Low commission may mean slower home sales, study finds
Real estate agents steer buyers away from homes with lower commissions, study finds
• University of Texas research analyzing 265,000 listings nationwide shows homes offering below-market commissions to buyer agents take 33% longer to sell and are 51% less likely to sell at all
• Properties with the lowest commissions received 8% fewer online views than those with highest rates, providing systematic evidence of agent steering behavior
• The findings help explain why U.S. real estate commissions average 5-6% compared to 1.5-2% in countries like the United Kingdom
Real estate agents routinely steer their clients away from homes that offer lower-than-average commissions, according to the first nationwide study documenting the practice that helps keep U.S. real estate fees among the world's highest.
The research from the University of Texas at Austin provides systematic evidence for what industry insiders have long suspected: when sellers try to save money by offering below-market commissions to buyer agents, those properties languish on the market significantly longer and are far more likely to go unsold entirely.
"A seller offering a lower commission rate to buyer agents should be prepared to see fewer potential buyers," said John Hatfield, a finance professor at Texas McCombs School of Business who led the study published in the Iowa Law Review.
Lower commissions create major sales obstacles
The research team, including Jordan Barry from USC's Gould School of Law and former REX Real Estate data scientist Will Fried, analyzed 265,000 listings across 30 markets from June 2021 to February 2022. They compared how properties performed based on the commissions offered to buyer agents relative to local market rates.
The results show a clear pattern of discrimination against lower-commission properties:
Homes with the lowest commissions were 51% less likely to sell compared to those offering going rates
The lowest-commission group took 33% longer to sell than highest-commission properties
Properties offering below-market rates received 8% fewer page views on Redfin, indicating reduced buyer interest
In Austin, for example, where the typical buyer agent commission was 3%, homes offering less than 2% faced significant market disadvantages.
Steering explains high U.S. commission rates
The findings help explain why American real estate commissions remain stubbornly high compared to other countries, Hatfield said. While U.S. agents typically earn 5% to 6% of a home's purchase price, agents in the United Kingdom work for 1.5% to 2%.
"Because of that threat, sellers are highly incentivized to go ahead and offer very high compensation to buyer agents," Hatfield explained.
The steering behavior creates a vicious cycle: sellers who try to offer lower commissions face reduced market exposure, forcing most to pay prevailing rates to ensure their homes sell in reasonable timeframes.
Settlement opens door for buyer negotiations
The research comes as the real estate industry faces major changes following a $418 million settlement by the National Association of Realtors in 2024 over antitrust concerns. The settlement gives homebuyers more control over their agents' compensation, potentially breaking the traditional model where sellers pay both their own and the buyer's agent.
Hatfield sees opportunity for buyers to leverage the new rules to their advantage. He recommends buyers negotiate specific contracts with their agents before house hunting begins.
"You should try to write a contract with them before you go out looking for houses," he said. "That contract should be very particular about how your real estate agent is getting paid."
Buyers advised to negotiate like car purchases
One strategy Hatfield suggests is requiring agents to rebate any commission above a certain threshold back to the buyer. For instance, if a seller pays more than 2% to the buyer's agent, the contract could specify the agent must return the excess to the buyer.
"Think of it as like negotiating when you're buying a car," Hatfield advised. "You don't simply take the sticker price as a given. You negotiate with the car salesman to reduce that price. If you don't like the prices one is offering, you can go look for another."
Market harm extends to both sides
The steering practice harms both buyers and sellers, according to the research. Buyers may never see homes that could be perfect fits if their agents avoid showing lower-commission properties. Meanwhile, sellers face pressure to pay high commissions or risk extended time on market.
"If you offer a rate that is below the going rate, your house will take longer to sell, and it might not sell at all," Hatfield said. "For most sellers, that's a very precarious position to be in."
The study provides the first systematic, nationwide evidence of steering behavior that has previously been documented only through anecdotes and localized research. The findings suggest the NAR settlement could benefit both buyers and sellers by introducing more flexibility into commission structures that have remained rigid for decades.