Commissions vs. Concessions in Real Estate: What Changed After the NAR Settlement

• Buying Buddy
• August 15, 2024
• Industry News
• 0 Comments

Concessions in real estate are costs a seller agrees to help a buyer cover, such as closing costs, loan origination costs, or property repairs. A commission is how a real estate agent is compensated for their services. The two are easy to confuse, and since the NAR settlement practice changes took effect on August 17, 2024, the difference matters more for how you advertise listings and work with buyers.

This guide explains how each one works today, what changed in 2024, and where to confirm the rules that apply in your market.

What are concessions in real estate?

A seller concession is something the seller agrees to cover on the buyer’s behalf. NAR describes seller concessions as a way to help the buyer cover certain transaction costs, and lists examples such as loan origination costs and property repairs. Seller concessions can also be used toward fees for buyer broker services.

Like commissions, concessions are negotiable. NAR notes that all forms of compensation remain fully negotiable, as they were before the settlement.

What is a real estate commission?

A commission is how an agent is paid for representing a client. Commissions are not set by law, and NAR does not dictate them. They are negotiable.

A buyer’s agent can be compensated in several ways, all of them negotiable:

• A fee paid directly by the buyer.
• Concessions from the seller.
• A portion of the listing broker’s compensation.

What changed on August 17, 2024

The NAR settlement practice changes took effect on August 17, 2024. These two affect how commissions and concessions are communicated.

Offers of compensation are no longer allowed on the MLS

Offers of compensation to buyer brokers can no longer be communicated on Multiple Listing Service (MLS) platforms. Sellers can still offer compensation to a buyer’s agent, but that offer has to be made off the MLS.

Written agreements are required before touring

Agents working with buyers through an MLS must have a written agreement with the buyer before touring a home, in person or by live virtual tour. The agreement must:

• Clearly state the amount or rate of compensation the agent will receive.
• Use an objective amount, not an open-ended one.
• Prevent the agent from receiving more than the agreed amount from any source.
• State that broker fees and commissions are fully negotiable and not set by law.

How concessions and commissions differ

• Purpose: a commission pays an agent for their services. A concession helps the buyer with costs of the transaction.
• The buyer agreement: when you work with a buyer through an MLS, your compensation must be stated in your written buyer agreement.
• The MLS: seller concessions can still be communicated on the MLS, for example a concession toward the buyer’s closing costs. Offers of compensation to buyer brokers cannot.
• The condition: a concession on the MLS cannot be conditioned on, or tied to, payment to a buyer broker, although concessions can still help cover fees for buyer broker services.

How this affects your listings and your website

When you describe a listing, keep the two separate. A concession toward buyer closing costs can appear on the MLS, as long as it is not tied to paying the buyer’s agent. An offer of compensation to buyer brokers has to stay off the MLS.

On your own website, Buying Buddy lets you add a seller-agreed buyer concession as custom text on your listings, so buyers see it on the property page. See how listing details work in our IDX widgets overview.

Before you change how you advertise listings or structure buyer agreements, confirm the details that apply to you with your broker, your MLS, and your state REALTOR® association.

Frequently asked questions

Do seller concessions include the agent’s commission?

They are different things. A seller concession helps the buyer cover transaction costs, and those costs can include fees for buyer broker services. A concession communicated on the MLS, however, cannot be conditioned on payment to a buyer broker.

Can concessions be listed on the MLS?

Yes. Sellers can communicate concessions on the MLS, such as a concession for buyer closing costs, provided the concession is not tied to payment to a buyer broker.

Can a seller still pay the buyer’s agent?

Yes. Sellers can still offer compensation to a buyer’s agent. The offer just cannot be communicated on the MLS.

Next steps

Review your listing descriptions and buyer agreement templates with your broker, and make sure your website presents concessions clearly and separately from compensation. To see how Buying Buddy shows listing details, including seller concessions, on your own website, request a live demo.