this subject. Commission has always been negotiable. No statute, association or MLS sets a rate, and NAR’s settlement requires buyer agreements to say so conspicuously. Any figure you meet is either one contract’s number or a survey observation.

Attributed observations are still useful, read as measurements. The Consumer Federation of America, a nonprofit research organization, analyzed 17,805 home sales in a 2022 report and found buyer-agent rates highly uniform: in each of 24 cities at least 88% of sales carried rates between 2.5% and 3.0%, and in each of 18 cities at least 70% carried identical rates. CFA read that as weak price competition, not a benchmark. Review NAR’s research and statistics on agent compensation rather than a secondhand average.

Ask for the number before you ask for a discount: The rate is a term, and terms are negotiated before signature.
Reduced-fee models are a trade, not a trick: Flat-fee and limited-service brokerages price lower because they do less. Compare scope line by line.
Price the service, not just the fee: Before optimizing the percentage.

Be equally skeptical of the reverse claim, that agent-assisted homes sell for far more than for-sale-by-owner homes, sourced to NAR’s Profile of Home Buyers and Sellers. That report shows a lower median FSBO price, but it compares different populations and controls for neither property nor market. It is not a measurement of what an agent adds to your price.

How can a seller still pay the buyer’s agent?

Three routes remain open, all negotiated rather than posted. A seller may authorize their listing broker to offer compensation off-MLS, on the brokerage’s website, on a flyer or sign, or broker to broker. A buyer may write compensation into the purchase offer. Or the parties may treat it as a seller concession, which an MLS may still display, because a concession is a credit to the buyer rather than an offer to a broker.

The difference matters at closing. An offer of compensation is a payment to a brokerage. A concession is a credit the buyer’s lender must approve within its limits on interested-party contributions, and one the buyer may need for closing costs instead, see seller-paid closing costs.

In a competitive file this is a term like any other, weighed alongside price, financing type and closing date, see how to handle multiple offers. One caution: how a seller chooses among offers is a fair housing question. The Fair Housing Act bars discrimination in the sale of housing on the basis of protected characteristics, and Michigan’s Elliott-Larsen Civil Rights Act adds its own protected classes. Compare offers on their terms, and treat buyer “love letters” as exposure rather than a tiebreaker.

How does commission show up on the closing statement?

As a real, itemized line. Under the federal Closing Disclosure rules, real estate commissions appear in the form’s “Other” section, and the amount disclosed must be the total paid to any brokerage as a commission, regardless of who held the earnest money. Additional brokerage charges are itemized separately, each naming the service and the person ultimately paid.

Sellers usually get their own settlement statement from the closing agent rather than the buyer’s Closing Disclosure, but the arithmetic is the same: sale price, minus brokerage fees, transfer taxes, title and closing charges, prorated property taxes and the payoff, equals proceeds. If the statement does not match the agreement, ask the closing agent and then a Michigan real estate attorney.

What Michigan sellers should know

Commission is negotiated nationally but lands locally, and in Michigan it sits next to a transfer tax the seller is statutorily liable for: $3.75 per $500 of value to the state, plus 55 cents per $500 to the county in counties under 2,000,000 population, every Michigan county. Together, $8.60 per $1,000 of sale price.

A $400,000 Waterford sale, worked through: Say you agree to a 2.5% listing fee and a 2.5% buyer-agent concession. Figures chosen for clean arithmetic, not because any rate is standard. That is $10,000 and $10,000, plus $3,000 state and $440 county transfer tax: $23,440 before title charges, prorated summer and winter taxes and your payoff.³
The state portion may be exempt on a principal residence: Michigan exempts a conveyance from the state transfer tax where the seller claimed the principal residence exemption and the property’s state equalized value at sale is at or below its SEV at acquisition, in an arm’s-length sale; a refund may be requested from Treasury. Confirm eligibility with your closing agent.
Your agent is paid by their broker: A Michigan salesperson may not accept a commission for licensed activity from anyone but the employing broker, which is why the settlement statement names a brokerage, not a person.
Proceeds and taxes are separate questions: Commission reduces your amount realized, but whether you owe tax on a gain is a federal question, see capital gains tax exemptions, then a tax professional.

One boundary, stated plainly, because this is a mortgage broker’s site. Align Lending does not pay real estate agents for referrals and does not accept payment from them: Section 8 of the Real Estate Settlement Procedures Act, 12 U.S.C. 2607, bars giving or accepting any fee, kickback or thing of value under an agreement that settlement-service business will be referred, and bars splitting charges except for services actually performed. We are not a listing brokerage, an agent-referral service or a law firm. See the benefits of working with a mortgage broker and our Selling Strategies hub.

How Align helps when you are selling

If you are buying your next home too, the order matters. Samantha lines up your next mortgage before your home lists, so the sale and the purchase run on one timeline instead of two.

Over the last 12 months, her loans averaged under 14 days from application to clear to close, across more than 100 loans. Your closing date is set by your purchase agreement. Her job is to have your loan ready well before it.

She lives and works in Oakland County, and local agents bring her in for second opinions when their buyers arrive preapproved elsewhere. You get one person who knows your goals from the first call to the closing table, with a processor supporting her behind the scenes.

Plan a buy before you sell

Sources: Align Lending loan records, 12 months to October 2026.

FAQ: Real estate agent commissions

Here are answers to common questions about real estate agent commissions.

Who pays the real estate agent commission now?

Each side pays its own brokerage under its own written agreement, and the seller often still funds both. The listing fee comes out of the seller’s proceeds; the buyer’s side is set in the buyer’s agreement with their agent, and the buyer may ask the seller to cover it off-MLS or as a concession. Sellers frequently agree, because it widens the pool of represented buyers.

Is the commission rate negotiable?

Yes, entirely, and it always has been. No law, association or MLS sets a rate, and the 2024 NAR settlement requires written buyer agreements to state conspicuously that broker fees are not set by law and are fully negotiable. Negotiate before you sign, and get the rate and the included services written in together.

Can a seller still offer to pay the buyer’s agent?

Yes. The 2024 practice changes prohibit communicating an offer of compensation through a multiple listing service. A seller may still authorize an offer off-MLS, accept a compensation term in the buyer’s purchase offer, or negotiate a concession, which an MLS may display because it is a credit to the buyer. Ask how each interacts with the buyer’s loan, see seller-paid closing costs.

Does the commission come out of my sale price or my proceeds?

Both, in sequence. It is calculated on the final sale price and deducted from your proceeds at closing, alongside Michigan transfer tax of $8.60 per $1,000, title charges, prorated property taxes and your mortgage payoff. Ask for a written estimate before you accept an offer, a seller’s net sheet shows every line.

The bottom line on real estate agent commissions

A real estate commission is a negotiated, contingent brokerage fee, calculated on the final sale price and paid at closing from the seller’s proceeds. Since August 17, 2024, offers of buyer-agent compensation may no longer be communicated through an MLS, and an MLS-participant buyer agent must have a written agreement stating a specific, objectively ascertainable fee before touring a home. Compensation is still fully negotiable, still payable by the seller off-MLS or through a concession, and still not set by any law or association. The Consumer Federation of America’s 2022 finding of 2.5% to 3.0% buyer-side rates across 24 cities is a measurement, not a rate card. Price it against the services in your agreement, and see it on a net sheet first.

If you’re ready to sell and buy again with the whole picture in front of you, talk to Align Lending. We’ll shop your next mortgage across competing wholesale lenders and show you the numbers side by side, so financing costs don’t undo what you negotiated at the closing table. Call 248-506-5727 or start online. Take commission disputes to a Michigan real estate attorney and proceeds questions to a tax professional.

Footnotes:

1. Align Lending is not a party to the National Association of REALTORS® settlement, is not a real estate brokerage, and does not administer MLS rules. The practice changes described took effect August 17, 2024 and are implemented by NAR, by individual multiple listing services and by individual brokerages; local MLS rules, forms and state agency law vary, and settlement-related litigation has continued after final approval. Nothing here is a quote, an estimate, or a representation of what any brokerage will charge. Confirm current MLS rules, compensation terms and the wording of your own agreement with your real estate broker and, where appropriate, a Michigan real estate attorney. Return to text.

2. Percentages used in this article are illustrative arithmetic only. Real estate commissions are fully negotiable and are not set by law, by any trade association or by any multiple listing service; there is no standard, typical or customary rate, and no figure here should be read as one. Survey findings cited are attributed to the issuing organization and year of publication, describe rates observed in specific markets and time periods, and do not predict what any brokerage will charge you. Return to text.

3. Example figures are hypothetical and for educational purposes only; they do not constitute an advertisement of credit terms, a rate quote, or an estimate of any brokerage’s fee under federal or state law. The transfer tax amounts reflect Michigan’s statutory rates as of publication and assume no exemption applies; actual liability, exemptions and refunds depend on the property, the transaction and the county. This article is not tax advice, consult a qualified tax professional about your proceeds, your basis and any gain. Return to text.

Sources: Prohibition on offers of compensation being communicated through a multiple listing service, the ability of sellers to offer compensation off an MLS and to offer buyer concessions on an MLS, the requirement that MLS participants enter written agreements with buyers before touring a home, the requirement that such agreements specifically and conspicuously disclose the amount or rate of compensation and state that broker fees are fully negotiable and not set by law, the requirement that buyer-agreement compensation be objectively ascertainable and not open-ended and that participants not receive compensation from any source exceeding the amount agreed with the buyer, and the effective date of August 17, 2024, National Association of REALTORS®, “What the NAR Settlement Means for Home Buyers and Sellers,” “NAR Settlement FAQs,” and “Written Buyer Agreements 101.” NAR’s agreement to pay $418 million over four years and the grant of final approval by the U.S. District Court for the Western District of Missouri on November 26, 2024, National Association of REALTORS® newsroom. Analysis of 17,805 home sales finding that in each of 24 cities at least 88% of sales had buyer-agent commission rates between 2.5% and 3.0%, and that in each of 18 cities at least 70% of sales had identical rates, Consumer Federation of America, “Real Estate Commission Rates in 35 Cities: Uniformity and Variability” (2022). Comparison of for-sale-by-owner and agent-assisted median sale prices. National Association of REALTORS®, Profile of Home Buyers and Sellers; the comparison is not controlled for property, market or transaction differences. Requirement that an agreement, promise or contract to pay a commission for or upon the sale of an interest in real estate be in writing and signed by the party to be charged, and the bar on bringing an action to enforce such an agreement against the owner or purchaser absent a signed writing, Michigan statute of frauds, MCL 566.132(1)(e) and MCL 566.132(3). Prohibition on a real estate salesperson accepting a commission or valuable consideration for licensed activity from any person other than the employing real estate broker, MCL 339.2510, Article 25 of the Occupational Code, 1980 PA 299, administered by the Michigan Department of Licensing and Regulatory Affairs. State real estate transfer tax of $3.75 per $500 of value and liability of the seller or grantor. State Real Estate Transfer Tax Act, 1993 PA 330, MCL 207.523 and MCL 207.525; principal-residence exemption where the state equalized valuation at transfer is equal to or less than the SEV at acquisition in an arm’s-length transaction, and the refund request procedure, MCL 207.526(u). County real estate transfer tax of 55 cents per $500 in counties with a population under 2,000,000, Real Estate Transfer Tax, 1966 PA 134, MCL 207.504. Disclosure of real estate commissions in the “Other” section of the Closing Disclosure as the total amount paid to any real estate brokerage regardless of who holds the earnest money, separate itemization of additional brokerage charges, and disclosure of real estate broker contact information, Regulation Z, 12 CFR 1026.38(g)(4) and 1026.38(r) and official interpretations. Prohibition on giving or accepting any fee, kickback or thing of value pursuant to an agreement or understanding that settlement-service business will be referred, and on splitting charges other than for services actually performed, Section 8 of the Real Estate Settlement Procedures Act, 12 U.S.C. 2607, and Regulation X, 12 CFR 1024.14. Prohibition on discrimination in the sale of housing, Fair Housing Act, 42 U.S.C. 3604; Michigan’s Elliott-Larsen Civil Rights Act, 1976 PA 453. Further reading: Nolo’s legal guide to selling a house, Michigan’s statute of frauds provision on commission agreements, and the CFPB’s guidance on buying and closing on a home.

This article is for informational purposes only and is not intended to provide legal, financial, or tax advice. Real estate commissions are set by private contract and are fully negotiable; no rate is standard, typical or customary, and none is set by law or by any trade association. MLS rules, brokerage practices, agency law and licensing requirements change and vary by state, confirm current requirements with your real estate broker and the licensing authority in your state, confirm contract and disclosure obligations with a Michigan real estate attorney, confirm tax consequences with a qualified tax professional, and confirm loan terms with your loan officer. Align Lending is an independent Michigan mortgage broker, NMLS #2041154, and is not a real estate brokerage, an agent-referral service, or a law firm; we neither pay nor accept fees for the referral of settlement-service business.