Americans pay some of the highest real estate commissions in the world, and those fees are under scrutiny.
The average commission for a home sale here is usually around 5-6%, usually split 50-50 between the seller and buyer’s agent. The Wall Street Journal reports that this is the third highest number in the world. For example, fees in the UK are typically 1.3 per cent and in Australia 2.5 per cent.
Rising mortgage rates have led some consumer advocates to argue that U.S. real estate agents’ fees are too high, considering the Internet has made it much easier for shoppers to do their own research. claims. A federal jury found in late October that the National Association of Realtors and several large brokerages conspired to keep commissions high and were liable for about $1.8 billion in damages.
Real estate agent groups argue the fees are justified given their expertise in navigating an increasingly complex market. They also claim that fees are negotiable.
Q: Are U.S. real estate agent fees too high?
Caroline Freund, School of Global Policy and Strategy, University of California, San Diego
yes: If we paid British fees, Americans would save more than $70 billion a year. Real estate agents can earn more through faster sales, higher transaction prices, and maximum commissions. They have an incentive to proactively share new listings with a few colleagues, while also keeping buyers away from their homes with discounted fees. While there is value in having intermediaries in stressful negotiations, the current system encourages collusion and bad behavior. This is a rare area where further regulation and oversight is needed to improve competition.
Kelly Cunningham, San Diego Economic Institute
no: You primarily pay for what you get from negotiating the price and fees of a real estate transaction. Some people choose to negotiate the deal themselves, paying for the representation of a real estate agent and the services they provide (including access to multiple properties). One of the largest transactions a consumer has ever made involves complexity and risk, and it is worth paying some cost for the expertise of a professional to deal with such complexity. . Comparing prices without considering all factors is misleading.
Lynn Reaser, economist
yes: The Internet has significantly reduced the cost of matching buyers and sellers, compared to the typical 5 to 6 percent commissions that existed before the advent of computers. Rather than being the third highest commission in the world, a 3-4% commission likely reflects the real estate agent’s value in most transactions. Real estate agents still provide valuable services to many buyers during their search process, including arranging walk-throughs, negotiating prices, and handling contract documents. However, those services may be too expensive.
Phil Blair, Manpower
yes: So many changes have taken place in the residential real estate market, both good and bad. Prices exclude sales commissions, etc. Luxury real estate sellers negotiate the sales commission they pay, and commercial real estate is no different. With so much technology available to buyers and sellers today, the services they require can vary widely. Pricing should also be a la carte.
Bob Rausch, RA Rausch & Associates
no: No, I agree that if there was a law that said you had to pay a 6 percent commission when you sold your home, that would be too high. However, commission offers are negotiable. These are determined by the market and the value the real estate agent brings to the consumer. In my business, if his nightly rate for a hotel is $300, that may sound high. So please be somewhere else. If you don’t like the restaurant’s prices, eat somewhere else.
James Hamilton, University of California, San Diego
yes: Modern technology has made it easy to find details about available homes for sale and their fair market value. This allows brokers to connect buyers and sellers much more efficiently than before. There are still benefits to having a private broker help you with some of the details. But that service isn’t worth 6 percent of the value of a $2 million home.
Norm Miller, University of San Diego
yes: The top 10% to 20% of experienced full-time agents deserve to be paid handsomely for their advice and assistance in avoiding pitfalls and risks before making a home transaction. The bottom 80 percent, many of whom are part-time and inexperienced, are not worth the regular fees, but they add to market inefficiency: overpriced listings. Lower fees will encourage top agents to make more deals and, hopefully, marginal producers will fall out of the system.
Jamie Moraga, Franklin Revere
no: Commissions are negotiable and there are many agents to choose from. From scheduling listings and marketing to negotiating and closing deals, real estate agents provide the expertise and years of experience you need to earn commissions. Brokerage fees are worth the time, effort, and guidance a real estate agent provides, and many consumers are willing to pay them. If you don’t want to pay a real estate agent’s commission, you have the option of selling by owner or listing on an app like Zillow.
David Ely, San Diego State University
yes: The federal jury verdict against NAR and several large brokerage firms provides the strongest evidence that the fees are excessive. Consistent with this view is the lack of opportunity for buyers to negotiate the commissions they pay to brokers. With online resources available to buyers, agents can spend more time helping customers identify properties. Having the option to purchase services individually rather than as a package reduces expenses for many people.
Ray Major, Sandag
yes: Nothing a real estate agent does will guarantee you 6% of the home price. The concept of “paying a percentage of a home’s value to sell it” has its roots in his 1800s system, where agents had to work hard to find a buyer. With the advent of the Internet, agents are no longer needed. The average salary for a San Diegan working 2,000 hours is $69,000, but the commission on a $1 million home is $60,000, which seems disproportionate.
Austin Newdecker, Weave Growth
yes: Rewards should correlate with the value provided. I have had very positive experiences with agents in the city and have received commissions, but other experiences have left me feeling exploited. Digital platforms have made listings and advertising highly commoditized. Depending on the market, significantly less effort is required on one side of the transaction. Agent fees must be paid on both sides of the transaction to adjust profits and may be adjusted based on performance and size.
I won’t be participating this week
Alan Ginn, University of San Diego
Honey Hong, San Diego County Taxpayers Association
Gary London, London Moder Advisors
Chris Van Gorder, Scripps Health
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