Question: What is the normal commission rate for buyer-side real estate agents?
Answer: There has been a long-held belief that real estate agents should avoid any public discussion of commissions to avoid antitrust laws and ethics violations, but now that many popular public-facing real estate websites (e.g. Zillow and Redfin) are publishing buyer-side commissions, not to mention recent efforts by the National Association of Realtors to open-up transparency, I don’t see any reason why I can’t share that data the same way I do other relevant stats throughout the year.
The data and charts below represent the buyer-side commission published in the MLS for transactions in Arlington, sans any subjective commentary that could get me in trouble ☺
How Are Commissions Determined?
In most cases, commissions are set in the Listing Agreement between the seller and the seller’s real estate agent. A total commission fee is established, with a disclosed amount going towards the agent/broker representing the buyer of the home. That buyer-side commission is published in the MLS. The other portion of the commission/fees (that going to the listing agent/broker) is not and I do not have any broad-market insight into those numbers.
Buyer agents may establish minimum commissions or other fees in the Representation Agreement between the buyer-side agent/broker and the buyer, but this article/data is specific to the buyer-side commission, offered by the seller/listing broker, published in the MLS.
Buyer-side Commissions Down 11.4% Since 2014/2015
In 2014 and 2015, buyer-side commissions averaged 2.9% across all transactions in Arlington. As of 2021, the average buyer-side commission in Arlington dropped by 11.4%, to 2.57%. The biggest one-year drop occurred between 2018 (2.75% average) and 2019 (2.65% average).
Setting aside the historically high volume of real estate transacted in 2021, gross revenue (calculated by real estate sales volume multiplied by the average buyer-side commission percentage) to brokerages covering buyer-side transactions in Arlington remained fairly consistent year-to-year from 2014-2020 because lower buyer-side commissions were offset by rising real estate values.
So, for everybody out there with a dislike for us real estate agents, you can raise a glass and toast to the industry (at least the buyer-side of Arlington transactions) getting little-to-no raise in the seven years from 2014-2020!
3% Buyer-Side Commission, It Was Nice Knowing You!
In 2014 and 2015, just under 80% of buyer-side commissions in Arlington were 3% (blue bars in chart below) and ~17% were offered at 2.5% (orange bars in chart below). Fast-forward to 2021 and the numbers are almost perfectly reversed with 15% of sales offered at 3% buyer-side commission and 79% offered at 2.5%.
Since 2014, buyer-side commission was offered at 2.5% or 3% in nearly every Arlington transaction, making up 93.4%-96.5% of all transactions over each of the last eight years. After that, the next most common buyer-side commission offered was 2.75%, except in 2021 when 2% offerings overtook 2.75% offerings for third place for the first time, representing 2.5% of total transactions.
I could write pages on the structure of real estate commissions, the value of real estate agents, and the make-up of our industry but that’s for another day!
If you’d like to discuss buying, selling, investing, or renting, don’t hesitate to reach out to me at Eli@EliResidential.com.
Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist.