Real Estate Brokerage

CFA Report Explains How Home Buyers Can Get a Better Deal by Using Newly Available Information About Buyer Agent Commissions Published on Home Sale Listings

These Commissions Are Prominently Published by Redfin’s Website on Most Homes Listed for Sale, and also by Zillow and a Couple Large Firms on Many of Their Listings

Washington, D.C. – Today the Consumer Federation of America (CFA) released a new report – Buyer Agent Commission Rate Disclosures and Their Implications for Home Buyers and Sellers – that can help home buyers purchase the home they want and pay less for it.  The report includes an analysis of the publication of buyer agent commission rates by more than 300 local brokerage and portal websites.  (A commission rate represents a percentage of the home sale price.)

“The prominent publication of buyer agent commissions can help home buyers avoid well-documented steering by some agents away from low-commission homes to high-commission ones,” noted Stephen Brobeck, a CFA senior fellow and long-time researcher of residential brokerage policies and practices.  “Steered consumers may not be shown homes they would have preferred and end up paying higher commissions that are effectively added to the sale price of homes,” he added.

CFA recommends that on homes that interest them, home buyers always note the commission rate offered by the listing agent to buyer agents, then check to see whether their agent discourages them from visiting low-commission homes.  CFA also recommends that, if the rate is relatively high, buyers inquire as to whether a portion of it can be “rebated” to them.

Published buyer agent rates can also benefit home sellers by giving them information about typical rates usually paid to buyer agents in their area.  Today, because multiple listing services (MLSs) require listing agents to offer compensation to buyer agents, home sellers directly pay the commissions of both their agent and the buyer agent.

The report found that many large firms – including Berkshire Hathaway, Sotheby’s, Compass, Howard Hanna, Long & Foster, Crye-Leike, Century 21, and Realty One – never or rarely publish buyer agent rates.  It also learned that Zillow, Keller Williams, and Better Homes and Gardens prominently publish buyer agent rates on many of the homes for sale that they list on their websites.

Redfin, however, prominently publishes buyer rates on a large majority of the homes listed on local multiple listing services (MLSs).  “Home buyers who cannot find buyer agent rates on the website of their buyer agent can usually find these rates on the Redfin website,” CFA’s Brobeck noted.

The report emphasized that, while published buyer agent commission rates can benefit consumers, they are unlikely to increase price competition because buyers remain unable to negotiate these rates.  Two major lawsuits – Sitzer v. NAR and Moehrl v. NAR – have challenged the tying (or coupling) of listing agent and buyer agent commission.  “Untying commissions would allow buyers to negotiate rates, encourage sellers to do the same, and provide new opportunities for discount brokers to market their services,” said CFA’s Brobeck.  Research has found that commissions in the U.S. tend to be relatively high (internationally) and uniform (locally).