Homebuyer’s agent commissions dropped to an average of 2.63% in 2021.
Strong Seller’s Market in 2021 Likely Cause of Drop in Buyer Agent Commissions
The 2021 heavily skewed seller’s market encouraged some sellers to think they could attract potential buyers and bidders without having to offer buyer’s agents the traditional 3% of the home’s sale price.
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The result? Buyer agent commissions dropped to 2.63% of the home sale price, the lowest commission rate since at least 2017, according to Redfin.
Buyer Agent Commission Rates Dropped in Percentage Terms, NOT in Dollar Terms
Even though home sellers spent less in commissions to buyer’s agents in terms of percentages during 2021, home sellers paid buyers’ agents more in dollars.
Due to 2021’s exploding home prices, the typical home seller paid the buyer’s agent $12,415 in commissions when the house sold. During 2020, the typical seller paid the buyer’s agent a commission of $11,608 and in 2017, the typical buyer’s agent commission was $9,610.
Possible Connections to Falling Commission Rates
As housing markets, home searches and consumer preferences evolve, there are a variety or combination of reasons that agent commission rates are changing.
First, according to the National Association of REALTORS® (NAR), 95% of homebuyers searched online for a home in 2021 . Additionally, NAR found that potential buyers were twice as likely to have searched for a home online as a first step in their homebuying journey instead of first contacting an agent. The result? Sellers and their agents know they’ll be more than likely to find a buyer for the home regardless of what commission they offer to a buyer’s agent.
Second, sellers know their homes are hot commodities amid this market of having too few homes to sell and too many buyers anxious to buy them. Sellers know that in this completely out-of-whack seller’s market their houses will attract multiple bids from buyers with or without a buyer’s agent.
Sellers also know there are more real estate agents than there are homes for sale. Agents themselves compete with each other by offering clients lower commission fees.
Sellers know too that some home sellers and home selling companies, iBuyers,are already paying lower commissions.
Sellers know that some real estate websites began publishing buyer’s agent commission rates in some of their markets during 2021. More websites and multiple listing services will be required to publish buyer’s agent commissions in 2022.
Sellers know that the Department of Justice is currently looking into real estate industry protocols having to do with buyer agent commissions. How the DOJ probe into commissions goes and how two consumer class action suits regarding buyer agent commissions are decided could completely upend “traditional” real estate practices and commission structures.
Lastly, sellers of homes with price tags of $500,000 or less are the most likely to offer buyers’ agents less in commission rates. Why? Demand for homes priced at or under $500,000 is the greatest. These homes sell like hot cakes with or without buyers’ agents.
Metros with Largest Drops in Buy-Side Commission Rates
During the three months ending November 30, 2021, metros with the lowest buyer agent commission rates included:
– Nassau County NY – 1.98%
– Boston MA – 2.21%
– Anaheim and Riverside CA – 2.22% and 2.25% respectively
– New Brunswick NJ – 2.30%
– Los Angeles CA – 2.34%
Kansas City MO and Columbus OH had the highest average buyers’ agents commissions at 2.94%.
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Thanks to Redfin.
