John Omoruyi
17 Dec

The commission structure in real estate transactions is a significant consideration for both buyers and sellers. The question often arises: where did the tradition of a six percent real estate agent commission originate?

This practice traces back to the 1940s when local Real Estate Boards engaged in price-fixing to establish a standard commission rate. While seen as an unfair practice, it gained traction during a time when national attention was diverted to external matters.In the early 1950s, the Supreme Court ruled the established 6% commission as illegal. However, rather than embracing a more competitive market, Real Estate Boards cleverly labeled the 6% commission as "suggested." 

This linguistic maneuver persisted through the 1950s and 1960s.Legal challenges in the 1970s brought an end to the Boards' ability to mandate or suggest a 6% rate. Although the market opened up to competition, the commission rate remained relatively stable. The argument for maintaining a standard 6% rate highlights its potential benefits for consumers, akin to certain sectors like healthcare.Real Estate agents emphasize that, unlike various services and products that saw a surge in costs during the 1940s, real estate commissions have maintained a consistent rate, hovering around 6%.

The increase in agents' earnings is often attributed to the rise in property values.In the Nigerian real estate landscape, similar considerations apply. While the internet has introduced alternative fee structures, the 6% commission remains the industry standard. The debate continues regarding whether a fixed commission rate is beneficial for consumers or if a more dynamic, market-driven approach would better serve all stakeholders.As the Nigerian real estate market evolves, exploring commission structures and adapting to consumer needs will likely play a crucial role in shaping the industry's future.

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