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Real-Estate Commissions Remain High

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Real-Estate Commissions Remain High

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Real-Estate Commissions Remain High

Real-Estate Commissions Remain High

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U.S. homebuyers and sellers paid more than $60 billion in real-estate commissions last year. Despite new technology, commissions have remained at around 6 percent. Federal regulators blame anti-competitive foot-dragging by the industry. But realtors say their business is more competitive than ever.


This is ALL THINGS CONSIDERED from NPR News. I'm Michele Norris.


And I'm Melissa Block.

`Sold' signs are going up in record numbers outside houses around the country, and that means record sales commissions for the real estate industry. Home buyers and sellers paid $61 billion in real estate commissions last year, and government regulators are asking why customers aren't getting more of a break on the traditional 6 percent rate. NPR's Scott Horsley reports.

SCOTT HORSLEY reporting:

Six percent is a lot more than it used to be. As housing prices have soared around the country, so have the commissions paid to real estate agents. Bert Foer, who heads the American Antitrust Institute, doesn't think it should be that way.

Mr. BERT FOER (American Antitrust Institute): Think about this for a second. If you've got a house that was $200,000 a couple of years ago and is now $400,000, why should the fee to the person selling the house for you also double? Has the amount of time or effort or expertise that goes into that sale doubled? Probably not.

HORSLEY: Individual realtors aren't necessarily getting rich. Hundreds of thousands of new agents have entered the profession in recent years. And senior vice president Jeff Lewis of the big network RE/MAX says that's kept the market fiercely competitive.

Mr. JEFF LEWIS (Senior Vice President, RE/MAX): Our brokers tell us that when they go in to make a listing presentation, they're typically competing against several others to get a listing, sometimes even agents from their own office.

HORSLEY: But according to congressional investigators, realtors typically don't compete on price. Investigators say real estate commissions have hovered in the 5 to 7 percent range for a long time, regardless of market conditions, housing prices or the effort it takes to sell a home. The Internet has changed that sales effort. Many buyers now do much of their initial house-hunting online, so agents can spend less of their time playing chauffeur. That's allowed maverick agents, like Brian Yui of, to charge just 4 1/2 percent when he sells a home. He also gives buyers a rebate of up to 1 percent of the purchase price.

Mr. BRIAN YUI ( So if they bought an $800,000 house, you can get a check up to $8,000 at close of escrow, which is significantly more than just getting a gift basket from a traditional agent.

HORSLEY: But unlike other brokerage industries, where the Internet has made big inroads and dramatically lowered prices, discount firms like Yui's account for just 2 percent of the real estate market. Some states actually prohibit real estate rebates, and others have laws that restrict discount competition.

This fall the Justice Department sued the National Association of Realtors over proposed rules that might have prevented some Internet-based firms from using local real estate listings. Bert Foer says those listings, known as the MLS, are a key weapon for traditional realtors looking to defend their turf.

Mr. FOER: It is an informational bottleneck that contains all the really valuable information about the houses that are on the market. If you don't have access to that MLS, you can't participate equally in the game.

HORSLEY: The National Association of Realtors has suspended enforcement of the rules that potentially limit access to real estate listings. But the association's Lawrence Yun insists those listings belong to the member agents and shouldn't have to be available to just any discount broker.

Mr. LAWRENCE YUN (National Association of Realtors): It's not a public utility, just as a shopping mall is not a public utility. One do not expect a shopping mall to open up to a--flea market venders to, say, open up little flea market tables right outside of Macy's and others.

HORSLEY: Yun argues that consumers do have a choice of what they pay a real estate agent and what they get in return. But as those payments get bigger, both consumers and government watchdogs are paying more attention. Bert Foer's Antitrust Institute holds a symposium on the subject tomorrow. He also points to the Justice Department's lawsuit, lobbying by the Federal Trade Commission and the recent scrutiny of congressional investigators.

Mr. FOER: All these things are moving in the same direction to suggest that if we are going to get reform in this industry, this is the year, this is the time and this is the place to get started.

HORSLEY: But Foer cautions that traditional real estate agents remain well-connected politically. And with more than a million realtors jealously guarding their commissions, change will not be an easy sell. Scott Horsley, NPR News.

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