Buyer agreements don't lead to lower commissions, Fed finds
Research based on three decades of data suggests rising home prices are a more likely factor, which aligns with current reports on post-settlement compensation.
Key points:
- A Federal Reserve paper found that commissions have fallen since the 1990s, but the declines aren't related to buyer agreements.
- Researchers reached that conclusion after looking at buy-side compensation rates in 15 states that previously instituted buyer agreement requirements.
- Since NAR's rule changes went into effect last August, commissions have remained fairly stable, and sellers generally still pay buyer agents, Redfin reports.
If the past is any indication, the National Association of Realtors' nationwide buyer agreement mandate won't have an impact on buyer agent commissions, a new government report suggests.
The Federal Reserve published a paper on May 12 — "Commissions and Omissions: Trends in Real Estate Broker Compensation" — that analyzes the relationship between buyer agreements and commission rates after 15 different states enacted buyer agreement laws as early as the mid-1990s. The research was first reported by Inman.
Commissions have fallen over time, but buyer agreements aren't the culprit
The paper concluded that while there has been a modest downward trend in buy-side commission rates, which fell from roughly 3% in the 1990s to around 2.7% in the 2020s, there was no evidence that the introduction of buyer agreements contributed to the downward trend — rather, rising home prices and technology improvements were cited as more likely factors in the decline.
"When house prices are higher relative to consumer prices or prevailing incomes, real estate agents may be more willing to work for lower commission rates, since the higher selling price offsets the lower rate," the report stated.
Small dips in commissions over the past nine months may be following that pattern, according to the report. "So far, since the settlement changes went into place in August 2024, outside estimates suggest that buyer agent commissions may have declined some but have remained at relatively high levels," researchers wrote, concluding that "changes in these policies might not have a material effect" on commission rates.
Other outcomes hard to predict
While the Fed didn't see evidence of compensation changing yet, the paper noted that NAR's settlement "could lead to more substantial changes to business models and agent commissions going forward."
But the authors also included a caveat: Because agents are still sharing commission information off the MLS and NAR has "relaxed" Clear Cooperation with the addition of a delayed marketing option, "these sorts of adaptations make it difficult to predict the long-run effects of the settlement."
Buy-side commissions relatively stable since August
The Federal Reserve paper seems to align with current data on buy-side commissions. In a May 16 report, Redfin found that buyer's agents earned an average commission of 2.4% in the first quarter, based on transactions involving Redfin agents. That percentage is actually up slightly compared to the third quarter of 2024 (2.36%) when NAR's rule changes went into effect.
Similar to the Fed's analysis, Redfin found that agents accepted lower commissions on higher-priced homes. For properties that sold for $1 million or more, buyer agent commission rates averaged 2.17% — down from 2.22% in the third quarter of 2024.
Commission percentages on lower-priced homes increased, however, averaging 2.49% for homes that sold for less than $500,000, up from 2.42% in the third quarter of 2024. Commissions on homes between $500,000 and $999,000 also inched up from 2.27% in the third quarter of 2024 to 2.29% in the first quarter of 2025.
Sellers still pay, but that could change if the market shifts
In general, sellers are continuing to compensate buyer agents, Redfin found — at least for now.
"Sellers don't seem to have any issue paying a buyer's agent commission," said Charley McVay, a Redfin Premier agent in Portland, Oregon.
"But if we enter a seller's market similar to that of 2021 and 2022 — with rampant bidding wars — sellers may be inclined to offer low or no commission to the buyer's agent, forcing buyers to bridge the gap. And if that happens, first-time buyers will be hit hardest because many of them can already barely afford to buy a home," he added.