Is the 6% Real Estate Sales Commission Outdated?

The Internet is changing the real estate business, continually drawing into question the current commission regime: typically 6% of the average home sales. With buyers doing a lot of the legwork, seeking out properties and neighborhood stats online, this is leading many to question whether that $18,000 chunk of change (6% of the average $300,000 home) is a worthwhile investment.

Why the 6%, Anyway?
Back in the day (the 40s-50s), the National Association of Realtors (NAR) required its members to set commissions at a certain level, either working full-time, or holding enough customers to earn a living in order to join and get access to the Multiple Listing Service (MLS).

A 1950s Supreme Court ruling deemed these ‘certain rates’ illegal. So the NAR changed them to ‘suggested’ rates. How it originally became 6% remains unknown. But since federal tracking of rates began in 1991, it has fallen from 6.1% to 5.18% in 2014.

Should Your Rates Be Dropping?
Real estate selling services are typically bundled, sometimes requiring consumers to opt-in for options they don’t need. On the…

Seller’s Side
Marketing, advertising, open houses, and price negotiation.

Buyer’s Side
Listings, showings, market research/knowledge, navigating the purchase process.

As consumers seek to ‘unbundle’ these services in the increasingly DIY Internet world, they are turning to services such as Redfin and ListingDoor, asking for/actively seeking agents outside of the traditional commission structure.

Rate Reductions & A La Carte Services
With this ‘get what you pay for’ mentality in mind, consumers and agents are looking for rate reductions in exchange for a reduction in services rendered, as a $300,000 home doesn’t necessarily cost twice what a $150,000 home does to sell (though it nets double the commission). As the market changes and grows increasingly competitive, such tactics may be worth a second-look.

Do you have the real estate selling tips you need to roll with the times? Stay ahead with the help of Properties Online.

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