HousingWireHousingWire
Real estate agent commissions have held steady since August, but there’s a divergence at different price points.
That’s the conclusion of new data from Redfin, which shows that the average commission between August and October dropped by 1 basis point to 2.34%. The data is derived from sales by Redfin agents who have closed a transaction in October or are scheduled to by the end of the month.
“Redfin agents say the biggest difference since Aug. 17 is the need to educate customers about rule changes and have conversations about agent fees with buyers at the start,” Redfin chief economist Daryl Fairweather said in a statement. “Our agents see that as a positive, as it encourages more communication upfront and increases transparency around fees.”
There’s a caveat to the overall stability in commissions. The average commission rate on homes sold for less than $500,000 was at 2.41% in August and rose slightly to 2.43% in October. For homes sold at a price between $500,000 and $1 million, it has fallen one 1 point to 2.24%.
But on homes sold for $1 million or more, the average commission rate has fallen 13 basis points to 2.11% from August to October.
Measuring commission rate changes since August is significant because that’s when new rules related to the National Association of Realtors‘ antitrust settlement went into effect.
The settlement rules ban blanket offers of compensation to buyer agents on multiple listing services. And the plaintiffs’ attorneys in the commission lawsuits have said that the new rules are intended to bring commission rates down.
Redfin’s data also shows that commission rates have been gradually declining over the past 10 years, even as total commissions paid have risen dramatically as a result of rising property values. Even in the past two years, commissions have come down as the average rate was 2.51% in January 2023.
The topic of commission rates has been a hot one for the industry, but whether rates are coming down or not often depends on the perspective of the agent or brokerage. While lower rates will definitely affect agents, they could also send many brokerages into operating losses that would endanger their very existence.
Redfin said it’s too early to tell if the slight drop since August is being caused by the new rules or is just part of an ongoing trend. But the brokerage also reported that sellers are increasingly wanting to pay 2% to buyer agents, and that commissions are being negotiated more often as a result of the new rules.
“Commissions may face more downward pressure next year if we see a resurgence of bidding wars,” Fairweather said. “Sellers are becoming increasingly aware that commissions are negotiable and that if they have a desirable home, they may be able to get the buyer to cover some, or even all, of the buyer’s agent commission.”
