Many of the nation’s largest real estate firms still do not publish the share of the commission paid to agents who work with homebuyers, leaving buyers to fend for themselves.
Buyers can sometimes get a better deal when they know in advance what their so-called buy-side agents are being paid, said Stephen Brobeck of the Consumer Federation of America. If you know your agent’s cut, it’s possible to bargain for a lower rate or even ask for a rebate at closing. But if you have no clue what they’re being paid, you are going into the transaction with blinders on.
Perhaps more importantly, if you understand who gets what, you can avoid being shown only the houses with the highest commission rates.
“Steering is the real problem,” Brobeck told me. “‘Steered’ consumers may not be shown homes they would have preferred and end up paying higher commissions that are effectively added to the sale price of homes.”
In a typical real estate transaction, the commission is split 50-50 between the brokerage firms where the listing agent and the selling agent work. Then, each brokerage pays a share of its take to their respective agents.
Most sellers know what their costs will be. But buyers rarely, if ever, ask – even though it’s their money that is disbursed at closing. It’s their money because the commission is paid as a percentage of the purchase price, which the buyer pays.
Another reason you should know what your agent takes from the sale: Your agent should be working for you. If they do not have your best interests at heart, maybe they shouldn’t be paid as much as someone who does.
Some Commission Splits Now Public
In late 2021, the nation’s 600 or so multiple listing services were required by the National Association of Realtors to allow MLS participants to publish the compensation offered to buyer’s agents on all home listings.
The new rule was, in part, a response to criticism that by not publishing commission splits, agents were given a green light to steer buyers away from low-commission properties in favor of high-commission ones. Not all agents engage in this unethical practice, but enough do that it is a problem – one recognized by the Federal Trade Commission as far back as 1983.
In his latest report, Brobeck said that even though some firms and listing-aggregate portals now allow splits to be published, few brokerages do so. Only Redfin “predominately publishes” buy-side rates on the houses carried on its site, Brobeck’s research found. Redfin, for what it’s worth, is primarily a low-commission broker.
Zillow, Keller Williams and Better Homes and Gardens show rates for only about half the houses on their sites, largely because local MLSs don’t publish them, according to the report. And major firms like Century 21, Berkshire Hathaway, Sotheby’s, Compass, Howard Hanna, Long and Foster, Crye-Leike and Realty One rarely, if ever, note buy-side commission rates.
Visibility Not Lowering Rates
Unfortunately, knowing what your agent earns for helping you find a house and making sure the sale goes through isn’t likely to increase price competition, Brobeck explains, because splits are coupled together in one rate. He has been a major advocate for the uncoupling of commission rates.
Buyers should have the same ability to negotiate commissions with their own agents that sellers have with theirs, Brobeck said. “Untying commissions would allow buyers to negotiate rates, encourage sellers to do the same and provide new opportunities for discount brokers to market their services.”
Two major lawsuits against the NAR are challenging the practice of tying rates together. Until that decoupling occurs, if it ever does, homebuyers should always look at the listing to find what share of the sales commission their agents are earning. If you can’t find that percentage, ask your agent – and don’t settle for “half” as an answer. Half of what?
If your agent still balks, you can “almost always” find what you need to know on Redfin’s property listings, said Brobeck.
Armed with that information, you can check to see if your agent discourages you from visiting properties where their cut is smaller. And if the percentage seems high, you can inquire whether a portion of it can be rebated to you. (Note: Nine states still outlaw such rebates.)
If buyer’s agent rates were easily available to homebuyers, the CFA report said, “buyers might wonder or even question agents’ reluctance to show buyers low-commission properties. Moreover, informed buyers could insist that these properties be shown.”
The key message is this, said Brobeck: “Learn the commission rate offered to agents on any property of great interest to you. And talk to your agent about the possibility of a partial rebate of this commission to you.”
Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at firstname.lastname@example.org.