SEATTLE, Feb. 25, 2021 /PRNewswire/ -- (NASDAQ: RDFN)
— Today Redfin (www.redfin.com), the technology-powered real estate
brokerage, published an in-depth analysis on real estate
commissions, giving consumers access to data that has historically
been unavailable to them. Redfin's analysis found the typical U.S.
home seller in 2020 paid the brokerage representing the buyer a
commission equal to 2.7% of the sale price—down only slightly from
2.8% in 2012.
Redfin expects fees will likely decline in 2021 and beyond as
data on agent commissions becomes widely available for the first
time. Real estate websites are now allowed to publish commission
rates that homesellers offer to the broker who brings a buyer as
the result of an antitrust settlement between the National
Association of Realtors (NAR) and the Department of Justice (DOJ).
Sellers will be able to see what other sellers are offering when
they visit real estate websites, helping them make more independent
and informed decisions.
"When a homeowner can see that their neighbor offered a 2.5%
buyer's agent commission rate, it makes it much easier to justify
offering a similar rate when they sell their home," said Redfin
Chief Economist Daryl
Fairweather.
Earlier this month, Redfin began displaying the buyer's agent
commission for more than 700,000 home listings and plans to add
more data as it becomes available. Redfin will continue to report
on commission rates and how they change over time as part of its
efforts to make the real estate industry more transparent for
consumers.
How Do Commission Fees Work?
Most often in a home sale
transaction, the seller pays the fees of both their agent and the
buyer's agent. While commission rates are negotiable and vary, U.S.
sellers typically pay 5-6% of the final sale price, which is split
between the seller's agent and the buyer's agent. The DOJ
settlement only impacts buyer's agent commissions, which are the
focus of this report.
A Red-Hot Housing Market Is Already Prompting Some Sellers to
Offer Lower Commissions
Today's hot housing market is accelerating the decline in
commissions. Demand for homes is sky-high, with thousands of
Americans moving and taking advantage of record-low mortgage rates
during the coronavirus pandemic. At the same time, there aren't
enough homes for sale, fueling fierce bidding wars. As a result,
some sellers have realized that finding a buyer will be a cinch,
regardless of the commission they offer to the buyer's agent.
"I've been talking with some of my sellers about offering no
more than 2.5% given the lack of inventory," said Sylva Khayalian,
a Redfin real estate agent in Los
Angeles. "There's such a huge shortage of houses for sale
that most homes will attract a long line of eager buyers no matter
what. As a result, many sellers feel they don't need to compensate
the buyer's agent as much for that part of the process."
iBuyers Pave the Way for Lower Commissions
Homes are
increasingly being sold by thrifty businesses like iBuyers instead
of individual sellers' agents. The term "iBuyer" (short for instant
buyer) is used to describe a real estate company that purchases
houses from homeowners in quick cash transactions, makes any
necessary improvements to the homes, and then resells them.
When an iBuyer resells a home, it pays a commission to the
buyer's agent, just like an individual home seller does. The
average commission rate paid by iBuyers dropped to 2.5% in 2020
from 2.8% in 2019 as these companies experimented with paying lower
fees to trim costs.
RedfinNow, Redfin's iBuying business, has experimented with
offering lower commissions to buyers' agents when it sells homes.
On more than 70% of its new listings this year, RedfinNow has
offered 0.5% less to the buyer's agent than it has historically,
according to RedfinNow Vice President Jason
Aleem.
"So far, offering a lower commission has not impacted our
ability to attract buyers and sell homes for top dollar. Paying
lower commissions means we can make even stronger offers to
homeowners who request a cash offer from RedfinNow," Aleem said.
"We're excited to share this strategy with our brokerage clients,
who can hopefully save a chunk of change when they sell their home
with a local Redfin agent."
In many of the top iBuyer markets last year, iBuyers paid lower
commissions to buyers' agents than individual sellers did. In
Phoenix, iBuyers paid 2.6% on
average, while individual sellers paid 2.8%. When the DOJ
settlement goes into effect and sellers can see what other
sellers—including iBuyers—are paying in commissions, many of them
may opt to pay a lower fee as well.
"iBuyers may have started the trend of offering lower
commissions, but other sellers will follow," said Sabrina Archolecas, an asset manager for
RedfinNow in Texas.
Commission Summary By Metro Area
50 largest metros
by number of home sales in 2020. Data* represents all homes sold in
a given metro, including those sold by iBuyers and
homebuilders.
Metro
Area
|
Average Commission
Rate Sellers Offered to Buyers' Agents (2020)
|
Share of Sellers
Offering Commission of 3% or More to Buyers' Agents
(2012)
|
Share of Sellers
Offering Commission of 3% or More to Buyers' Agents
(2020)
|
Anaheim,
CA
|
2.4%
|
33.0%
|
5.7%
|
Atlanta,
GA
|
3.0%
|
89.3%
|
92.3%
|
Austin, TX
|
3.0%
|
96.4%
|
95.3%
|
Baltimore,
MD
|
2.5%
|
33.0%
|
7.1%
|
Boston, MA
|
2.2%
|
8.1%
|
0.9%
|
Buffalo,
NY
|
2.9%
|
93.4%
|
80.7%
|
Camden, NJ
|
2.8%
|
25.0%
|
55.6%
|
Chicago,
IL
|
2.4%
|
19.9%
|
1.9%
|
Columbus,
OH
|
3.0%
|
93.4%
|
94.5%
|
Dallas, TX
|
3.0%
|
95.0%
|
95.4%
|
Dayton, OH
|
3.0%
|
95.9%
|
96.1%
|
Denver, CO
|
2.8%
|
17.2%
|
5.3%
|
Elgin, IL
|
2.4%
|
25.8%
|
1.9%
|
Fort Lauderdale,
FL
|
2.8%
|
86.7%
|
68.1%
|
Fort Worth,
TX
|
3.0%
|
94.5%
|
92.3%
|
Frederick,
MD
|
2.5%
|
47.5%
|
12.2%
|
Grand Rapids,
MI
|
3.0%
|
93.1%
|
94.2%
|
Houston,
TX
|
3.0%
|
94.3%
|
94.5%
|
Indianapolis,
IN
|
3.0%
|
89.5%
|
83.4%
|
Kansas City,
MO
|
3.0%
|
94.4%
|
92.8%
|
Lakeland,
FL
|
2.6%
|
57.0%
|
32.0%
|
Little Rock,
AR
|
2.4%
|
14.4%
|
7.8%
|
Los Angeles,
CA
|
2.4%
|
33.2%
|
4.1%
|
Minneapolis,
MN
|
2.7%
|
22.6%
|
1.6%
|
Montgomery County,
PA
|
2.6%
|
63.2%
|
32.9%
|
Naples, FL
|
2.9%
|
84.1%
|
67.7%
|
Nashville,
TN
|
3.0%
|
94.6%
|
91.9%
|
Nassau County,
NY
|
2.0%
|
6.0%
|
3.1%
|
New Brunswick,
NJ
|
2.4%
|
24.7%
|
7.8%
|
New York,
NY
|
2.3%
|
23.2%
|
15.3%
|
North Port,
FL
|
2.9%
|
90.6%
|
81.9%
|
Oakland,
CA
|
2.5%
|
35.3%
|
4.4%
|
Orlando,
FL
|
2.7%
|
80.4%
|
39.5%
|
Philadelphia,
PA
|
2.7%
|
74.2%
|
42.0%
|
Phoenix,
AZ
|
2.8%
|
64.0%
|
57.7%
|
Portland,
OR
|
2.4%
|
16.4%
|
1.0%
|
Raleigh,
NC
|
2.5%
|
20.1%
|
4.6%
|
Riverside,
CA
|
2.5%
|
59.4%
|
19.7%
|
Rochester,
NY
|
3.0%
|
96.7%
|
94.4%
|
Salisbury,
MD
|
2.6%
|
51.8%
|
27.6%
|
San Diego,
CA
|
2.5%
|
33.9%
|
4.1%
|
San Francisco,
CA
|
2.5%
|
18.2%
|
3.9%
|
San Jose,
CA
|
2.5%
|
30.1%
|
3.9%
|
Seattle,
WA
|
2.8%
|
87.8%
|
58.1%
|
St. Louis,
MO
|
2.7%
|
35.8%
|
5.8%
|
Tacoma, WA
|
2.6%
|
68.6%
|
22.1%
|
Tampa, FL
|
2.6%
|
32.6%
|
12.3%
|
Virginia Beach,
VA
|
2.9%
|
91.0%
|
90.6%
|
Washington,
DC
|
2.6%
|
72.9%
|
18.2%
|
West Palm Beach,
FL
|
2.7%
|
85.3%
|
50.1%
|
National—U.S.A.
|
2.7%
|
59.7%
|
44.8%
|
To read the full report, please visit:
https://www.redfin.com/news/real-estate-commissions-2021
About Redfin
Redfin (www.redfin.com) is a
technology-powered residential real estate company, redefining real
estate in the consumer's favor in a commission-driven industry. We
do this by integrating every step of the home buying and selling
process and pairing our own agents with our own technology,
creating a service that is faster, better and costs less. We offer
brokerage, iBuying, mortgage, and title services, and we also run
the country's #1 nationwide brokerage website, offering a host of
online tools to consumers, including the Redfin Estimate. We
represent people buying and selling homes in over 90 markets in
the United States and Canada. Since our launch in 2006, we have
saved our customers over $800 million
and we've helped them buy or sell more than 235,000 homes worth
more than $115 billion.
For more information or to contact a local Redfin real estate
agent, visit www.redfin.com. To learn about housing market trends
and download data, visit the Redfin Data Center. To be added to
Redfin's press release distribution list, email press@redfin.com.
To view Redfin's press center, click here.
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SOURCE Redfin