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Commissions Will Remain Under Intense Pressure, Industry Disruptors Say

The average commission in the United States is between 5 and 6 percent. In four to five years, that could be cut by 200 basis points or more, through models like Purplebricks that are offering the full breadth of services at a fraction of the cost.

(Mountain Lakes, NJ, August 10, 2017) — Real estate commissions mostly have defied the predictions of the doomsayers who anticipate brokerage fees will plummet. But the onslaught continues, as another wave of disruptive brokers takes aim at traditional commissions.

Exhibit A: British discounter Purplebricks, which plans an ambitious expansion into the U.S. real estate market.

While Purplebricks hasn’t disclosed how much it will charge sellers to list, the price should be similar to the $1,100 the company collects from sellers in Britain, says Eric Eckardt, Purplebricks’ chief executive in the U.S.

Ultimately, he says, pressure from Purplebricks and others could send commission rates plunging as low as 3 percent.

Traditional brokers take such claims with a healthy dose of skepticism. Discounters for years have decried traditional commissions as too high, yet rates have edged down rather than collapsed.

Even so, commissions are under attack. Redfin, the Seattle-based brokerage, has rolled out 1 percent listing fees in several U.S. cities. And Realogy, the nation’s largest real estate broker, has reported a slow but steady decline in commission rates since the housing crash.

More on Purple Bricks and other discount models appears in the August issue of Real Estate Broker’s Insider newsletter.

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