DoJ: Competition and Innovation are Good, Even in Real Estate

Yesterday, the Department of Justice published a website that focuses on the importance to consumers of competition in real estate. There’s a good summary on the InmanNews blog. They found that that commissions have risen along with home prices, which is no surprise to anyone who’s been in the market. But the data are interesting, and the DoJ also adds specific information on regulations by state.

The DoJ estimates that the median commission paid by consumers so far in 2007 is $11,302. This includes both buyers’ and sellers’ commissions. (The buyers’ agent is usually paid half of the sellers’ agent’s commission, so while buyers’ agents may charge no direct fee, they are still receiving up to 3% of the total costs paid by a buyer at closing.)

As a point of comparison, we looked at commissions paid by Redfin customers who bought in 2007. We focused on buyers’ commissions only, where we have the most data. Redfin’s average commission was $15,071, and because we refund 2/3 of our commission back to the buyer, $10,194 of that went back to consumers. By market, Redfin’s refund to buyers breaks down as follows:

Redfin Buyer Refund, 2007 Year to Date

This tells us a couple of things:

  1. Redfin buyers are buying expensive homes. Assuming a total commission of 6%, which is typical in our markets, our buyers paid a little over $500,000 for their homes. That’s much higher than the median home price of $218,184, but Redfin is also in some of the most expensive housing markets in the country.
  2. Of course, where house prices are high, consumers pay much more than the median for commissions. Again assuming a 6% commission, total commissions (both buyers’ and sellers’) would have been over $30,000 on average for these homes, much higher than the $11,302 that concerned the DoJ.

Redfin buyers are successfully searching our MLS listings to find properties on their own, then working with our local agents to negotiate and close the deal. They’re buying expensive houses and saving a lot of money. And the DoJ would seem to think that’s a good thing.


  • http://www.daltonsazhomes.con/blog Jonathan Dalton

    > standard total commission of 6%

    But I don’t think they’d view use of this phrase as a good thing as it implies there’s a standardized commission rate.

  • Atlanta Georgia Rebate

    The USDOJ is shedding light on rebates so consumers can see for themselves how they save on their real estate transactions.