Typical Buyer’s Agent Earns 2.55% in Commission, a Rate That Has Declined Since the NAR Settlement Was Announced in March, Redfin Reports

Rhea-AI Summary

Redfin reports that the typical U.S. home seller pays a 2.55% commission to the buyer's agent, down from 2.62% in January. This decline may be influenced by the National Association of Realtors (NAR) settlement announced in March. In dollar terms, the average commission is $15,377, up slightly due to rising home prices. Commission percentages have decreased in most major metros since the settlement, with Detroit seeing the largest decline from 3.18% to 2.87%. San Francisco has the highest average commission in dollars at $50,734. The NAR settlement, effective August 17, will change how buyer's agent commissions are advertised in MLSs, potentially impacting the homebuying and selling process.

Positive

• Commission percentages have been gradually declining over the past decade, from 2.89% in 2013 to 2.66% in 2023
• The average commission in dollar terms has increased marginally to $15,377 due to rising home prices
• Greater fee transparency and competitive housing market have contributed to the decline in commissions

Negative

• The NAR settlement may lead to changes in the homebuying and selling process, potentially affecting how commissions are negotiated
• Some sellers are considering offering no commission or a relatively low one, which could impact real estate agents' earnings

Financial Analyst

The recent decline in buyer's agent commissions, from 2.62% in January to 2.55% currently, marks a significant shift in the real estate industry. This trend, potentially influenced by the NAR settlement, could have far-reaching implications for Redfin (NASDAQ: RDFN) and other real estate companies.

While the average commission in dollar terms has slightly increased to $15,377 due to rising home prices, the percentage decrease suggests a changing landscape. This could impact Redfin's revenue model, as lower commissions might squeeze profit margins. However, Redfin's technology-driven approach could position it well to adapt to these changes.

The variation in commission rates across different metros is noteworthy. High-cost areas like San Francisco, with average commissions of $50,734, contrast sharply with markets like Cleveland at $5,280. This disparity might lead to strategic shifts in how real estate companies allocate resources and target markets.

For investors, this trend signals a potential industry-wide transformation. Companies that can efficiently operate under lower commission structures while maintaining quality service may gain a competitive edge. Redfin's emphasis on technology and transparency could be advantageous in this evolving market.

However, the full impact of the NAR settlement remains to be seen. The upcoming changes in MLS listings and potential shifts in commission negotiations could further disrupt the industry, presenting both challenges and opportunities for agile companies like Redfin.

Market Research Analyst

The gradual decline in buyer's agent commissions over the past decade, from 2.89% in 2013 to 2.66% in 2023, reflects a broader trend of increased transparency and competition in the real estate market. This shift, accelerated by the recent NAR settlement, could significantly alter consumer behavior and market dynamics.

The regional variations in commission rates are particularly telling. Markets like Detroit, Cleveland and Miami have seen the most substantial declines, while others like Cincinnati have remained relatively stable. This disparity suggests that local market conditions play a important role in commission structures, which could lead to more localized pricing strategies for real estate services.

The increased awareness among consumers about negotiable commissions could drive further changes in the industry. As noted by Redfin's Chief Economist, some sellers are already inquiring about offering lower or no commissions. This shift in consumer mindset could lead to more competitive pricing among real estate agents and potentially disrupt traditional business models.

For companies like Redfin, this trend presents both opportunities and challenges. Their technology-driven approach and existing focus on transparency align well with these market changes. However, they may need to adapt their pricing strategies and service offerings to remain competitive in a market where commissions are increasingly under scrutiny.

The upcoming changes in MLS listings, set to take effect by August 17, could be a catalyst for further industry transformation. This could lead to more direct negotiations between buyers and sellers, potentially changing the role of buyer's agents and how they are compensated.

Legal Expert

The NAR settlement's impact on buyer's agent commissions highlights significant legal and regulatory shifts in the real estate industry. The decline in average commissions from 2.62% to 2.55% since January may be partly attributed to increased awareness of commission negotiability following the settlement.

A key legal implication is the change in MLS listings. By August 17, listing agents can no longer advertise unilateral offers of buyer's agent commissions in NAR-affiliated MLSs or those opting into the settlement. This change could fundamentally alter how commissions are structured and negotiated, potentially leading to more direct discussions between buyers and sellers about agent compensation.

The settlement's effects extend beyond just commission rates. It may lead to increased transparency in real estate transactions, potentially reducing antitrust concerns that have plagued the industry. However, it could also lead to new legal challenges as the industry adapts to these changes.

For companies like Redfin, compliance with these new regulations will be crucial. They may need to revise their practices around commission disclosures and negotiations to align with the settlement terms. This could involve updating their technology platforms, training agents on new procedures and potentially revising their business models.

The regional variations in commission rates also raise interesting legal questions. As some markets see more significant declines than others, it may lead to scrutiny of local real estate practices and potential claims of unfair competition or price fixing in areas where rates remain high.

Overall, this settlement and its aftermath represent a significant legal shift in the real estate industry, with potential for further regulatory changes and legal challenges as the market adapts to these new conditions.

In dollar terms, the typical buyer’s agent commission is $15,377 per deal, up marginally since January due to rising home prices.

SEATTLE--(BUSINESS WIRE)-- (NASDAQ: RDFN) — The typical U.S. home seller pays a 2.55% commission to the real estate agent hired by their home’s buyer, according to an analysis of MLS data by Redfin, the technology-powered real estate brokerage. That’s down from an average of 2.62% in January.

Commissions have been gradually declining over the past decade, from an average of 2.89% in 2013 to 2.66% in 2023. It's possible that news of a legal settlement by the National Association of Realtors (NAR) in March has contributed to the recent decline by making consumers more aware they can offer any commission to a buyer's agent or none at all. Under the terms of the settlement, by August 17 listing agents may no longer advertise a unilateral offer of buyer’s agent commissions in MLSs that are affiliated with NAR or in MLSs that have opted in to the NAR settlement. That has the potential to change the homebuying and selling process in various ways, and make it more likely that buyer agent commissions become part of the offer negotiation.

“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,” said Redfin Chief Economist Daryl Fairweather. “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.”

In dollar terms, the average commission paid to a buyer’s agent in the U.S. is $15,377, up slightly from $15,124 in January. The dollar amount has increased marginally even though the percentage has declined because of the rise in home prices. The national average commission is calculated as an average of actual buyers’ agent commissions in the multiple listing services (MLSs) that are currently reporting on this data. This analysis looked at rolling four-week periods through July 14, 2024.

Commission percentages have declined in all but three of the most populous U.S. metros since the NAR settlement–but the decreases are small

Broken down by metro area, commission percentages paid to buyer’s agents have declined in all but three of the most populous metro areas since the NAR settlement was announced. They increased incrementally in one, and stayed flat in two. Most of the declines are small, less than one-tenth of a percent. Redfin analyzed the 50 most populous U.S. metros and included in this analysis the 49 with sufficient data.

• Commission percentages have declined most in Detroit: The average commission paid to a buyer’s agent there was 2.87% during the four weeks ending July 14, down from 3.18% in January. Next come Cleveland (2.39%, down from 2.62%), and Miami (2.63%, down from 2.84%).
• Commission percentages increased incrementally in Cincinnati; the average there is 2.95%, up from 2.93% in January.
• Commission percentages are highest in Austin, TX (2.99%), Cincinnati (2.95%) and San Antonio (2.91%). They’re lowest in Nassau County, NY (1.95%), Providence, RI (2.05%), and Anaheim, CA (2.11%).

Dollar-amount commissions are highest in expensive California metros

In dollars, the average amount of money buyer’s agents earn in commission is highest in metros where homes are expensive. In San Francisco, the average commission was $50,734 during the four weeks ending July 14. Next came San Jose, CA ($43,159) and Anaheim ($39,877).

Buyer’s agents earn the least amount of money per deal in places where homes are relatively inexpensive, all in the Rust Belt: Cleveland (average of $5,280 per deal), Detroit ($7,054) and Pittsburgh ($7,918).

To read the full report, which includes local data, please visit: https://www.redfin.com/news/buyers-agent-commission-july-2024.

About Redfin

Redfin (www.redfin.com) is a technology-powered real estate company. We help people find a place to live with brokerage, rentals, lending, title insurance, and renovations services. We run the country's #1 real estate brokerage site. Our customers can save thousands in fees while working with a top agent. Our home-buying customers see homes first with on-demand tours, and our lending and title services help them close quickly. Customers selling a home can have our renovations crew fix it up to sell for top dollar. Our rentals business empowers millions nationwide to find apartments and houses for rent. Since launching in 2006, we've saved customers more than $1.6 billion in commissions. We serve more than 100 markets across the U.S. and Canada and employ over 4,000 people.

Redfin’s subsidiaries and affiliated brands include: Bay Equity Home Loans®, Rent.™, Apartment Guide®, Title Forward® and WalkScore®.

For more information or to contact a local Redfin real estate agent, visit www.redfin.com. To learn about housing market trends and download data, visit the Redfin Data Center. To be added to Redfin's press release distribution list, email press@redfin.com. To view Redfin's press center, click here.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240802756092/en/

Redfin Journalist Services:

Alina Ptaszynski

press@redfin.com

Source: Redfin

FAQ

What is the current typical buyer's agent commission rate according to Redfin (RDFN)?

According to Redfin's analysis, the typical U.S. home seller pays a 2.55% commission to the buyer's agent as of July 2024.

How has the buyer's agent commission rate changed since January 2024 for Redfin (RDFN)?

The buyer's agent commission rate has decreased from 2.62% in January 2024 to 2.55% in July 2024, according to Redfin's report.

What is the average dollar amount of buyer's agent commission reported by Redfin (RDFN) in July 2024?

Redfin reports that the average dollar amount of buyer's agent commission is $15,377 as of July 2024.

Which U.S. metro area saw the largest decline in buyer's agent commission rates since January 2024, according to Redfin (RDFN)?

According to Redfin's analysis, Detroit saw the largest decline in buyer's agent commission rates, dropping from 3.18% in January to 2.87% in July 2024.

What change will the NAR settlement bring to buyer's agent commissions on August 17, 2024, as reported by Redfin (RDFN)?

The NAR settlement will prohibit listing agents from advertising unilateral offers of buyer's agent commissions in NAR-affiliated MLSs or those that have opted into the settlement, starting August 17, 2024.