In 2024, the National Association of Realtors settled one of the most significant commission lawsuits in the real estate industry’s history. The outcome resulted in changing the way that Realtors explain, disclose and collect commissions with consumers.
Many Realtors worried that this would disrupt business as usual and force many agents out of the business. The reality is that recent data shows that Realtors’ commissions have actually not been significantly impacted at all. Depending on how you interpret the data from Redfin’s analysis, there is evidence that supports a slight uptick in commissions.
In this article, I will share the data and insights as to why this is happening and speculate about what might be ahead for commissions for Realtors in the future.
True to it, not new to it
As most of us know, buying, selling or even leasing a home is one of the most expensive transactions we’ll ever face. It’s also not an everyday, quickly processed event. Transactions often take three weeks or more to close, which means there is plenty of time to discuss the financials, including commission.
This speaks to a key point: While there may be unscrupulous actors in real estate (as in any industry), this one-year data highlights how many practitioners likely already had ethical and transparent commission processes in place. In other words, borrowing from the hip-hop lyricist Moneybagg Yo, we’re “true to it, not new to it.”
The law of the land
This level of transparency isn’t a new requirement in many states and locales. For example, here in Georgia, we have had to make these disclosures via buyer brokerage agreements since 1994 (31 years).
This again shows that a lack of commission transparency was not a widespread plague, but rather a localized issue. In places where disclosure and transparency were already the law of the land, very little has changed. It has simply been a reminder for practitioners to follow these long-standing practices and not get lax proactively.
Moreover, in real estate, we are acutely aware of the economy’s cyclical nature, whether it’s feast or famine. Practitioners who rely on this career as their primary income and offer a full array of services didn’t blink at the settlement’s requirement for transparency, nor did they assume such disclosures would discount their hard-earned commission.
It stands to reason that fees should only be reduced due to disclosure when the pro has been hiding something. Perhaps the public expected a “gotcha” moment, but for many of us, being open, honest and willing to negotiate has always been our standard practice — and often a requirement of local real estate commission rules.
Therefore, the latest rules on transparency wouldn’t cause commissions to be lowered for those who have consistently operated in this manner.
This is real work
I encourage agents not only to recognize the value they bring to the closing table but also to quantify it for clients during their first meeting using a method I call TAP into Your Value. TAP is a core, tried-and-true coaching strategy I’ve used for more than a decade:
- Tasks: Agents list every single task they do, whether working with a seller or buyer. Those with whom I’ve worked around the nation who justify listing commission rates of 10 percent to 12 percent+ can often list 200 to 500 tasks they handle for their clients. Translation: This is REAL work despite TV shows that reduce the weeks of work of real estate agents and brokers to 22 minutes.
- Agenda: This is the time it takes to complete each task.
- Price: This is the market or “going” rate to complete that task by a typical homebuying/selling novice, especially without the resources, connections and discounts available to practitioners.
How to TAP in
For a simple example of TAP, a task might be verifying a property’s legal address at the offer stage (you don’t want to make an offer on the wrong home). For a practitioner with partnerships or retainers with real estate attorneys, this might take five minutes.
For the average consumer who’s never had to do this, it could take hours to locate the necessary information on a government website, or even days if they outsource it to an attorney, with all the back-and-forth. Depending on negotiations, this information may come separately from the actual closing office (read: a separate cost), as the legal address is needed to start the process.
The cost of this single task could range from free (if you do it yourself using public government resources) to several hundred dollars based on a lawyer’s hourly rates (if you do not find a flat fee service first, since the clock is ticking on how many due diligence days have been negotiated).
Note: That was just one task on a list of 200-500 tasks. It quickly becomes evident to clients who view the TAP that this is a full-time job beyond simply opening a door, for which the practitioner should be paid accordingly.
NAR’s settlement didn’t put Realtors out of business. Instead, it proved their worth
The short answer is that many real estate professionals have been transparent about their commissions long before this lawsuit or settlement. Personally, from my time as a sales agent to now coaching real estate agents, brokers, and firms and teaching MBA graduate students, I find it’s rare to have clients who don’t have questions about every financial detail. This is why it is crucial that agents can effectively communicate their value.
Ultimately, this lawsuit was alarming not because it would decrease pay for dedicated real estate practitioners, but because it risked making an already difficult housing market even more out of reach for first-time homebuyers. First-time buyers have been notably financially taxed to the point where the median age of the first-time homebuyer is currently higher than ever in U.S. history.
My predictions for the future of real estate? Commissions will remain stable (and even potentially increase) if Realtors continue to explain their value and assist consumers through complex transactions.
Lee Davenport is a licensed real estate broker, trainer and coach. Follow her on YouTube, or visit her website.
