Last summer, a legal settlement resulted in new rules that were supposed to revolutionize the housing market in favor of sellers and buyers. The traditional 6% commission split between the buyer’s and seller’s agents was dead, and now the buyer and seller would negotiate lower fees with their own agents.
The headlines were plentiful. This was going to shake up the industry, and we were among the people who voiced optimism about the prospect of lower housing prices for everyday Texans.
Our optimism was premature. Nothing seems to have changed in any meaningful way.
Recent reporting by The New York Times revealed that real estate agents across the country are still holding on to 5% to 6% commission fees. They appear to be following the letter if not the spirit of the legal settlement against the National Association of Realtors.
That agreement prohibits sellers’ agents from offering buyers’ agents a split on the commission via multiple listing services, which are private industry databases. However, The Times found that sellers’ agents are finding other ways to keep commissions steady and communicate the split with buyers’ agents.
For instance, some sellers’ agents telegraph or broadcast a half-split on a 6% commission by featuring the number 3 in listing photos, by creating their own landing pages for listings online or by directly texting with buyers’ representatives.
Everyday people trying to sell their home and striking out on their own are being iced out of the market. One seller told The Times that agents wouldn’t budge on a 5% commission on his $2.7 million luxury home, so he chose to sell it himself and found out some agents were purposefully steering potential buyers away from his property.
Real estate agents play an important role in the housing market, and they deserve to be paid for their work. But homebuyers and sellers should be able to negotiate rates with those real estate agents the way they would do with contractors and other service providers. Think about the challenge of listing a fixer-upper, and how much harder a seller’s agent might have to work in that scenario compared to an agent listing a modern, turn-key home. It makes sense that a seller would negotiate a fee based on the expected amount of work, and that a buyer would do the same with his or her agent.
On the median home price of $395,000 in the Dallas area, a 6% commission amounts to $23,700 — no small fee.
With the real estate brokerage industry resistant to change, it will be up to buyers and sellers to take the reins. The real estate fees have long been negotiable, but most of us don’t ask, choosing the path of least resistance. Consumer advocates have previously suggested listing the commission in dollar amounts instead of percentages in the paperwork, to give home sellers and buyers a better picture of what they’ll owe their agents. Seeing the actual amounts owed to agents might also spur more people to negotiate.
More energetic education campaigns around the negotiable nature of these commissions might snap more home sellers and buyers out of autopilot. Amid high interest rates and a housing shortage, Texans need all the help they can get to realize the American dream.
