Real Estate Fee Price Competition is Coming.

Real estate broker commissions are negotiable. The National Association of REALTORS (NAR) says they are, and I agree. Home sellers and buyers may negotiate with the brokerage firms. Negotiation requires at least two parties to exchange proposals. Are consumers asking to negotiate commissions, and if they are, is there participation from the brokers?

There is, to my knowledge, no coordinated effort by firms to refuse to negotiate. Such a step would surely attract the attention of Antitrust attorneys. The absence of a published policy to control commissions among the NAR members isn’t stopping a class-action lawsuit filed last year from proceeding. The New York Times published this story last week. 

As a developer of a company built on the idea that all real estate commissions are open for negotiations, we have evidence to support the position that consumers desire alternative fee models. In our opinion, no one model is best. Consumers situated differently benefit when they have alternative service models to compare and contrast. Research exists to show billions of dollars paid to real estate firms that consumers could save if alternatives were available. Essential Real Estate, LLC, is an alternative. Our Madison office has a solid start as a complete service option for consumers who desire to save some of those billions of dollars. We will extend our service model option into Eastern Virginia with Essential Real Estate VA, LLC, in Virginia Beach before the end of this year.  

For the free market to work for the consumer, there must be a choice. There are reasons that consumers have lots of options in real estate firms but relatively little choice in service and price. The current state of affairs may be financially beneficial to the broker at the expense of the consumer. We chose to create our business model to be a part of consumers’ solution to keep more of their equity and spend less on broker commissions. There will be more options coming for consumers. It’s exhilarating to be one of the few firms solving a problem consumers need to resolve.

We look forward to more firms entering the market, bringing with them even more business models. Mark S. Nadel wrote a comprehensive review of the brokerage fee issue and the obstacles slowing a shift toward more consumer choices.* A link to his paper, Obstacles to Price Competition in the Residential Real Estate Brokerage Market, is included below. 

*Nadel, Mark S., Obstacles to Price Competition in the Residential Real Estate Brokerage Market (February 22, 2020). Berkeley Business Law Journal, Vol. 18, No. 1, 2021, Available at SSRN: https://ssrn.com/abstract=3571088