Breaking Down the Commission Wars

The real estate industry is no stranger to change, but few disruptions have hit as hard as the ongoing battle over traditional commission structures. What once seemed like an untouchable norm is now being scrutinized in courtrooms, boardrooms, and living rooms across the country. With lawsuits challenging the legality and fairness of commission sharing agreements, the rules of the game are shifting—and not everyone will come out unscathed.

The Roots of the Battle

At the heart of these lawsuits is a long-standing practice: sellers typically agree to pay a 5-6% commission, which is split between their agent and the buyer’s agent. Critics argue this structure inflates costs for sellers while locking buyers into a system that discourages transparency and competition. Several high-profile lawsuits claim that this arrangement violates antitrust laws by preventing buyers and sellers from freely negotiating their respective agent’s compensation.

The lawsuits have shone a spotlight on an industry practice that’s been taken for granted for decades. But as legal challenges mount, the fallout could reshape the landscape of real estate—and not everyone is equally prepared.

Who Wins?

1. Buyers

The clearest winners are buyers. If commission-sharing structures are dismantled, buyers may gain greater flexibility in choosing their representation and negotiating fees. Without an automatic 2.5-3% payout to their agent, buyers could opt for alternative models, such as flat-fee services or hourly consulting, potentially saving thousands of dollars.

2. Tech-Forward Brokerages

Startups and tech-driven companies are poised to thrive in this new environment. Platforms offering transparent pricing, self-service options, or direct connections between buyers and sellers will gain traction. These disruptors are already designed to operate outside the traditional commission model, giving them a significant edge as the old system unravels.

3. Sellers in Competitive Markets

In markets where demand outpaces supply, sellers could benefit from paying reduced commissions or negotiating directly with agents. If buyers are willing to cover their agent’s fees, sellers may find themselves with lower overall costs.

Who Loses?

1. Traditional Brokerages

Legacy brokerages reliant on commission splits are under threat. Their business models hinge on maintaining the status quo, and any disruption could erode profitability. Many are scrambling to adapt, but the inertia of large organizations often makes them slower to pivot than their nimble, tech-savvy competitors.

2. Buyer’s Agents

Buyer’s agents face the most immediate risk. The current model ensures they are compensated without directly billing their clients. If buyers are required to pay their agents out of pocket, many may opt to forgo representation altogether, leading to decreased income and a potential shakeout of the profession.

3. Smaller Independent Agents

Without the resources to invest in technology or alternative business models, smaller agents may struggle to remain competitive. As consumers gravitate toward innovative solutions, these agents risk being left behind.

The Broader Implications

The commission wars are about more than just money—they’re about the future of real estate itself. Here are three critical shifts we’re likely to see:

1. Greater Transparency

Buyers and sellers will demand clearer, more upfront information about what they’re paying for. Agents and brokerages that embrace transparency will be better positioned to build trust and retain clients.

2. Innovative Compensation Models

As the traditional structure falters, we’ll see a proliferation of new models, from subscription-based services to pay-as-you-go options. This diversity will give consumers more choices but may also create confusion in the short term.

3. Industry Consolidation

Smaller, less adaptable players will be forced to merge or close their doors, accelerating the trend toward consolidation. Larger, more resilient companies will emerge stronger, leveraging scale and technology to dominate the market.

What’s Next?

The commission wars are far from over, but the writing is on the wall: change is inevitable. For agents and brokerages, the key to survival will be adaptation—rethinking their value propositions, embracing new technologies, and finding ways to thrive in a world where the traditional model no longer reigns supreme.

At Pending, we see this as an opportunity, not a threat. By acquiring and modernizing boutique brokerages, we’re creating a future-ready ecosystem that benefits everyone—agents, buyers, and sellers alike. The old model may be under fire, but for those who innovate, the possibilities are endless.

Noel Roberts is the Co-Founder & CEO of Pending, Inc— a tech-enabled real estate brokerage & holding company. Pending focuses on a consumer platform to help homebuyers discover properties before they’re listed, as well as acquiring profitable boutique brokerages.