The complaint, filed March 6, takes aims at National Association of REALTORS (“NAR”) rules that require all brokers to offer buyer broker compensation when listing a property on a MLS, saying this has driven up costs to the seller and stifled competition. It targets several states and complaint is centered around the MLS, where real estate commissions are artificially inflated with the “standard” offering being between 2-3% across the US.
Discount and traditional, despite a slide different in the seller’s commission, all offer 2-3%, driving the cost of selling a home higher. At dwellowner, we offer 1% out to buyer agents in the MLS and 1% to us, the selling (listing) agent, totaling 2%. Other firms may charge “only 1% to list,” but when you read the fine print, the seller is still responsible to pay out 2-3% on top of that 1%.
Over the years, the industry has continued to have pressure from the FTC and DOJ along with many scholars, who question the commission fees in then US, averaging over 5%. Most recently, in 2018, our founder, Eric Eckardt participated at the FTC/DOJ real estate panel in Washington, discussing real estate commission fees. He was joined on the panel with other industry participants. At the time, he was leading a platform for a national “discount broker,” but they were offering the full buy-side standard commission levels – he has since exited to launch dwellowner with complete autonomy to introduce a true consumer centric brokerage with a broader product offering. .
We expect the industry to continue to feel pressure on commission fees, being curtailed by at least 50% over the next few years due to the change in consumer behavior, optionality in market and technology. Real Trends, a data analytics and consulting firm in the real estate industry, estimated the average commission levels have declined to 5.09% in 2017, from levels around 6% several years ago – this trend will continue.
There are a number of viable alternatives now in market with more investment being made in the brokerage sector, targeting a $80 billion dollar industry – the total amount of real estate commissions consumers pay each year. This is providing home-sellers with more choice with companies like dwellowner. This combined with the change in consumer behavior, where we are seeing consumers become more technologically efficient and value driven has created an inflection point in the industry. Technology, allows us to optimize operating efficiencies and pass on cost savings – we’ve see in other industry like hospitality, travel and more. At dwellowner, we operate in the cloud, minimizing our fixed operating expense so we can easily pass on the cost savings to the consumer by reducing our commission fees to 2% total. At a traditional real estate firm, some would potentially implode and/or burn through liquidity given their razor thin margins.
So what does all this mean for you, the consumer – you will continue to see pressure on commission fees while having more optionality in market!