A major legal shift in mid-2024 has changed how real estate commissions are handled in residential sales across Texas. Following a lawsuit that challenged traditional commission practices as anti-competitive, the National Association of Realtors (NAR) and its members implemented new procedures for disclosing and paying buyer’s agent commissions. These updates are reflected in the latest Texas Real Estate Commission (TREC) contracts and broker agreements.
Here’s a breakdown of the three primary ways buyer’s agent commissions are now handled:
Option 1: Buyer Pays Their Own Agent
Under this straightforward approach, the buyer agrees to compensate their agent directly. This arrangement is documented in a Buyer Representation Agreement between the buyer and their agent.
This model promotes transparency, as the buyer clearly sees the cost of their agent’s services and pays them out of pocket or through negotiated closing costs. This is often the cleanest route, but not all buyers are comfortable with direct payment obligations.
Option 2: Seller Pays the Buyer’s Agent Directly
In this scenario, the seller agrees to pay the buyer’s agent directly. This arrangement must be explicitly stated in Paragraph 12 of the TREC residential contract, which now includes new blank fields for the specific amount or percentage the seller will pay.
This method ensures the buyer’s agent gets paid at closing, but it’s important that the amount is negotiated and agreed to upfront as part of the contract terms.
Option 3: Seller’s Agent Pays the Buyer’s Agent
The third approach involves a commission-sharing agreement between the listing agent and the buyer’s agent. Here, the seller pays a commission to their listing agent under the terms of a standard listing agreement. Separately, the listing broker agrees to split a portion of that commission with the buyer’s agent through an agreement between brokers.
This layered method requires coordination between both agents but keeps the seller’s total commission obligation centralized in their listing agreement.
Legal and Practical Considerations
These changes stem from a 2024 legal settlement targeting NAR’s commission rules, which alleged a previous link between buyer’s agent and seller’s agent compensation. The goal of the rule change is to promote free-market negotiation and greater transparency.
Texas real estate professionals must now be more deliberate in documenting who pays whom and how much. Buyers and sellers alike should review their agreements closely and consult with their agents (or attorneys) to understand their obligations.