The US real estate commission model in the US is archaic, structured around a model half a century ago and is estimated to be over a $80 billion dollar industry. In 2019, there are still firms charging commission fees between 5-7%, extracting equity from home-sellers. Furthermore, it’s a common myth that, as a buyer, you “don’t pay your real estate agent” because the seller pays all commissions. However, that’s not really the case – you pay for it indirectly.
One Example – Commission Structure
Bill is buying a $500,000 home that Jennifer is selling with it listed on the MLS. Jennifer, the seller, has a real estate agent called a listing agent and Bill has his own real estate agent called a buyers agent.
Susan has offered 6% commission on the sale of the home.
Usually the listing agent will make 3% of the purchase price as a commission, and the buyer’s agent will also make around 3%. In this situation this works out to $30,000 or $15,000 per agent. Remember, there is no legal statute defining how much commission real estate agents should be paid or must charge the consumer – you can always negotiate. https://dwellowner.com/2019/03/27/class-action-lawsuit-targets-6-commission-with-nar/
So now that we understand how much is being paid in commission between a buyer and seller agent, we can address the question who pays the real estate commission. The short answer is the seller pays the commission. The longer answer is that the buyer technically pays both commissions in the purchase price of the home indirectly. Bill is actually paying the $30,000 for agent fees in his purchase price of $500,000.
For most consumers (home-buyers), when you amortize the commissions paid in the purchase price, a home owner like Bill will actually spend his first 2-3 years paying off agent commissions alone. Where on the sell side, if the seller only had $100,000 of equity, paying 6%, or $30,000 in real estate commission would wipe out 30% of their equity – sounds easier to digest when agents tell you 6% versus 30% of your equity!
New Progressive Real Estate Models
There are a number of real estate models challenging the US commission fee models, from flat fee to lower percentages, but most still pay out obnoxious buy-side commissions rates of 2-3%. . . Whereas, DwellOwner only pays out 1% on the buy and sell side – saving consumers thousands in commission expense. Historically, there was a risk third-party agents would not show a property offering only 1%, but today they are empowered with access to a wealth of information, including all available market inventory by looking on sites like Zillow, Realtor,com and dwellowner in markets we operate. The consumer typically starts their home search 4-5 months in advance of contacting an agent and know the homes they want to view.
Furthermore, when you work with dwellowner, you also get outstanding customer service while working with a licensed real estate professional. No hidden fees, just results! Why would anyone want to give away equity in 2019 on the sale of their home by paying archaic pre-internet real estate commission fees when you have a viable alternative as dwellowner – we are here to serve and pursue our social mandate, saving families thousands on commission expense!