The Times examines the question of how long six percent can continue to be the standard real estate brokerage fee in an era when the democratizing effects of the Internet is enabling buyers to do a lot more of their own leg-work and techno-savvy start-ups are willing to undercut the old horses. We’re sure plenty of you who have sold in the last couple of years have stories of agents who did agree to cut the commission to five, or even four, percent. Of course, given what the market has done, a one or two percentage point cut still results in absolute fees way above where they were a decade ago. The authors of Freakonomics found that commissions do not align the interests of agents and their customers. Why? On the margin, the agent doesn’t have much incentive to get a higher price; instead, he’d much rather get the deal done and move on to the next one. The financial advisory business began migrating to the salary model a few years ago for this very reason. Think that could ever happen in real estate?
Last Stand of the Six Percenters [NY Times]
Illustration by Scott Pollack