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US Real Estate Commissions Haven't Changed in over 100 Years

When real estate commission percentages were created by The National Association of Realtors back in 1913, these were the housing prices ⬆️.

On the sale of this property, assuming a standard commission of 5%, there would have been a whopping $41.50 distributed to the agents. 

Adjusted for today, that's $1,100 in total commission on a $21,000 home. 

To put that time period in perspective, Ford had just released the Model T ⬇️.

Photo courtesy of The National Museum of American History/Smithsonian

During the 1920s, only agents knew, exclusively, what properties were for sale, and they would personally drive their clients around looking at homes (most of you, I'm assuming, aren't currently driving your clients around in your Model S).

Along with being a personal chauffeur, the average commission was roughly only 2.5% - and that was split (thanks to the NAR’s 108-year old rule) between the sellers agent and buyers agent.

The average home in 1913 was equivalent to $78,000 today, compared to today's actual home average of $416,000. That's a 5.3x increase with no adjustments in commission along the way.  

Fast forward to 2023 - all the information is publicly available, customers can educate themselves on the real estate market in their area, and despite this, agents are making a hell of a lot more when it comes to commission.

And just to compare, the average commission in the UK is just above 1.18% + tax.

So you might be thinking my solution is to just... lower commission prices. 

But I too understand this is a complex situation. 

Just like any profession, those at the top of their game, the high-performers want and expect to be compensated appropriately for their work.

So, going with an agent who takes the least commission is not necessarily going to serve you or your transaction in the long run.

If an agent is willing to budge on their commission price, I’d question their ability to negotiate the best price/offer on your behalf.

Ultimately, you don’t want that kind of real estate agent selling your home.

So it begs the question, without mass agreement or legislation from the governing body, what is the solution?