The Changing Landscape of Real Estate Commissions: What You Need to Know

If you’re gearing up for your real estate exam, you’ve probably heard that the industry is undergoing some major changes. As of August 17, 2024, new rules around real estate commissions have come into play, and these changes are crucial to understand—not just for your exam, but for your future career in real estate.

Let’s dive into what’s different and how it might show up on your test.

The Traditional Commission Structure

First, let’s talk about how things used to work. In the traditional real estate model, when a seller listed their home, they agreed to pay a commission—usually around 5% to 6% of the sale price. This fee was typically split between the listing agent and the buyer’s agent.

Even though the seller paid this commission, the cost was often built into the home’s sale price. This meant that buyers were indirectly covering the commission costs as part of their purchase, without having much say in how much their agent was getting paid. This is how the system worked for decades, and it’s likely something you’ll need to understand for your exam.

What’s New? The 2024 National Association of Realtors Rules

The new rules introduced by the National Association of REALTORS® (NAR) in August 2024 have made some significant changes to this structure:

1. No More Automatic Commissions for Buyer’s Agents on the MLS: Under the new rules, listing agents can no longer offer compensation to buyer’s agents via the MLS. This means that buyers now need to directly negotiate their agent’s fee, rather than having it set by the seller.

2. Mandatory Buyer Representation Agreements: Before any property tours can happen, buyers must now sign a written agreement with their agent that clearly outlines the commission structure. This agreement is key to ensuring that buyers know exactly what they’re paying for, and it’s a topic you’ll want to be familiar with for your exam.

These changes are all about transparency and giving consumers more control over the process. But they also add a new layer of complexity that you’ll need to be prepared to discuss on your test.

How Will This Affect Your Exam?

Expect questions that test your understanding of these new dynamics. For example, you might be asked about the impact of these changes on the negotiation process, how commissions are now structured, or what the legal requirements are for buyer representation agreements.

You should also be ready to explain the reasoning behind these changes—how they’re meant to empower consumers by making costs more transparent and putting more negotiation power in the hands of buyers.

What Does This Mean for Your Future Career?

Understanding these new rules is not just about passing your exam—it’s also about preparing for the real-world scenarios you’ll face as a licensed real estate professional. Moving forward, you’ll need to be comfortable helping buyers navigate these new requirements, negotiating commissions, and ensuring that all agreements are clearly understood and documented.

For sellers, you’ll need to explain why they can no longer advertise buyer’s agent commissions on the MLS and help them strategize how to structure deals in this new environment.

Key Takeaways for Your Exam Prep

• Know the New Rules: Make sure you understand the key changes—no more automatic buy-side commissions on the MLS and mandatory buyer representation agreements.

• Understand the Implications: Be ready to discuss how these changes impact buyers, sellers, and the negotiation process. You’ll likely face questions that test your ability to navigate these new scenarios.

• Prepare for Real-World Application: Think about how these changes will affect your future interactions with clients. The more you understand now, the better prepared you’ll be once you’re out in the field.

The real estate industry is evolving, and these new rules are a big part of that change. By staying informed and incorporating these updates into your study routine, you’ll be better equipped to ace your exam and succeed in your real estate career.