Key Takeaways
- A report by the Consumer Policy Center showed that homebuyers and sellers could be leaving thousands on the table by sticking with a traditional real estate commission structure.
- Real estate commissions are generally 5% to 6% of the home’s sale price, but more low-fee brokers are emerging, offering similar services for half that price or less.
- There are several steps buyers and sellers can take to negotiate better rates and make sure that agents aren’t steering them away from better deals.
American homebuyers and sellers could be shelling out thousands more than necessary just to close a deal.
A new report suggests that both sides of a housing transaction could be overpaying agents by more than $10,000 on a home sale.
In most markets, agents charge between 5% and 6% of the home sale price as a commission, which is often split between the buyer’s and seller’s brokers. But there is increasing competition in the real estate market: Low-fee brokerage firms are emerging that charge less than half the price of traditional brokers.
Still, many buyers and sellers have been reluctant to embrace low-fee agents, according to a recent report from the Consumer Policy Center.
“For decades, the traditional real estate industry has successfully protected a pricing structure that grossly inflates their fees above the rates that would prevail if they were subject to the same form of price competition that limits prices for most other goods and services,” said the think tank’s Senior Fellow Mark Nadel in the report.
Why This is Important for You
High real estate commissions increase the cost of buying and selling a home, which can worsen affordability, reduce household savings, and limit how much equity owners keep. As home prices rise and technology lowers search and transaction costs, increased fee competition could shift how value is priced in housing.
The savings could be significant. Given that the median home sales price is just over $400,000, reducing agents’ fees to 3% could save buyers and sellers more than $12,000, the report found.
Real Estate Agent Commissions Rise with Home Prices
Housing values have soared since the pandemic, with S&P Global calculating a 55% increase in home prices since 2019. As a result, homebuyers and sellers are experiencing a similar increase in real estate agent fees, even though the services rendered haven’t changed, Nadel wrote. On top of that, technological changes have made it easier for buyers and sellers to handle their own transactions in the housing market.
“Today’s buyers have so much access to listing data that many find the home they want before ever calling an agent,” said Alvaro Moreira, founder of Moreira Team MortgageRight, a Georgia-based mortgage lender, in an email. “In that environment, paying a premium commission can feel outdated. Especially when affordability is tight and every dollar saved can make the difference between a deal working or falling apart.”
The prices that real estate professionals charge for their services have been under increasing scrutiny since a 2024 settlement in a class-action lawsuit over real estate commissions. While the settlement made some changes to real estate commission structures, the report argued that it has so far failed to meaningfully cut costs for buyers and sellers.
The problem: Many people just aren’t sure about what they’re getting with a low-fee broker.
“Most consumers are apt to suspect that low-fee agents offer less than meets the eye,” the report said.
How To Lower Sales Commissions
There are strategies that both buyers and sellers can employ to lower their costs during a real estate transaction, the report says. One is to negotiate a real estate agent fee up-front, which should be part of an agreement that also specifies the services that buyers or sellers will receive. Sellers should also retain control of fees that are allocated for the buyer’s agent but aren’t paid out, which the report said often flows to the listing agent as a bonus.
Sellers should also evaluate offers based on net proceeds, not sales price. An offer from a buyer using a low-fee agent could be a better deal for sellers, even if it is lower than other offers, the report said.
Nadel also warned buyers and sellers to be on the lookout for agent behaviors that could be intended to steer clients away from low-fee agents. Agents may not alert buyers to homes listed by low-fee agents or to listings that don’t include fees for buyer’s agents, even if it represents a better deal for the buyer.
And selling agents may initially limit access to their listings to agents in their networks, reducing the number of potential buyers who see it and potentially steering sellers to buyers’ agents charging the full commission, the report noted.
But when both buyers and sellers can negotiate on agent price, it can often be a better deal for both parties.
“When [real estate] commissions are negotiated, it can improve the economics of the entire deal,” Moreira wrote. “If sellers and buyers save on agent fees, that money can often be used to lower the sale price or offer concessions, which reduces a buyer’s cash-to-close and makes the purchase more affordable.”