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Why Are Buyer’s Agents Earning Less on Home Sales?

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It has been a seller’s market in the U.S. real estate market for the past several months. Many consumers realize the low mortgage rates, coupled with low housing inventory have driven up home prices.  Buyers have been met with bidding wars and have purchased homes over asking price.  However, in some situations, the buyer’s agent isn’t getting as big of a cut, in the form of commission, as they have historically.

According to an article published in MarketWatch.com, “The average commission rate for these agents was 2.63% of the sales price of a home as of the three-month period ending Nov. 30, down from 2.69% a year earlier.”  In fact, it’s the lowest rate since Redfin began tracking the data in 2017.  The buyer’s agents are seeing smaller commission rates because, sellers, who determine and ultimately pay the commission rate to both agents, are offering anywhere from 2-2.5% commission to buyer’s agents instead of the historical 3%.  Simply put, the homes are in such demand sellers don’t have to offer larger commissions to the buyer’s agent.

Coincidentally, real estate buyer’s agents’ commission rate has been the subject of some class action law suits.  It has been argued that the “set-up is unfair to consumers” and could eventually result in buyers having to pay their own agent’s commission instead of it being the responsibility of the seller. This is a topic to continue to watch because it, coupled with eventual decline in home prices, could result in an overall reduction in the dollars in agents’ pockets.

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