As a former journalist, I understand the need to shorthand explanations and round up numbers. It’s part of the effort to relate often-complicated concepts to a general audience.
When it comes to reportage about real estate commissions, even fractions of a percentage point make a difference in the narrative, and media outlets aren’t doing their best to relate the commission situation when they consistently round up numbers.
Of course, I am referring to media outlets which continue to tout a standard 6% commission on real estate sales, as if that’s the going rate no matter what.
Cases in point:
— CNN: “The 6% real estate commission is doomed.”
— Barron’s: “The 6% real estate broker commission could soon be gone. Here’s why.”
Except the average commission is not 6%, a fact that anyone – from practitioner to association executive alike – should make crystal clear.
According to data provided by Anywhere Real Estate, the average commission for one side is 2.4% for company-owned firms and 2.45% for franchises, or 4.8% and 4.9%, respectively for both sides. Bankrate reports the average commission in Illinois was 5.35%, and the national average was 5.49% in 2023.
Even if you apply the rules of rounding, 5.35% or 4.9% can’t be rounded up to 6%.
Yet, the headlines still imply that the commissions are 6%. By doing so media outlets (and commentators) do a disservice to the truth and at the same time insinuate that rampant, industry-wide collusion is to blame.
Sure, some commissions may be 6 percent (or more), and as recently as 2022, the average commission was closer to that number (5.3%), but even then, it wasn’t 6 percent, according to the Anywhere data.
Any conversation about commissions is a third rail of sorts as the real estate industry languishes in a legal paralysis over the uncertainty created by Sitzer and the resulting settlements. That’s doesn’t mean it’s wrong to push back against flat-out wrong statements that color the industry as guilty of rate-fixing.
Practitioners and associations should aggressively push back on any blanket statement that commissions are 6%. They aren’t, and there’s nothing wrong with pointing that out. If reporting uses the 6% language the response should be polite, direct and demanding of a correction.
Additionally, real estate professionals should be careful not to fall into the 6% trap as they discuss the real estate environment with others. Never utter the words “6%”, as doing so just obliquely reinforces a flawed narrative.
Instead, cite the data. Point out that “other higher numbers” that are touted are simply wrong.
There’s nothing wrong with stating the facts.
There’s nothing wrong with demanding accuracy.
Do everything you can, no matter how small, to squash the notion that 6% is the standard.