Real estate sales commissions appear to have reversed course. After falling in the aftermath of the class action lawsuits that rocked the business, they seem to be returning to “normal” – for each side of the transaction.
At the 150-day mark after the National Association of Realtors (NAR) settled suits charging the trade group and its largest member-firms with forcing buyers to pay too much to their agents, the average rate paid by sellers was up a tick compared to the same time a year ago, according to AccountTECH, which provides back office software to realty companies.
As of January 17, sellers were paying their agents 2.73% of the sales price, on average, the Canadian firm says. That’s just a hair more than the 2.72% they were paying when NAR agreed to require affiliated multiple listing services to remove commission splits from all listings.
Similarly, buy-side rates also are at their prior-year levels. At the fifth-month mark, buyers paid an average of 2.55%, which is identical to the typical rate buyers paid at the same time a year earlier.
That wasn’t always the case. In fact, early indications showed commission rates were falling.
A poll of some 1,300 agents by RISMedia 45 days post-settlement found that sales fees had shrunk 68 basis points, or 0.68%. The real estate publishing company called the decline “very significant.” And in terms of dollars, it was. The slide translates into a loss of $2,870 on a 6 percent commission on a median-priced house. That’s $2,870 back into the pockets of either the buyer or the seller – or both.
AccountTECH found a similar pattern on the buy-side alone. In the first month after the NAR Settlement, rates to sellers dipped from an average of 2.79% to a 2.75%. And they continued to fall. At the 90-day mark, they fell to a low of 2.69%.
Moreover, RISMedia’s survey suggested that rates were poised to drop even further. Asked their expectations, a slim 51% majority anticipated no change. But 37% of the respondents said they were planning for even further cuts, with 7% expecting “significant” declines. The remaining 12% thought their fees will rise again.
As it turns out, those 12% were right, at least according to AccountTECH’s analysis, which covered transactions from 1,290 real estate offices. Only deals which became pending during the five-month comparison periods were examined. But a total of 224,176 sales were included.
While the early declines in sales fees suggested that the settlement might push rates down, as the pundits, analysts and lawyers believed, the reversal “indicates that market forces, rather than the settlement itself, may have a stronger influence on commission structures,” says AccountTECH CEO Mark Blagden.
He cited such factors as inventory levels, interest rates and regional economic conditions as possibly contributing to the shifts in commission rates.
The data “underscores the complexity of predicting the long-term impact of regulatory changes on market dynamics,” Bagden said. “While initial trends indicated potential downward pressure on buyer commissions, the recovery to prior-year levels suggests a more nuanced outcome.”
Meanwhile, another survey, this one of 652 agents by Inman, a real estate focused news company, found that buyers, for the most part, are not making any attempt to negotiate lower fees. At the same time, though, a “sustained number” are trying their hands at negotiating for a fee lower than what has been typical in their market.
Many of the agents polled here indicated they are “approaching conversations surrounding agent compensation in a manner that suggests less anxiety around commissions overall. That also may mean that agents are finding more solid footing to perform with more confidence in their business on a day-to-day basis.”
As for sellers, a “stable share continues to show curiosity” over whether they are required to cover the buyer’s agent’s commission.
