1. Commissions are always negotiable.
Commissions can be negotiated at any point throughout the transaction, including at the outset, after the results of a home inspection and after an offer has been made. Sellers negotiate with their broker what fee they are willing to pay for their broker’s services and the amount the listing broker offers to pay a cooperating buyer broker who brings a buyer for their home.
2. There are different commission models to choose from.
Buyers have many different choices about which broker they want to work with in terms of everything from the commission model to a real estate agent’s particular expertise to the agents’ customer service approach. In the full-service approach, commissions are negotiable at any point during the home buying process. The reduced service/discounted fee model allows for flexible offerings and pricing. The flat fee approach allows buyers to negotiate a set price per service.
3. Commission rates are set by the market.
The free market organically establishes commission costs within local real estate markets based on service, consumer preference and what the market can bear, among other things. National Association of REALTORS’® guidelines ensure that the listing broker advise all other participants in their local broker marketplace what the amount of compensation to the buyer’s broker will be for closing the sale. That amount is determined by the seller and the seller’s broker. Commissions fluctuate over time, including having decreased steadily in recent years and having fallen to a new low of 4.94% in 2020.
4. Commissions cannot be included as part of a mortgage.
The vast majority of mortgage lenders do not allow commissions to be added to home loans. For many, saving for a down payment is difficult enough. If buyers had to pay commissions directly on top of their closing costs, it would increase their out-of-pocket expenses in a way that would freeze out many from an already competitive market. That’s especially true for first-time and low- and middle-income buyers, and communities of color that disproportionately fall in those categories.
5. REALTORS® are bound by a strict code of ethics in the home buying process.
REALTORS® are bound by NAR’s Code of Ethics to always further clients’ best interests, including showing homes that meet buyers’ needs regardless of commissions offered. Additionally, in November 2020, NAR introduced its Fair House Action Plan, abbreviated ‘ACT,’ which emphasizes (A)ccountability, (C)ulture Change, and (T)raining in order to ensure America’s 1.5 million REALTORS® are doing everything possible to protect housing rights in America.
6. Broker cooperation keeps local broker marketplaces from fracturing.
Because of broker cooperation, buyer and seller brokers are incentivized to share their information in their local, independent broker data hub. Without it, lack of complete, transparent and accessible data for all would mean smaller brokerages and new entrants have to piecemeal information and couldn’t offer as many options to sellers and buyers, and larger brokerages would dominate local markets, creating emerging behemoths that would drive up costs.
7. Broker cooperation sets the U.S. real estate industry apart from the rest of the world.
The U.S. model has long been – and is still – viewed as the best option for consumers around the world. Buyers abroad are forced to wade through a complex and fragmented market where they have to work with multiple brokerages and where there is no exclusivity so sales can fall through. Generally, the homebuying process abroad is similar to buying a car in the United States where you have to go dealer to dealer, it’s very time consuming and impersonal. It’s also common for brokers to charge fees and taxes in other countries that add up to the equivalent or greater of costs associated with buying and selling property in the U.S., yet only provide a fraction of the services consumers receive here.