In most Michigan home sales, the seller pays the realtor fees for both sides, and the total commission comes out of the seller’s proceeds at closing. That has been the default for decades, and it is still the most common arrangement. What changed in August 2024 is that sellers no longer have to offer anything to the buyer’s agent, so buyers can now find themselves paying their own agent directly. If you are asking who pays realtor fees in Michigan today, the honest answer is: usually the seller, sometimes the buyer, and increasingly a negotiated split that is decided deal by deal.
The Traditional Model: Seller Pays Both Sides
Under the traditional structure, the seller signs a listing agreement that sets a total commission, typically 5% to 6% of the sale price. At closing, that amount is deducted from the seller’s proceeds. The listing brokerage keeps its share and sends the agreed portion to the brokerage representing the buyer. The buyer never writes a separate check for agent services.
Michigan’s statute of frauds requires any agreement to pay a real estate commission to be in writing and signed by the party responsible for payment. An oral promise to pay is unenforceable. For sellers, that written obligation lives in the listing agreement, which also authorizes the listing broker to share part of the commission with a cooperating buyer’s agent. Without that written authorization, the listing brokerage cannot legally distribute any of the seller’s funds to another firm, because Michigan’s Occupational Code restricts licensed brokers from sharing commissions with anyone who is not properly licensed.1Michigan Legislature. Michigan Code 339 – Occupational Code – Article 25
What Changed in August 2024
Since August 2024, multiple listing services no longer display offers of buyer-agent compensation alongside property listings. Sellers can still offer to pay the buyer’s agent, and many do, but the offer no longer appears on the MLS and it is no longer assumed. Buyer-agent compensation now gets worked out during offer negotiations rather than being baked into the listing from the start.
The practical consequence is that every transaction now includes a conversation about who pays the buyer’s agent. When a seller declines to cover that fee, the buyer becomes responsible for it on top of the down payment and other closing costs. Buyers who have not planned for this possibility can face a real surprise at the closing table.
When the Buyer Ends Up Paying
Since August 17, 2024, buyers working with an agent must sign a written buyer agency agreement before touring any home, including virtual tours. The requirement comes from the National Association of Realtors settlement and applies nationwide. The agreement must clearly state the compensation the buyer’s agent will earn, and it cannot be left open-ended.
These agreements almost always include a provision making the buyer responsible for the agent’s fee if the seller or listing broker does not cover it. The math is where it gets real. If your buyer agreement specifies a 2.5% commission and the seller only offers 1%, you owe the remaining 1.5% at closing. On a $300,000 home, that is $4,500 you need in addition to the down payment and other costs.
To keep that out-of-pocket cost from derailing the purchase, buyers commonly ask for a seller concession in the purchase offer, requesting that the seller contribute toward closing costs including the agent fee. If the seller agrees, the concession effectively folds the buyer’s agent commission back into the overall transaction. Concessions are not guaranteed, though, and asking for one in a competitive market can weaken your offer. Talk through the tradeoff with your agent before you submit, rather than assuming the seller will cooperate.
Loan-Type Limits on Seller Concessions
If the seller is going to cover your agent’s commission through a concession, your mortgage type caps how much the seller can contribute. Exceeding the limit will not kill the deal outright, but the excess gets deducted from the sale price before your loan-to-value ratio is calculated, which can affect your loan approval.
Conventional Loans (Fannie Mae)
Fannie Mae ties seller concession limits to how much equity you are putting down:2Fannie Mae. Interested Party Contributions (IPCs)
- More than 90% LTV (less than 10% down): capped at 3% of the sale price
- 75.01% to 90% LTV (10% to about 25% down): capped at 6%
- 75% LTV or less (25%+ down): capped at 9%
- Investment properties: capped at 2% regardless of LTV
A first-time buyer putting 5% down on a $250,000 home can receive no more than $7,500 in total seller concessions. If that has to cover the buyer’s agent commission plus other closing costs, it gets tight quickly.
FHA Loans
FHA caps total seller concessions at 6% of the sale price. Seller-paid real estate agent commissions that follow local custom are generally not counted toward that cap, which matters: if the seller pays your agent’s commission as part of the standard transaction rather than as a concession, it does not eat into the 6% available for other closing costs. Confirm the treatment with your lender, because how the commission is structured on the closing disclosure determines whether it counts.
VA Loans
Veterans can now pay their own buyer’s agent directly under the VA Home Loan Reform Act of 2025 (Public Law 119-31), which made permanent a temporary policy the VA introduced in August 2024.3Veterans Benefits Administration. Temporary Local Variance for Certain Buyer-Broker Charges Before this change, VA rules effectively prevented veterans from paying buyer-broker fees, which hurt them in markets where sellers were not offering compensation. Two details still apply: buyer-broker charges cannot be rolled into the VA loan amount, and the VA does not treat seller payment of these charges as a seller concession.
Commission Rates Are Negotiable
No Michigan law or regulation sets a standard commission rate. Every commission is individually negotiated between the client and the brokerage, and treating any rate as an industry standard violates federal antitrust law. Agents are required to disclose in writing that commissions are fully negotiable, and that disclosure appears in listing agreements, buyer agency agreements, and pre-closing documents.
Rates in Michigan tend to land in the 5% to 6% range split roughly evenly between the two sides, but typical is not required. A seller can negotiate a 4% total, agree to a flat fee, or structure compensation however they and their broker see fit. Buyers have the same flexibility with their own agent. Anyone who tells you the rate is standard or non-negotiable is wrong as a matter of law.
What to Check on the Closing Disclosure
Every dollar paid to a brokerage must appear on the closing documents. Michigan law requires the broker involved at closing to provide both the buyer and the seller with a complete closing statement showing all receipts and disbursements affecting each party.4Michigan Legislature. Michigan Code 339.2512 – Licensee Penalties Federally, the Closing Disclosure (the standard TRID form required by the Consumer Financial Protection Bureau) itemizes all fees, including agent commissions, in a standardized format you receive at least three business days before closing.
The agency disclosure form you sign earlier in the process identifies who your agent represents, but it does not list commission dollar amounts.5Michigan Legislature. Michigan Code 339.2517 – Disclosure of Agency Relationship The actual numbers show up only on the closing statement and the Closing Disclosure. Review both before signing. If you see a line item you do not recognize, particularly an administrative or compliance fee from a brokerage, ask about it before closing day. Brokerages sometimes charge flat administrative fees ranging from a few hundred to over a thousand dollars on top of the standard commission, and these are negotiable even if the form makes them look fixed.
How the Commission Affects Your Taxes
Who pays the commission also shapes the tax picture. For sellers, any commission paid is treated by the IRS as a selling expense. It gets subtracted from the sale price when calculating the “amount realized,” which directly reduces the taxable gain on the home. On a $400,000 sale with a 5.5% total commission, that is $22,000 less counted toward profit. Combined with the federal capital gains exclusion ($250,000 for single filers, $500,000 for married couples filing jointly), most homeowners selling a primary residence will not owe capital gains tax at all. The commission reduction still matters for sellers with large gains or investment properties.6Internal Revenue Service. Publication 523, Selling Your Home
For buyers who pay costs that would typically fall to the seller, such as the seller’s agent commission, the IRS lets those amounts be added to the home’s cost basis. A higher basis reduces the taxable gain when you eventually sell. If you pay your own buyer’s agent directly, that cost may also be included in basis as an expense connected with the purchase.7Internal Revenue Service. Topic No. 703, Basis of Assets Keep your closing disclosure and any separate commission payment records. You may not need them for years, but reconstructing these numbers after the fact is harder than filing them away now.