The real estate industry has been confronted with a new version of the same argument every few years: Real estate commissions are too high, and the right technology or business model will finally force them down. The latest version focuses on artificial intelligence, with a recent industry report finding that AI now outperforms agents on most tasks involved in a typical home sale.
According to the report, AI can perform 23 tasks involved in a home sale, including writing listing descriptions and scheduling showings. However, the conclusion that this will lead to lower agent fees misreads how the market works.
Consumers have always had cheaper options, such as for-sale-by-owner or discount brokers, but most have declined to use them.
The reason for this is not inertia or lack of awareness, but rather that consumers do not rank the cost of representation as their primary concern. For buyers, top priorities are avoiding a costly mistake and working with someone who helps them get into the right home. For sellers, it’s finding a professional who knows the market and can guide them through a process that remains a high-stakes legal and financial transaction.
The market has already run this experiment, with companies like Redfin and Help-U-Sell attempting to disrupt the traditional brokerage model with lower commissions and consumer rebates. However, these companies have not been successful in changing the market, and most consumers still choose traditional, full-service representation. They have tried to offer alternatives, but consumers prefer the services of traditional agents.
Help-U-Sell pioneered the flat-fee model in 1976.
The argument that AI will compress commissions rests on a logical assumption: If technology reduces the time and effort required to complete a transaction, the price of that transaction should fall. However, real estate agent economics do not follow that pattern, and the savings generated by using AI to perform tasks are not meaningful enough to make lowering the agent’s fee the obvious move. It is a matter of how agents use their time and resources.
Top producers are focused on managing high-quality relationships, and reducing their personal workload by using AI tools is valuable, but they will likely use the time savings for other activities, such as taking an afternoon off or developing more quality client relationships. The idea that agents will instead use that efficiency to “pass along the savings” to the customer through lower fees is counterintuitive to the agent, as it undermines their ability to build trust and provide high-quality services.
Agents who have tried to compete on fees consistently encounter the same problem: Positioning with low pricing first undermines their message of high-quality representation by implying that they do less or are worth less. This strategy does not work for building the trust-based relationships that drive referrals and repeat business. Instead, agents focus on providing exceptional services and guidance to their clients.
AI changes the standards for agents, making it clearer who can demonstrate judgment, local expertise, and relationship skills. The technology only makes the gap between a capable agent and a marginal one more visible, and the likely outcome is not commission compression, but the continued consolidation of transaction volume among agents who can clearly demonstrate value. This shift will lead to a greater emphasis on the skills and services that agents provide.
The key to success in the real estate industry is what brokerages and agents offer that a capable consumer with good tools cannot replicate on their own. The answer has consistently been that most consumers want a trusted professional guiding them through one of the most consequential decisions of their lives — and they are willing to pay for it. AI does not change that; it raises the standard for what trust looks like, and agents must adapt to meet these new expectations.
As the real estate industry continues to evolve, it’s likely that AI will play a larger role in the home-buying and selling process, particularly in areas such as new roles for industry leaders. However, it’s unlikely to lead to lower commissions, and instead will likely lead to a greater emphasis on the skills and services that agents provide, such as negotiation execution, hyperlocal knowledge, and emotional support, which are not easily replicated by machines. The industry will continue to shift, with agents focusing on providing high-quality services and guidance to their clients.
There is a trend towards starter homes becoming more expensive, and this shift will likely continue as the industry evolves. Agents must be able to handle these changes and provide their clients with the best possible guidance and support. The real estate industry is complex, and agents must be able to adapt to the changing setting.
NAR has been involved in several lawsuits, including a lawsuit related to its practices. The outcome of these lawsuits will likely have an impact on the industry, and agents must be aware of the potential changes. The real estate industry is highly regulated, and agents must be able to handle these regulations to provide the best possible services to their clients.
The future of the real estate industry is uncertain, but one thing is clear: agents will continue to play a vital role in the home-buying and selling process. They will need to adapt to the changing setting and provide their clients with the best possible guidance and support. The industry will continue to evolve, and agents must be able to evolve with it.
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