Back in April 2019, attorneys representing a putative class of recent homesellers filed what would come to be known as the Moehrl lawsuit in Illinois. Around six weeks later, another law firm filed a largely identical lawsuit in Missouri. Quickly drawing interest both inside and outside the industry for its (somewhat) novel claims regarding real estate antitrust, many saw these lawsuits as existential threats to real estate practices, with pundits speculating that the real estate industry could be forced to transform, or shrink significantly.
Fast forward five and a half years. Agents and brokers are grappling with what was once unthinkable to many—most notably, compensation removed from the MLS, though many other decades-old precedents have gone by the wayside as well.
What, specifically, though, was supposed to happen if the plaintiffs got their way? One of the biggest worries for real estate agents was that commission rates would drop significantly (although at least some data has shown that rates fluctuate over time).
That worry may have been merited, as RISMedia’s survey of more than 1,300 agents and brokers from every part of the country found. Asking agents and brokers to report the average commission rate for buyer and listing agents for transactions over the last month (timed to include only those that took place after the August 17 deadline for policy changes), RISMedia found a drop of 68 basis points (0.68%) compared to the full year before.
That is very significant, translating to a loss of $2,870 in commission on a median-priced home.* This kind of drop also defies other explanations, as it comes after commissions rose between 2023 and 2024, and is a much larger decrease than what most other sources have measured on a short-term basis, with average commissions generally fluctuating by relatively small amounts over time.
The decrease also appeared to be mostly taken from the buy-side, in line with what would be expected if the drop was catalyzed by policy changes (which were mostly projected to affect buyer agents).
The 0.37% decrease for buyers represents $1,561 out of buyer agents’ pockets per transaction*. There were also other indications in the data that point to buyer agents feeling the squeeze more than listing agents.
While experience has previously been shown to have an effect on commission rates—despite what some of the lawsuit plaintiffs have alleged—there was an especially large gap in commissions between inexperienced buyer agents (less than three years in the industry) and veterans (those with 10 or more years in real estate).
While inexperienced buyer agents brought in 2.58% on average leading up to the settlement, they only got paid 1.82% post-August 17—more than three-quarters of a percentage point lower. Again, on a median-priced home in 2024*, that is a pay cut of $3,207 per transaction. By comparison, veteran buyer agents only saw a 10-basis point drop post-settlement, from 2.68% to 2.58% (losing $422 on the average transaction).
Inexperienced listing agents were also hit hard, with average commissions down to 2.41% from 2.98% the year before. But notably, experienced listing agents (with 10 or more years experience) took a larger pay cut than buyer agents who had the same tenure. The average commission rates for those veteran listing agents fell from 3.00% to 2.74%.
That result is somewhat incongruous with what was predicted. The fact that experience was not enough to prevent listing agents from lowering their rates significantly, while time in the industry did appear to insulate buyer agents, could be interpreted multiple ways. Possibly, consumers are putting a great emphasis on the value of experience when it comes to the buy side in what is still a seller’s market for most of the country. It is also possible that sellers are negotiating more strenuously with listing agents based on all the recent news of the settlement, and have more leverage due to the current low-inventory environment.
Another notable insight to come out of the report has more to do with region rather than buy versus sell side. In the weeks and months after the settlement, there was speculation that based on local laws and norms, some agents and brokers would be more prepared to negotiate commissions or sign agreements with buyers, and therefore would be less affected by the changes. There are also some significant holdouts to the settlement changes, with MLSs on both coasts not taking part in the agreement.
While the survey did not break down respondents by state, there was a noticeable difference in the drop in buyer commissions in the Northeast.
While buyer agents in the South, Midwest and West took an average hit of 0.39% from their commissions after the settlement, the Northeast saw buyer commissions drop by 0.24%—still significant, but noticeably smaller than the other regions.
It is not fully clear what could have caused this, although many Northeast states (Connecticut, New Hampshire, Pennsylvania and Vermont) had some requirements for buyer agreements before the settlement. MLS PIN, which claims around 40,000 subscribers in Massachusetts, Rhode Island and New Hampshire, was also not party to the NAR settlement and did not implement the changes required by that agreement—though it previously made other changes based on a separate settlement in another lawsuit.
*based on median home price, NAR data from Sept. 2024.
This survey was conducted by a national market research firm on behalf of RISMedia. Invitations were sent to respondents by RISMedia from a database of more than 130,000 real estate professionals and data was collected from a sample of 1,331 individuals between September 17 and October 7, 2024. Broker/owners and other real estate professionals who do not work on a commission structure were terminated from the survey.
So we are working for peanuts, not a good business to be in.
Buyer agents really need to have good approach when negotiating their commissions and don’t have too much window with the seller.
If you have been in the business long enough, you know that way too many buyers just cannot afford to pay commission (regardless of any “approach”). This only means that their agent’s commission will be negotiated into the transaction, and taken out of the Seller proceeds anyway. The entire affaire is a nasty joke on all of us, Buyers, Sellers and Realtors, played by a small group of shrewd people who profited from another meritless lawsuit and settlement.
Exactly!
You are so
right.
Looks like I’m moving to the midwest…
I predicted this in 1981 after one year in the business. Ive said it ever since. What in Gods name took so long for ambulance chasing lawyers to make the largest mountain out of a non existatnt mole hill. 41 years ago I said we would all end up being paid like paralegals to be paperwork pushers and people would buy homes from a McDonalds kiosk, and that the only reason we exist is that lawyers dont like to drive people around looking at homes. Well the internet took care of the taxi part of our jobs, and made most local MLS systems a bit useless. or at least not exclusive any longer. Who has profited from these suits and settlements? Lawyers. End of story. Ambulance chasers.
I say continue to work hard and be good at presenting your services and marketings plan. TK
Let’s use our best negotiation with our clients as an example of how we can be great negotiators for them. If you’re able and willing to approach a strong position with buyers and sellers, that demonstrates to them how you are able to be strong and capable for them as well. Showing our clients how “cooperative” negotiation works, will affect our bottom line in two ways.
Very sad that someone that brings an actual qualified buyer would have to take a pay cut ..Time to start cutting attorney fees.
Good Luck with that!
You are right!!
Exactly, also cut title fees, brokerage fees, admin fees etc. Agents put $ out for photos, appraisals, inspections, and even some minor repairs and cleaning – we take a cut and the “vendors” keep their same rate. Perhaps in the spirit of cooperation, they should follow suit.
I think the settlement slowed the industry altogether in sales one it has was confusing, and people froze up, not wanting to show properties. Especially the inexperienced buyers agent. I am strictly a listing agent and I have found that listings are sitting stagnated without a lot of showings, regardless of price drops.
This is an insult to agents who have a 20 yr plus record, over 90 million closed transactions. Taking a paycut with all my years experience is insulting and expertise. I have earned my fees! The tears, the hard work, the professional advise. I am really disappointed with this, such a disgrace to agents who have worked their whole career and now making less money. What next???
Many of us have only dealt with sellers regarding commissions regardless of years in the industry. It’s a whole new ball game now.
Why not bring a “class action case” against the Attorneys who tell their potential clients they won’t have to pay any legal fees, when they win the lawsuit!
The folks on the loosing side of a lawsuit won’t pay the winning side’s attorney fees, unless there’s a “prevailing party fee” negotiated before proceeding with a lawsuit!
To be fair, when Attorneys are hired, their client should pay their fee whether they win or loose!
It’s all open and clear who’s paying who and how much!
I don’t see it as an issue. Every agent got a pay increase over the past 3 years due to the rising prices. So, it’s been good for many agents. Regarding the new rules, If the home buyer makes a good offer, most home sellers will pay compensation to the buyers broker. And if not, the buyer must pay. It’s not that complicated. If you are an agent, diversify your business.
Your logic of “every agent got a pay raise due to rising prices” is flawed. Rising prices were caused by Inflation, which made EVERYTHING more expensive, not just housing. And many Buyers do not have the money to pay extra fees for their Buyer’s Agent as, once again, everything (is more expensive. (Title Fees, Insurance Fees, Mortgage Closing Costs).
I agree with you. At first I was very upset and turned off to this business by the change in compensation structure; however I have been seeing that we can actually do better now as agents if we are good at our jobs. We can demand 3% commission from our seller for all our marketing efforts, advise them to give out buyer agent compensation in order to maximize foot traffic and showings. If not, the buyer’s agent can easily negotiate their commission in the contract. There are always new ways around an obstacle if you step outside the box and your comfort zone.
We can’t demand anything, its all driven by supply, demand and negoatiation no matter how good you are or how tenured.
I wish the media would report on the irony of the situation. After the plaintiff’s decided they did not like how it felt to have the commissions coupled together, sued the entire real estate profession. After they have changed how the entire country conducts real estate business, they announced they started a “flat fee” company that will revolutionize the real estate industry. Well welcome to the industry. Real estate has so many different models and the “flat fee” service model is nothing new. Good luck my friends.
Good data points but still too early to start making judgements. Our team has been in practice since 2001 so we’ve seen many changes over the years. Personally, I’m excited about the path forward in representing buyers; our comp is no longer determined by someone else. We are able to set ourselves apart and demonstrate better value. We haven’t experienced, allowed, or accepted any material commission reductions. In fact; I think this whole thing is helping our business standout. I think the reductions and discounts will continue and work themselves out of the system. I’ve done the math and it’s hard to sustain and grow a practice with commission rates that go lower than 2.5% to each side or somewhere between 5-5.5% total. Prices may be increasing but so are all of our expenses so trust we’re not getting any raises by default of increased prices. Having a complete and comprehensive understanding that a buyers agent commission is no longer the sellers responsibility is important and a critical piece of understanding how to position our value to our buyer clients. Those that continue to discount and drive comp lower will continue to drive quality and effectiveness out of their brand, practice, and business. There is always room for high quality and full service professionals.
As a lister, it’s much easier to get 3% than 6%(or 5.5, or 5, 4.5). The pocket listing guys are usually on the lower end of that scale, but never in the Seller’s best interest to limit exposure.
Yes, some shrewd attorneys saw a payday in this industry, a pretty big target. We put ourselves here as we are mostly independent contractors with our own untrained or bad actors. NAR tried to corral us with a code of ethics and clear cooperation as the industry evolved, but it wasnt enough.
So let’s get trained, remember that the client’s best interest is our focus, and stand for our value as Realtors.
And maybe cut out those who prey on our hard work for their own sole benefit through free syndication.