{"id":179100,"date":"2024-11-20T13:41:32","date_gmt":"2024-11-20T20:41:32","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=179100"},"modified":"2024-11-20T13:41:34","modified_gmt":"2024-11-20T20:41:34","slug":"new-study-says-nar-settlement-had-no-real-impact-on-commissions","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/new-study-says-nar-settlement-had-no-real-impact-on-commissions","title":{"rendered":"Did the NAR Settlement Lower Commissions? Here’s What the Numbers Look Like Three Months After"},"content":{"rendered":"\n

After a mammoth<\/span> $418 million National Association of Realtors (NAR) settlement<\/span><\/a> threatened to decimate real estate agent commissions, <\/span>AccountTECH<\/span><\/a>, an accounting software firm, has crunched the numbers to see how much agents’ earnings are <\/span>actually<\/span> down now. The results might surprise you.<\/span><\/p>\n\n\n\n

Despite headlines a few months ago that predicted the end of real estate as we know it, with many agents and brokers fearing they would have to find new jobs, <\/span>a study by AccountTECH<\/span><\/a> found that there has been little to no movement in commission numbers since industry rule changes took effect. The evidence <\/span>is substantiated<\/span> by <\/span>Mike DelPrete\u2019s analysis of commissions<\/span><\/a> dating back to last September.<\/span><\/p>\n\n\n\n

The lack of variation may be partly because it’s still relatively early in the aftermath, and many deals <\/span>have not yet cycled<\/span> through the system.<\/span> However, agents fearing instant income armageddon can <\/span>breathe a sigh of<\/span> relief\u2014at least for now. <\/span><\/p>\n\n\n\n

The Data Is Consistent With Our Interviews<\/span><\/h2>\n\n\n\n

The AccountTECH study found that the percentages paid to listing agents increased marginally, while those paid to buyer agents declined slightly. Specifically, the study found that the average commission rate for seller agents was 2.738% at 60 days post-settlement, up slightly from 2.724% in 2023\u2014a number that the study’s authors agree falls within “the range of normal market variation.”<\/span><\/p>\n\n\n\n

The study bears out the sentiments of many of the agents <\/span>BiggerPockets interviewed<\/span><\/a> a month after the settlement. They felt that real estate professionals at the top of their game would not feel much of a hit.<\/span><\/p>\n\n\n\n

“It has not changed anything regarding obtaining business; the changes are how we communicate with new clients once we get connected with them,” Ian Hoover of Deacon & Hoover Real Estate in Pittsburgh told BiggerPockets at the time. “We must have more in-depth conversations upfront to explain the process and how it works, now and into the future\u2026. Occasionally, buyers will want to represent themselves, especially if the process <\/span>is not explained<\/span> effectively. <\/span>This<\/span> will be a one-off and should not decrease revenues too much.” <\/span><\/p>\n\n\n\n

Is It Too Early to Draw Conclusions?<\/span><\/h2>\n\n\n\n

A better barometer for the change the settlement has engendered will <\/span>most<\/span> likely be felt by next summer, after the spring buying season.<\/span> The study’s authors advised: <\/span><\/p>\n\n\n\n

“Industry watchers should keep tracking this number <\/span>closely,<\/span> since a continuation of this two-month trend of 0.05% decrease per month would bring commission rates on the buyer side to 2% by June 2025.” <\/span><\/em><\/p>\n\n\n\n

The report analyzed data from 625 real estate offices and 17,358 buy-side pending transactions.<\/span><\/p>\n\n\n\n

Real Estate Investor Takeaways<\/span><\/h2>\n\n\n\n

Here are the factors real estate investors should consider. <\/span><\/p>\n\n\n\n

Buy-side transactions drop precipitously<\/span><\/h3>\n\n\n\n

Despite the modest commission dip, the study found that buy-side transactions had dropped noticeably by 10% year over year during <\/span>the 60-day period<\/span> analyzed.<\/span><\/p>\n\n\n\n

The authors noted that the buy-side numbers could <\/span>be indicative of<\/span> many factors other than the NAR settlement, such as <\/span>mortgage<\/span><\/a> rates and the overall economy. <\/span>A more extended period with more data points would <\/span>give a better indication of<\/span> the overall trend.<\/span><\/p>\n\n\n\n

Commissions distribution<\/span><\/h3>\n\n\n\n

Breaking down numbers, the most common commission rate on the buy side was 3%, paid on 5,251 transactions, 2.5% (5,090 transactions), and 2% (4,026 transactions). <\/span><\/p>\n\n\n\n

Numbers tally with BiggerPockets interviews and brokerage reports<\/span><\/h3>\n\n\n\n

As stated, many of the agents interviewed by BiggerPockets didn’t expect to see a meaningful change in revenue among established agents.<\/span> Real Estate News <\/span><\/a><\/em>said<\/span><\/a> this was consistent with third-quarter earnings calls from many brokerage CEOs.<\/span><\/p>\n\n\n\n

HousingWire begs to <\/span>differ<\/span><\/h3>\n\n\n\n

Although the NAR settlement only went into effect in mid-July 2024, <\/span>HousingWire<\/span><\/a> released an article on Aug. 2 entitled “Buyer agent commissions down to 2.55% since the NAR settlement.” The story <\/span>was based<\/span> on Redfin MLS data, which showed that commission had dropped to 2.55% from an average of 2.62% in January.<\/span><\/p>\n\n\n\n

However, Redfin admitted that factors other than <\/span>just<\/span> the NAR settlement could have <\/span>been affecting<\/span> their data.<\/span> Redfin chief economist Daryl Fairweather said in a statement:<\/span><\/p>\n\n\n\n

“Still, even before the <\/span>blitz of publicity<\/span> around the class-action lawsuits and NAR settlement, commissions were coming down. That’s partly because of the competitive housing market before and during the pandemic\u2014which motivated some sellers to offer a low commission because they knew they could still attract buyers\u2014and greater fee transparency.”<\/span><\/em><\/p>\n\n\n\n

What should you believe?<\/span><\/h3>\n\n\n\n

In <\/span>a study released Sept. 1<\/span><\/a>, AccountTECH found that hundreds of brokerages across the U.S. will become unprofitable if the NAR settlement reduces commission rates and brokers fail to transform their operations. AccountTECH reviewed the finances in depth for 100 randomly selected companies and found that if commission percentages drop to 2%, 79% of the companies in this analysis would be unprofitable.<\/span><\/p>\n\n\n\n

The study based this on three assumptions:<\/span><\/p>\n\n\n\n