In June, Redfin commissioned SurveyMonkey Audience to conduct a survey of more than 2,000 people in eight major U.S. markets who had bought or sold a home in the past year to better understand people’s home-buying and selling experiences and their perspectives on the real estate industry. The most surprising findings were also the most telling about changes that are happening in real estate and hint at where the industry is heading. Here’s what we found:
Most sellers save money on commissions, as do nearly half of buyers
Sixty percent of people who sold a home in the past year said they got a discount on the commission they paid to their real estate agent. The average discount was 41 percent off the typical commission.
Among people who bought a home in the past year, 46 percent said their agent gave them a refund, rebate, closing cost contribution or other form of savings of more than $100, with the average savings amount in that group being $3,693. Last year, 37 percent of buyers said they had received savings from their agent worth $500 or more1. The above findings on savings exclude responses from people who indicated that they bought or sold a home with Redfin, which systematically saves its customers money by charging sellers 1.5 percent to list and by refunding a portion of the buyer’s agent commission back to buyers at closing.
The notion that so many people are saving so much money in fees is surprising because REAL Trends, a widely cited source for statistics on agent and broker commissions, reports that agents’ commissions have increased slightly in the past decade to 5.26 percent in 2015 from 5.02 percent in 2005. It’s possible that while commissions have increased, so has the frequency with which agents provide refunds, rebates, closing cost contributions and other forms of savings to their clients. For tips on how to negotiate commission, check out How to Save Money on Realtor Commission Fees.
How did savings on real estate fees become so widespread?
There are a few things going on in the industry:
One is a surge of investment in real estate disruptors like Redfin that offer money-saving brokerage and other services to homebuyers and sellers. According to CB Insights, more than $1.5 billion was raised by real estate tech companies in 2015, and more than $1.8 billion has already been raised so far this year.
Another reason for the widespread savings may be Redfin’s growth and influence. To date, Redfin has saved its customers more than $335 million in fees. While Redfin serves a small portion of the market, its growing presence across the country has influenced other brokers to offer savings to their customers in order to compete. Providing a higher level of service at a lower price has been a key tenet of Redfin’s business model since its inception, but this year’s survey results show that other brokers have similarly been able to adjust their fees while improving the quality of their service. Seventy percent of people who bought or sold with Redfin in the past year would recommend their agent to a friend or colleague2, essentially flat from last year. Among people who bought or sold with other brokerages this year, 57 percent would recommend their agent, up from 49 percent last year.
The shrinking supply of homes for sale could be yet another reason for widespread savings for those homeowners who have taken the plunge and sold their homes. The number of homes for sale has shown year-over-year declines in each of the past nine months, which means that real estate agents are competing for a withering pool of business. Offering a discounted fee is a simple and common way to appeal to a homeowner who knows that if priced right, their home is likely to fetch multiple offers and sell within a matter of days.
One in five sellers forgo the help of a full-service agent
Also contributing to a climate where agents are motivated to drop their fees could be the fact that more home sellers are choosing to forgo the help of a full-service agent. Nine percent of people who sold a home in the past year used a limited-service agent and another 11 percent chose to forgo the help of an agent altogether. This is slightly higher than the latest figure reported by the National Association of Realtors, which states that for-sale-by-owner (FSBO) accounted for 8 percent of home sales in 2014.
Interestingly, there is some correlation between selling at a higher price point and selling without a full-service agent. People selling million-dollar-plus homes were the most likely to do so without an agent, and those selling homes for more than $500,000 were more likely than those selling for less to use a limited-service agent.
|For Sale By Owner (FSBO)||13%||9%||7%||9%||23%|
Most people who sold without a full-service agent did so to save money. Among high-priced home sellers, however, the most popular reason was that they didn’t think a full-service agent was necessary.
|Reason for Selling Without a Full-Service Agent (Check all that apply)||Total||Sold for <$750,000||Sold for $750,000 or more|
|Don’t think a full-service agent is necessary||30%||30%||41%|
|Don’t trust real estate agents||14%||10%||16%|
|Couldn’t find an agent I liked||12%||9%||19%|
Meanwhile, the share of buyers who bought without an agent’s help increased slightly to 15 percent from 17 percent last year.
If consumer sentiment is any indication, technology-powered, money-saving alternatives to the traditional real estate brokerage model will continue to change the way we buy and sell homes. Sixty-nine percent of survey respondents said they are open to an alternative to the traditional real estate service, up from 64 percent last year. When asked about agent incentives, just 52 percent of respondents said they prefer a purely commissioned agent. This means that nearly half of homebuyers and sellers are open to a model like Redfin’s, which employs real estate agents, paying them salaries and bonuses based on customer satisfaction.
The bottom line is that people who are buying or selling a home soon should evaluate all their service options and negotiate on fees. Here are some links that offer advice when considering various options for buying or selling a home:
- 15 questions to ask when hiring a real estate agent
- An argument for why you need a real estate agent to buy a home
- How to buy a home without an agent
- How to sell a home without an agent
Methodology and Footnotes
SurveyMonkey fielded an online survey from June 1 to June 18 using the SurveyMonkey Audience platform to reach 2,220 people from the general population who indicated they had tried to buy or sell a home in the past year or plan to this year. The survey targeted eight major metro areas where Redfin has its largest market share (Baltimore, Boston, Chicago, Los Angeles, San Diego, San Francisco, Seattle and Washington, D.C.). Of the 2,220 respondents, 964 had successfully bought a home and 515 successfully sold a home, including 58 people who bought or sold with a Redfin agent.
Year-over-year comparisons were made using the results of a similar survey conducted by SurveyMonkey Audience in July 2015 with responses from more than 2,000 people across the country who had bought or sold a home in the prior two years.
Responses from Redfin customers were excluded from the reported findings on seller and buyer savings.
1This question was worded differently last year than this year. Last year, the survey asked “Did your agent give you a commission refund or rebate, a closing cost contribution, discounted commission for selling your last home, or a closing gift worth more than $500?” The answer choices were “Yes,” “No” and “I don’t know.” This year, the survey asked three distinct questions:
1. Did your agent give you any of the following? Select all that apply:
- Refund or rebate
- Closing costs contribution
- Discounted commission for selling your last home
- Closing gift*
- Other form of savings or discount on real estate commission
- None of the above
2. What was the approximate dollar value of what your agent gave you? (type in dollar amount).
3. Approximately what percentage of the purchase price of your home went to your buyer’s agent as a commission? Select one response option:
- 3% or more
- I don’t know
- Flat fee (type in dollar amount)
*Note that if a buyer responded that they only got a closing gift from their agent and no other form of savings, they were not counted among the 46% of buyers who got savings from their agent.
2To achieve a significant number of responses from Redfin customers in order to report on the portion who would recommend their agent to a friend or family member, SurveyMonkey used the SurveyMonkey Email Collector to send the unbranded survey to a Redfin customer list to reach an additional 428 respondents who had used a Redfin agent. To ensure that the Redfin customer list was not biased, Redfin pulled and randomized a list of
10,092 people who had bought or sold a home with a Redfin agent in the past year. Analysts who pulled the list were blind to whether and how each customer rated their agent. Responses from this group were included only in the analysis of how likely people were to recommend their agent to a friend or family member. All other figures reported only include SurveyMonkey’s Audience of the general population.
CORRECTION: A previous version of this report did not specify the fact that if a buyer received only a closing gift and no other form of savings from their agent, then they were not counted as having gotten “a refund, rebate, closing cost contribution or other form of savings.”
CORRECTION 3/17/2017: A previous version of this report stated that one in four home sellers sold without a full service agent and that 16 percent of buyers bought without the help of an agent. These figures were changed to reflect the share of people who successfully sold a home or successfully bought a home. The numbers in the previous version reflected responses from people who successfully sold or tried to sell and from people who successfully bought or tried to buy.