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Average Percentage Commission For Real Estate Agents – In a strong seller’s market, some landlords find that they can attract bidders without offering a high percentage to the buyer’s agent.
For the three months ending Nov. 30, 2021, the typical commission paid to brokerages representing home buyers was 2.63 percent of home sales prices, down from 2.69 percent a year ago and the lowest since 2017. is a low indicator.
Average Percentage Commission For Real Estate Agents
In a typical home sale transaction, the seller covers the cost of both their agent’s and the buyer’s agent’s fees. Over the past two decades, the average commission rate has been about 5%, with roughly half paid to the seller’s agent and half to the buyer’s agent. That’s down from a total of 6 percent in the 1990s. This report focuses on the portion of the fee paid to the buyer’s agent.
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Some sellers are offering lower commissions because they have become less reliant on the buyer’s agent to attract buyers, agents say. A report by the National Association of Realtors (NAR) states that nearly all home buyers (95%) searched for a home online in the past year, and they are twice as likely to search online than to contact an agent as the first step in the home buying process. . Today’s competitive housing market can accelerate the decline in the buying commission rate, with sellers and their agents realizing that they can find a buyer regardless of the commission they offer the buyer’s agent.
“We are experiencing a historic shortage of homes for sale. “Sellers know their home is a hot commodity and can attract multiple offers no matter what, so they start offering buyer’s agents 2% or 2.5% instead of 3%.” said Joe Hunt, market manager in Phoenix. . “Why offer 3% when you know you can offer less and sell your home for the same price?”
Hunt added that owners of homes priced at $500,000 and under can offer a lower fee to a buyer’s agent because properties in that price range are the most sought after.
With more real estate agents than homes for sale, agents also compete with each other for clients by accepting lower fees.
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Another factor is increased transparency. Some real estate websites, including last year, began publishing buyer’s agent commission rates in select markets. In November, NAR adopted a policy requiring multiple listing services and allowing brokers and agents to display buyer’s agent commissions on their websites, bringing commission transparency to even more markets in 2022. As a result, more consumers are already paying lower commissions than some home sellers and real estate brokerage companies (iBuyers) and are following suit.
In addition, the real estate industry has faced scrutiny over the way commissions are paid. The Justice Department is conducting an open investigation into real estate industry practices, and two consumer class-action lawsuits are working their way through the courts. The plaintiffs allege that NAR’s policy, which requires listing brokers to offer compensation to buyers’ brokerages to market homes in the MLS, has limited competition and resulted in sellers paying higher fees.
“The lawsuits and DOJ investigation do not have a major impact on commission rates at this time, but the industry is watching closely to see if it could lead to buyers being responsible for paying their agents,” said chief economist Daryl Fairweather. “If that happens, buyers will be more willing to negotiate commissions.”
While the average commission rate is down, the dollar value of acquisition commissions is increasing. Average commission paid by a buyer’s agent for the three months ending Nov. 30 was $12,415, up 6.9% year over year and 29.2% over the same period in 2017. The median US home sales price rose 15% year-over-year to $383,100 in November, marking the 16th straight month of double-digit price gains.
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“One might think that rising home prices, which are driving up dollar-for-dollar commissions, would also cause sellers to offer lower commissions as a percentage, but that’s not the case,” Fairweather said. “Instead, sellers are likely offering lower commission rates because they understand that a well-priced home in this extreme seller’s market will naturally attract buyers.”
Fairweather continued, “With home prices so high, the seller, their agent, and the buyer’s agent are splitting a larger amount than ever before. So even though the buyer’s agent technically has a smaller share of the pie, their check up 6.9% from a year ago.That could change if home prices begin to decline.
Of the 100 most populous US metropolitan areas, only 32 had adequate commission data. This section focuses on those metros. Scroll to the bottom of this report to see a table with complete data for all 32 metros.
In Indianapolis, the average commission rate for the three months ended Nov. 30 fell 0.21 percentage points to 2.85%. Indianapolis tied for the biggest drop with Riverside, CA and Phoenix, which also dropped 0.21 percentage points. Anaheim, Calif., followed, down 0.14 percentage points, followed by Atlanta and New Brunswick, New Jersey, both down 0.12 percentage points.
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Hunt said that while sky-high competition from home buyers is a major factor in giving sellers the confidence to offer lower commissions in Phoenix, the presence of iBuying’s business may also be a factor. Phoenix is one of the largest markets for home-selling companies known as iBuyers, which are experimenting with paying lower commissions to cut costs.
IBuyers buys homes from homeowners in quick cash transactions, makes the necessary improvements, and then resells them. When iBuyer resells a home, it pays the buyer’s agent a commission, just like a home seller. In Phoenix, iBuyers paid an average commission of 2.28% in the third quarter of 2021, down from 2.57% a year ago. During the same period, the average acquisition commission rate in Phoenix fell from 2.77% to 2.54%. According to Hunt, the decline in commissions paid by iBuyers could be one of the factors putting pressure on the overall commission rate in markets like Phoenix.
Chicago was the only metro in this analysis to see a commission rate increase; the typical seller paid a buyer’s agent a commission of 2.47% of the sales price for the three months ending Nov. 30, up 0.1 percentage point from a year earlier.
In Nassau County, N.Y., home sellers paid a buyer’s agent an average commission of 1.98% for the three months ending Nov. 30 — the lowest among the 32 metro areas in the analysis. Nassau County was the only metro area with an average commission rate below 2%. Boston (2.21%), Riverside (2.22%), Anaheim (2.25%) and New Brunswick (2.3%) followed.
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“In New York, Massachusetts and several other states, the law requires real estate attorneys to preside over home closings,” Fairweather said. “This means that the buyer’s agent has less responsibility in some cases, which may be one of the contributing factors to the decline in buying commissions in these states.”
At 2.94%, Kansas City, MO and Columbus, OH had the highest commission rates of the 32 metros in this analysis. Austin, TX (2.92%), Virginia Beach, VA (2.91%), Houston (2.90%) and Dallas (2.88%) followed.
Analyzed MLS home sales records to determine average national and metro buying commission rates. The national commission rate was calculated by averaging the commission rate for each MLS sale in the US. On a metro level, we analyzed the 100 most populous U.S. metro areas and focused on 32 areas that have had ample shopping opportunities for at least four years. commission information. To calculate commission fees in dollars, we multiplied the home sale price by the commission rate for all homes listed on the MLS with sufficient listings, and then averaged those values in a given metro.
This analysis excludes home sale listings with commissions between 0.1% and 0.5% and home sale listings with commissions greater than 10%.
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As a data journalist, Lily is passionate about helping readers understand the intricacies of the housing market. She is particularly interested in climate change, racial and gender equity, and housing affordability. Lily worked as a reporter for Bloomberg News in New York for four years prior to her tenure.
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In a real estate transaction, agents or brokers are usually paid by the seller
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