Compensation is always negotiable. The seller decides what fee they are willing to pay for their broker’s services and how much that listing broker should offer a broker who brings a buyer to close the transaction. Compensation is always negotiable and consumers are encouraged to talk to their broker to understand and agree upon how they expect to be compensated.The U.S. broker compensation model benefits consumers. The practice of listing brokers’ offering compensation to buyer brokers leads to brokers sharing their inventory with each other. In turn, that means sellers have access to the largest possible pool of potential buyers, and buyers have access to the greatest number of housing options in one place.
Compensation cannot be included as part of a mortgage. The vast majority of mortgage lenders do not allow compensation to be added to home loans. Listing brokers’ offers of compensation to buyer brokers gives first-time and low- and middle-income home buyers a better shot at affording a home and professional representation in the home-buying process. For many buyers, saving for a down payment is difficult enough, if buyers had to pay real estate compensation out-of-pocket on top of closing costs, it would push the dream of homeownership even further out of reach for countless people.
Compensation rates are determined by market forces. Historically, real estate commissions have always fluctuated due to the market conditions at a given time. In fact, according to RealTrends, who started tracking real estate commissions in 1991, commission rates are currently well below where they were in the 90s, all while REALTOR value has increased.
You get what you pay for. Local MLS broker marketplaces allow small brokerages to compete with large ones and provide for unprecedented competition among brokers, including different service and pricing models. So, you can choose from many compensation models. Those are choices to consider as you prepare to make likely the single most significant investment in your lifetime.
U.S. real estate market is the world standard. The U.S. real estate model has long been viewed as the most consumer-friendly around the world. Buyers abroad are forced to wade through complex markets that require consumers to work with multiple brokerages to access fragmented inventory because listings are not shared freely in the marketplace. The result is more time consuming, impersonal and costly.
Is there a “set compensation rate” real estate brokers charge consumers?
No. The market decides compensation rates, and compensation is always negotiable. Consumers have the choice of who they want to pay and how they want to pay them. Because of the pro-consumer local MLS broker marketplace model, and options like a success fee, there is unprecedented competition among real estate brokers, especially when it comes to the service and compensation options available to consumers.
Why not require buyers to pay compensation directly to their broker instead of the historic practice of listing brokers paying the buyer broker?
Forcing buyers to take on the additional out-of-pocket expense would cause them incredible hardship and would freeze many, particularly first-time and low- and middle-income home buyers, out from an already competitive market. That could also force home buyers to forgo professional help during what is likely the most complex and consequential transaction they’ll make in their lifetime.
How does the U.S. model compare to other, international broker marketplaces?
The U.S. approach is the most consumer-centric model. By consolidating fees and the overall process, our nation’s model simplifies the experience, provides greater certainty of success to both buyers and sellers, and provides guidelines that ensure the accuracy of housing inventory made available to real estate professionals and consumers, all at comparable or lower total costs than those in other countries.
Why should real estate professionals make the money they do in compensation when so much information is available online?
Real estate brokers provide essential guidance as consumers navigate the legal, financial and community aspects of a purchase, including everything from determining property value to negotiating the price. They also make local broker marketplaces, which online housing portals tap into, possible because of all the information they input into those databases. And REALTORS annual income is just $43,330 and 88% are small businesses, a majority of which are women-owned.
How does the current approach to compensation benefit small businesses?
Local real estate marketplaces create the largest, most accessible and most accurate source of housing information available to consumers. That levels the playing field among brokerages, allowing small brokerages to compete with large ones, and provides for unprecedented competition among brokers, including different service and pricing models for consumers.
For more information, please visit https://realestatecommissionfacts.com/.
