Homebuyers are largely confused about real estate agent commissions. Redfin has updated its listing to change all that.
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A new survey shows that nearly 40% of recent homebuyers don’t understand how their real estate agent was paid. Another 13%? They have “no idea” how much their agent was paid or even where the money came from.
Real estate brokerage Redfin is hoping to change all that, with its launch of more transparent home listings as of this morning. Starting today, all homes listed by a Redfin agent will clearly detail how much a buyer’s agent will make on the sale.
This screenshot shows what Redfin’s new, more transparent listings will look like.
Courtesy of Redfin
The news comes on the back of a recent announcement from the Northwest Multiple Listing Service, which offers real estate listings throughout the Pacific Northwest. The NWMLS published new rules last month that would allow area brokerages to share buyer-agent commission details on their listings.
The rules also remove the requirement stipulating that selling agents offer an automatic buyer’s agent commission when listing a property. This opens the door for homebuyers to negotiate their agent’s compensation one-on-one.
According to Redfin CEO Glenn Kelman, other regional MLSs are considering following in NWMLS’ footsteps—but his company wasn’t willing to wait around for it to happen.
“Redfin doesn’t have to wait for the MLS to give us permission to show the commissions offered to buyers’ agents on our own listings,” Kelman says. “Today, for every home that Redfin has listed for sale ourselves, any Redfin.com visitor can now see exactly how much of a commission the homeowner is offering the agent representing a buyer of that listing.”
Kelman says the move will encourage homebuyers to be more “careful about commissions.”
In most transactions handled by real estate agents, the seller’s agent is paid a 6 to 7% commission fee out of the sale proceeds. If they’re a member of the National Association of Realtors and list the property on a participating MLS, the agent has to offer a commission split with the buyer’s agent—usually somewhere between 2 and 3%.
The practice has come under fire in recent months, with several class-action anti-trust suits lobbied against NAR and brokerages across the country. The suits allege collusion, inflated commissions, and price-fixing, among other things.
Regardless of what happens with the suit, one thing is certain: There’s confusion about agent commissions.
As Paul Reid, a Redfin broker in Boise, Idaho, explains, “As an agent, I’m often explaining how commissions work to my buyers and sellers. Especially with first-time buyers, there is a lot of confusion. Showing consumers the commission a seller is offering a buyer’s agent is a great win for making real estate more transparent. When a buyer has a better understanding of how his agent is being paid and the costs the seller is incurring, he can make a more informed decision on what to offer.”
Results from a recent Redfin survey show homebuyers are confused about agent commissions.
Courtesy of Redfin
According to NWMLS CEO Tom Hurdelbrink, “Consumers want greater transparency and flexibility in the home buying and selling process.”
He believes the changes at his organization will encourage other brokerages and MLSs to move toward more transparent models as well.
“Transparency in real estate transactions benefits everyone,” explains Jason Wall, an NWLMLS board member and broker with Lake & Company Real Estate in Seattle. “Why shouldn’t a buyer know—in advance—how much his or her broker will be paid for the broker’s services?”