The Consumer Policy Center argues that percentage-based commissions give buyers’ agents a “backward incentive” and that consumers now have a chance to save money.
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After multiple years of intense legal and industry wrangling over agent commissions, a new study suggests that consumers actually save money when those commissions are presented in dollar amounts rather than percentages.
The report, from a think tank called the Consumer Policy Center, makes two arguments in favor of expressing commissions in dollar amounts. First, it argues that percentage-based commissions “discourage buyer agents from negotiating down home sale prices.” The report cites research from the Federal Reserve that characterized commissions as a “backward incentive for buyers’ agents.” It also mentions a 2015 study suggesting that percentage-based commissions create a conflict of interest for buyers’ agents.
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As a solution, the study — authored by Consumer Policy Center Senior Fellow Stephen Brobeck — goes on to encourage buyers to negotiate with their agents for a fixed fee rather than a percentage.
“Buyers should try to negotiate a fixed dollar fee (called ‘flat fee’) that does not rise if their agents fail to try negotiating a lower price because it is not in their financial interest to do so,” the report states. “Listing agents have this financial incentive. A flat buyer agent fee will help prevent an increase in home price simply because a listing agent tries to raise the sale price while the buyer agent ‘shirks’ from trying to lower it.”
The report’s second argument against percentage-based commissions boils down to perception. Essentially, the report argues that expressing agent compensation in percentages adds a “layer of abstraction” and makes an agent’s compensation sound smaller than it is.
“For example, $30,000 appears much larger than 6 percent when both represent agent compensation on the sale of a $500,000 house,” the report states, adding later that some people ultimately underestimate commissions when they’re put in percentages.
The report ultimately urges consumers to discuss commissions with their agents in dollar amounts and to ask what dollar amount a specific percent represents in the context of a particular sales price. The report also suggests that “sellers and buyers should consider working with flat fee brokers as an option.”
The report comes about a year after the National Association of Realtors agreed to settle antitrust litigation based on the way agents get paid. That litigation made commissions top of mind for most real estate professionals in 2024 and, ultimately, ushered in a new set of rules governing the way Realtors get paid. Most relevant to the new Consumer Policy Center report, sellers’ agents are no longer allowed to make offers of compensation to buyers’ agents within their NAR-affiliated multiple listing service.
The result is that buyers and their agents are more likely to negotiate compensation, rather than simply accept what sellers offer.
The report consequently offers advice for consumers, though it notes that it is not pushing for a policy or requirement that commissions be expressed in dollar amounts. Instead, the aim is merely to provide “suggestions” that will make commissions lower.
“Now that agent fees are being partially uncoupled, buyers as well as sellers have the opportunity to negotiate them,” the report concludes. “To the extent these consumers treat the fees as dollars, not percentage of sale price, they should be able to more effectively negotiate the fees. This ability, most experts agree, will not only lower commissions overall but align agent compensation more closely with the services that agents provide.”
