Leveling the selling field

USC Gould School of Law • January 31, 2024
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A new empirical study co-authored by Professor Jordan Barry presents the first systematic, nationwide evidence that buyer’s agents regularly steer clients away from properties that offer lower buyer’s agent commissions.

The paper, “Et Tu, Agent? Commission-Based Steering in Residential Real Estate,” was co-authored by Professor John Hatfield at the University of Texas at Austin and Will Fried, senior data scientist at True Footage and former data scientist at REX Real Estate. Barry and the co-authors plan to publish the article in 2024.

The study has direct implications for two multibillion-dollar federal lawsuits against the National Association of Realtors and two of the largest national brokerage firms. On Oct. 31, the jury in the first of these lawsuits found NAR and brokerages liable for about $1.8 billion in damages for conspiring to keep commission prices artificially high. NAR will appeal the verdict.

The study was covered in articles in The Wall Street Journal, Bloomberg and real estate news outlets including Inman and HousingWire.

“Since the 1970s, regulators and policymakers have been concerned that commission-based steering keeps real estate commissions high, but they have lacked hard data,” says Barry. “Our paper provides that data. It’s the first paper to provide systematic, nationwide evidence that buyer’s agents steer clients away from
low-commission listings. We hope that our findings will help empower regulators to act. Reforms here could save U.S. consumers tens of billions of dollars per year.”

The study includes an analysis of user activity on the brokerage website Redfin. All else being equal, listings that offer commissions below the going rate in a given market tend to receive less traffic than listings that offer at least a going-rate commission.

This decline in traffic becomes more severe the lower the commission, suggesting that buyer’s agents frequently skip over low-commission homes in favor of high-commission homes when choosing which listings to forward to their clients.

The researchers linked this behavior with real-world consequences. Compared to listings that offer going-rate commissions, homes that offer the lowest commissions take 33% more time to sell. “And that assumes that these homes sell at all,” Hatfield says. “In a typical market, such properties are 75% more likely to remain unsold.”

“In a lot of ways, the people who are hurt most by this are sellers who offer going-rate commissions because they are worried about steering,” Barry says. “For most homeowners, their house is by far their largest asset. Giving up 6% of the sale price in commissions is a real burden.”

The study covered more than 30 major U.S. real estate markets, including Los Angeles, Riverside, Orange County, Chicago and Houston.

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