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Agent commissions expected to soar to record high in 2021

Total commission revenue in 2021 could ultimately top $100B for the first time, according to a new report from Knock.

A hot real estate market and rising home prices should lift total U.S. agent commissions to a record high this year, according to a new report from real estate technology startup Knock.

The analysis found that by the end of 2021, agents in the U.S. will likely have brought in $104 billion in total commission revenue, the report states. If that projection comes true, it’ll be the first time the industry hits that benchmark — through agents came close in 2020 when they collectively earned $90.5 billion in total commission revenue.

The report ultimately describes this year’s projected revenue as “a number that could quite possibly be making history.”

These findings are especially notable because the report also points out, commissions have experienced “some downward pressure” in recent years. Nevertheless, the total number of commission dollars agents generate continues to grow, and could ultimately end up this year is nearly double what it was back in 2002.

To create the report, Knock examined the Mortgage Bankers Association Mortgage finance forecast for both 2020 and 2021. The company’s analysts then multiplied the number of actual and projected existing home sales in those years by the industry average commission rate of 4.94 percent. Knock assumed commission rates on new home sales would be half the rate for existing homes.

Knock ultimately believes 7.1 million homes will sell in 2021, the report additionally notes.

Commissions have become a hotly debated topic in recent years, thanks in part to a handful of lawsuits that challenge the way agents get paid. Among other things, the suits aim for the practice of sellers agents splitting their commissions with buyers’ agents. Agent compensation is also at the heart of a lawsuit the U.S. Department of Justice is pursuing against the National Association of Realtors (NAR).

None of those cases are resolved yet, but for now, the new report from Knock suggests that in a tight market the agents who are doing business are generating significant amounts of revenue for themselves and their brokerages.

Aside from commissions, the report also includes other good news for real estate professionals: Consumers are turning to agents in growing numbers, despite some anxiety that people might abandon trusted advisors in favor of technology.

“Eighty-nine percent of consumers choose to rely on agents’ expertise to navigate these dynamics with more certainty,” the report notes. “This percentage has continued to trend upwards from previous years. And there is good reason; agents’ invaluable local market knowledge and personal touch have proven to outweigh other methods available in this complex transaction process.

By Jim Dalrymple II



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