So, who’s really cashing in on the recent settlement with the National Association of Realtors over commission price fixing? It’s the folks who own and invest in residential real estate. They’ve been the ones shelling out for the so-called "standard" real estate commission, which usually hovers between 5% and 6%. But now, thanks to the judgment against the NAR and other brokerages like Keller Williams, we’re likely to see average commission rates drop by 1% to 3% this year. That means homeowners could keep an extra 1% to 3% of their home equity when they sell.
Even if you’re not planning to sell, this could still boost the value of your real estate holdings by 1% to 3% in your net worth calculations. So, take whatever your properties are worth and add 1% to 3% to see how much more they’re worth now. And looking ahead, it’s possible that homeowners could see their property values increase by 5% to 6% as competition drives commission rates down to 0%.
Now, there’s one group of real estate investors who might not benefit from this settlement. These are the folks who aren’t willing to negotiate down a listing agent’s commission. Maybe they’re too rich to care, too shy to haggle, unaware of the ruling, or just okay with paying more. But for most savvy investors who want to maximize their wealth, negotiating lower commission rates will be a top priority.
And what’s the worst that could happen? The agent says "no"? Well, there are more real estate agents in America than there are homes for sale, so you can always find another one. The point of this lawsuit is to make the market work better for consumers, not to call out the many hard-working and honest real estate agents out there.
And don’t worry about getting "screwed" by listing agents now. That’s based on the idea that most agents are dishonest, which just isn’t true. Unless agents themselves think they’re dishonest, homebuyers don’t need to worry.
Believe in your ability to negotiate a better deal. I’ve done it myself, negotiating my commission down to 4.5% in 2017 and then to 3.5% in 2024 with a great husband-and-wife team. Stand up for what you deserve. If you’re struggling to believe in yourself, find someone who does.
Even homebuyers, who never paid a real estate commission, could benefit from this settlement. Now that homeowners are 1% to 3% richer, some might decide to share some of their savings with the buyer in the form of a credit at closing. This could help seal the deal and cover the cost of the buyer’s agent if they choose to have one.
The sharing of savings probably won’t be a 50/50 split with the buyer. But even if just 20% of the 1% to 3% savings (0.2% to 0.8%) was offered to the buyer, that could be a win. Why? Because the price buyers will pay for an agent’s services will be determined by the free market. If an agent charges more than a buyer thinks they’re worth, then a contract won’t happen. And if a contract does happen, then the buyer can afford to pay the agent. The buyer believes the agent’s value is equal to or worth more than the cost. That’s the beauty of free markets!
So, if you own residential real estate, congratulations – you’re suddenly wealthier. With real estate commission rates on a downward trend, it makes sense to hold onto your properties for as long as possible. Ideally, you’d hold onto them forever, knowing that over time, you’ve got a positive tailwind due to lower selling costs.
As a homeowner, do you agree that you’re suddenly richer by 1% to 3%? Does the drop in real estate commission rates make you want to hold onto your home longer? Besides real estate agents, is anyone else against the real estate commission price fixing lawsuit? If you’re interested in investing in residential real estate in lower-cost areas, check out Fundrise. They manage over $3.3 billion, focusing mainly on residential and industrial real estate investments in the Sunbelt region. With lower valuations and higher yields, the Sunbelt is an attractive prospect due to shifts toward more affordable areas driven by technology and remote work trends.
