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Understanding US Real Estate Commission Fees

Why do Americans pay about twice as much commission to real estate agents compared to their counterparts in other countries? The answer lies in the controversial ‘bundled’ commission system used across the US since 1913. For each sale, the buyer’s and seller’s agents take equal commission, which is paid for by the seller and is usually between 5 and 6 percent.

How Does the Bundled Commission System Affect Buyers?

A recent report by investment bank Keefe, Bruyette & Woods (KBW) argued that because the agents are bundled in the US, almost all buyers are represented by an agent. In the UK and Australia, less than 5 percent of home buyers have an agent, according to the report. Not only does the bundled system create artificially high buyer’s agent usage, the report claims, but it also reduces the incentive for buyers to negotiate a lower price for their services in the event they actually want them.

How Do US Real Estate Commissions Compare to Other Countries?

According to a report by investment bank Keefe, Bruyette & Woods, Americans pay about twice as much commission to real estate agents as their counterparts elsewhere in the world. The report states that countries where buyer’s agents are common and where buyers compensate their agents directly have roughly 30 to 35 percent lower commission rates on average than those countries where sellers typically compensate buyers’ agents.

What Does the Future Hold for US Real Estate Commissions?

Following a recent jury decision that found the National Association of Realtors (NAR) enabled agents to collude to keep their commissions artificially high, an upcoming order by the judge is expected to change how the system in the US works. Real estate consultant and founder of Las Vegas-based 7DS Associates, Rob Hahn, predicts that buyers will start paying for agents themselves and their use will decline, likely leaving many Realtors without a job.

What Are the Potential Consequences of Changing the Commission System?

As a result of the expected changes to the US commission system, many buyers may decide to purchase homes without using an agent. Hahn believes that buyer agents will eventually move towards being paid directly by the buyer on an hourly rate basis, upfront. The secondary consequence of this is that a lot of buyers will simply buy houses without using an agent, which could leave many Realtors without a job.

How Can Buyers and Sellers Navigate the Changing Real Estate Market?

For those looking to buy or sell a home, understanding the changing real estate market and the impact of commission fees is essential. By working with an experienced real estate agent, such as Jessica Fulk, buyers and sellers can navigate the market with confidence and ensure they are getting the best possible deal. With a focus on professionalism, engagement, and exceptional service, Jessica Fulk and her team are committed to helping clients achieve their real estate goals.

Orginal article: Link To Article – provided by Kansas City Realtors