Real estate agent commissions at an all-time low

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There was once a time when the current commission for realtors But recent reports from Real Trends and Realogy Corp. show that the average commission is less than 5% – and this percentage is usually split between the listing agent and the buyer’s agent.

Let’s see why this happens and what it means for real estate investors wants to make money.

How the market affects agency fees

The hot seller market is to blame for the falling real estate commissions. When house prices are skyrocketing and bidding war are common, many homes spend little time on the market before the SOLD sign is posted. The argument is that agents simply have much less work to close a deal, especially when there are several bids in excess of the asking price, often even before open house over.

Of course, this can ultimately work for agents, especially if the sale price is high and they can close two or three deals in the same amount of time it takes to close one deal in a cooler real estate market.

On the other hand, in slower markets where high real estate inventories are more likely to lead to lower prices than auctions, agent commissions tend to be higher. From a buyer’s perspective, this may seem counterintuitive at first, but the logic is that real estate agents deserve a higher rate for doing more work to promote outdated listings to a smaller pool of buyers.

Meeting room

Sellers can negotiate not only price and contingencies in their contracts with buyers, but commission rates with their agents. And what is only there are so many of them – This is a good reason why agents themselves don’t go for a tougher deal. National Association of Realtors (NAR) reports a membership of 1.4 million licensed agents. In 2019, 5.6 million properties were sold, averaging just four sales per member.

Previously, real estate agents only went face to face with other real estate agents in the same city or town. But now agents are fighting big firms like Redfin which seek to disrupt the traditional model of real estate sales and offer much lower commissions. So it’s no surprise that in order to stay in business, the real estate agents themselves ditched the almost mythical 6% commission.

The essence

Sellers not only make money in the real estate market, but they also retain most of their profits due to lower real estate commissions. If you were previously reluctant to work with a real estate agent due to the size of the commission, now is the time to change your strategy.

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