As the real estate industry undergoes a significant shift in its commission structure, a recent Redfin survey reveals a lack of knowledge among homebuyers regarding their agents’ compensation. According to the findings, a significant portion of recent homebuyers remain in the dark about crucial aspects of agent payments.
For example, 28% of recent homebuyers were unaware of the precise amount their agent received, 17% lacked knowledge about how this amount was determined and 19% were uncertain about who footed the bill for their agent’s services.
Only 37% of respondents had a clear understanding of their agent’s payment, while 38% were aware of who covered the costs. Meanwhile, 33% demonstrated comprehension regarding the methodology behind determining the payment.
The Redfin-commissioned survey was conducted by Qualtrics in February 2024. It was sent to 2,995 U.S. homeowners and renters, and it focused on the roughly 120 respondents who indicated they bought a home in the last year and used an agent.
Historically, commissions in real estate transactions have been negotiable, with the customary practice involving the home seller bearing the expenses for both the listing agent and the buyer’s agent.
“Many Americans make the biggest purchase of their life without knowing precisely how the professional they hired to guide them through the transaction is getting paid,” Redfin chief economist Daryl Fairweather said in a statement.
“Home sellers often have a candid conversation about fees with their agent before signing an agreement to work together. Buyers would benefit from doing the same. People feel awkward talking about money, but it’s important to understand what your agent is charging and have a discussion about whether you will need to ask the seller to cover your agent’s fee as part of your offer negotiation or pay for it out of pocket.”
In March, the National Association of Realtors (NAR) agreed to pay $418 million in damages to settle the real estate commission lawsuits. The trade group has also agreed to abolish the “Participation Rule” that required sell-side agents to make an offer of compensation to buyer brokers.
In addition to the damages payment, the settlement also bans NAR from establishing any sort of rules that would allow a seller’s agent to set compensation for a buyer’s agent.
Additionally, all fields displaying broker compensation on MLSs must be eliminated, and there is a blanket ban on the requirement that agents subscribe to MLSs in order to offer or accept compensation for their work.
The settlement agreement also mandates that MLS participants working with buyers must enter into a written buyer broker agreement. NAR said that these changes will go into effect in mid-July 2024.