Real estate broker fees are a mystery to buyers: Redfin survey

The brouhaha over real estate commissions and who pays them has generated much discussion in housing finance, but a significant number of recent consumers don't know some of the basics regarding those fees, a Redfin survey found.

Approximately 28% of respondents to a February survey that bought a home in the past year and used an agent said they had no idea how much money that person was paid.

Another 35% said they had some idea while 37% claimed they knew the exact amount of their agent's compensation.

Commissions have been in the news because of the Sitzer/Burnett settlements and more recently, a federal appeals court ruling allowing the Department of Justice to withdraw from its own settlement with the National Association of Realtors and reopen its investigation.

Under the system in place prior to those settlements, the sellers typically were responsible for paying both agents. As part of the process, the seller usually had a candid conversation with their representative before entering into an agreement, said Daryl Fairweather, Redfin's chief economist.

"Buyers would benefit from doing the same," Fairweather said in a press release. "People feel awkward talking about money, but it's important to understand what your agent is charging and have a discussion about whether you will need to ask the seller to cover your agent's fee as part of your offer negotiation or pay for it out of pocket."

Half of the respondents said they had some idea of how the commission they paid was determined, with one-third stating they knew exactly and 17% having no concept of this.

While 19% had no idea who paid their agent, 39% did know and 43% had some insight.

Commissions range average 5.49%, with the split being 2.83% for the seller side and 2.66% for the buyer rep, a Clever Real Estate survey of affiliated agents found.

However, most people think the typical commission on a residential home sale is 6%, split evenly between the two agents.

When it comes to that 3% buyer's representative compensation, 36% of those planning to sell their home in the next year and 37% of those looking to buy over that time frame said that amount is just right.

Among sellers, 14% believe it is too high and 25% called it a little high. The buyers' response was 13% and 22% respectively.

On the other hand, 14% of the potential sellers and 17% of likely buyers called it a little low, while 12% and 10% of each group thought it seemed very low.

The survey was conducted for Redfin by Qualtrics, with the full sample of nearly 3,000 homeowners and renters. These responses were pulled from subsets that met the criteria of the questions.