Website design By BotEap.comThe commission paid to the Real Estate agent is a significant amount of money and a concern in any transaction involving the sale of Real Estate. Where did this six percent commission come from?

Website design By BotEap.comThe idea of ​​a 6% real estate commission being paid to the agent originated during the 1940s, when local Real Estate Boards became openly involved in pricing to establish a standard rate. This process was a clear case of unfair practice, but the 1940s was a time when the country’s attention turned to some serious foreign issues and the idea caught on and spread rapidly through the industry.

Website design By BotEap.comIn the early 1950s, the Supreme Court ruled that a set commission of 6% was illegal. Instead of opening up commissions to a more competitive free-market system, Real Estate Boards simply switched gears with a bit of fancy language play and began calling the 6% commission the “suggested” amount. During the 1950s and 1960s, they managed to get away with this practice without much trouble as most real estate agents complied with the suggestion.

Website design By BotEap.comIn the 1970s, laws brought against Real Estate Boards put an end to this practice. The commissions of Real Estate agents were opened to competition without the Boards being able to order or even suggest a 6% rate set in stone. However, the rate did not change much in the years after these court cases. Although the rate may not have been carved in stone, it has practically become established in the real estate market as a standard.

Website design By BotEap.comGenerally, competitive markets benefit consumers. As long as someone is willing to offer a discounted rate, it would seem that the consumer could save money. However, proponents of a 6% standard rate commission point to things like healthcare to argue that the standard rate may actually be helping the consumer by keeping the commission at 6% instead of increasing it to that level. Although the cost of health care is not regulated, the overall trend has skyrocketed.

Website design By BotEap.comReal estate agents would be quick to point out that if you were to look closely at any service or product that was offered or sold in the 1940s, you would find a very substantial increase in cost to the consumer. Except for Real Estate commissions that continue to be around 6%. The amount that agents are paid has increased dramatically simply because the value of the property being sold has increased. Today, the internet has been responsible for some chips in the 6% commission rock by offering some direct fee or reduced fee services that allow sellers to list their own properties. The results are still mixed and the 6% commission is still the standard.