International Residential Real Estate Brokerage Fees and Implications for the US Brokerage Industry

Abstract

It is commonly understood that residential real estate brokerage fees in the US tend to run 6% or 7% within local markets for existing property resales. Exceptions to these historically uniform going rates are starting to appear, and utilization of the internet will provide new efficiencies that should lead to lower commission rates in the future. One possible indication of where the long term commission rates may head, should price competition increase, is provided by a review of commission rates around the world. This study is a first attempt to gather such data and begin the process of global comparisons. Most industrialized country brokerage rates are significantly below those of the US, although there are clearly differences in the services provided, red tape, and liabilities, as well as information access. An exploratory model attempts to explain variations in fees around the world and deepen our understanding of possible equilibriums for US firms should price competition increase.