The average commission paid to real estate agents on American home sale transactions continues to decline—and could even dip below 5% within the next few years, the Chicago Tribune reports.
According to Real Trends, a research and advisory company that monitors and compiles data on sales and commission rates of 450,000 U.S. sales agents, the actual national average for commissions was 5.26% in 2015, even though 6% is the preferred rate at many full-service, traditional brokerages. And based on preliminary data, it’s likely to decline further when the final numbers are tallied for 2016.
“We are headed for (a) sub-5% overall rate within the next few years,” says Real Trends President Steve Murray.
In 2010 and 2012, the average rate was 5.4%, and in 2013 it was 5.36%. During the 1980s and early 1990s, the standard sometimes was 7%, depending on the local market.
The decrease is the result of multiple factors such as the rising number of agents working for brokerages that allow them flexibility to negotiate lower commission rates, with no set minimum. Tech-savvy discount rate competitors such as Redfin, which is now active in 83 markets, are offering lower charges and putting pressure on competing firms’ agents to be more flexible on fees.
And during 2015 and 2016, some major markets saw severe shortages of homes available for sale, making traditional agents more willing to negotiate lower fees in order to obtain listings.