Wait, Weren’t Commissions Supposed to Fall? Why U.S. Buyer Agent Commissions Are Creeping Up Again in 2025
Last updated: December 9, 2025
One year after the National Association of Realtors (NAR) settlement was supposed to revolutionize real estate commissions, something unexpected happened. Instead of dropping, buyer agent commission rates in 2025 are creeping back up. The average U.S. buyer’s agent commission rose from 2.36% in Q3 2024 to a peak of 2.43% in Q2 2025, according to Redfin and BusinessWire data (October 2025), before leveling at 2.42% in Q3 2025. For homes under $500,000, commissions hit 2.52% in Q2 2025, the highest for that tier since Q3 2023.
This isn’t what anyone expected when the NAR settlement commission changes took effect in August 2024. Yet here we are, 12 months later, and first-time homebuyers face the same commission costs plus new challenges: losing bidding wars to cash buyers, getting priced out by inventory shortages, and discovering the promised “transparency” created more confusion than savings.
Key Facts in 30 Seconds:
- Current average buyer agent commission: 2.42% nationally, 2.52% for homes under $500K
- NAR settlement took effect: August 17, 2024
- Main changes: Sellers no longer advertise buyer agent compensation on MLS; buyers must sign written fee agreements
- Who typically pays: Most sellers still cover commissions through credits and concessions
- What buyers should do: Focus on market timing over commission savings
Who This Guide Is For:
This article is written primarily for first-time buyers in expensive U.S. markets (especially NYC, San Francisco, Los Angeles), but the commission trends apply nationally. Where we discuss NYC-specific dynamics, we’ll clearly flag them as regional.
How the NAR Settlement Was Supposed to Change Buyer Agent Commission
The Promise: August 2024
The $418 million NAR settlement (announced March 15, 2024) created two major rule changes:
Rule Change #1: Sellers can no longer advertise buyer agent compensation on MLS. They can still offer it, but must communicate separately.
Rule Change #2: Buyers must sign written broker agreements before touring properties, specifying how agents will be compensated.
The Expected Outcome vs. Reality
Economists predicted transparency would trigger commission reductions. A Clever Real Estate survey (September 2024) found 63% of buyers said a $12,000 agent fee would make them less likely to purchase.
The data shows otherwise. According to Redfin:
- Q3 2024: 2.36%
- Q4 2024: 2.37%
- Q1 2025: 2.40%
- Q2 2025: 2.43% (peak)
- Q3 2025: 2.42%
For homes under $500,000, rates hit 2.52% in Q2 2025, the highest since Q3 2023.
Major outlets echo this conclusion. The Wall Street Journal noted commissions ticked up to 2.43% in Q2 2025 despite reform expectations (June 2025), while Kiplinger summarized that the settlement “hasn’t lowered costs for homebuyers” (July 2025).
Why Didn’t Buyer Agent Commission Drop After the NAR Settlement?
Short answer: Financing realities and seller incentives kept commissions baked into prices, even though the line items moved around.
The Counterintuitive Mechanism
A Chicago Redfin agent explained in October 2024: “If demand were high, I think we would see sellers offering lower commission. But now the market is slower, and buyers can ask for higher commission knowing they may be the only offer.”
In slow markets:
- Sellers won’t signal weakness: Reducing commission from 2.5% to 2.0% signals desperation
- First-time buyers can’t pay cash: Median first-time buyer has $50,000-$60,000 saved (NAR 2024). Asking $10,000 separately makes deals impossible
- Financing prevents decoupling: Buyers finance everything into mortgages
- Agents discourage reduction: Listing agents tell sellers “market rate” (2.5%) is required
A Colorado Springs broker confirmed in September 2025: “Commissions have not been affected by the settlement. Homes are staying on market longer, but we’re seeing the same percentages.”
Why Financing Prevents Real Change
On a $400,000 home with 10% down:
- Down payment: $40,000
- Closing costs: $12,000
- Other fees: $4,500
- Total: $56,500
If buyers must pay $10,000 commission separately, total becomes $66,500. Most don’t have extra cash. Instead, they request “seller concessions” where price increases slightly and sellers credit the commission. Buyers finance it into mortgages.
Old vs. New Commission Scenarios: What Actually Changed
| Scenario | Who Pays | Buyer Cash | How It Works | Commission |
|---|---|---|---|---|
| Pre-settlement | Seller via MLS | $56,500 | Seller pays 2.5% directly | 2.5% ($10,000) |
| Post: Buyer cash | Buyer savings | $66,500 | Buyer pays $10,000 separately | 2.5% ($10,000) |
| Post: Credit (most common) | Seller credit | $56,500 | Price→$410K, seller credits $10K | 2.5% financed |
Key insight: The third scenario dominates 2025. The line item shifted, but economics stayed identical. Buyers still finance commission, sellers still cover it through higher prices.
The Bigger Problem: Cash Buyers and Inventory Shortage
While buyer agent commission 2025 rates matter, the real barrier isn’t commission—it’s cash dominance and inventory shortage.
Cash Buyer Dominance
According to Redfin (September 2025):
- Homes under $100K: 67% all-cash
- $100K-$500K: 25% all-cash
- $500K-$1M: 35% all-cash
- Over $1M: 40%+ all-cash
Manhattan: 64% all-cash (StreetEasy, August 2025). Miami: 43%.
Cash offers beat financed offers: they close in 7-14 days versus 45+, eliminate appraisal risk, and remove lender involvement. A March 2025 Manhattan survey found buyers without underwritten commitments lose bidding wars twice as often (Douglas Elliman).
The Inventory Crisis
- Manhattan listings: 6,536 in Q3 2025, up only 1% year-over-year (Douglas Elliman, October 2025)
- Months of supply: Below 3.0 (balanced market needs 5-6)
- NYC vacancy: 2.11% (NYC Housing Survey, June 2024)
Nearly 27% of Manhattan leases involved bidding wars in early 2025 (StreetEasy, February 2025). Properties receive multiple offers within 24-48 hours.
How Do the New NAR Commission Rules Actually Work in 2025?
The New Rules Simply Explained
Change #1: Sellers cannot advertise buyer agent compensation on MLS but communicate it separately through agent networks.
Change #2: Buyers must sign agreements specifying compensation amount, who pays, duration, and area covered.
What This Means for Real Transactions
Most 2025 transactions follow traditional patterns:
- Sellers still offer commission: A Real Brokerage survey (December 2024) found 63% of agents report sellers “frequently” offer compensation, with 21% “occasionally” (HousingWire)
- Buyers don’t pay out of pocket: Sellers use credits that finance commission into mortgages
- Rates stay 2.0-2.5%: Agents discourage below 2.0%
The power dynamic remains unchanged. This is why buyer agent commission 2025 rates stayed at 2.42% despite regulatory changes.
Why Are First-Time Buyers Struggling Even Though Commission Rules Changed?
Shifted Demographics
- Median first-time buyer age in 2014: 31
- Median age in 2025: 40 (all-time high, NAR April 2024)
- Market share: 24% (historic low, down from 33% pre-pandemic)
- Affordability: Households can afford only 25-30% of homes (Redfin, October 2025)
The Real Pain Points
Pain Point #1: Pre-Approval Isn’t Enough
Pre-approval (2-3 days) shows basic review. Full underwriting (7-14 days) proves loan will fund. In Manhattan’s 24-48 hour market, buyers with only pre-approval lose consistently.
Pain Point #2: Down Payment + Closing + Commission = Unaffordable
On $400,000:
- Down payment: $40,000
- Closing + fees: $16,500
- If buyer pays commission: +$10,000
- Total: $66,500 (most saved $50,000-$60,000)
Pain Point #3: NYC Co-op Barriers (NYC-Specific)
NYC co-ops require 20-50% down, 6-8 weeks board approval, 5% rejection risk, $5,000-$8,000 non-refundable fees (NYC Department of Finance, 2024).
Pain Point #4: Bidding Wars (High-Cost Markets)
Despite national “slow market” narratives, NYC sees 27% bidding war rates. International buyers, institutional investors, and second-home purchasers maintain pressure.
Comprehensive FAQs for First-Time Buyers
FAQ #1: Should I Wait for Commissions to Fall?
No. Commission trajectory: 2.36% → 2.43% → 2.42%. Sub-$500K: 2.52%.
What you lose waiting: Appreciation (3-4% = $12,000-$16,000/year on $400,000) + rent ($36,000-$48,000/year) = $48,000-$67,000 for potential $2,000-$3,000 commission savings.
FAQ #2: How Much Should I Pay in Commission?
Current rates (Q3 2025):
- Under $500K: 2.52%
- $500K-$1M: 2.32%
- Over $1M: 2.22%
Walk away from agents demanding 3%+ on sub-$750K purchases. Standard: 2.0-2.5%.
FAQ #3: Why Am I Losing Bidding Wars?
Pre-approval shows possibility. Underwritten commitment shows certainty.
Winning strategy:
- Complete underwriting before searching (7-14 days)
- Waive financing contingency if 20%+ down
- Commit to 30-day closing
- Submit personal letter
Even perfect underwriting can’t beat all cash. Focus on less-competitive properties or off-season buying (November-March).
FAQ #4: Should I Waive Inspection?
No. Common post-purchase surprises: maintenance ($80K-$150K), roof ($25K), electrical ($15K), foundation ($30K+).
Better strategy: Pay $400-$800 for pre-inspection before offers. Submit offers without contingencies after knowing condition. Pre-inspection cost versus $50K-$200K in hidden problems makes this obvious.
FAQ #5: Co-op or Condo?
| Factor | Co-op | Condo |
|---|---|---|
| Down payment | 20-50% | 10-20% |
| Approval time | 6-8 weeks | 1-2 weeks |
| Rejection risk | ~5% | <1% |
| Price | 15-26% cheaper | 15-26% more |
Recommendation: Under 20% down = condo only. Over 30% down = co-ops acceptable for savings.
FAQ #6: How Much for Closing Costs?
On $400,000: 2-6% ($8,000-$24,000)
| Item | Amount |
|---|---|
| Mortgage recording tax | $1,000-$7,200 |
| NYC transfer tax | $5,000 |
| Attorney fees | $3,000-$6,000 |
| Inspection/appraisal | $1,500-$2,500 |
| Title insurance | $2,000-$3,000 |
Reduction strategies: Negotiate seller concessions (1-2%), use NYC HomeFirst grants (up to $100K), time closing Q4/Q1, shop title insurance.
FAQ #7: Is the Barrier Commissions or Prices?
Prices, by far.
- Commission difference (2.42% vs. 2.0%): $1,512 on $360,000
- Annual appreciation (3-4%): $10,800-$14,400
- Neighborhood premium (10-20%): $36,000-$72,000
Focus on: Expanding search (saves $54K-$90K), locking rates (saves $20K-$50K), buying now (gains $10K-$14K/year). Impact: 30-50x versus commission negotiation.
FAQ #8: Can I Roll Commission Into My Mortgage?
Yes, through seller concessions.
- Conventional: Sellers can offer concessions up to 3-6% covering agent commission
- FHA: Allow up to 6% seller concessions (FHA guidelines, 2024)
- VA: No specific cap on seller-paid concessions
Why separate payment is rare: $10,000 cash separately busts budget. Sellers increase price by $10K and credit it back, letting you finance into 30-year mortgage (adds ~$65/month at 6.5%).
This financing mechanism is why NAR settlement commission changes couldn’t truly “decouple” compensation.
FAQ #9: Should I Buy Without an Agent?
Only with significant experience.
Why agents matter: Price negotiation saves 1-3% ($4,000-$12,000), legal protection, inspection coordination, closing management.
Risks: Overpayment (–$10K to –$50K), missed issues (–$50K to –$200K), title problems (–$5K+).
Net math: Commission +$10K versus risk –$50K to –$200K = agent saves $40K-$190K.
FAQ #10: What Changed With NAR Settlement?
Two changes:
- MLS compensation advertising prohibited
- Written buyer broker agreements required
What didn’t change:
- Most sellers still cover commissions
- Rates stayed 2.0-2.5%
- Buyers still can’t pay out of pocket
- Agents discourage below-market rates
NAR settlement commission changes created paperwork transparency but didn’t address financing keeping commissions in prices.
FAQ #11: Can I Negotiate After Signing?
Technically yes, difficult in practice. Before offers, discuss adjusting if you found property yourself (1.5-2.0% possible). After offer accepted, renegotiation damages relationships. Best: Negotiate before signing.
FAQ #12: How Do I Know If My Agent Is Worth It?
Strong agent: Sends off-market listings, provides written comps, responds within 2 hours, gives honest feedback.
Red flags: Pushes higher prices, discourages negotiations, skips inspections, slow responses, won’t show homes with lower commissions.
Why the NAR Settlement Failed
The settlement was designed on false assumptions:
False Assumption #1: “Buyers will negotiate separately” Reality: Buyers can’t afford separate payments, must finance into mortgages
False Assumption #2: “Agents will compete on rates” Reality: Agents standardized around 2.5% “market rate”
False Assumption #3: “Transparency will drive rates down” Reality: No enforcement, buyers unaware they can negotiate
False Assumption #4: “Slow markets force lower commission” Reality: Slow markets make sellers risk-averse
What Could Actually Change Commissions in the Future?
While NAR settlement didn’t deliver savings, emerging trends could genuinely disrupt buyer agent commission structures:
1. Flat-Fee and Salary Brokerages: Companies like Redfin are experimenting with salaried agents earning fixed compensation rather than percentages. According to Business Insider (September 2024), these models could normalize $3,000-$5,000 flat fees.
2. Regulatory Pressure: Additional antitrust scrutiny and state-level regulation could force more fundamental changes.
3. Technology and Consumer Education: AI-powered search and virtual tours may drive demand for unbundled services at lower price points.
Timeline: Most analysts predict 3-5 years for meaningful impact. For 2025-2026 buyers, expect rates to remain 2.0-2.5%.
Conclusion: What First-Time Buyers Should Do
The NAR settlement promised revolution but delivered paperwork. Buyer agent commission 2025 rates (2.42% nationally, 2.52% under $500K) look nearly identical to pre-settlement levels.
The real barriers—cash competition (33% nationally, 64% Manhattan), inventory shortage, bidding wars (27% in Manhattan)—dwarf commission impact.
Your action plan:
- Complete full underwriting before searching
- Expand geographic search by 5-10 miles
- Pre-inspect properties to eliminate contingencies
- Time purchases for Q4/Q1 (30-40% less competition)
- Accept market-rate commission and focus on home price
Stop worrying about 2.0% versus 2.5% commission ($1,800 difference). Focus on strategies saving $40,000-$100,000: neighborhood expansion, timing, and mortgage rates.
Each year waiting costs $48,000-$67,000 (rent plus lost appreciation) for potential $2,000-$3,000 commission savings. Buy when financially ready. Your success comes from strategy, not commission structure.
Data and Sources
Real Estate Industry: Redfin (Q3 2024-Q3 2025 commission reports), NAR (settlement details, 2024 Home Buyers Report), StreetEasy (Manhattan data, 2025), Douglas Elliman (Manhattan Q3 2025), Real Brokerage (seller compensation survey, December 2024)
Financial/Mortgage: Freddie Mac (2025 survey), FHA guidelines (2024), NYC Department of Finance (2024)
Media Analysis: BusinessWire (October 2025), Wall Street Journal (June 2025), Kiplinger (July 2025), HousingWire (December 2024), Business Insider (September 2024), Zillow (June 2024), MarketWatch (July 2024)
Government: NYC Housing and Vacancy Survey (2024), NYC HomeFirst program
All data points cited with specific months and years. Commission trends reflect Redfin’s analysis of actual closed transactions across major U.S. markets.
