When Are Concessions and Commissions Paid? Understanding the Process After the August 2024 Changes
If you are buying or selling real estate today, one of the most common questions is simple:
Who pays what, and when does everyone get paid?
The answer has changed. Since the August 2024 settlement changes, commissions and concessions are no longer handled the way they were for decades. Here is a clear, step-by-step explanation of how it works now.
There is no set or standard commission in real estate.
Every fee is negotiated and agreed to in writing.
Two separate agreements now control compensation:
Listing Agreement → determines what the seller agrees to pay their listing broker
Buyer’s Broker Agreement → determines what the buyer agrees to pay their agent
These are independent contractual obligations.
When a seller hires a listing agent, they sign a listing agreement. This agreement outlines:
The listing price
The marketing plan
The compensation that the seller agrees to pay the listing brokerage
Key point:
The seller is only obligated to pay what is written in the listing agreement.
The listing broker is paid at closing, from the seller’s proceeds, once the transaction is completed and funded.
The buyer must now sign a buyer’s broker agreement before viewing homes.
This agreement states:
The services the agent will provide
The compensation the buyer agrees to pay their agent
Key point:
The buyer’s agent is working under a contract with the buyer, not the seller.
That compensation is also paid at closing, but how it is funded can vary:
Paid directly by the buyer
Covered in part or whole by seller concessions (if negotiated in the contract)
Concessions are negotiated in the purchase contract, not in the listing agreement.
They are funds the seller agrees to contribute toward the buyer’s costs, which can include:
Loan costs
Closing costs
Prepaid items
Survey, inspections, or tests
The buyer’s agent compensation (as outlined in the buyer’s broker agreement)
Important:
Sellers are not obligated to pay concessions. They are negotiated as part of the offer and depend on:
The seller’s bottom line
Market conditions
Strength of the offer
When are concessions paid?
Concessions are paid at closing, and they are shown on the settlement statement as a credit to the buyer.
They are not paid upfront and cannot be collected before closing.
Here is how it typically works on closing day:
The buyer brings their required funds (down payment, remaining costs)
The lender funds the loan
The seller’s proceeds are calculated
The closing attorney or title company distributes funds:
Listing broker is paid per the listing agreement
Buyer’s broker is paid per the buyer’s broker agreement (using buyer funds and/or concessions)
Buyer receives any negotiated credits (concessions)
Everything is documented on the closing disclosure or settlement statement.
The seller no longer automatically pays the buyer’s agent
Buyer representation now requires a signed agreement upfront
Commission is fully negotiable on both sides
Concessions have become a key tool to structure deals
For Sellers:
You control what you agree to pay in your listing agreement
You decide whether to offer concessions when negotiating a contract
For Buyers:
You are responsible for your agent’s compensation through your agreement
You can negotiate concessions to help cover your costs
Real estate transactions today are more transparent than ever, but they also require clear planning.
Understanding who is responsible for what, and when it is paid, allows both buyers and sellers to move forward with confidence and avoid surprises at closing.
Your next chapter starts here.