Published in RISMedia
As a small business owner and president of the National Association of REALTORS® (NAR), I want to set the record straight on misconceptions by some about the real estate industry.
Commissions for real estate agents and brokers are negotiable. Always have been. Always will be. Let’s put that on the table right now.
Like most transactions in the American economy, market forces set individual commission rates to provide for competition among brokers, increase efficiency for consumers and ensure we are providing the most market-driven and best possible service to our clients.
It’s the free market at work, and the reality is that the commission structure gives everyday Americans critical advantages they otherwise wouldn’t get. That structure is what ultimately makes it possible for many people to realize the dream and benefits of homeownership.
That same free market makes it possible for small business owners to earn a living as real estate professionals. In fact, most of NAR’s 1.4 million members, including myself, are small businesses. We make a median gross income of $43,330 and are grateful for every dollar we earn.
As COVID-19 persisted, real estate agents worked tirelessly to navigate one of the most complex markets any of us had ever seen. Pandemic or not, day to day we’re managing untold challenges that buyers and sellers have to face. We handle the regulatory complexities unique to our own localities (each state sets its own licensing requirements for agents), we work to withstand the industry’s inevitable ebbs and flows, and we navigate the market to stay current on what our clients need to know and to stay competitive as a byproduct.
Real estate agents and brokers work, too, to help put keys in the hands of America’s small business owners. Entrepreneurs who define the spirit of this country endured some of the most significant COVID-induced financial hardships this year. We know their trials because we experienced the same ones. We continued to put roofs over their heads and food on our families’ tables.
And here is where the perils and unintended consequences of the actions by the Department of Justice against the current Multiple Listing Service (MLS) system are most alarming. Despite the White House’s strong, genuine desire to increase opportunities for homeownership among families of color, a fight against the MLS system would have the opposite effect.
In fact, the traditional commission structure, where the listing broker offers to share his or her commission with the buyer broker, ensures the greatest possible equity for first-time to middle-income homebuyers from all walks of life who may otherwise not be able to afford a home and professional representation.
If buyers had no choice but to pay a commission directly to an agent on top of their closing costs, it would increase out-of-pocket expenses in a way that could freeze out many from an already competitive market. With the nation in the midst of a historic, ongoing inventory shortage, that’s a problem that’s all too real today.
In fact, 24% of buyers in 2020 had to delay purchasing a home by more than five years because of the potential debt and 31% of those were first-time homebuyers. Given even more competitive pricing and bidding competition in 2021, those challenges are even more exacerbated. Seems to me the last thing we want to do is make buying a home harder for everyday Americans, especially given large racial disparities in homeownership still exist for Asian, Hispanic and Black Americans who make up a critical portion of first-time homebuyers.
In short, the American real estate system helps connect buyer’s agents with seller’s agents, creating the greatest number of housing options for buyers and offering sellers access to the largest possible pool of potential buyers. It’s a model that is both efficient and transparent and has worked remarkably well for decades. Employing the free market principles of private property rights, competition and open negotiation, our MLS system remains the envy of the free world.
NAR and real estate agents remain the nation’s strongest, most vocal proponents of that kind of generational wealth-building opportunity associated with homeownership. We advocate for policies that ensure the market is healthy and functional, that the American Dream is accessible for as many families as possible, and that our laws and regulations reflect real estate’s importance on the broader U.S. economy.
We work to ensure real estate agents have every fair and tangible resource at their disposal to keep the market moving forward. We create and offer education programs and professional development tools for REALTORS®. We recently launched a mentorship program designed to increase diversity in the industry, and we remain a tireless defender of fair housing laws in the fight against discrimination in real estate.
The desire for property ownership and the belief in the free market are in our DNA as Americans. NAR continues to fight for that tirelessly to the benefit of our clients, U.S. consumers and the nation as a whole.