How Real Estate Compensation Works (2026 Guide)

Nobody enjoys asking this question, which is probably why so many people sign paperwork without really asking it.

So here is the whole thing in plain terms.

If you are buying

Washington law requires a written services agreement between a buyer and the real estate firm before, or as soon as reasonably practical after, the broker begins providing brokerage services.

For Northwest MLS brokers, the Buyer Broker Services Agreement is the form commonly used to spell out the relationship and compensation.

The important part is not memorizing a form number.

It is understanding what you have agreed to pay, what another party may agree to pay, and what happens if those numbers are different.

The current forms make the point conspicuously:

Broker compensation is fully negotiable and is not set by law.

There is no government commission rate.

There is no legally required percentage.

Your broker can set the price at which they are willing to provide their services, you can negotiate it, and the agreement needs to state what you actually agreed to.

Buyer compensation

This is what your buyer-broker agreement says the firm can receive for representing you.

A seller or listing firm may agree to pay some or all of it. Your offer may request seller-paid buyer-broker compensation. You may be responsible for some or all of it if another party does not pay enough to satisfy the amount you agreed to.

You should know the answer before you write the offer.

Limited dual agency

This addresses what happens if the same broker represents both sides of the transaction.

Washington requires written consent, and that consent has to acknowledge the limits on advocacy.

My preference is usually to have one side represented by somebody else rather than put myself in the middle of both clients.

I went through why in Limited Dual Agency, and Why I Usually Avoid It.

Unrepresented seller

A buyer's broker can also encounter a seller who has no broker.

The buyer's broker still represents the buyer, not the seller.

The transaction simply needs more direct coordination with the unrepresented party.

“The buyer's broker still represents the buyer, not the seller.”

If you are selling

Your listing agreement sets out what you agree to pay the listing firm and what, if anything, you authorize toward the buyer's brokerage.

It may also address what happens if the buyer is unrepresented or if limited dual agency occurs.

The exact section numbers can change as NWMLS revises its forms, so the safest rule is very simple:

Read the current agreement you are actually signing.

Listing-firm compensation

What you agree to pay the firm representing you.

Unrepresented buyer

Your listing agreement can establish different compensation for a transaction where the buyer has no broker.

That makes sense because the agency relationship does not change, but the amount of transaction coordination on the listing side can.

I wrote about that in Working With an Unrepresented Buyer.

Buyer's broker compensation

A seller can agree to pay some or all of the buyer broker's compensation.

A seller is not required to make the same offer on every property or to pay a buyer broker simply because that broker exists.

It is negotiated as part of the seller's listing strategy and, depending on how the transaction is structured, may also be negotiated in the buyer's offer.

“A seller is not required to make the same offer on every property or to pay a buyer broker simply because that broker exists.”

What actually changed in 2024

This is where two separate changes often get blended together.

Washington changed its agency law first

Changes to Washington's Real Estate Brokerage Relationships Act took effect January 1, 2024.

Among other things, the law expanded written-services-agreement requirements and requires those agreements to address compensation and agency.

So Washington buyers were already operating under a written-agreement framework before the national NAR settlement practice changes took effect.

The NAR settlement changed MLS practice nationally

Beginning August 17, 2024, NAR's settlement-related MLS policies required MLS participants working with buyers to enter into a written buyer agreement before touring a home, with limited situations such as an unrepresented consumer simply attending an open house treated differently.

The agreement must disclose broker compensation in an objectively ascertainable way and must conspicuously state that broker fees and commissions are not set by law and are fully negotiable.

Offers of compensation came off the MLS

The NAR changes also prohibited offers of broker compensation from being displayed on NAR-affiliated MLS systems.

That does not mean a seller can no longer pay a buyer's broker.

Seller-paid buyer-broker compensation can still be negotiated off the MLS and within the transaction.

That distinction matters.

“Washington law requires the compensation arrangement to be written down.”

Who actually pays

There are several possible answers.

The buyer can pay their broker.

The seller can agree to pay the buyer's broker.

A listing firm may share compensation when properly authorized.

Compensation can also be structured through the transaction in other ways allowed by the contract, lender rules and applicable law.

What I would not tell a buyer is that the seller "always pays it."

That is not how the current agreements work.

Seller-funded buyer-broker compensation remains an available and common transaction structure, but it is negotiated rather than guaranteed.

And I would not describe broker compensation as simply being "financed over thirty years" either.

The seller pays agreed costs from closing proceeds when the contract requires it. The buyer finances the purchase price through their mortgage. Those economics interact, but they are not literally the same line item.

“A listing firm may share compensation when properly authorized.”

About those national average figures

You will find articles quoting a national average commission.

The numbers do not agree with one another because the data sets and transaction types do not agree with one another.

I am not going to pick one national percentage and present it as the rate.

There is no legally set rate.

A national average combining Manhattan, Texas, Seattle and rural Skagit County tells you very little about what the brokerage services on your transaction should cost.

The number that matters is the number in the agreement you are being asked to sign.

Ask me what I charge and why.

That is a fair question and it deserves a straight answer.

The bottom line

Washington law requires the compensation arrangement to be written down.

The NAR settlement changed how buyer agreements and MLS compensation practices work nationally.

Neither created a standard commission.

Broker fees are negotiable and not set by law.

If you want to know what the money buys, the companion piece is What Does Your Realtor Do to Earn Their Compensation?

Sources: Chapter 18.86 RCW, including Washington's January 1, 2024 amendments; National Association of Realtors 2024 MLS practice changes and written-buyer-agreement requirements. NWMLS form references should always be checked against the current form version being signed. This is general real estate information, not legal advice.