The History of Real Estate Commissions—and What the Future Might Look Like
For decades, real estate commissions were something most people didn’t question. You hired an agent, they guided you through the process, and when the home closed, a commission (usually around 6%) was paid by the seller and split between both agents.
But in 2024, a major legal ruling turned that model on its head.
Now, more buyers and sellers are asking:
“What exactly am I paying for? And is there a better, more transparent way to do this?”
As a real estate advisor rooted in service and empathy, I welcome these questions. So today, I’m sharing a look back at how the traditional commission structure came to be, what changed with the 2024 NAR lawsuit, and an idea that I have to rethink my own pricing model to better reflect the work I do, and the value I bring.
How Did Real Estate Commissions Start?
The traditional 6% commission model traces back to the early 1900s, when agents began organizing into cooperative networks. The National Association of REALTORS® (NAR), founded in 1908, helped establish the Multiple Listing Service (MLS)—a shared database of property listings. To encourage cooperation between agents, it became standard for listing agents to offer part of their commission (usually half) to buyer’s agents.
This model was built on collaboration, but it also created a default expectation:
- The seller pays the commission
- That amount (typically 5–6%) is split between the two agents
- Buyers usually pay nothing directly to their agent
Over time, this became the norm. But it also meant that commission fees were often bundled into the home price and rarely discussed in detail.
What Happened in 2024? The NAR Lawsuit
In 2024, a landmark class-action lawsuit challenged this very system.
The plaintiffs argued that NAR’s rules and large brokerages’ practices kept commissions artificially high by requiring sellers to offer compensation to buyer agents—even though those buyers were not their clients. The result? Less flexibility and less transparency for everyone.
The outcome of the lawsuit was major:
- MLSs can no longer require or display buyer-agent commission offers
- Buyers now need to negotiate compensation directly with their agent
- Sellers have more freedom to determine how (or whether) to compensate the buyer’s side
In short: the legal system called for *more choice and more transparency*. But it also left many people unsure of what’s “normal” anymore.
What This Means for Buyers and Sellers Today
If you’re buying or selling a home now, you may find the commission conversation suddenly feels a little… fuzzy.
Some key shifts:
Buyers may now be expected to pay their agent directly, especially if a seller offers little or no commission
Sellers can negotiate commission based on the services they want instead of a fixed percentage
Agents are being called to clearly articulate their value in ways the traditional model never required
This moment is an opportunity: for greater clarity, for mutual respect, and for more personalized service.
Rethinking Commissions: An Idea for a New Model Rooted in Transparency
Here at Nurture Lane Realty, I’ve been thinking deeply about how to meet this moment with integrity. One option I’m currently exploring is a service-based, hourly-estimated flat-fee model, similar to how you might work with a designer, attorney, or consultant.
Rather than a flat percentage, my fee would be tied to the actual work and time required, tailored to your specific needs.
For Buyers, this would include services like:
A deep-dive consultation to understand your goals and timeline
Searching the MLS and previewing listings that match your criteria
Touring properties together and providing market insight
Crafting a competitive offer and negotiating with the seller’s agent
Coordinating with your lender, inspector, and title company
Keeping you informed and supported from contract to closing
👉 Under a transparent pricing model, I’d estimate the hours required for your home search and provide a clear, upfront quote. That amount would never go over the estimate. If it comes in under, you’d save.
For Sellers, this could look something like:
Walking through your home and creating a strategic prep plan
Coordinating any cleaning, staging, or light updates
Hiring and managing professional photography and listing materials
Creating a marketing strategy to reach the right buyers
Hosting open houses and handling showings
Reviewing offers and negotiating on your behalf
Managing every detail through closing
👉 In this model, you’d receive a detailed breakdown of estimated hours and associated costs. You’ll know exactly what you’re paying for—and why it matters.
🧾 A Quick Note on Tax Rules and Real Estate Compensation
You might be wondering: “Why doesn’t every agent just charge by the hour?”
It’s a fair question, and the answer comes down to how real estate agents are classified by the IRS.
Most agents, myself included, operate as independent contractors under their brokerage (in my case, Century 21 Everest). This means we’re not W-2 employees, we pay our own taxes, cover our own business expenses, and have the freedom to manage our time and client load.
But here’s the catch: To legally maintain independent contractor status, the IRS requires that we are paid based on output or results, such as sales commissions or flat fees for services rendered. If we were to charge strictly by the hour, it could jeopardize that classification and trigger tax consequences for both the agent and the brokerage.
That’s why the model I’m exploring uses estimated time to create capped, flat-fee service packages instead. This structure offers:
- Transparency and predictability for you as a client
- Flexibility and compliance on my end as your agent
- A fair exchange based on services delivered, not home price alone
It’s a thoughtful balance of professional ethics, client care, and legal responsibility.
**NOTE - This model is something I’m actively exploring, but has not been finalized or approved by my brokerage at the time of writing this post.
Final Thoughts
Real estate is changing, and that’s a good thing.
As commissions evolve, we have a chance to build something better. Something more human. More fair. More grounded in real partnership.
Whether you choose a traditional model or a service-based one, what matters most is that you feel informed, respected, and supported.
And that’s exactly what I’m here for.
Sources:
National Association of REALTORS® (NAR): History and Purpose
https://www.nar.realtor/about-nar/vision-and-history
Origin of the MLS system
https://www.inman.com/2020/12/17/a-brief-history-of-the-mls/
Traditional 6% Commission Model
https://www.investopedia.com/financial-edge/0512/how-the-real-estate-industry-works.aspx
DOJ and Class Action Lawsuits Overview
https://www.nytimes.com/2023/10/31/realestate/nar-commission-lawsuit.html
https://www.wsj.com/real-estate/nar-reaches-418-million-settlement-on-real-estate-commission-lawsuits-62cf71ec
Settlement Details and Policy Changes
https://www.nar.realtor/newsroom/nar-announces-settlement-agreement
https://www.housingwire.com/articles/what-nars-settlement-means-for-real-estate-agents-and-homebuyers/
IRS Independent Contractor Rules (Section 3508)
https://www.irs.gov/real-estate-tax-center/real-estate-tax-tips
https://www.irs.gov/pub/irs-pdf/p1976.pdf
Independent Contractor Classification and Commission-Based Pay
https://www.nar.realtor/field-guides/field-guide-to-independent-contractor-status
https://www.taxconnections.com/taxblog/real-estate-agents-employee-vs-independent-contractor/
Flat-Fee and Tiered Real Estate Models
https://www.bankrate.com/real-estate/flat-fee-real-estate-agents/
https://www.forbes.com/home-improvement/real-estate/flat-fee-real-estate-agent/
Consumer Interest in Transparency and Pricing Options
https://www.consumerreports.org/money/home-ownership/buying-selling-home-real-estate-agent-commission-changes-a1319697356/
