How A Sellers' Market Affects Real Estate Brokers

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Well, how else do you think - a sellers' market means brokers representing sellers have to reduce their commission rates. 

How On Earth?

Not exactly rocket science. When housing prices skyrocket (effect), it is a clear indication that demand is way ahead of supply (cause) and there is a housing shortage. 

This also means that every home on sale is likely to get more than one offer. Because of such a favourable wind for the seller, this weather is known as a sellers' market. 

The increased confidence in the market leads home sellers to sit down with their brokers over a cup of ginger chai and ask them to lower their commission rate. 

Proof Of Concept?

This report from Redfin shows that buyers’ broker fees can drop considerably in a seller's market. In the US, average commission rate for sellers' agents was 2.63% of the selling price of a home during Sept-Oct-Nov, 2021, down from 2.69% a year earlier. 

Plummeting sellers’ broker fees is a reflection of sellers’ power, considering they’re the ones who pay these fees.

Does That Hurt Brokers?

Alright, let's take the help of some numbers. Per the same report, home prices have increased so rapidly that it has offset the declining commission rate. In dollar terms, the average seller was paying the broker USD12,415; up from USD11,609 in 2020, even while the commission rate touched record lows. 

Clearly, real estate brokers aren't the ones going back home empty handed from a seller's market.