In the realm of real estate, where transactions involve substantial financial stakes and intricate negotiations, the commission structure has always played a pivotal role. It has long been a standard practice for real estate agents to earn a percentage-based commission on the sale or purchase of a property.
Traditionally, a six percent commission was charged on all transactions which was typicalluy split if two agents were involved, one representing the seller and one the buyer. This is the structure we’ve all known for decades.
This structure was basically enforced by the National Association of Realtors. The NAR maointains the national multiple listing service (MLS) and if you were an agent and wanted access to this network, which is incredibly valuable to have, then you had to be an NAR member and you had to abide by the six percent commission structure.
A lawsuit that was settled recently in Missouri has changed all of that with the commission structure now open to change. We were trying, with this article, to provide information on what may now transpire in the industry with this new reality in place.
However, we were able to get very little information ferom local agents probably due to the fact that no one really knows what’s going to happen and no one wants to say anything until they know more.
Our prediction: since this is a free market economy, the market will eventually assert itself and change will come. Almost certainly cmmissions are going to come down. Ther have already been companies over the last few decades that experimented with lower commissions but none of themhave been very successful for a number of reasons.
Having been in sales for decades, I have seen a lot of sales situations and strategies in differnet areas of business. If I am not mistaken, what will start to happen is a gradual lowering of commissions as some agents decide to drop their rate to attract more business. Other people will follow suit gradually and in a certain period of time everyone will be competing for business by doing the same thing.
If we were in a robust market that may happen more slowly but we’re not. We’re in a market where a lot of agents have been selling less properties and making less money because of the high interest rates primarily. What are these agents going to do to get more business.?
In any situation a lower price makes it easier for a customer to buy so that’s what will happen. Commission rates will go down as agents figure it would be better to make a little less on each sale but have more of a volume of sales.
It’s what I would do if I were selling real estate right now and I’m pretty sure that’s what will happen with real estate now.
But who’s going to be the first to start aggressively marketing lower commission rates to their customers. I think there will be a wait-and-see period where no one will want to be the first to lower their rates but it will inevitably happen and then the floodgates will be open.
I think this is the reason no local agents wanted to talk about what’s going on. Plus, they’re still trying to figure out what their strategy will be. It will be interesting times moving forward in any case.
— John Williams
