Annual Profile of Home Buyers and Sellers is Revealing
Every year, the National Association of REALTORS publishes its statistical analysis of market recent market and related data. Every year there is an interesting tidbit or two - this year was no different.
Internet Continues to Grow as Primary Resource (...so why hire an agent?)
I always look forward to the annual release of the NAR Profile of Home Buyers and Sellers. The National Association of Realtors has access to lots of market data that is the basis of the Profile. It's full of interesting info about the real estate industry and how consumer behavior continues to evolve as a result of the internet. This year was no different. More good news for anyone who thinks the internet will change real estate. Eventually.
More buyers used the internet (95%) than an agent (92%)
Obviously there is a giant overlap. The reality is that buyers today use both the internet and an agent in their search for a home. That means that a seller can effectively reach buyers directly via the internet, without having to hire real estate agents. Or at a minimum, a seller only needs to hire one agent to represent the seller, and no longer needs to pay for a buyer's agent. Because agents' commissions are the biggest transaction cost, sellers can net much more of their equity today by marketing directly to buyers via the internet.
More than half of all buyers found their home themselves on internet
There is more evidence in the NAR Profile that sellers today don't need to hire real estate agents - or at least a buyer's agent. The last five years have been a tipping point. In 2016, more than half of all buyers first learned of the home they eventually bought via the internet, up 11% since 2011. Needless to say, this trend is unlikely to change anytime soon, if ever.
If buyers are finding their homes themselves, then clearly buyer's agents are less important to the seller. Sure, buyers absolutely should be represented. But sellers no longer need agents to "sell" their house. So why are sellers still paying 3% to the buyers' agents? It is the single biggest transaction cost to the seller! Here in WA and Seattle:
- 1.78% to the tax man (excise tax due upon sale of real property)
- About 1% or so in title and escrow fees
- 2.5% or so to the seller's agent (known as the "listing agent")
- 3% to the buyer's agent
For 100+ years the buyer's agent has been known as the "selling agent" - and still called that today. Yet they don't "sell" anymore. Since the 1990's, by law buyer's agents work exclusively for the buyer and must represent the client's best interests. That's not "selling."
Buyers look for and find the homes that they eventually purchase. They ask their agent to help them buy it. The agent works with and for the buyer. Quite simply, there is no longer any reason for sellers to pay buyer's agents. It's right there in the NAR Profile.