If you paid a full 6% commission when you sold your home recently, you’re the minority, this according to a new survey from online real estate brokerage Redfin.
The company noted that some 60% of those who sold a home in the past year received some sort of discount on the real estate commission, which traditionally represents six percent of the sales price.
More importantly, those who did receive a discount were able to get 41% off the standard market commission, which can amount to some serious savings.
Additionally, nearly half (46%) of those who purchased a home in the past year were given some sort of refund, rebate, or closing cost contribution from their real estate agent.
The average savings for buyers amounted to $3,693 on average, perhaps enough to cover most lender fees associated with a mortgage.
For the record, Redfin considers itself a pioneer, or should I say disruptor, on the real estate commission front. They only charge 1.5% to list a property and refund a portion of the buyer’s agent commission back to the buyer ($4,000 on average) at closing.
Why Home Sellers and Buyers Are Saving on Commissions
Redfin noted that there are several reasons why home buyers and sellers are saving money on real estate commissions.
For one, competition is fierce in the real estate market at the moment. While homes are selling for a hefty premium compared to a few years ago, inventory is still way down. That means it’s tough to do serious volume as a real estate agent.
At the same time, more and more real estate agents have entered the fray, which is typical when the market enters a period of strong price appreciation. Everyone thinks they can get rich as a real estate agent, all at the same time…
Redfin also took credit for their reduced commission model having an effect on both buyers and other real estate agents, and other disruptors.
I recently wrote about the 4% real estate commission pitch where the seller’s agent only gets 1%, or maybe 1.5%, to list the property.
This seems to be one way for real estate agents to separate themselves from the crowd as homeowners get increasingly price-sensitive.
Homeowners are also becoming a lot more clued into the real estate buying and selling process thanks to websites like Redfin, Trulia, and Zillow, so they may think they can go it alone or use a more hands-off agent.
Speaking of, 15% of those who sold a home in the past year used a so-called “limited-service agent,” while another 10% chose to ditch the real estate agent altogether. Watch out NAR!
More Expensive Homes = More Hands-Off Agents
Interestingly, this was more common at higher price points, which seems odd to me given the fact that so much is at stake and more expensive homes often take more massaging to get done.
Of course, the commission can also be sky-high on a multi-million dollar mansion.
Check out this chart to see the use of an agent versus limited-agent and FSBO by price point.
Why People Are Ditching Real Estate Agents
If you’re wondering why homeowners decided to ditch the full-service agent, wonder no longer. Here are the top five reasons.
1. Save money (54%)
2. Don’t think a full-service agent is necessary (30%)
3. Don’t trust real estate agents (14%)
4. Couldn’t find an agent they liked (12%)
5. Other (5%)
Redfin said the takeaway is that the real estate agent model is changing after years and years of remaining static, granted they are the ones working to change it. Others like REX are doing the same.
And the stats prove the people want something different. Some 69% of those surveyed said they were open to an alternative to the traditional real estate service, up from 64% a year earlier.
In case you’re wondering, Redfin agents were involved in 10,092 transactions in the past year.
Read more: How much does it cost to sell a home?