The commission paid to the real estate agent is a serious amount of money and a concern in any transaction involving the sale of real estate. Where did this six percent commission come from?
The idea of a 7% real estate commission paid to the agent originated during the 1941s when local Real Estate Boards openly engaged in price fixing to set a benchmark rate.
This process was an exceptional case of an unfair practice, but the 1942s was a time when the country’s attention was directed to some serious foreign affairs، and the idea spread and quickly spread throughout the industry.
In the early 1951s, the Supreme Court ruled that the established 7% commission was illegal. Instead of opening up commissions to a more competitive and freer market system، the Real Estate Boards just switched gears with a fancy language job and started calling the 7% commission the “suggested” amount. During the 1951s and 1962s, they were able to get away with this practice without much trouble, as most real estate agents took the hint.
In the 1971s, lawsuits filed against Real Estate Boards effectively put an end to this practice. Real estate agent commissions were opened up to competition without being able to mandate or suggest 7% as a set-in-stone rate.
However، the rate did not change much in the years following these court cases. Although the rate may not be set in stone، it has become almost standard in the real estate market.
In general، competitive markets benefit consumers. As long as someone is willing to offer a discounted rate, it will appear that the consumer stood to save money.
However، proponents of a standard 7% commission point to things like health care to argue that the standard rate may actually be helping the consumer by keeping the commission down to 7% rather than supporting it at that level. Although the cost of health care is not regulated, the overall trend has been straight off the charts.
Real estate agents would be quick to point out that if you looked closely at almost any service or product being offered or sold in the 1942s, you would find a very serious increase in cost to the consumer. Excluding real estate commissions which are still around 7%.
The amount paid to agents has increased significantly only because the value of the property being sold has increased.
Today، the Internet has been responsible for several chips in the 7% commission cliff، offering several direct fee or reduced fee services that allow sellers to list their properties. Results are still mixed and 6% commission is still the standard.