As many of you know, The Sitzer-Burnett case was a class-action lawsuit filed by a group of home sellers in Missouri against the National Association of Realtors (NAR) and several large real estate brokerages. The sellers alleged that the defendants had conspired to artificially inflate real estate commissions through anti-competitive practices. It was settled last year with the major brokerages having to pay settlements to plaintiffs and changing the trajectory of how commission would be paid in real estate transactions forever.
Customary real estate agent commission rates in the United States typically range from 5% to 6% of the home's final sale price. This amount is usually split between the seller's agent and the buyer's agent.
Key points about real estate commissions:
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Who Pays: Historically, the home seller paid the entire commission, which was then split between their listing agent and the buyer's agent. However, recent changes in the industry, particularly following the National Association of Realtors (NAR) settlement, have shifted how commissions are handled. Now, while sellers can still offer to pay the buyer's agent commission as a concession, it is no longer a requirement. Buyers may now be responsible for negotiating and paying their own agent directly
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The Split: The total commission is divided between the two agents involved in the transaction. A common split is 50/50, so if the total commission is 5.5%, each agent's brokerage would receive approximately 2.75%.
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How it's Calculated: Commission is a percentage of the final sale price. For example, on a $400,000 home with a 6% commission, the total fee would be $24,000
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Negotiability: Commission rates are not fixed and are often negotiable. They can vary based on local market conditions, the specific real estate firm, and the value of the property. For high-priced homes, for instance, an agent might agree to a lower percentage rate
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Brokerage Split: The commission paid by the client is not the agent's take-home pay. The agent must also split their portion of the commission with their brokerage, which can be a significant cut.