Paying Broker Compensation
PAYING YOUR REALTOR IN 2026
NEW RULES
Outlined here are revised NAR and Greater Capital Area Association of Realtors and MLS rules, and how they affect buyers and broker compensation.
DISPELLING MYTHS
A lot of misinformation spread through the media after practice changes were implemented in August of 2024. Learn the difference between fiction and fact.
COOPERATION
Cooperative Compensation is important for consumers, and still exists. The NAR settlement didn’t eliminate cooperation, it simply changed venues.
FAQ ABOUT BROKER COMPENSATION
Are claims about “the end of 6% commission” true?
No. Unreliable Internet sources mislead the public when they claim that the cost of representation for real estate transactions was mandated to drop from 6% due to the NAR class-action lawsuit settlement.
- False premise: That real estate commissions were set at 6% nationally
- Fact: There is/was no uniform real estate brokerage compensation. It has always been negotiable
- Fact: The NAR settlement does not relate to the cost of representation, only the methods and timing used in communicating compensation and/or cooperation options and offers
Background: The class-action lawsuits against NAR claimed that NAR’s cooperative compensation rules inflated housing costs and reduced competition. Transparency in communicating rates was also at issue.
Definition of Cooperative Compensation: The NAR imposed rule requiring listing brokers to publish unilateral offers of compensation, including zero, to buyer brokers when listing a property with a Realtor-affiliated MLS service.
Parties to real estate transactions have, and have had, many options for respresentation, including so-called ‘discount brokerages’, limited service transaction agency, and more. Broker compensation is not a blanket fee. Compensation rates can vary based on market conditions, the type of property or transaction, expected length of the sales cycle, included services and marketing, special provisions, buyer broker bonuses, new construction, as well as brokerage and agent business models.
Many service industries operate similarly. Taking law firms as an example, varying fee theories are available, including:
- Cost/profit model: Law firms set prices to cover costs plus a percentage for profit;
- Competitive model: Law firms set prices based on the pricing of their competitors;
- Value model: Pricing is based on the value provided to the client.
Real estate brokerages employ comparable models. According to the FTC (Federal Trade Commisison); “Matching competitors’ pricing may be good business, and occurs often in highly competitive markets. Each company is free to set its own prices, and it may charge the same price as its competitors as long as the decision was not based on any agreement or coordination with a competitor.“
Individual companies may establish prices and other competitive terms on the basis of supply and demand, as well as other market conditions and their own business models.
What Did The NAR Settlement Accomplish?
The March 2024 NAR settlement agreement effected a few key changes to the process of buying and selling homes. The existing system was devised in the 1990s to benefit home buyers and sellers, and cooperative compensation was an integral component. But the settlement:
- Reverses unilateral offers of compensation on MLS and removes all brokerage compensation offers from the multiple listing site (less transparency)
- Cooperative Compensation (seller offers to pay all or a portion of buyer broker compensation) may not be published on MLS or MLS-related sites
- Other forms of seller cooperation, such as closing cost credits or interest rate buy-down offers, may be published on MLS as long as they do not pertain in any way to broker compensation
- Buyer/Broker agreements must be signed by buyers before showings occur. This pertains to all MLS members, not only Realtors
- Buyer agency agreements must include:
- A prominent disclosure of the amount or rate of compensation the real estate agent will receive and how this amount will be determined;
- Compensation may not be open-ended, but specific (ex: values for flat fee, percentage, hourly rate, etc.);
- Disclosure that broker may not receive compensation for brokerage services from any source in excess of the amount agreed to in the agency agreement;
- A prominent statement that broker fees and commissions are fully negotiable by the homebuyer and agent involved and not set by law.
The outcome also triggered changes to the way buyer representation is managed by associations and brokerages. In the DCMA:
- Broker compensation has always been agreed upon in listing and buyer agency agreements. Now, there are additional documents buyers and sellers must sign concerning compensation and other terms
- There is no single venue for cooperative compensation posting, so the confirmation process is made difficult and time-consuming. Brokerages and third party developers are working on a solution
- There may be an increase in enforcement of restrictions related to ‘ministerial acts’ for unrepresented buyers
About Cooperative Compensation
THE IMPORTANCE OF COOPERATION
Cooperative compensation not only widens the buyer pool for sellers, it creates a layer of opportunity and fairness for home buyers who can’t afford all the high costs involved in a home purchase, such as down payment, closing costs, out-of-pocket expenses like inspection and appraisal, and also comply with mortgage loan reserve requirements.
Some industry experts go so far as to say that abolishing cooperation would equate to a step backward for equal housing.
While negotiation for cooperative compensation for each individual transaction seems fair on its face, it can put many buyers at a disadvantage. There is also potential for favoritism, discrimination and equal housing abuses. Sellers and listing agents may face increased liability in transacting with unrepresented buyers.
BROKER COMPENSATION AND YOU
- Broker compensation has always been negotiiable on both the buying and selling side
- Sellers have built buyer broker compensation into the list prices of properties for over 100 years. The practice originated around 1913 with the cooperative commission system established by the National Association of Real Estate Exchanges (now NAR) in 1913. It mandated that listing agents share their commission with the agent who brought the buyer. This practice has embedded compensation for both sides within ‘market rate’ valuation. The extent to which this practice has affected market values is a variable that cannot be quantified because many factors affect the equation per transaction
- Brokerages individually set their base compensation according to their business model, market and other factors, in compliance with FTC regulations
- Similarly, agents, as independent contractors, may set their individual base compensation rate as long as it meets or exceeds the requirements of their afiiliated brokerage
- Most brokerages charge buyers and sellers a nominal administrative or ‘tech’ fee. Agents do not control or benefit from this fee
- The selling broker is authorized to accept only the amount of cooperative compensation and/or bonuses set forth in the Buyer Agency Agreement signed by the buyer and broker, regardless of the the amount offered by the listing side. The buyer is fully responsible for the full amount of buyer broker compensation
- Broker compensation is due on the date of settlement, paid as a buyer debit, or in part or full from cooperative compensation or credits offered by the seller
- Compensation, along with other funds pertinent to real estate transactions, is typically held by the title company or attorney managing the transaction
- Compass broker retainers are held by the brokerage and are non-refundable. Retainers are applied towards total compensation due when a transaction closes
- Most DCMA brokerages require agents to join NAR, GCAAR and MLS. Membership in Virginia and Maryland associations may also be required of agents transacting in those states
- Buyer representation requires approvimately four times the amount of work and time that seller representation requires
- Agents will perform more work, and work for a much longer period of time on some transactions than on others.
- Transactions require varying degrees of skill, knowledge and experience. Adjustments are not made for these conditions, which are often not evident until a transaction is underway
- Agents are not paid unless a transaction closes
- Broker compensation rates have remained largely unchanged since 1939.
The DC real estate market is influenced by inventory levels, mortgage interest rates, and general economic conditions. In the District, an election year can also have an impact on the market. But the market will not be devalued by questions about who pays what.
Some home buyers will find the new system challenging. HPAP buyers, who always foudnthe road to homeownership tough, will find it even more difficult now. VA home buyers have been given a temporary dispensation to pay their own agents.
New approaches and resources are being developed to streamline the broker compensation portion of the home buying process.
Author | Agent
Skilled Realtor® Susan Isaacs is a 20+ year residential real estate and new construction veteran with expertise in buyer and seller representation, investor representation, new homes, relocation and exchanges. Licensed in the District of Columbia and Virginia since 2006. GCAAR Gold Award 2024, Modern Luxury Top Teams 2024, 2024 Elite Level Producer, Real Trends 2024, Compass Top Teams 2024.
Compass is the #1 real estate brokerage in the nation and a leader in real estate technology.
Caren Says
“While other agents said, “This is what you need to do;” The Isaacs Team said, “We can do this for you!” Our process was smooth and quick, and they designed a strategy and negotiated a sale well above our asking price; and a purchase price below asking – both in the same market.”
READ MORE
For clarification on this topic, read the following:
Consequences
CONSEQUENCES OF THE SETTLEMENT
What are the impacts to Sellers?
Pros
- Increased understanding of negotiation options
- Increased flexibility in offering cooperative compensation marketplace-wide
Cons
- Increased focus on cooperative compensation
- Possible confusion in communication of cooperative compensation offers and inclusion in contracts
- Increased complexity in pricing homes and net
- Increased negotiation with buyers
- Potential for increased DOM due to compensation screening by buyer agents
- Potential for reduced traffic due to zero compensation offers
- Potential for greater workload for listing and selling agents
- Potential for buyers to rule out properties not explicitly offering cooperative compensation to avoid paying out-of-pocket
- Potential for an increased number of unrepresented buyers, whch can increase risk and complicate transactions.
What are the impacts to Buyers?
Pros
In our opinion, buyers see no benefits from the changes.
Cons
- Negatively impacted by the requirement to agree contractually to a brokerage commission without knowledge of any seller offers of cooperative compensation
- Added layers of negotiation
- Compensation negotiation may replace price negotiation that may have been possible otherwise
- Increased difficulty in ascertaining property values due to 30+ years of compensation inclusion in market pricing
- Sellers can exclude buyer broker compensation, but buyers are still paying the seller’s broker compensation through market value pricing
- Low-income buyers at a distinct disadvantage
- HPAP program impact
- May forego representation if uneducated on options, creating risk and diminished opportunity in access to off-market listings, as well as disadvantages in search, negotiation, and transaction management
- Additional contract terms and Addendums
- Uncertainty due to deviation from industry standards
These changes place greater focus–not less–on seller offers of cooperative compensation.
The Next Antitrust Lawsuit
CLEAR COOPERATION
The Clear Cooperation Policy (CCP) is a rule that requires Realtors to list properties on a Multiple Listing Service (MLS) within one business day of public marketing.
Forced Memberships Tied To Services
Realtors are real estate agents who are members of the National Association of Realtors (NAR) trade organization. In theory, the Clear Cooperation policy should only apply to Realtors because it is an NAR mandate, but in practice, NAR affiliate ownership of MLS means many multiple listing services force the policy on non-members as well.
Bright MLS, which controls listings from New Jersey to Virginia in the Mid-Atlantic region, was formed in 2015 when MRIS and TREND elected to merge as ‘Mid-Atlantic Property Services’, but adopted the name ‘Bright MLS’ when seven additional MLS joined in January 2017. Bright is owned by 43 NAR-tied associations, and is the second largest MLS in the nation.
Most of the 522 MLSs in the U.S. are Realtor-association-owned, giving NAR monopoly control over listings, brokers and agents, whether they are NAR members, or not.
NAR, their affiliated real estate boards, and MLSs also control essential tools like electronic lockboxes and software. Without these, functioning as a broker or agent is nearly impossible.
A Trade Association is a ‘not-for-profit organization’ made up of a collection of companies and/or individuals with common interests or who work in the same industry.
Regulators monitor trade associations to ensure they do not engage in practices that violate antitrust laws.
Clear Cooperation Is An Antitrust Violation
NAR mandated the Clear Cooperation Policy in 2020, requiring MLS listing promised to ensure transparency and equal access to information for buyers and sellers. But that hasn’t been the case.
Instead, it has increased the number of off-market (“pocket”) listings, and stifles competition and consumer choice by restricting how agents and brokers can market properties, ‘office exclusives’ in particular, since CCP restricts public marketing of these listings, damaging the seller by preventing public visibility. This restriction could easily be considered an antitrust violation. It imposes a cookie-cutter rule on the market that limits the ability of agents and brokers to differentiate their services and work in the best interests of their clients.
Monopolistic Control
Clear Cooperation creates a monopolistic control over real estate listings, preventing innovation and competition in how properties are sold. The policy could easily be found to unfairly constrain market forces and restrict the ability of independent brokers and agents to compete outside of the MLS system, which is primarily owned by NAR affiliated associations.
The NAR’s “MLS of Choice” policy was implemented in 2018, allowing Realtors to join any Realtor-owned MLS without being a member of that MLS’s association. Real estate agents can access the MLS systems of any association by completing an “MLS Only Application” if they are in good standing with one local Realtor association. Agents do not need to be a member of the local association running the MLS to access its data–but their brokers must be participants. Most NAR affiliated brokerages, in turn, require NAR and local association membership of their agents. It’s a chain that results in forced NAR membership.
The majority of U.S. brokerages are NAR affiliates. Membership provides them with essential tools such as access to lockboxes, transactional forms and business tools, educational programs, discount programs, real estate market data, and the benefits derived from NAR’s Broker Involvement Program and the trade org’s political lobbying arm.
From an antitrust perspective, NAR and local association membership requirement could easily be interpreted as “tying” or “bundling”products in a way that is anti-competitive. Tying can be illegal under antitrust laws, such as the Sherman Act or the Clayton Act, if it restricts competition or forces people into unwanted associations between products. Forcing agents to join NAR could be seen as creating an unfair competitive advantage for NAR over other professional associations or independent real estate professionals.
In the DC Metro Area, brokers and agents are forced to join multiple boards and associations in addition to NAR, escalating dues, fees, licenses and other requirements that increase costs substantially.
The burden of these costs is often passed along to buyers and sellers through increased commission rates or reduced flexibility in negotiations.
Real estate agents should have the autonomy to choose which, if any, organizations they join.
WHAT IT MEANS FOR YOU
By removing the Clear Cooperation Policy, the playing field for home sellers would be even with that of developers and builders. Or, by makng Clear Cooperation mandatory for all, data gaps would be eliminated and Buyers would have greater access to off-market listings.
Inequitable System Hurts Individual Home Sellers And Unfairly Benefits Others
When the Clear Cooperation policy (CCP) was introduced, NAR claimed the rule was “designed to shore up the pro-competitive, pro-consumer benefits” of MLSs, “ensure transparency and fairness,” and prevent the growth of pocket listings that are marketed off-MLS to select clients.
In fact, it limits competition, harms consumers on both listing and selling sides, and limits transparency and inequity. It has not prevented the growth of ‘pocket listings’, as developers and builders are exempted.
Builder And Developer Exemption
While seller choice is handcuffed by the Clear Cooperation policy, developers and home builders are exempted from its marketing restrictions. This provides them with a distinct advantage over resale sellers, by allowing them to advertise their product publicly well in advance of its release for sale.
MLS allows bulders and developers to display only a sampling of properties in a project, rather than all available homes. They are also permitted to display images that don’t represent the particular property listed, but instead a ‘representative’ property–usually a more desireable one–which misrepresents the property actually listed. Builders and developers are also allowed to withhold sold data, leaving a huge gap in comparable data and creating a non-transparent purchasing process for buyers.
These practices hide vital values and data from the public, allowing builders to cherry-pick published prices, leaving a gaping hole in comparables and industry statistics, while resale sellers are strictly held to a long list of tight restrictions.
Third Party Sites Stigmatize Resale Listings
MLS sells brokers’ listings to thrid party listing aggregators. These well-known third party “consumer” websites built their business models in a way that promotes their services at the expense of resale home sellers by featuring negative insights on resale listings using:
- MLS days on market (DOM) and CDOM
- Price Adjustments
- Crime
- Weather and Geographical Risk
- Inaccurate comparables
- Inaccurate value assessments
Real estate developers and builders are spared these weaponized tools because they are not forced to enter their listings into the MLS.
Third Party Sites Funnel Buyers To Developers But Hide Resale Listing Broker Contacts
When they aren’t required to list their homes on MLS, developers and builders also gain unfair advantage by ensuring that their sales representatives receive all listing inquiries.
Their buyer prospects are therefore well-informed about the attributes and advantages of their properties, while individual homeowners suffer the effects of MLS listing syndication, where agents who know nothing about the home are receiving inquiries and potentially misrepresenting or under-representing their properties.
Inequity
Clear Cooperation is clearly a policy that benefits some while imposing damaging restrictions on others.
Homes are often our most valuable financial assets and they deserve the best return when sold. We shouldn’t have to compromise our financial futures because a trade organization and data provider have created an inequitable system that benefits one seller over another.
The DOJ And Others Take Legal Action
The U.S. Department of Justice (DOJ) has expressed antitrust concerns over the CCP’s effect of forcing agents to join MLSs and NAR, limiting competition and creating roadblocks to innovation and competition that would benefit consumers. The DOJ has opened investigations into the CCP and several lawsuits by private organizations are pending, and an NAR replacement has formed.
2025 Changes To Clear Cooperation Policy
NAR’s new Multiple Listing Options for Sellers policy has been introduced as a compromise on CCP. It offers “delayed marketing exempt listings.” Further confusing and layering MLS rules, this designation allows sellers to postpone the public marketing of their properties via syndication and Internet Data Exchange (IDX) feeds during a specific time period–which is (again) determined by the MLS, not sellers or their agents, in a one-size-fits-all manner.
The policy change is in effect, but the DC area’s MLS (Bright MLS) has until September to provide brokers with implementation.
The new policy does not change an MLS’s existing rules, which require that a listing be added to the MLS within one business day of being publicly marketed.
2026 Bright MLS Interpretation Of Clear Cooperation Policy
Bright MLS considers uploading of its ‘Office Exclusive’ form sufficient for Compass Coming Soon listings to have met requirements necessary to advertise and promote.
Additional Topics
DUAL AGENCY
Some buyers may choose to work directly with listing agents as an unrepresented buyer, or ‘customer’. The listing agent, in this case, would provide only ‘ministerial services’ to the buyer.
Some buyers may choose to be represented by the listing agent, which is known as ‘Dual Agency.’
The practice of dual agency dates back to the 1980’s, when the real estate industry became primarily focused on seller representation.
Any agent not a specifically designated buyer’s representative functions as a sub-agent of the listing brokerage. Dual agency created conflicts of interest, as buyers were often unaware that the agent assisting them was legally obligated to represent the seller’s interests, not theirs. This eventaully led to the evolution of buyer agency. Buyer agency agreements and standards were created dual and designated disclosure requirements were required in many states.
I do not practice dual agency (one agent representing both the seller and buyer in the same transaction). We may refer buyers from inquires or open houses to a team member for representation and collect a referral fee from the referred agent.
I practice and recommend Designated Agency, in which the buyer and seller are both represented by the same brokerage (but by different agents). This allows buyers to tour and consider properties listed by my brokerage, but with seller representation by another agent.
WHAT’S A BROKERAGE FEE?
A brokerage fee, also known as ‘additional commission fee’ and previously as an ‘admin,’ ‘processing,’ or ‘ABC fee’ is a mandatory add-on fee most brokerages charge home buyers and sellers atop commissions. This fee–erroneously attributed to agents– is imposed by brokerages and paid directly to the brokerage. The agent receives no split of this fee.
What’s it for? Brokerages don’t provide a complelling justification for this fee, even to their agents. In its past form as the “admin fee,” it was ruled to be illegal by U.S. District Judge Virginia Emerson Hopkins (Birmingham, Ala.), whose 2009 decision in Vicki V. Busby v. JRHBW Realty, Inc. found the vaguely titled “admin fee” illegal based on Section 8(b) of RESPA which clearly states that no fee may be charged for the rendering of a real estate settlement service other than for settlement services actually performed. The decision was the result of a class action lawsuit. Her ruling didn’t end the practice, however, since all federal courts did not agree with Hopkins’ interpretation of the statutory language on unearned fees. Brokerages concerned about optics or legalities simply changed the names of their fees to “additional commission,” ‘transaction fee,’ ‘compliance fee’ or similar labels, and continued the practice, regularly increasing the amount of the fee. The bottom line is simply that it is a junk fee.
If a buyer or seller negotiates the fee, they are effectually asking their agent to pay it (in addition to the commission split and fees the agent is already paying the brokerage) because if it is not paid by the client, the brokerage will automatically assess it to the agent.
This should be part of the commission payment conversation between agents and their prospective clients.