BrokerageIndustry News

Real estate fees inflated by $30 billion

Article criticizes industry's commission structure

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The commission structure in the real estate industry is "an anomaly" that may inflate compensation for services rendered by tens of billions of dollars each year, according to an article published by the AEI-Brookings Joint Center for Regulatory Studies, which offers analysis and recommendations on regulatory programs. The draft paper, "A Critical Assessment of the Standard, Traditional Residential Real Estate Broker Commission Rate Structure," suggests that consumers would benefit most from fee-for-service real estate companies that base compensation on flat fees, hourly fees and other specific payments for services rather than relying on a commission rate that is based on a percentage of the sale price of a home. "Residential real estate brokers and salespersons have long quoted their fees as a straight percentage of a home's sale price. This traditional formula, however, ill serves the interests of both home buyers and sellers, and is a primary reason why such fees may be inflated b...