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Real EstateBrokerage

The 100-years-war over real estate commissions

The battle raging now is rooted in the National Association of Realtors’ 108-year-old rule.

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In 2002, Natalya Delcoure and Norman Miller, two real estate economists, set about to learn what fees consumers pay real estate agents in America. They were especially interested in real estate commissions. 

What Decloure and Miller discovered was somewhat shocking. On average 6% of the proceeds from each home sale went to the participating real estate agents. The figure was not just more than what agents make in other countries but wildly more; 200% to 400% more. 

The economists figured this startling disparity couldn’t last in the digital age, but it has. 

While commissions have fallen even farther in other countries, U.S. real estate agents today make more than they did 20 years ago.

U.S. real estate agents rake it in as their sales broker brethren – stockbrokers, travel agents – long ago scurried to other lines of work.   

“These patterns are puzzling given the industry’s significant technological changes,” concluded a Brookings Institution paper from 2019.

For the past month, HousingWire plunged down the foreboding rabbit hole of residential real estate commissions, uncovering the past, present and future of this wholly unique part of the economy.

We sifted through the present, which includes a raft of pending lawsuits that claim the National Association of Realtors and its member brokerages wage a “horizontal conspiracy” that rips off home sellers to the tune of billions of dollars each year. That’s part two, coming up Thursday.

And in part three for Friday, we examined alternative business models, possible cracks in the structure, and the future of real estate agents. 

In part one today, we document a 108-year-old rule that has led to the both controversial and cherished commission structure of now. 

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