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Although the deadline for enacting the National Association of Realtors commission settlement rules is 15 days away, a Redfin report published on Friday revealed the typical buyers’ agent is already beginning to feel the crunch.
The typical buyer’s agent started the year with a commission of 2.62 percent; however, that average has dropped by 2.67 percent to 2.55 percent as of July. Although the commission percentage has declined, robust home sale prices mean the typical buyers’ agent is earning 1.64 percent more in commission dollar amounts ($15,124 in January vs $15,377 in July).
Redfin said buyer’s agent commissions have been on the decline for years, but it’s not unreasonable to believe that heightened conversations about NAR’s settlement terms — which include removing offers of compensation to buyer’s agents in Realtor-affiliated multiple listing services and requiring buyers’ brokers sign representation agreements with buyers before taking them on a home tour — have led to greater negotiation.
Daryl Fairweather
“Redfin agents are reporting that commissions have been top of mind for clients since the NAR settlement was announced, and some sellers are asking about what it would mean to offer no commission or a relatively low one,” Redfin Chief Economist Daryl Fairweather said in a prepared statement. “Still, even before the blitz of publicity around the class-action lawsuits and NAR settlement, commissions were coming down.”
“That’s partly because of the competitive housing market before and during the pandemic — which motivated some sellers to offer a low commission because they knew they could still attract buyers — and greater fee transparency,” she added.
On a local level, Redfin found that buyer’s agent commissions have dropped in 47 of 50 of the largest U.S. metros.
Commission percentages declined the most in Detroit, with the typical buyers’ agent’s commission declining from 3.18 percent in January to 2.87 percent by July. Cleveland (2.62 percent to 2.39 percent) and Miami (2.84 percent to 2.63 percent) rounded out the top three markets with commission percentage declines of 8.77 percent and 7.39 percent, respectively.
Cincinnati was the only market to experience growth in commission percentages, with the typical buyers’ agent’s commission inching up 0.68 percent from 2.93 percent in January to 2.95 percent in July.
When it comes to commission dollar amounts, California unsurprisingly leads the pack. The typical buyer’s agent in San Francisco ($50,734), San Jose ($43,159), and Anaheim ($39,877) earned double the national average in July. Meanwhile, the typical buyers’ agent working in the Rust Belt region — Cleveland ($5,280), Detroit ($7,054), and Pittsburgh ($7,918) — earned four figures per deal.
Redfin CEO Glenn Kelman addressed the commission crunch at Inman Connect Las Vegas on Wednesday, saying brokerages and portals need to do more to help real estate agents on both sides of the transaction increase their productivity and earn fair wages.
“More than a third of [agents] have to work a second job just to be able to stay in real estate. But I’m not trying to be down about this industry. I’ve been doing it for 18 years. It’s the industry that I love,” he said. “And the thing that I have learned by coming to this conference is where that love comes from: people love being their own boss.”
“People worry about the unpredictability of income, and it’s hard for them to find customers,” he added. “This is the challenge that we have been trying to address. It shouldn’t be so hard to be a real estate agent and make a living.”
