How Real Estate Agent Commissions Changed - The NAR Settlement Explained

In October 2023, a Missouri jury delivered a verdict that sent shockwaves through the real estate industry. The Sitzer/Burnett v. National Association of Realtors case found that NAR and several major brokerages had conspired to inflate real estate commissions, costing home sellers billions of dollars over decades. The resulting settlement fundamentally changed how agent commissions work in the United States, and those changes are now fully in effect.

If you are buying or selling a home in 2026, these new rules directly affect your transaction. Here is what happened, what changed, and what it means for your bottom line.

The Lawsuit That Changed Everything

The Sitzer/Burnett case centered on a practice that had been standard in real estate for decades: sellers were required to offer compensation to the buyer's agent as a condition of listing their home on the MLS (Multiple Listing Service). In practice, this meant that sellers typically paid a total commission of 5-6%, split between their own listing agent and the buyer's agent. Sellers had no practical ability to negotiate or decline the buyer-side portion.

The Missouri jury found that NAR and major brokerages - including Keller Williams, HomeServices of America, and RE/MAX - had conspired to maintain this system. The verdict led to a massive settlement: NAR agreed to pay $418 million, with combined settlements across all defendants exceeding $876 million. The payment schedule called for $197 million paid in February 2025 and an additional $72 million due in February 2026.

Three Major Rule Changes (Effective August 17, 2024)

The settlement did not just involve money. It mandated three structural changes to how real estate transactions work across the country. These rules took effect on August 17, 2024, and apply to every MLS-listed transaction.

1. Written Buyer Broker Agreements Required Before Touring Homes

Before the settlement, buyers could tour homes with an agent without any formal agreement about compensation. The agent's payment was handled behind the scenes through the MLS. Now, buyers must sign a written agreement with their agent before touring any property. This agreement must clearly state how the agent will be compensated, how much they will be paid, and who is responsible for that payment.

This is a significant shift. Buyers can no longer casually work with an agent without understanding the financial arrangement. Every buyer must now confront the question: who is paying my agent, and how much?

2. MLS Compensation Offers to Buyer Agents Are Prohibited

This is the most impactful change. Under the old system, sellers listed their homes on the MLS with a built-in offer of compensation to the buyer's agent - typically 2.5-3% of the sale price. This practice is now prohibited. Sellers can no longer set or advertise buyer agent compensation through the MLS.

Buyer agent compensation is now a separate, independent negotiation between the buyer and their agent. Sellers may still choose to contribute toward the buyer's agent costs, but it is no longer automatic, expected, or listed publicly.

3. Greater Transparency Requirements

The settlement imposed broader transparency rules on how agents disclose their compensation. Agents must be upfront about how they are paid, who is paying them, and whether any referral fees or additional compensation arrangements exist. The goal is to eliminate the hidden financial relationships that inflated costs for consumers.

How Commission Rates Have Responded

When the new rules first took effect in August 2024, buyer agent commissions dipped to approximately 2.5% as the market adjusted. However, by early 2025, the average buyer agent commission had rebounded to 2.82%. The market found a new equilibrium, lower than the pre-settlement norms but not the dramatic reduction some had predicted.

Commission rates also vary significantly by price point. For homes under $500,000, the average buyer agent commission is 2.52%. For properties over $1 million, it drops to 2.21%. Higher-value properties have always commanded lower percentage commissions, and that pattern has become more pronounced post-settlement.

On a $300,000 Chicago home, the difference between a 3% pre-settlement commission and a 2.82% post-settlement commission is only $540. The savings are real but modest for individual sellers. The broader impact is structural: the automatic, non-negotiable nature of buyer agent compensation has been permanently disrupted.

The Appeal: The Settlement Is Not Final

Despite the sweeping changes already in effect, the NAR settlement is not fully resolved. The Eighth Circuit Court of Appeals heard oral arguments on January 14, 2026, from parties challenging the settlement terms. The outcome of this appeal could reshape, modify, or uphold the current rules. Until the appeal is decided, the existing rules remain in effect - but both buyers and sellers should be aware that further changes are possible.

What This Means for Sellers

If you are selling a home in Chicago or the surrounding suburbs, the most important takeaway is this: you are no longer automatically responsible for paying the buyer's agent. Under the old rules, a seller listing a $300,000 home would typically pay $9,000 in buyer agent commissions before even counting their own listing agent fees. That obligation no longer exists by default.

However, the practical reality is more nuanced. Many sellers still choose to offer some buyer agent compensation because it makes their property more attractive to buyers who are working with agents. The difference is that this is now a negotiation, not a requirement.

Sellers should also be aware that total transaction costs have not disappeared - they have just been restructured. Between listing agent commissions (typically 2.5-3%), transfer taxes, closing costs, and potential repairs, selling a home through traditional channels still involves significant expenses.

What This Means for Buyers

For buyers, the settlement introduces a new financial responsibility. You may now need to pay your own agent's commission, either directly out of pocket or by negotiating with the seller to cover it. This affects how much you can realistically offer on a home, since agent costs that were previously absorbed by the seller may now come from the buyer's side of the transaction.

Buyers with limited cash reserves may find that paying their agent's commission - on top of the down payment, closing costs, and other fees - stretches their budget significantly. Some buyers are choosing to work without an agent entirely, though this comes with its own risks in a complex transaction.

How Cash Buyers Are Different

When you sell directly to a cash buyer, the commission question disappears entirely. There is no listing agent on your side and no buyer agent on ours. The price we offer is the price you receive, minus only standard closing costs. No 2.82%, no 3%, no commission negotiations of any kind.

On a $300,000 property, eliminating a total 5-6% commission saves $15,000-$18,000. When you factor in the speed of closing (typically 2-3 weeks versus 60-90 days for a traditional sale), the elimination of repair requests, and the certainty that the deal will close without financing contingencies, the financial picture becomes even more favorable.

The NAR settlement shifted commissions from automatic to negotiable. A direct cash sale eliminates them altogether.

The Bottom Line

The NAR settlement is the most significant structural change to the real estate industry in decades. Sellers are no longer locked into paying buyer agent commissions. Buyers must now confront the true cost of agent representation. And the appeal still pending before the Eighth Circuit means additional changes could be on the horizon.

For homeowners in Chicago and the suburbs who want to avoid commission complexity altogether, selling directly to a cash buyer remains the most straightforward path. No agents, no commissions, no uncertainty about who pays what. For more details on the settlement, visit the NAR settlement FAQ page.

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