For many years, American real estate agents have routinely taken a commission of between 5% and 6% with every home sale. With prices for California homes at astronomic levels, this can mean a lot of money for the agents. However, the percentage comes out of the sale price, so that means it takes a big chunk out of the profit any homeowner makes when they sell their home. Typically, sellers take this percentage into account before putting their homes on the market, and so the buyers end up paying a higher price.
This has been standard practice in residential real estate transactions for decades, but it may now be changing.
Real estate commissions
Ordinarily, sellers pay a commission, which is split equally between their own sales agent and the buyer’s agent. Technically, the seller can negotiate a commission rate with their agent before they put the home on the market, but market forces tend to keep it around 6% — about twice the rate that’s common in other countries.
Critics allege that industry groups have conspired to keep commissions high. Recently, a court ordered the National Association of Realtors and other industry groups to pay $1.8 billion for violations of antitrust law.
The industry groups will appeal that decision, but it appears that the 6% commission doesn’t look as standard as it used to. Until recently, online real estate websites in the United States wouldn’t even list a property if its commission was under a set number, but some organizations have recently announced that they are changing this policy. Some will now list properties with even a 0% commission, as is the case in certain cases where the sellers go without an agent.