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The most prolific real estate agents, once they reach the top of their industry, have more important assets than those with lower volumes, such as more established relationships, more leads, and more regular revenue streams. It has long enjoyed an advantage.
These benefits may be even more pronounced in a post-settlement paradigm, according to a new poll of real estate professionals.
Participate in the December INMAN Intel Index Survey
The latest results from the Inman Intel Index study confirm previous findings that fee negotiations have not yet had a meaningful impact on most agents’ bottom lines due to new rules that took effect in August. It became.
However, even though the industry’s worst fears have not materialized, customers continue to exert downward pressure on compensation, and that pressure has gradually deepened over time. Its long-term effects are still unknown.
But in the short term, one in seven agents who responded to the November Intel Index survey reported that their experience was very different.
And they are divided down the middle between two camps.
A group of small and medium-sized agents, including a significant number from independent firms, are reporting “significant” discrepancies in their negotiated compensation rates. and a large group of performers who are taking advantage of the new environment to successfully negotiate with buyers for a larger share of the deal.
It’s worth noting that most agent respondents (7 out of 10 in the November survey) reported little change in compensation. Negotiated rates are either largely unchanged or have fallen slightly, but not enough to have a material impact.
But if this trend at the periphery holds, it will widen the gap between companies at the top of the industry and those in the middle.
In this week’s report, Intel takes a deep dive into the evolution of buyer agency negotiations and the client interactions that drive them.
Fees are maintained, but customers are not giving up
Before we dive into the emerging gap between high-performing agents, let’s take a broader look at where we are a little over three months into the new NAR rules.
Here are some big trends.
1. More sellers are trying a hard line.
Shortly after the change, in late August, only 27% of agent respondents said Intel had at least one listed client who was not willing to pay the buyer’s fees.
Although this number is still a small number of agents, it has gradually increased with each subsequent survey.
As of late November, 36% of agent respondents said at least some sellers were taking a hard line. For the majority of this group (22 percent of all agent respondents), pushy sellers remain a minority of recent customers, less than 10 percent.
Still, listing agents have answered many questions and report that sellers are broadly aware of the new options available under the settlement.
In November, 38% of agent respondents said “more than half” of their recent seller clients had inquired about at least a buyer fee-free strategy, up from 21% three months earlier.
But these trends on the part of sellers are just the backdrop to a potentially more impactful set of arguments happening on the buyer side.
2. Buyers are negotiating and sometimes win.
In the first few weeks after the new rules went into effect, 76% of agents responding to an Intel Index survey found that among their recent clients, they tried to negotiate lower commissions than were common in their market. No one answered that they had done so.
By late November, only 61% of agents were able to make similar claims.
The percentage of agent respondents who said a significant percentage of buyers (at least 10 percent of this type of customer) attempted to negotiate rose from 10 percent in late August to 15 percent three months later.
This increase in the level of negotiation has also had a noticeable impact on the buyer agent agreements concluded. For most agents, this is a relatively minor issue. But for some, it made an even bigger difference.
In November, 33% of agency respondents said that at least some buyers signed deals with Intel at below-market compensation rates, up from 21% who said the same three months earlier. . In November, 16% of agent respondents said at least 10% of their buyer-agent contracts were below market commission rates, compared to 10% of agents in August.
This continues to represent a small number of contracts. However, what is clear from the results is that customer awareness is only increasing. And fees are still on a slight downward trajectory, so far small but not fully reflected yet.
3. Overall commission rates have declined, but not significantly.
More than three months into the new era, agents are increasingly confident that fees haven’t fundamentally changed.
At the end of August, 37% of agent respondents said it was “too early to say” how the new rules would affect commissions, but that number had fallen to 15% in the months since.
This is the situation in late November.
Have you observed what has happened to real estate agent commissions (as a percentage of purchase price) since the NAR Settlement Rule went into effect in August?
Commissions as a percentage of purchase price increased — 7% No change — 40% Slightly decreased — 31% Significantly decreased — 7% Too early to say — 15%
result? Although downward pressure is greater than upward pressure, its effect is still small or even non-existent for most agents.
However, few agents actually take advantage of the opportunity to communicate their value to their clients.
winners and losers
Still in its early stages, Intel survey respondents (including a total of 57 agents in the latest survey) found that few reported increases or significant decreases in their negotiated commission rates with buyers. plug.
But the two groups stand out from each other in ways that make sense.
Attributes of agents with increased commission rates:
Increase in transaction volume — 38% of fee increasers reported having completed 20 or more trades in the past year, compared to 7% of brokers who reported a significant decrease in fees Large intermediaries — commissions 62% of agents with increased rates benefited from the “local knowledge” advantage — compared to 54% of agents with significantly lower commissions who belong to either traditional franchise agent’s 21 percent say local knowledge is what their clients value most, while 7% of agents who saw their commissions drop significantly said the same
On the other hand, agents who are outmaneuvered by buyers tend to start with a weak hand.
Less experience to draw on — Only 50 percent of agent respondents who saw their commission rates drop significantly had more than 15 years of experience in the industry, compared to increases in compensation. 65% of agents say they are taking a small indie approach — almost half of agents are seeing a significant decrease in commissions from private indie brokerages (46%), while 38% of agents are seeing an increase in commissions. did.
Intel will continue to track these trends as new environments are rolled out.
Methodology note: This month’s Inman Intel Index study was conducted from November 18th to December. As of April 4, 2024, 751 responses were received. The entire Inman reader community was invited to participate, and a rotating selection of randomly selected community members were encouraged to participate via email. Users answered a series of questions about their self-proclaimed niche in the real estate industry, including real estate agents, brokers, financiers, and proptech entrepreneurs. Results reflect the views of our passionate Inman community, but do not necessarily align with the views of the broader real estate industry. This survey is conducted monthly.
Email Daniel Huston
