As if there wasn’t enough negative attention on the real estate industry, last week a study was released, “Et Tu, Agent? Commission-Based Steering in Residential Real Estate.” The study suggests that buyer agents may steer their clients away from properties offering low commissions. It argues that this is a key reason why agent commissions have remained high in the digital age, even as commissions in other industries have declined. According to the report, listings with the lowest commissions take 33% longer to sell and face a 75% greater risk of not selling at all.
So, is this true?
That’s a difficult question to answer. First, as the chart below indicates, the average commission rate offered to a buyer’s agent in the St. Louis market has remained relatively stable. For over 20 years, the annual average rate has been 2.7%, with the only exception occurring in March 2010 when it rose to 2.925%. Given that most listings offer the same commission rate, it’s challenging to determine if agents are steering away from low commissions. However, this consistency might support another allegation: that the industry has established a “normal” commission rate. It’s hard to deny some level of pressure on listing agents to offer a specific commission rate when thousands of listings end up offering the same rate. Moreover, offering a “below-normal” commission rate as a listing agent can attract criticism from peers.
Professionals Put Clients First
It’s worth noting that many agents pay little or no attention to the buyer’s commission rate on a listing. These professionals prioritize their clients’ needs over their own financial interests. At MORE, REALTORS®?agent_id=02107, our agents have been transparently including a minimum rate or amount of compensation in their buyer’s agency agreements for years. This allows agents to focus solely on finding the right home for their clients, irrespective of the commission offered by the seller.
The Future of the Industry
Given ongoing litigation, such as the Sitzer v NAR case currently in trial in Missouri, changes are undoubtedly coming to the real estate industry. These changes will likely focus on commissions and may require all buyer’s agents to specify their compensation in buyer’s agency agreements. Personally, I believe this will be a positive development, bringing greater transparency for buyers and encouraging them to be more selective in choosing an agent. This will benefit professional agents and weed out those who are less competent.
St Louis 5-County Core Average Buyers Agent Commission Since 1998
(click on chart for live, interactive chart)
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