This post provides general information and resources as a starting point and should not be construed as legal advice. Buyers and sellers should consult with their attorney, broker, and financial advisor before making decisions related to agency agreements or compensation.
Understanding Buyer Agent Compensation After the NAR Settlement
Some Background
For decades, Realtor and MLS association rules required “cooperative compensation” — meaning listing brokers were obligated to share a portion of their commission with any broker representing the buyer. For example, a seller might hire Broker X to list their home at a 6% commission. Broker X would then offer, through the MLS, a portion of that commission (often 50%) to all local Realtor members as an incentive to bring a buyer. If Broker Y represented the buyer and closed the sale, Broker X would pay Broker Y the advertised buyer-agent commission from the total commission amount.
These “cooperative compensation” rules were eliminated in 2024 following a settlement between the National Association of Realtors (NAR) and plaintiffs in a class-action antitrust lawsuit. We won’t unpack the entire legal case here, but this New York Times article offers helpful background.
The core argument of the lawsuit was that mandatory commission-sharing artificially inflated buyer-agent fees and led to uniform commission rates being published in the MLS. Economically, the incentive structure supported that idea — listing brokers often avoided offering lower commissions for fear that buyer brokers would steer clients toward listings with higher compensation.
Another inefficiency was that buyers were largely excluded from deciding how much their agent was paid. Many Buyer Agency Agreements simply stated that the agent would receive “the amount offered in MLS by the listing broker,” leaving the actual fee determination to the listing side rather than the buyer.
How It Works Today: The impact on Madison’s real estate market has been similar to national trends
After the rule changes, it was widely assumed that buyers would negotiate their agent’s fee directly and pay it at closing, much like other closing costs (e.g., loan origination or inspection fees). It was also expected that this shift would reduce average buyer-agent commissions.
So far, that hasn’t happened — in fact, Redfin reports that buyer-agent commissions have returned to pre-settlement levels.
While listing brokers can no longer advertise compensation to buyer agents through the MLS, they can still agree to pay buyer-broker fees outside the MLS. In practice, many sellers are now offering to cover the buyer-agent fee directly within the Offer to Purchase.
This isn’t necessarily a bad thing. Buyers often stretch to cover down payments and closing costs, and since buyer-agent fees can be substantial, a seller who agrees to pay that fee may make their listing more competitive and increase the odds of a successful sale.
Buyer Agency Agreement and Offer to Purchase
The Wisconsin Buyer Agency Agreement authorizes the buyer’s agent to seek payment of their fee from the seller (lines 53–56) and prohibits the firm from accepting compensation from any source exceeding the agreed amount (lines 59–60). View the full form here.
Similarly, the WB-11 Residential Offer to Purchase form now includes an optional clause allowing the seller to pay the buyer-agent fee as part of the purchase contract. View the full document here.
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