The majority of real estate agents in a recent survey said that home sellers are more likely to negotiate commission rates today than a year ago, and that companies offering discounts have had the most impact on their sales commissions in the last year.
That’s one of the key findings in an Inman News research report, “The State of Real Estate Commissions: 2006,” released today. The report also includes findings about agents’ business cost structures, what they typically spend to market and advertise property listings, and how their splits with brokers work.
Real estate commissions have come under fire after record-breaking home sales and price growth in recent years have placed a spotlight on the costs involved in a typical home sale. Critics have questioned the structure of traditional commission rates, which typically are a percentage of the home-sale price, and have raised specter about the value of key services performed, asking why some companies offer steep discounts while others do not.
Commission dollars earned have increased or stayed the same over the last year, despite a pervasive angst amongst agents about how long this can sustain, the report concluded, with factors such as discount companies and an influx of new agents having an impact.
“A dramatic increase in the number of agents was the second-most cited source of impact on commissions by all groups,” according to the report, and the current market is also having an impact, though in some cases it is pushing commission rates up.
“Some respondents noted that high for-sale inventory levels are causing home sellers and listing agents to offer a higher commission split to buyers’ agents. Others noted that higher inventories have caused sellers to be more willing to pay a higher commission than a year ago, which could indicate upward pressure,” the report noted.
However, some agents said that some homeowners in slow markets lack enough equity to pay a standard commission rate, which is causing the agent’s commission to decrease in these instances.
Taking a deeper look at agents’ costs, the report found that money spent to market property listings typically hovers below $1,000 and doesn’t generally increase even when a higher commission is earned. Fifty-eight percent of the highest commission-dollar earners spend less than $1,000 to advertise and market a listing, and 77 percent of the lowest commission earners surveyed spend less than $1,000, according to the report.
The agents who said they spent more to market a typical listing, though, were also those who earned the highest average gross commissions.
The report also examined differences between agents who just entered the business in the last five years and those who have been selling real estate for more than 15 years. Agents with the most experience clearly work under the best terms with brokers, the report found, and there’s some evidence that the number of transactions completed per year builds over time.
The most experienced agents showed the highest commission splits with brokers, and those who haven’t been in the business as long tend to get lower splits, the report found.
Online leads were another area examined in the report, which sought to uncover the percentage of brokers who charge agents for company-generated leads and the percentage of agents who buy online leads from third parties.
“The majority of agents responding to this survey said they don’t pay for online leads — either to their broker or to an outside source. But of the minority who said they do pay for Web-generated leads, those with the highest marketing spend were more likely to allocate money to this,” the report stated.
Only 22 percent of agents surveyed said they pay for online leads, and more of the experienced agents pay their brokers for leads than the newer agents do.
Despite the low portion of agents who buy online leads, the majority of survey participants said they pay for their own Web sites and many also pay to market their sites.
The full 52-page research report is available for purchase at //www.inman.com/reports/.