Buyer agents asking for higher fees than they were 3 years ago
Despite some reports suggesting agent commission rates were dropping, a CPC report finds that 95% of buyer agents ask for 2.5-3% of a home’s final sale price.
Key points:
- Every agent that Consumer Policy Center researchers engaged with as “mystery shoppers” asked for a percentage of a home’s sale price for compensation rather than a fixed dollar amount, according to a new report.
- There was a “remarkable homogeneity of quoted rates” across metros, wrote CPC researchers, who also implied that they discovered “evidence of price-fixing.”
- There was little to no uniformity in the use of buyer agreements. One agent told a CPC mystery shopper that “no-one’s checking contracts to make sure they’re signed.”
A year after new mandatory rules from the landmark NAR settlement went into effect for real estate agents, a new report suggests not much has really changed when it comes to commission rates and consumer fees.
The report from Consumer Policy Center (CPC) researchers Stephen Brobeck and Wendy Gilch finds that buyer agents are still largely pushing for a percentage of a home sale price — generally in the 2.5% to 3% range — instead of a set dollar amount. Additionally, the report finds that the adoption — and terms — of buyer agency agreements vary widely.
The industry may be seeking to preserve old compensation model
For their report, CPC researchers engaged as "mystery shoppers" with 281 buyer agents in 26 metros across the U.S. between July and September. All buyer agents quoted a commission or fee as a percentage of the home's final sale price — something the Consumer Federation of America has discouraged, advising consumers to negotiate a specific dollar amount instead.
Of the buyer agents who engaged with CPC researchers, 95% said they charged a fee between 2.5% and 3%.
The report noted a "remarkable homogeneity of quoted rates in individual metropolitan areas," suggesting that "local agent cultures exert a powerful effect on rates." The report's authors implied that, since listing agents regularly represent buyers in other sales, they "have an interest in maintaining current buyer agent rates."
The uniformity in commission rates across the country is "unusual" compared to marketplaces for other services, the report added.
Findings suggest 'evidence of price-fixing'
While the class action suits brought against brokerages and NAR were largely focused on decoupling or separate seller agent and buyer agent commissions — seeking to prove collusion among industry professionals and participants — there remains some "evidence of price-fixing," CPC researchers wrote, particularly in reference to agents who suggested they were charging the "standard" or "usual" rate for their area.
While some early reports after the NAR settlement suggested that commission rates were dropping, an August report from Redfin suggested that rates were actually increasing — and the CPC study finds that there are more agents charging 3% today than there were a few years ago. When compared to a similar study the group conducted in 2022, the percentage of buyer agents requesting or charging 3% per transaction has increased from 40% to 64% in the last three years.
Due to consumers' newfound ability to negotiate commissions and fees, the report authors suggest that some agents may be "charging a risk premium to help ensure the continuation of pre-settlement rates."
'No-one's checking contracts to make sure they're signed'
Meanwhile, there is little uniformity in buyer agreements. Half of the agents the CPC engaged with offered some kind of short-term touring agreement without any termination penalties for the buyer.
Roughly 52% of agents wanted a buyer agency agreement signed before the first showing, while others only pushed for a signed agreement after a showing or before making an offer on a home. One agent suggested they would backdate the buyer agreement before making an offer, while others implied that there was no one monitoring or enforcing buyer agreement rules.
Effectively, "no-one's checking contracts to make sure they're signed," a Sacramento agent told the CPC mystery shopper.
More work is needed to change commissions
There is still much more that the industry and regulators can do to inform and educate consumers about the costs of buying and selling a home, CPC researchers suggested.
"While future buyer and seller attempts to negotiate buyer competition might increase as they learn more about the new negotiation opportunities, it has become increasingly apparent that successful agent work-arounds have greatly limited these opportunities," the report's authors wrote. "Buyers are still assured by most agents that sellers will pay their commissions. And if sellers fail to do so, they fear that their homes won't be shown."
The class action suit and Department of Justice scrutiny of the industry — and efforts to truly separate seller and buyer agent commissions — "should be revived and prioritized," the report said.