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MortgageReal Estate

Real estate agent 6% commission increasingly under threat

Majority of sellers increasingly pay less

The standard 6% commission for real estate agents is getting pushed to the test as the majority of Americans in today’s market end up paying less.

Per Bloomberg:  

The article cited a recent Redfin survey that found 60% of people who sold a home in the U.S. over the last year got a discount from their agent, with average savings of 41% off the standard commission.

Of course, this result is not a surprise coming from Redfin, a low-commission real estate listing service. However, there is no denying the rise of the sharing economy, where people use inexpensive, digital tools such as Uber and Airbnb to list services, is impacting real estate.

Even paying only 5% commission can add up to a decent-sized savings for sellers. But on the other side, it could come as a loss to real estate agents.

Here’s the math from the article by Patrick Clark:

If you’re selling a $400,000 house and manage to cut your agent’s commission to 5 percent, you just saved $4,000. If you got the 41% discount that Redfin’s survey identified as the average, you saved just under $10,000.

This is bad news for real estate agents right? Not necessarily.

While the article suggests that low inventory is causing agents to fight over a small number of listings or even that agents are agreeing to accept discounted fees due to pressure from real estate tech startups, this isn’t the likely answer.

The most likely reason could actually translate into more money for the agent.

From the article:

A more plausible argument is that not all sellers look the same to real estate agents. Homes that sell for higher amounts generate larger commissions—and probably create some additional wiggle room for agents to cut fees. Likewise, a seller who plans to use the same agent to sell their old home and buy a new one probably has extra leverage in bargaining.

The Redfin survey indicates that even sellers with more modest properties and no plans to buy a new home should inquire about reducing their fee. As any good negotiator would tell you, it doesn’t hurt to ask.   

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