Why lower commissions have never been the answer 

Thinking big about residential real estate success requires a big-picture perspective. Industry Decoded features industry experts who can enrich your understanding of issues affecting the industry as a whole.

The views expressed in this column are solely those of the author.

Every few years, the industry is confronted with a new version of the same argument: Real estate commissions are too high, and the right technology or business model will finally force them down. 

The latest version focuses on artificial intelligence. A recent industry report catalogued 23 tasks involved in a typical home sale and found that AI now outperforms agents on most of them, concluding that consumers are overpaying for the work agents do. The implication is that commission compression is coming — soon.

There is something useful in that analysis. But the conclusion misreads how this market works — and why attempts to remake it around price have consistently fallen short.

Consumers have always had cheaper options

The most important data point in this debate is one that rarely gets much attention: the for-sale-by-owner rate.

In 1985, roughly 21% of American home sellers sold without an agent. Last year, that share hit a record low of 5%, according to NAR's 2025 Profile of Home Buyers and Sellers. This happened across four decades of expanding price transparency, the rise of listing portals and discount brokers, and the emergence of iBuyers.

Consumers have been able to bypass a full-service agent for years. Most have declined.

The reason is not inertia or lack of awareness. Research has consistently found that consumers do not rank the cost of representation as their primary concern. For buyers, top priorities are avoiding a costly mistake and working with someone who helps them get into the right home. For sellers, it's finding a professional who knows the market and can guide them through a process that remains a high-stakes legal and financial transaction, regardless of the technology on the back-end.

Agent fees are not irrelevant to consumers. But in residential real estate, they have never been the primary lever. The for-sale-by-owner trend is the clearest evidence available, and it runs counter to the commission-compression thesis.

The market has already run this experiment

Before drawing conclusions about AI's downward pressure on agent compensation, it's worth examining previous disruptions that spurred similar predictions.

Redfin built one of the most-visited real estate websites in the country on a foundation of lower commissions and consumer rebates. After years of operation and significant investment, in 2022 Redfin abandoned its consumer rebate model. Its brokerage market share never exceeded 1% of U.S. home sales. It was acquired by Rocket Companies last year — not because its rebate model succeeded at scale, but because its traffic and technology had value as part of a broader mortgage and real estate platform.

Help-U-Sell pioneered the flat-fee model in 1976. Nearly 50 years later, it remains a niche franchise operation. Trelora, which built a following in the Denver market on the premise that percentage commissions were outdated, was acquired by a fellow discount brokerage in 2022 after more than a decade without reshaping its market. There are countless other examples.

These companies didn't fail to change the market for lack of effort or capital, but because the market was telling them something they did not want to hear: Most consumers were not motivated by the savings they were offering.

Perhaps the most salient example is what happened after the Sitzer/Burnett lawsuit and settlement. The plaintiffs' attorneys predicted that if buyer agents had to disclose their fees up front, and sellers no longer felt obligated to cover those fees, a renaissance of price competition would occur — lowering the cost of buyer agent services. Instead, commissions have largely remained flat or increased since new industry rules took effect nearly two years ago.

In the majority of real estate transactions, buyer agent services are still 100% contingency-based — a structure buyers typically prefer, surveys have found. Most agents, therefore, are not willing to take a pay cut when they are already taking on significant risk by investing time in client work with no guarantee of payment.

Efficiency does not automatically lead to lower prices

The argument that AI will compress commissions rests on a logical assumption: If technology reduces the time and effort required to complete a transaction, the price of that transaction should fall. In many industries, that is exactly what happens.

Real estate agent economics do not follow that pattern, for a reason that is specific to how agents think about their businesses.

The savings generated by using AI to perform the tasks it excels at — writing listing descriptions, scheduling showings, entering data into MLS systems — are not meaningful enough to make lowering the agent's fee the obvious move.

Top producers are focused on managing high-quality relationships well. For an agent who is already busy, reducing their personal workload by using AI tools is valuable, and they will likely use the time savings for other activities (like taking an afternoon off) or developing more quality client relationships. The idea that agents will instead use that efficiency to "pass along the savings" to the customer through lower fees is counterintuitive to the agent.

There is another important dynamic at play. Agents who have tried to compete on fees consistently encounter the same problem: Positioning with low pricing first undermines their message of high-quality representation by implying that they do less or are worth less. It is not a strategy for building the trust-based relationships that drive referrals and repeat business.

What AI changes — and what it does not

None of this means AI is irrelevant to the future of agent compensation. But the mechanism of change is different from what a task-efficiency analysis suggests.

The same report that gave AI an edge over agents in most home sale tasks found that humans had a clear advantage in three critical areas: negotiation execution, hyperlocal knowledge and emotional support. Notably, those are among the most valuable things agents do, and they are not easily replicated by machines.

What AI will change — and is already changing — is the floor. Agents who cannot demonstrate judgment, local expertise and relationship skills will have a harder time justifying full-service rates. The technology only makes the gap between a capable agent and a marginal one more visible. The likely outcome is not commission compression, but the continued consolidation of transaction volume among agents who can clearly demonstrate value — and continued pressure on those who cannot. That dynamic has been underway for years. AI accelerates it.

The right question

The useful thing about the current wave of AI analysis is that it forces a precise accounting of what agents actually do and what that work is worth. But the conclusion is not that commissions will collapse. It is that the brokerages and agents who will thrive will be those who can provide a clear answer to an important question: What do we offer that a capable consumer with good tools cannot replicate on their own?

The question isn't new, and the answer has consistently been that most consumers want a trusted professional guiding them through one of the most consequential decisions of their lives — and they are willing to pay for it. 

AI does not change that. It raises the standard for what trust looks like.

Jack Miller has held leadership roles in the real estate industry for over two decades and is currently CEO and president of T3 Sixty, one of real estate's leading management consultancies. (Note: Real Estate News is an editorially independent division of T3 Sixty.) Jack also contributes to the Swanepoel Trends Report, writing about brokerage industry trends, technology in real estate and emerging business models.