AI could push real estate commissions lower, Alloy Advisors says

A new report from Alloy Advisors estimates that a typical $400,000 U.S. home sale generates $39,660 in transaction costs, with real estate commissions accounting for $23,000—nearly 6% of the sale price. Authors Amit Kulkarni and Russ Cofano argue that AI will accelerate downward pressure on the traditional commission model by empowering consumers to scrutinize and negotiate fees more effectively. The report, *The Home Sale Transaction, Reconsidered*, breaks down the economics of a 2025 U.S. resale, highlighting that sellers bear about $30,200 of the total costs, while buyers pay roughly $9,460 beyond their down payment. Kulkarni warns that AI will expose the perceived overpricing of real estate transactions, forcing the industry to justify its value proposition. Despite expectations that the National Association of Realtors’ (NAR) 2024 commission lawsuit settlement would reduce rates, data from Clever Real Estate and Redfin shows average commissions rose to 5.44% in mid-2025. A HousingWire survey from April 2025 found 58.8% of agents reported no change in buy-side commissions post-settlement, while 11.76% saw increases. The report cites structural barriers, including 13 states banning à la carte brokerage services and a system that compensates agents only for completed transactions. Alloy Advisors suggests AI will make consumers more cost-conscious, challenging the industry’s reliance on opaque commission structures. Kulkarni emphasizes that AI benefits consumers, not just professionals, allowing them to question and negotiate individual transaction costs—a shift that could redefine real estate pricing dynamics. The analysis concludes that the industry must adapt to AI-driven transparency to remain competitive.