Why Home Sellers Still Pay High Commissions Despite Alternatives Why Do Home Sellers Still Pay High Realtor Commissions Despite Alternatives?
Home sellers in the U.S. overwhelmingly continue to pay traditional real estate commissions (often 5–6% of the sale price, split between listing and buyer agents) even though lower-cost alternatives exist. In 2023, about 90% of home sellers used a real estate agent, while only 6% sold by owner (FSBO) nar.realtor. This is striking given that Americans pay some of the highest real estate commissions in the world (roughly $100 billion per year) urban.orgen.wikipedia.org. Why do so many sellers stick with the high-commission model? The reasons include psychological comfort and fear of the unknown, the perceived value of full-service agents, powerful social norms and habits, and structural “invisible hand” forces in the industry. Recent legal scrutiny (DOJ and class-action lawsuits) has also shed light on how industry practices have reinforced the status quo en.wikipedia.org. Below, we explore these factors using consumer surveys, behavioral economics insights, and industry commentary.
Comfort, Fear of the Unknown, and Complexity of FSBO Alternatives
Selling a home is a complex, high-stakes transaction that most people undertake rarely, so it's natural to feel risk-averseabout trying unconventional methods. Many homeowners worry about making mistakes if they sell without a professional. Even those inclined to try a For Sale By Owner (FSBO) approach often get cold feet: a recent survey found 75% of homeowners who initially considered selling on their own had doubts about foregoing an agent keepingcurrentmatters.com. This “fear of the unknown” is a powerful deterrent.
Practical complexities reinforce that fear. According to the National Association of Realtors (NAR), FSBO sellers report that the hardest parts of the process are pricing the home correctly (17%), selling within the planned timeframe (13%), and handling the paperwork (10%) nar.realtor. These are exactly the areas where professional agents are expected to guide the seller. In other words, sellers worry they don’t know what they don’t know – from setting the right price in a changing market to navigating legal forms and disclosures keepingcurrentmatters.comkeepingcurrentmatters.com. An NAR advisory notes that an agent’s expertise in pricing and paperwork can be critical, since mistakes in these areas can have big financial or legal consequences keepingcurrentmatters.comkeepingcurrentmatters.com.
There’s also evidence that going it alone can lead to poorer outcomes on average, validating those fears. In a survey of 1,000 recent home sellers, those who sold without an agent often regretted it – they were 3× more likely to say they lost money on the sale, and nearly half believed their home would have sold for more with an agent nar.realtornar.realtor. In fact, the study found agent-assisted sellers netted about $46,600 more in profit on averagethan unrepresented sellers in 2022–2023 nar.realtor. FSBO sellers also reported higher stress: over 50% felt overwhelmed, and half admitted to crying at some point during the process nar.realtor. By contrast, 77% of sellers who used an agent were satisfied and 72% would use their agent again nar.realtor. These findings send a clear message: many who try alternatives end up validating the traditional model, which further reinforces other sellers’ belief that using an agent is the safer, smarter choice.
It’s worth noting that not all FSBOs fail – some homeowners do sell successfully on their own, especially when a buyer is already lined up. (In fact, 38% of FSBO sellers sold to someone they knew – a relative, friend, or neighbor nar.realtor.) And academic studies have found comparable sale prices for homes sold via certain FSBO platforms versus agent-listed homes pricetheory.uchicago.edu. However, these studies also found FSBO listings had lower chances of selling and longer time on market on average pricetheory.uchicago.edu. This highlights a key point: even if a DIY sale can in theorymatch the price of an agented sale, there’s a greater risk of delay or no sale. Risk-averse sellers often prefer a “sure thing” – paying a commission to enlist an expert who can get the deal done faster and more reliably. As one real estate investor put it, a great agent is “well worth 6%” because they have the network and know-how to sell a house quickly and for maximum profit, which can save the seller carrying costs and stress hsh.comhsh.com.
In short, the complexity and uncertainty of selling a home create a strong psychological incentive to “play it safe” with the traditional agent model. Fear of legal missteps, mispricing, or marketing blunders – and the many horror stories of FSBOs gone wrong – make the status quo feel like the prudent path for most sellers.
Perceived Value: What Full-Service Agents Bring to the Table
Another reason sellers stick with standard commissions is the belief that agents add significant value that justifies their fee. A good agent provides services and expertise that many sellers feel they can’t easily replicate with a cheaper alternative. These include: pricing strategy, staging and marketing, access to buyer networks/MLS, negotiation skills, and transaction management all the way to closing. Especially in today’s market with shifting conditions, sellers value an agent’s guidance on pricing and strategy. Zillow notes that “agents are pros when it comes to pricing properties and have their finger on the pulse of your local market”, helping hit the bullseye on price so the home sells for the best possible price without languishing keepingcurrentmatters.comkeepingcurrentmatters.com.
Agents also handle the legal paperwork and contracts, which can be daunting for a layperson. An experienced Realtor will ensure all disclosures are made and contingency clauses are handled properly, greatly reducing the risk of mistakes that could lead to lawsuits or lost deals keepingcurrentmatters.com. This peace of mind is worth a lot to cautious sellers. As one industry article put it, having a pro in your corner means you can “list with confidence, knowing you’ve got expert guidance from day one.”keepingcurrentmatters.com
Beyond technical expertise, full-service agents bring intangible benefits. They coordinate showings, filter out unqualified buyers, and act as an intermediary in negotiations – which spares the seller from direct haggling or emotional confrontations. Many homeowners want that buffer, especially for such a personal asset as their home. Agents often have a list of ready buyers or colleagues with buyers, which can lead to a quicker sale. Indeed, NAR statistics show agent-assisted homes tend to sell faster than FSBOs on average hsh.com. In the Clever Real Estate survey, 53% of agent-using sellers got an offer within a month, whereas FSBO sellers were nearly twice as likely to still have no offer after 3+ months nar.realtornar.realtor. Speed matters, and time is money when you’re paying a mortgage on a home you’re trying to sell.
Critically, many sellers believe that a skilled agent can net them a higher final price that more than covers the commission. While the data on price differences is mixed (some studies show no price premium for agented sales hsh.comhsh.com), the perception among consumers is that “Realtors know how to get top dollar.” NAR often cites that “agents sell for more”, and although that stat is debated, it resonates with sellers who fear leaving money on the table. In practice, even if an agent doesn’t literally fetch a higher price, they may help avoid underpricing or handle bidding wars effectively. Additionally, as investor Nathan Letourneau notes, “maximum profit does not always mean highest price” – selling quickly for a fair price can yield a better net outcome than chasing a higher price for months while incurring extra mortgage, tax, and upkeep costs hsh.comhsh.com. Great agents understand this balance.
Finally, trust and personal rapport play a role in perceived value. In one survey, buyers and sellers said the #1 thing they seek in an agent is trustworthiness newrez.com. Many home sellers hire an agent who was referred by a friend or family member, or someone they’ve worked with before nar.realtor. That trust in an individual agent’s competence can outweigh abstract savings from an unfamiliar discount service. Sellers might think: “I know Agent X will take care of everything and has my best interests at heart, so I’m willing to pay their rate.” In sum, the full-service, full-commission model persists because many consumers genuinely believe they are getting their money’s worth in expertise, convenience, and results.
“It’s How It’s Always Been Done”: Habit and Social Norms
Real estate is an industry with strong ingrained norms. The traditional 5–6% commission model has been the standard in the U.S. for decades freakonomics.comhousebeautiful.com, and behaviorally, people tend to stick with what’s familiar. This status quo bias is reinforced by observing peers: if virtually everyone you know used an agent to sell their home, doing the same feels like the natural choice. In 2023, nine in ten sellers used an agent nar.realtor, a figure that has actually inched up in recent years. (FSBO sales have declined to an all-time low share keepingcurrentmatters.com.) When a behavior is that dominant, it breeds a self-perpetuating cycle: homeowners see it as the normal, safe route, and alternatives seem fringe or risky.
One reason the norm persists is that many sellers don’t actively “comparison shop” or experiment with commission alternatives. According to NAR data, the majority of sellers (and buyers) hire the first agent they interview nar.realtor. They often find their agent via personal networks (40% through a friend, neighbor, or relative) nar.realtor and may never even consider a discount brokerage or DIY approach. In such cases, the commission rate isn’t a heavily scrutinized variable – it’s typically quoted as the standard (e.g. “5% or 6% total”), and the seller accepts it as the cost of doing business. There’s a social trust factor at work: the seller trusts the agent (often a friend-of-a-friend) and doesn’t want to jeopardize the relationship by haggling hard or seeking a cut-rate agent. In fact, only 27% of home sellers report interviewing more than one agent nar.realtor, which implies few aggressively shop for lower fees. This dynamic keeps fee pressure low and maintains the commission norm through social inertia.
Behavioral economists also point to signaling and quality perceptions. A drastically lower commission or a flat-fee service might signal “budget” or “low quality” to some sellers. As economist Alex Tabarrok mused, would you distrust a Realtor offering a much lower commission? Perhaps some do marginalrevolution.com. There’s a “you get what you pay for” mindset – if an agent is willing to work for 1%, maybe they’re desperate or less competent. Meanwhile, top-producing agents often refuse to discount their rates, reinforcing the idea that quality comes at a price. Many sellers simply assume the traditional agent model is the only viable way to maximize value, because that’s what they’ve seen in the marketplace for so long. As one commenter observed, “the system was created and people just got used to it, and on it went to the point of absurdity in some cases.”bogleheads.org In other words, the practice continues in part because it’s deeply entrenched and has not been fundamentally challenged by consumers at large.
It’s instructive to compare to other countries: In many European markets, commission rates of 1–2% (often paid by the seller or buyer, but not both) are common hsh.com. The U.S. norm looks steep by contrast. Yet despite the internet democratizing information (listings, comps, etc.), the U.S. commission model hardly budged for years marginalrevolution.com. By 2013, even with Zillow, Trulia, and Redfin enabling online home search, most sales still involved agents and ~6% fees marginalrevolution.com. This stability suggests a cultural norm or coordination equilibrium as much as a pure market outcome. Everyone continues to play by the customary rules, perhaps thinking “if it ain’t broke, don’t fix it.” Only now, with legal pressures (discussed below) and a new generation of tech-savvy sellers, are these norms starting to be questioned more widely.
Structural “Invisible Hand” Forces That Reinforce High Commissions
Beyond psychology and habit, there have been structural factors in the real estate industry – some explicit, some subtle – that effectively keep commission rates high and discourage deviation. Sellers may not always be conscious of these forces (hence an “invisible hand”), but they heavily influence behavior:
MLS Rules and Commission Sharing: For decades, the National Association of Realtors’ rules required that when a home is listed on the MLS, the listing agent makes a “blanket unilateral offer of compensation” to any buyer’s agent who brings a buyer en.wikipedia.org. In practice, this meant a seller must decide up front what commission (usually around 2.5–3%) to offer a buyer’s agent, on top of the listing agent’s own fee en.wikipedia.org. This rule cemented the seller-paid commission structure as the norm across the country. If a seller wanted to pay zero to a buyer’s agent, traditionally they couldn’t even list on most MLSs to reach buyers. The net effect was that avoiding commissions wasn’t really an option if you wanted full market exposure.
Buyer’s Agents “Free” to Buyers: From the buyer’s perspective, having an agent has typically come at no direct cost (the seller’s proceeds cover both sides). This created a lack of price pressure from the buy-side. Buyers had little incentive to seek homes being sold without agent commissions, since that wouldn’t save them money (they’d expect the price to reflect any commission savings, and many don’t understand the linkage). It also meant most buyers almost automatically work with an agent. In 2024, 88% of home purchases involved a buyer’s agent nar.realtor. If nearly all buyers have an agent expecting a commission, sellers feel obliged to offer one to attract those buyers. Skipping that commission could severely shrink the buyer pool for a home, which most sellers can’t afford to risk.
Steering and Agent Cooperation: Perhaps the most insidious “invisible hand” factor is steering. Because buyer agents could see on the MLS exactly what commission was being offered for each listing, there was a temptation to subtly steer buyers toward homes with higher commissions. Conversely, homes offering a discount commission (or FSBO homes offering none) might conveniently get overlooked. This practice is unethical and against the rules, but by many accounts it has happened in the industry housebeautiful.comen.wikipedia.org. NAR’s own guidance acknowledged this, and research has shown evidence of commission-based steering occurring en.wikipedia.org. For a home seller, the fear (whether overt or just sensed) that agents might snub your listing if you don’t offer the standard 2.5–3% buyer fee is a powerful motivator to “play by the rules.” It’s a classic collective-action dilemma: no individual seller wants to be the one listing that all the Realtors avoid because the commission is too low. As one forum participant put it, “there is a system in place that is very prejudiced against those who go against the norm”, making it hard for a lone seller to successfully break the mold bogleheads.org.
Agent Community and Norm Enforcement: Real estate agents frequently work together and have ongoing relationships. A buyer’s agent today is a listing agent tomorrow, and vice versa freakonomics.comfreakonomics.com. This close-knit community has a vested interest in maintaining the commission norms that benefit everyone. Stephen Dubner of Freakonomics recounted how, when he tried to negotiate a home purchase without a buyer’s agent (asking to knock the typical 3% off the price), the listing agent bristled and said “that’s not the way it works…that’s just not how I do business.”freakonomics.comfreakonomics.com In essence, agents collectively discourage practices that could unravel the traditional fee structure. While not an overt conspiracy in most cases, it’s an unspoken understanding: “this is how we all make a living, so let’s keep the system intact.” Economists have noted that agents can effectively punish or shun discount competitors – for example, by not showing their listings or not working with them – which makes it hard for lower-commission models to gain traction marginalrevolution.com. This kind of coordination among agents has historically blunted the impact of would-be disruptors. (Indeed, online brokerage Redfin, which rebates part of the commission, struggled for years to expand market share, whereas non-threatening tech sites like Zillow thrived by working with agents rather than undercutting their fees marginalrevolution.commarginalrevolution.com.)
Contingent Fee Structure (Risk-Sharing): Finally, the commission is only paid upon success – this aligns agent incentives with getting the deal done, and it also makes sellers more willing to agree to a high fee. Why? Because if the house doesn’t sell at an acceptable price, the seller owes nothing (except perhaps some nominal listing costs). This success-contingency feels preferable to, say, paying a flat fee or marketing costs up front with no guarantee. Sellers may reason that “paying 5–6% is fine if I get the price I want; if I don’t, I’m not out-of-pocket.” The psychology of not paying until you have the proceeds in hand softens the blow. Alternatives like flat-fee MLS listings or discount brokers sometimes require non-refundable fees or limited-service trade-offs, which can seem riskier – you pay something regardless of outcome. The traditional agent, by contrast, shares the risk (they invest time and marketing with no guaranteed pay). This model has a powerful appeal: it’s the norm and also feels fair in that you pay only for results.
In summary, an array of industry practices – from mandatory cooperative commissions (until recently) to steering and social pressure among agents – have acted as an “invisible hand” ensuring that most home sellers continue to pay the usual commissions. In economic terms, critics have argued this looks like a form of implicit price-fixing or cartel behavior, with NAR’s rules at the center en.wikipedia.orgen.wikipedia.org. Indeed, a jury in 2023 found NAR and big brokerages liable for conspiring to inflate commissions and “force home sellers to pay” more than they would in a truly competitive market en.wikipedia.org. That leads us to the recent developments addressing this very issue.
Post-Lawsuit Shifts: Are Attitudes and Practices Changing?
The latter part of 2023 and 2024 have seen unprecedented scrutiny of real estate commissions. The Department of Justice (DOJ) withdrew from an earlier settlement with NAR to pursue a deeper investigation, and private class-action lawsuits (e.g. Burnett/Sitzer v. NAR) made headlines with a $1.8 billion verdict against NAR and several major brokerages housebeautiful.comen.wikipedia.org. NAR subsequently agreed to a nationwide settlement of $418 millionand, more importantly, to change certain commission rules urban.orghousebeautiful.com. As of mid-2024, new policies are being implemented to increase transparency and competition:
No More Publishing of Buyer-Agent Commission on MLS: Sellers (and listing brokers) can no longer display the offered commission to buyer agents in public MLS listings housebeautiful.comhousebeautiful.com. The intent is to prevent “steering” – buyer agents will no longer be able to easily filter or favor listings by the commission offered housebeautiful.com. In theory, this means a home offering a below-standard buyer agent fee won’t be automatically blackballed by agents searching the MLS, since the commission amount isn’t shown. Buyers themselves, using sites like Zillow, typically weren’t shown commissions anyway, so the change mainly targets agent behavior. House Beautiful explains that this rule change should open up more homes for buyers to see, regardless of commission incentives housebeautiful.com.
Buyers Must Agree on Agent Commission Up Front: Another rule taking effect is that buyers now enter a written representation agreement with their agent, including how the agent will be paid urban.orghousebeautiful.com. In the past, many buyers never really discussed their agent’s fee (since it was coming from the seller’s side); it was often assumed to be a standard ~3%. Now, buyers have to negotiate or at least acknowledge their agent’s commission at the start. This could spur more competition and flexibility in fee arrangements – for example, some agents might charge an hourly or flat rate, or openly advertise a lower commission to win clients housebeautiful.com. The greater transparency may make buyers more cost-conscious and willing to consider homes without a traditional commission structure (knowing they could, say, pay their agent separately or work something out in the price).
Possibility of Buyer-Paid Commissions: The industry is buzzing about whether the age-old practice of sellers covering the buyer-agent fee will shift toward buyers paying their own agent directly. Some have speculated that buyers might start financing agent fees as part of closing costs or negotiating them into the deal. However, expert forecasts suggest the seller-paid model will largely remain, at least in the near term urban.orghousebeautiful.com. The Urban Institute predicts sellers will continue to pay buyer-agent fees out of sale proceeds in most cases – it’s simply “closest to the status quo” and avoids new hurdles with mortgages and appraisals urban.org. That said, they do anticipate overall commission rates will trend down as a result of these changes, especially for expensive homes urban.org. In a more open marketplace, a highly priced property might only warrant a 4% total commission, for example, instead of a flat 6%. Price competition could finally put a crack in the standard rates.
Sellers Gaining Flexibility: With NAR’s cooperative commission rule under review, some MLSs have started allowing $0 or very low buyer-agent commissions on listings. Sellers may feel freer to experiment with offering less than the traditional cut, especially in seller’s markets where demand is high and buyers’ agents have less leverage to demand full fees. Conversely, in a buyer’s market, sellers might continue offering commissions (or other credits) to entice buyers and their agents housebeautiful.comhousebeautiful.com. For example, if homes aren’t selling quickly, a seller could advertise they’ll help cover the buyer’s closing costs – indirectly funding the buyer’s ability to pay their agent. As one real estate executive noted, “when it’s harder for a seller to sell, they will be more incentivized to offer concessions or credits to the buyer” which could include agent compensation housebeautiful.com. In effect, the economics of who pays may shift, but sellers can still end up footing the bill as a sales incentive.
So, while the legal landscape is changing, it’s important to note that deep-rooted attitudes and fears won’t overturn overnight. Early data in 2024–2025 showed no surge in FSBOs – in fact, FSBO share hit record lows keepingcurrentmatters.com. Many consumers remain unaware of the commission reforms, and even those who are aware may prefer to let others be the guinea pigs. It’s likely that fear of the unknown and trust in tradition will persist until new practices prove themselves. As Freakonomics economist Chad Syverson remarked, the real estate system has long functioned as a kind of club: “If you want to do something different, I’m not sure we can keep working together.”freakonomics.comfreakonomics.com That club is finally being pried open, but it will take time for alternative models to feel “normal” to the average home seller.
Conclusion: A Combination of Psychology and Market Structure
In summary, home sellers’ willingness to pay hefty commissions when alternatives exist boils down to a powerful mix of behavioral and structural factors. On the behavioral side, fear of the unknown, lack of experience, and the comfort of a trusted expert make the traditional agent route psychologically appealing – especially when reinforced by anecdotes of DIY efforts leading to stress or regret nar.realtornar.realtor. Most sellers also genuinely value what a good agent provides, from pricing savvy to peace of mind, and they often have personal relationships that encourage sticking with the status quo. Social norms and “how it’s always been done” thinking create a default choice that few challenge bogleheads.org.
On the structural side, the real estate industry historically evolved to keep commissions baked into the cake: the MLS system and cooperation rules made paying a buyer’s agent essentially mandatory en.wikipedia.org, and opaque to consumers, thus facing little pushback. Agents as a group had every incentive to maintain this equilibrium, even if only through informal pressure and practices like steering housebeautiful.comen.wikipedia.org. This “invisible hand” has been a major reason alternative commission models struggled to gain traction – it wasn’t a level playing field.
However, with antitrust interventions and increasing consumer awareness, we may be at the dawn of a more flexible era. In the coming years, sellers might not automatically assume 5–6% is the cost of selling. They could negotiate lower fees or separate out the buyer-agent payment, especially if they realize those don’t always yield proportional benefit. But old habits die hard. For now, most home sellers continue to pay higher commissions largely because the system around them – and their own past experience – signals that it’s the safest bet. In essence, it has been “the way it’s always been done” and, until very recently, deviating came with too many uncertainties and perceived risks. As one industry observer quipped about the resilience of the 6% model: no one really understood why commissions stayed so stable, but everyone kept paying them anyway marginalrevolution.commarginalrevolution.com. That inertia is only now being tested.
Sources:
National Association of Realtors, 2023 Profile of Home Buyers and Sellers (highlights on usage of agents vs. FSBO, and FSBO seller difficulties) nar.realtornar.realtor.
Realtor Magazine (NAR) summarizing a Clever Real Estate survey of recent sellers (FSBO regrets: lower profits, longer time, more stress) nar.realtornar.realtor.
Keeping Current Matters – Why Most Sellers Hire Real Estate Agents Today (2025 analysis of FSBO decline and survey that 3 in 4 potential FSBO-sellers have doubts) keepingcurrentmatters.comkeepingcurrentmatters.com.
HSH.com – Is 6% Real Estate Commission Fair? (notes on agent value, NAR stats, and an NBER study finding no price increase from using an agent, though faster sales) hsh.comhsh.com.
Marginal Revolution (Alex Tabarrok) – The Real Estate Commission Puzzle (economic commentary on why 6% persists: not due to lack of info or entry, suggests signaling and agents discriminating against discount brokers) marginalrevolution.commarginalrevolution.com.
Freakonomics podcast – Are Realtors Having an Existential Crisis? (Chad Syverson interview discussing the unusual two-agent system, agent coordination, and anecdote of an agent refusing to cut commission for a no-buyer-agent deal) freakonomics.comfreakonomics.com.
House Beautiful (Aug 2024) – “Real Estate Commission Rules Just Changed — Will That Help You?” (explains NAR settlement changes: no displaying commissions on MLS, steering, buyer-agent agreements) housebeautiful.comhousebeautiful.com.
Urban Institute (Mar 2024) – Changing Real Estate Agent Fees Will Help… (discusses likely outcomes of settlement: seller-paid model to persist but fees should come down, especially for pricey homes) urban.orgurban.org.
Wikipedia – Burnett v. NAR (overview of 2023 antitrust trial verdict: NAR and others conspired to force sellers to pay inflated commissions, with background on MLS commission rule and steeringdefinition) en.wikipedia.orgen.wikipedia.org.
Bogleheads Forum discussion (2024) – insight into sentiment that the system punishes those who “go against the norm” and the need for change bogleheads.org.
