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After they endured one of the worst years in the history of the real estate industry, agents justifiably have a growing list of concerns. It seems the prospect of shrinking commission rates, though, remains far from the top of the list.
For the fourth-consecutive month, the Inman Intel Index, also known as the Triple-I, showed that fewer than 10 percent of agents cited “compensation compression” as their top business concern.
Despite newfound momentum nationally in new listings, a trend reinforced in the December Triple-I results, 4 out of 10 agents still rank the enduring lack of inventory first on their business-concern leaderboard.
This was the third time in four months that a lack of housing inventory outpaced the recurring business challenge options — including mortgage rates, commission lawsuit fallout, technological devaluation and other response choices.
- Mortgage rates, which edged out housing inventory in November’s Triple-I, fell to third on agents’ list of concerns for the first time since the survey began in September. This result follows approximately six weeks of general interest rate decline.
With deals down massively in 2023 and a series of lawsuits challenging the underpinnings of how agents have earned buyer-side commissions for years, a relative lack of concern by agents is confounding. Intel breaks down five potential explanations.
1. Occam’s razor
You may be familiar with the idea of Occam’s razor, explained by Jodie Foster’s character in the 1997 film Contact: “It’s a basic scientific principle. It says all things being equal, the simplest explanation tends to be the right one.”
Those words may ring true here as well.
The survey question asks about “commission compression,” not income. Evidence of a reduced-commission environment in the wake of the Sitzer | Burnett verdict and corresponding settlements is anecdotal at best, and conversations with agents and broker-owners don’t paint a picture of typical commissions as a percentage of the transaction shrinking just yet.
2. Too soon to tell?
Intel, Inman and its contributor community have written extensively on the evolution of agents’ acceptance that the commission lawsuits would cause meaningful change. There is a growing understanding of the weight of this moment, and each passing settlement drives home the point that the traditional cooperative compensation model is being upended.
But it is still clear that uncertainty outweighs certainty. Inconsistent application of buyer agency agreements and fragmented training around potential lawsuit fallout don’t help agents seeking clarity. Add the fact that this is the way that business has always been done, and sentiment shifts being more glacial than galloping is understandable.
3. Last year didn’t stink for every agent
It is worth noting that a not-insignificant segment of the agent world bucked the odds last year. Almost one-quarter of agents reported increased gross commission income in 2023 compared to 2022, and slightly more than 20 percent completed more transactions year-over-year.
4. Splendid splits
Another factor is how competitive existing splits are already. It’s feasible agents believe they can keep them that way, or they have wiggle room if compression does creep in. A split of 90 percent / 10 percent was the most common commission structure in December, as it has been since the survey began. An 80/20 split has finished second each time, and the first- and second-place responses have never accounted for less than 60 percent of agent respondents.
Other, first inserted as a response choice in October’s survey to account for the myriad compensation arrangements brokerages have with their agents, has always ranked as the third-most selected choice.
Among the written answers, edited for grammar and clarity:
- 95 percent to 5 percent
- Flat yearly fee
- Tiered that averages out to 86 percent to 88 percent (higher when I make more)
- 65 percent to 35 percent
- $349 for transactions under $700,000, $549 for transactions above $700,000
- 70/30 until cap [reached], then 100 percent
- Pay $10,000 at the beginning of the year and keep 100 percent of my commission
- 50/50 for company leads, personal are 70/30 to $2 million then 90/10 after. Company leads count toward the cap.
- $200 for every $200,000 in sales price
- Salary-based with bonuses
5. Winnowing competition
The final plausible explanation on this list may be just as likely as any other.
Career agents, the ones who have been through tough periods before and who aren’t jumping ship looking for a payday, see a big opportunity ahead. With significant attrition within the industry a possibility, and transparency into agent value on the rise, there is a pathway to greater gains for higher-performing agents.
“You’re going to see buyers agents charge more than they charge today,” James Dwiggins, NextHome co-founder and CEO, told the Inman Connect audience last month.
