Federal antitrust laws prohibit residential real estate agents from getting together to set a standard rate for commissions. They are allowed to charge anything a consumer is willing to pay, and that fee should be negotiable.
Nationwide commissions are generally 6 to 7 percent of a home's sale price, or about $13,000 on a $200,000 property.
For some, that is steep.
"It's more than a coincidence that commission rates are so standard nationwide," said Stephen Brobeck, executive director of the Consumer Federation of America in Washington, D.C. He said the real estate industry is "a cartel that overcharges homebuyers and sellers more than $10 billion a year."
U.S. real estate agents charge double what their counterparts do in Canada and often get higher hourly pay than lawyers and doctors. Commissions are so uniform that the quality of service often has no relation to the fee paid.
While most agencies charge the seller 6 to 7 percent, some companies offer lower commissions, typically 3 to 5 percent.
Larger agencies say their low-cost rivals don't offer the same level of service.
"Everyone is free to choose the method they want as far as having someone market their house, from for-sale-by-owner all the way to a full-service real estate broker," said Doug Vaughan, CEO of The Vaughan Company in Albuquerque, N.M. "But you get what you pay for. Selling a home today is the single biggest financial transaction 70 percent of the public will make. Today's real estate transactions are more complex than ever before, and Realtors offer so many services. You don't want to get the low bid in parachutes, elevators or real estate companies. It doesn't make sense with such a big-ticket item."
But the owners of lower-commission agencies say they provide what it takes to sell a house. "People assume if you pay less you get less, but that's just not true," said Jack Burkett, owner of Belleflower Realty in Albuquerque. "If you take away all the things you really don't need, it cuts the fees down."
Belleflower is strictly a listing agency. Sellers pay the company about a 3 percent commission.
"I think 7 percent is a lot of money to pay," Burkett said. "The statement I make every day is that paying more commission doesn't change the value of the house. If a property is priced right, it will sell."
Most homes listed with Belleflower are not placed in the Multiple Listing Service. Burkett uses $600 of the commission to advertise a home in the newspapers and on two company Web sites. Owners do their own showings and can field questions from potential buyers who see ads or the yard sign. Belleflower handles contracts, inspections and paperwork through closing when a house sells.
"Our system is user-friendly for the buyer and seller," Burkett said. "The buyer can go to the house and ask the owner a question. Most of our listings sell in-house (without a buyer's agent) because prices are right and people work harder."
"Buyers generally come to us directly. Most people buy because they drive neighborhoods and see signs. The best buyers come off the signs," said Burkett.
