How Traditional Real Estate Commissions Have Changed (And What That Means for Buyers)
Though real estate agents have traditionally claimed between 2 and 3% of a home’s sale price, many of today’s pros are challenging this status quo, instead offering flat-fees, reduced commissions, and even commission rebates to homebuyers and sellers alike.
The reason for this change of heart? It’s largely due to technology, which has allowed consumers to handle a lot of the home buying process solo. Long before contacting an agent, many buyers have already found listings, toured homes or, in some cases, even locked in on the property of their dreams. All they need from their agent is help drafting the offer and seeing the sale through to closing.
On the selling end, iBuyers like Opendoor are giving homeowners a quick and easy way to sell without ever listing on the open market. Often, these buyers only need agents for guidance along the way. In some cases, they forgo them altogether.
As a result, many agents are meeting this reduced workload with reduced or altered fees of some sort. Here are just a few of the ways they’re doing this:
- Flat fee structures – Rather than requiring a cut of the sales price, these agents ask clients to pay a set, flat rate for a roster of pre-determined services. Popular flat-fee options include Purplebricks and Clever.
- Reduced commissions – Similarly, agents offer their services for a lower commission rate — usually 1 to 1.5%. Redfin is a good example of a reduced-commission brokerage, charging its sellers just 1% of the transaction price.
- Commission rebates or refunds – In these arrangements, the agent still takes their typical 2 to 3% commission, but commits to “refunding” the buyer or seller a pre-determined amount of it. This is usually paid out at the end, after closing. A few agencies that offer this structure are UpNest, Redfin, REX Real Estate, and Clever.
Some agents offer a blend of these structures or, in many cases, are open to negotiating their commissions directly with their clients. If you’re looking to buy or a sell a home, be sure to research the options you have available. Just a one-point reduction in commissions (or a refund of the same amount) could mean thousands more in your pocket — or toward the cost of that new home.
Of course, a top notch real estate agent in a competitive market is often totally worth the cost. When you have an expert on your side who knows your local real estate market, they may be able to save you money in several different ways (like going to bat for you at the negotiation table) that far outweigh any commission you’ll pay in the end.
Need recommendations for agents or other home buying vendors in your area? Get in touch with a loan officer at Embrace Home Loans today. We’ll help you make the best decisions for your unique financial situation.