The online brokerage believes that displaying buyer’s agent commissions will add transparency and lead to a more efficient housing marketplace.

Redfin believes that real estate consumers don’t really understand the way commissions work, and so as of Thursday the online brokerage and portal is doing something about it: Now, all Redfin-listed homes will publicly display the commission that sellers are offering to buyers’ agents.

The new commission information will be included on Redfin’s website, and according to a company statement Thursday, it should “help consumers better understand the costs and incentives in the real estate transaction.” A screenshot of the new feature, provided to Inman before it went live, showed the commission data appearing in the “property details” section of a listing alongside a brief explanation of what exactly a commission is.

A screenshot of Redfin’s new buyer’s agent commission feature | Credit: Redfin

The new commission display feature only kicks in for homes that Redfin is listing itself, in its capacity as a brokerage. In other words, listings from other brokerages that appear on Redfin’s portal will not display buyer’s agent commissions.

In its statement, Redfin framed the decision to display commissions as a way to clear up an area that has long been misunderstood by consumers. The company conducted a survey of nearly 1,000 people in June, for example, and found that “more than half of recent homebuyers don’t fully understand how their agent was paid.”

A recent survey from Redfin indicated that shows many consumers poorly understand how commissions work. | Credit: Redfin

Redfin CEO Glenn Kelman also said in a statement that his company has tried to be competitive by refunding buyers part of the commission it collected. However, that strategy had its limitations because buyers “have always assumed the buyer’s agent is free, even though [the] buyer’s agent fee is often baked into the price the buyer pays for the house.”

Glenn Kelman

“As a result, over the past five years Redfin has shifted most of our technology-driven commission savings to the seller, not the buyer,” Kelman added. “Now, as buyers see more and more listings where the commission paid to the buyer’s agent is publicly displayed, we expect the marketplace for buyer’s agents to become more efficient, with buyers comparing agents’ fees just as sellers already do.”

Redfin argues in its statement that adding transparency regarding commissions should “stimulate conversations between consumers and their agents about what is fair and ultimately lead to more competition and lower fees for consumers.”

A Redfin spokesperson further told Inman that the company’s agents provide commission recommendations to sellers, but that those sellers ultimately choose how much to offer buyer’s agents.

Time will tell what impact this move has on agent compensation, but either way Redfin is not alone in choosing to publicly display commission information. Last month, Northwest MLS announced that it will let agents and brokers publicly publish the commission a seller is offering to buyer’s agents. Northwest MLS has 30,000 subscribers, and thanks to the rule change they will be allowed to publish buyer’s agent commissions on their own websites, as well as on third-party portals such as Zillow and Redfin.

At the time of Northwest MLS’s announcement, the idea of displaying buyer’s agent commissions flew in the face of standard industry practices. In some cases, multiple listing services have even threatened to cut off brokers who tried to display commission data.

However, the broker-owned Northwest MLS characterized its decision to allow publicly disclosed commissions as a move toward greater transparency.

“Making this information readily available to consumers will allow for complete transparency with regard to buyers’ broker’s compensation and provide consumers with additional information at the outset of the transaction,” Northwest MLS said in a statement.

Northwest MLS’s new commission display rule goes into effect on Oct. 1, meaning Redfin ended up beating the multiple listing service in the race to display buyer’s agent commissions by just over a month.

Significantly, Northwest MLS serves the Seattle metro area — which happens to be the home of Redfin’s headquarters. Asked about Northwest MLS, Redfin’s spokesperson told Inman that the company has “been encouraged by the recent dialogue surrounding buyer agent commissions as well as the move by Northwest MLS to unlock this data.”

“We believe the industry is moving in the right direction and we’re excited to play our part,” the spokesperson added.

Redfin does not see itself in violation of any MLS rules because it will be displaying commission information for its own listings on its own site. Additionally, “several MLSs assured us this doesn’t run afoul of the rules,” Redfin’s spokesperson added.

Kelman also referenced Northwest MLS’s decision Thursday and said in his statement that MLSs “across the country” are “now considering whether to follow” the multiple listing service’s lead regarding public commission information.

However in Redfin’s case, the company decided to move forward on its own.

“But with more than 20,000 homes listed for sale each year by a Redfin agent,” Kelman said, “Redfin doesn’t have to wait for the MLS to give us permission to show the commissions offered to buyer’s agents on our own listings.”

Email Jim Dalrymple II

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