Most U.S. Homebuyers in the Dark About Agent Commissions

Most U.S. Homebuyers in the Dark About Agent Commissions

Residential News » Seattle Edition | By WPJ Staff | April 12, 2024 8:41 AM ET

According to recent data from national property broker Redfin, a significant portion of U.S. homebuyers are in the dark about their real estate agent's compensation: 28% are unaware of the payment amount, 17% do not know how this figure was determined, and 19% are uncertain about who actually pays their agent. This information stems from a survey Redfin commissioned in February 2024, carried out by Qualtrics, which included 2,995 U.S. homeowners and renters, focusing specifically on the 120 respondents who purchased a home in the past year using an agent.

The survey revealed that only about 37% of recent homebuyers knew exactly how much their agent was compensated, 38% knew who paid the agent, and 33% fully understood how the payment amount was decided. Traditionally, it is common for home sellers to pay the commission for both their own and the buyer's agent, with each agent typically receiving a commission of 2.5%-3% of the home sale price.

Daryl Fairweather

Redfin Chief Economist Daryl Fairweather highlighted a significant issue: "Many Americans embark on the largest financial transaction of their lives without fully understanding how their agent is compensated. While home sellers often discuss fees openly with their agents, homebuyers could also benefit from such transparency. Discussing finances may be uncomfortable, but it's crucial for buyers to know what their agent charges and whether they should negotiate for the seller to cover this fee or plan to pay it themselves."

The topic of real estate commissions has been prominent in the news, especially following the National Association of Realtors (NAR) agreeing in March to a $418 million settlement in a series of lawsuits about agent compensation. As part of the settlement, agents are now required to establish written agreements with buyers detailing compensation before home tours begin.

Regarding opinions on fair commission rates, about 39% of homeowners intending to sell their home in the next year consider a 3% commission for a buyer's agent to be somewhat or very high. Conversely, 36% believe it is appropriate, and 26% feel it is on the low side. Similar sentiments were recorded for seller's agents, with 39% of future sellers thinking a 3% commission is too high, 40% saying it is just right, and 21% viewing it as too low.

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