Real estate sales is an industry rife with anti-competitive and corrupt practices. Appraisals, home inspections, lending, and sales are all in it together on this. I absolutely loathe them.
I feel like we have had electronic databases with backup capability for so long that errors in titles should have long been a thing that does not happen anymore.
Same thought. You'd think title insurance would only kick in if the last title transfer predates say 1980, or some other relatively-likely-to-have-county-digital-records date
My parents bought a house in ~2003 new from the builder that ended up having a title issue when they tried to sell it (work orders of some kind)... in a big city that I certainly assume was using digital records by then.
I did computer support and had a couple of title companies all though the 2007 boom and 2008 crash. I may seem impossible, and yet suits brining up chain of title going back into the 1800s do happen more commonly than one would think.
In the rural south there are some insane claims of title across families. I've seen title work where they had thousands of pages of paperwork involved with hundreds of possible heirs that had to be located.
Of all the scams associated with real estate transactions, title insurance is kind of legitimate. The title chain itself may be recorded, but there may be some lien against the property that was not properly recorded. That’s the situation you protecting against.
If so then there are laws to consider that any property that is not protected becomes legally owned by the one who has been servicing/inhabiting it, which is a bit before that decade would end.
The core problem of the lien is solved, the only thing left is to ensure the lawyers who seem to always get their cake no matter what aren't bloodthirsty enough.
> Of all the scams associated with real estate transactions, title insurance is kind of legitimate
As someone who has submitted (and failed to collect) on a claim against title insurance for legal fees incurred to correct a mistake in the original title that the title company missed, I'm skeptical of its value, at least for things like erroneous lot lines.
They claimed that they had correctly interpreted the documents as presented. The issue was that my condo (in a 2 unit condo building) hadn't been correctly deeded one of the 2 parking spaces, even though the building was designed and used that way for decades.
They claimed that the seller misrepresented the property by claiming it came with a parking spot.
Oh don't get me started on title insurance in Texas! It gets prorated depending on the last time you purchased or refinanced the property, but it has to be renewed every 7 years! Mind you 7 years ago they checked and verified it was good, so why do I need to renew when we know there are no issues with the title? If you notice, most title offices are very nice, beautiful buildings, fancy furniture and furnishings. That is what you are paying for!
I find that it's very similar to mob tactics. Prospective homeowners just get passed and funneled from person to person that they effectively have no choice but to interact with. And each of those people take a piece of the pie.
And there are a lot of fear tactics used as well. Or FUD, at least.
"Don't skip the inspection, what if something is wrong" sounds sensible but pre-purchase home inspections are quite surface level, will only find visible, obvious problems, and in the fine print they disclaim responsibility if they miss anything.
It's definitely you get what you pay for. If you have a good home inspector they may be able to tell you something like "Yea, the roof is fucked", or "That crack you didn't notice in the foundation is really bad news".
I don't build homes nor do I troubleshoot them on a daily basis. Someone that does, and has a at least a modicum of experience will still notice more than I.
It definitely isn't: There is little repeat business, and realtors do a lot of the recommendations. So you absolutely can end up paying top dollar for an inspection that appears thorough, but is nowhere near good enough.
It's just a very inefficient market, fraught with dark corners. That's why people hate it. A world where an expensive inspector actually meant higher quality would be far better than what we have
In my area, you won't get an offer accepted if you don't waive the home inspection. In fact, it's basically required to waive all inspections, such as radon and others. So the state says you have a so-called right to these, which divests the state from liability, but on a practical level, you need to waive these. Buyers end up having to buy ~$1M homes based upon just looking at them once or twice over just a couple of hours with basically no history given at all. It's such a messed up process. I get to do more due diligence buying something off of Reverb or eBay than I did with our home. And as you say, all of the people you're forced to interact with force you to sign papers that says that they have no responsibility for anything whatsoever.
That certainly affects it, but the realtors are still part of the process, and they have no incentive to encourage the inspections aside from the people they can refer if you insist on them. Right now, the only thing you are effectively entitled to know about the house, on a practical level, is that the house exists.
I've had good inspectors who point out everything wrong with a place. I cancelled offers based on their reports. Recently, however, I was on the way to the inspection and had a flat tire, so I was late, both seller and buyer agents were there with the inspector and my agent made sure to tell a different inspector what questions I had from the previous one, and completely missed on the inspection report that the outdoor electrical socket did not have GFCI and it actually had visible burn marks on the paint, also they didn't report that there was no carbon monoxide detector. Just very basic stuff that should be addressed before the transaction is finalized and is part of the negotiation and can lower your price some when the seller doesn't want to fix everything. I suspect that my agent implied that I was putting a lot of stock into their report and pushing him to minimize issues while I wasn't there.
The good inspectors told me about a condo loft that had plumbing issues throughout, probably a $5000 repair, and at a house, a sagging pier and beam foundation causing all sorts of problems.
That seems to highlight the problem with agents, they are supposed to represent your interests but they actually only want the sale to close so that they make their commission. That is how they get paid; that is their incentive.
Yeah I saw this a lot -- real estate people would recommend someone for some kind of independent opinion, but that person has a long-term relationship with them (passing referrals), but no relationship with you
The problem is inherently that most people are buying a home for the first time. Or they buy maybe 3 to 5 homes in their life.
So it's very easy to build up an information asymmetry / cartel there
I recall reading a section in the California DRE salesperson training book 20 years back on canvassing for new clients. They actually discussed perusing local obituaries and contacting next of kin, because you know, there's a likely sale to be had. But they cautioned waiting 2-3 days as it could be seen as being insensitive.
It is a fact that many homes are sold when their occupants die, and offering your services to a potential customer when the customer likely needs it does not seem out of bounds.
A phone call is a request for the person on the other end to stop what they’re doing and pay attention to the phone conversation. Plenty of people are annoyed when that happens in many contexts, not least of which includes telemarketers. Add on top of that the fact that the advice is to allow 2-3 days’ bereavement before the unsolicited possible annoyance... I genuinely don’t get the question.
Be available as a realtor and market well; allow such customers to find you instead of chasing this particular kind of lead.
But you're not offering your services. You're trying to get a potential customer to pay you for your services. And you're doing this during, presumably, a time of grief when the potential customer already has a lot to deal with physically and emotionally. And you're doing it because of the event that put them in this state.
So in that way, it's not so much kind as it is exploitative.
>But you're not offering your services. You're trying to get a potential customer to pay you for your services.
Yes, people usually work in exchange for money.
>And you're doing this during, presumably, a time of grief when the potential customer already has a lot to deal with physically and emotionally. And you're doing it because of the event that put them in this stat
Exactly, a real estate agent can take some of the load off. Keeping a home secure, traveling to it if you live far away, etc are not necessarily easy. People have jobs to get back to, families to attend to that may not be nearby, and things need to happen, regardless of emotional events.
Home inspections aren't compulsory are they? I thought that they weren't even required by lenders. Of all the things listed they sure seem like real value to the buyer.
If you're not borrowing to purchase a home you probably wouldn't need an appraisal. I think lenders just want objective evaluation of the collateral. Who can blame them?
Some lenders do require inspection, and FHA loans do require one. They have some value buyers for sure but inspectors also have an interest in finding something to make it seem worthwhile.
They won’t catch much anyway. Most inspectors take a short stroll through the house, test one or two receptacles and call it a free $400 after that. Their visit is shorter than when you looked at the house.
Maybe there’s good reputable inspectors. Ours weren’t
They'll just have to find a way to do that after they've finished taking 10 photos at 320x240 resolution (of which the last four are of the same room).
The reason is to not have the windows be absolutely blown out. They both look better that way and you can see the view, of the house has one.
Of course, there’s tastefully doing it and…not. When I did real estate photography I (almost always) solved that problem by using additional lighting inside to somewhat equalize the interior and exterior brightness. It looks a lot better in the end but it’s also a lot more work and requires more equipment.
I did real estate photography for a bit. It wasn’t worth it because realtors are terrible penny pinchers.
I did quite a few homes directly for sellers because their realtor’s photos were absolutely terrible. It looked like they took 2 minutes to zoom around the house, only putting their arm through doorways, taking everything vertically and tilted.
For what it’s worth at least at the time the MLS had a pretty low max resolution.
I probably got a 25% discount on my condo because the realtor had terrible photos.
1. It has an outdoor rooftop patio with a gas fireplace. This was not mentioned anywhere in the listing.
2. They poorly photoshopped furniture into all of the rooms at incorrect sizes. Whoever was doing the photoshopping assumed it was 8 foot ceilings when they were 10. Made everything look cramped and tiny.
3. Misreported the monthly HOA fees by about +30%.
4. It had been on the market for 4 months with almost zero showings, I happened to be touring another unit in the building when I decided on a whim to check out 'the penthouse' with my realtor. Price hadn't dropped at all in that time, even though the market was fairly quick.
I used to scoff at entrants into the space because I thought something valuable was being disrupted.
Then my agent let me get 90% through a sale before - "surprise" - such and such construction is required prior to closing due to recent statute in this town.
I had to haggle DOWN to 6% to enjoy effectively no representation or understanding of the market I was selling into.
If this industry is disrupted, even if by charlatans, unfortunately it deserves to be - we deserve it - for allowing the status-quo.
People forget just how terrible the Taxi industry was before Uber showed up too. Uber has plenty of problems, but you can be in the Taxi in 5 minutes and there are no surprise fees and you don't need to carry cash and you don't have to sit on hold for 20 minutes waiting for the dispatcher to pick up. The old taxi industry killed itself. Once there was any alternative it was dead.
It's wild for an industry with such a low barrier to entry, overfilled with such jokers in the good times, and starving for business in the bad times.. they managed to protect their 6% fee so long. Cartels really do work.
Ever since I bought my first house I have always hated the concept of realtors. Maybe before the internet it made sense because it wasn't easy finding houses. But what value does a realtor actually bring in the age of Zillow, Redfin, etc...
Also - the percent structure has never made sense to me. Why should a realtor make more money just because the house is more expensive? Does a realtor really deserve to make 60k on a 2 million dollar home sale? Did they really bring twice as much value as a 1 million dollar home sale?
I'm not saying that realtors don't have _any_ value. Yes if you are unfamiliar with an area it is nice to have someone who is familiar with the area help you look for a home. But with the internet this is nowhere near worth points of a sale of a home.
And yes, they can negotiate for you - this has value too... But is the delta of their negotiation skills worth 6% of the home value??
When I sold my home I was also frustrated. I remember when I looked for a realtor to sell my home they tried to convince me they have additional avenues they would sell beyond what me listing myself could do. "We will get your home on our LinkedIn page! On our monthly magazine!" Really? Have you ever heard of anyone buying a home from a LinkedIn page?
I bought on short sale and my realtor made it happen. Made $180,000 when I sold that place.
Used the same realtor buying the next place, it was down to 8 people that put offers in on the only day showing. We got it because she knew a couple of tricks, one not exactly ethical.
She is a family friend and normal people would have got 1/2 the work from her.
A hardworking realtor can absolutely make a difference. Good luck finding one!
Of course it is very zero sum and sharky. If you get a place below market value or sell it above that is great for you but someone else has to lose. So all these commissions are taken from all and the mean average person has no advantage. Bad value for money on average.
Ah, but you didn't get a hardworking realtor, you got a family friend to break the rules just for you. You even admit that no one else would have gotten the same deal that you did.
Isn’t some gotcha. You’re just rewording what I wrote as if it was. If you got a hard-working realtor, they could do the same things that our realtor did, because they were friendly.
Users flag comments, dang with usually reply if there is a legit issue. But mostly like the rule about taking a commentors best intended meaning rather than their unintended easy to refute meaning.
The percentage structure - while I want to agree with you, we can then look to things like ... the struggle now of delivery food percentages and tipping. If I order a $15 pizza and tip $3, I'm tipping 20%, but that is seen as "cheap" for a tip in 2023... yet if I order a $4,000 bottle of wine at dinner, and tip 20%, the staff will enjoy an $800+ tip for that meal. Worth 20% to pop the cork, really?
what are you talking about. 20% is still standard, and of course you don't tip 20% if for some reason you order a 4,000 bottle of wine, except also, if you do that, tip whatever you want, what do you care, you have 4,000$ to burn.
My parents recently sold their place in the Netherlands. They talked to several agents about representing them. Agents take a cut of the sales price. Buyers also need to use agents and since housing is scarce in the Netherlands, you pretty much have to rely on agents to find a place.
Where it gets sketchy is when those agents are friends with each other. A lot of deals get made before the property is even listed online. So, what my parents experienced was that they were quoted valuations of their property that had about a 20% bandwidth. 20% is a lot. Nearly 100K euros in this case They went with the highest valuation in the end. It sold within a week slightly above what they asked. This is normal in the Dutch market currently. Prices briefly dipped last year and then continued growing. Even the increased interest of mortgages has so far not changed that.
So, what was going on with those other agents deliberately low balling the price?
The interests of agents are not always aligned with their clients. They are either working for the buyer or seller. And they do each other favors. Like letting each other know when something hot (i.e. priced below market value) comes up for sale or convincing a seller to agree to a lower valuation. So, there are conflicts of interest. And sometimes they just need the money and getting the property sold quickly is worth more to them than having to put in work to sell at a higher price. Another factor is that when property comes back on the market, the same agents are often involved. So, there's a bit of double dipping happening there. Help a client buy cheap, and a few years later help them sell expensive. In a market with ever growing real estate prices that's the game.
I read the article, but I still don't understand how the National Association of Retailers enforce the 5-6% total commission. Does anyone know?
The incidence question (is the fee "paid" by the buyer or seller) is a semantic one, but if the cartel is able to inflate the total fees, that's something else entirely.
It's mostly due to the fact that in order to list a house or find a house you need to use a system called MLS. In order to use the system you need to be a realtor. It's quite simple actually
This is very true. A home I purchased recently, the sellers had a very new realtor, who was friends with them. She had listed the commissions very low - probably thinking she was doing them a service.
I purchased the home without a realtor, and one of the ways I had a much stronger position was because no one else was being shown the property. (As in, realtors weren’t mentioning it to their clients).
I had a friend of mine who is known locally in the area as one of the best realtors look at the mls and listing, and that was the take I got from him.
This was part of the evidence used in the case. They had recordings from buyer's agents who called about non-MLS homes. The agents were on-tape saying things like, "I am going to make sure no other agent shows your house." All because the seller refused to pay a buyer's agent commission.
There are a ton of websites that say it’s possible to create an MLS listing for a small fee, for a for sale by owner house.Are you suggesting there is some catch or that that is not actually possible?
I did that with my house. But I had to publish on the listing that we would pay a buyer commission otherwise, no one would come. Luckily, another unrepresented person bought it so I didn't have to pay the commission.
While my mom is a mortgage agent that always had access to MLS (which she shares with me), I'd argue some realtors (my realtor I've known since I was 4) are worth the 5% without MLS. She has like 4 assistants managing everything in the background that are so well-trained that I didn't even need to mention updating my converted Single to a Multi-family because they somehow figured it out and just did it. She also seems to conjure an army of prospective buyers to show up on the day she schedules and twice blew my expectations away. I was just joking that my multi-family was worth over $300k and she got $312k somehow. So there are realtors that are worth the cost, but she's kind of a rare exception to the norm.
> an army of prospective buyers to show up on the day
that's what i hate about realtors. in germany they will gladly invite a hundred interested people for a flat and by that make searching for an appartment a huge waste of time. it's easier for them and probably a nice ego stroke.
My question was always where the hell she finds all these people and always manages to achieve a rather large premium to my somewhat rigorously estimated value based on all the comparables I find on BrightMLS. They're obviously not getting a great deal. All 3 sales were also Philadelphia suburbs, which is not a lucrative market for speculative gentrification. The only major spike in values in the past 25 years was during COVID with like a single massive 80% jump because in a world where pandemics are real, urban market plummeted. But you'd think this army of buyers would see the name and say, "Screw that! I'm not going to Diane's open houses ever again."
Now imagine a world where realtor fees are 1% instead of 6%. On a 300k house, that's 15k you don't pay to the realtor. In this world, your realtor doesn't bring you an extra 12k from the buyer, but you still come ahead. And the buyer pays less too.
That's a win win world for everyone (except the realtor, who are redundant middlemen in the internet eta).
First off, I'm not opposed to such a world in general. However, you, like the other replier, failed to read how my $300k number was intended as a joke about my optimism. Thus, it makes more sense to conclude my estimates (made with both a degree in Finance and access to BrightMLS comparables to rigorously draw my conclusions) was obviously far lower than $300k and your numbers don't really make much sense. Remember, also, that I'm really only defending her ability to achieve those kinds of results and justify the 5% number. In general, you don't get a team of well-trained professionals diligently finding every possible angle to ensure you get a higher value and an army of prospective buyers. In fact, it's rather rare and it's really the only case where 5% is justified. Had I sold it privately, I'd expect far less than the price I'd joke about wanting.
Unless you did an experiment with different realtors, you have no idea if someone else besides the realtor (since you have known since 4) would have found you the $300k.
I have no doubt that there is a range of talent for realtors, just like SWEs. The problem is the 6%. Why doesn't your realtor get 10% and everyone else get 1%? The system is rigged.
>Unless you did an experiment with different realtors, you have no idea if someone else besides the realtor (since you have known since 4) would have found you the $300k.
Neither do you. Am I to believe you know more about one of the houses I owned than I do? Again, I'm all for lifting the fixed commissions. I'm just saying there does exist exceptions that I would still pay 5% for. Although, like I said, her operation isn't just some aspiring salesman acting slick. It's a team of about 4 professionals under her that go over every single angle to prepare it for the market. She's not even that persuasive or talkative. All they do are value-added services, which is how it should be. I wouldn't even know how to update the records to classify it a multi-family, yet they do it all automatically.
Again, $300k+ was a joke I made to her. So, obviously, my estimates were far lower and the price she achieved exceeded your estimated premium. Unless you think my joke was that a $297k property was worth $3k more, in which case I'd ask you to devote more thought to your conclusions.
> I still don't understand how the National Association of Retailers enforce the 5-6% total commission.
Plaintiffs submitted some recordings in either this or a related case of an agent who said she wouldn’t even bother to show a house that didn’t have a guaranteed commission. The NAR is not so stupid as to have a “you must sign here that you will only show houses with a commission” form.
>> the incidence question … is a semantic one
Definitely not semantics. This relates to the elasticity of demand and supply in the market. The incidence can be on the buyer OR the seller OR shared. Depends on the good and the demand.
I bought some undeveloped land a few months ago. I started off doing everything myself, but I found numerous instances where the selling agent wouldn't provide documents on the listing unless I had an agent. I ended up getting an agent just for that.
It’s a huge part of the law that commissions are to be up for negotiation, always. RE agents might forget that but it’s a foundation level principle that there are no set commissions. You could lose your license or at least be fined for even suggesting it to a client
A good realtor can guide you through the market, inspections, and negotiation - all of which hugely affect the largest investment most people make. But that's no reason for them to demand a PERCENTAGE off the sale of the home!
Closing fees plus realtor fees are a big reason why it takes so long for a home to break even for most people - something like 7 years in NYC. And one reason why there's so much pressure for home prices to keep going up. The cost of selling a home and buying another one also makes the labor market less dynamic - people find it harder to move to where there's better opportunities.
Sure they can, but the entire incentive structure creates a situation where it's in the agent's best interest to get the sale done regardless or the outcome to the buyer/seller.
There's also the Principal Agent problem here. If the seller's agent gets the home sold for an extra $50,000, the agent only makes an extra $1500. If this takes an extra month of work, it may not be worth it. And what guarantee does the agent have that their extra work will actually pay off?
Good agents do get referrals, which is a good incentive to do a good job. But are homeowners even able to tell apart a good agent from a bad one? If someone's slick and kind, the bed-side manner might be enough to be considered a great agent. But they might just be less competent compared to a more gruff one.
There is no incentive at the margin. And only the margin matters in real estate transactions. The first 80% is usually a given based on location. Total racket.
There should be waterfall hurdles like in Real Estate investing. Or variable commissions above certain thresholds or rolling sqft averages in that location.
If they can get that last $50k then split it 50/50 with them.
All of their money should be made at the margin.
Also there should be full transparency such that the buyer agent loses money when this happens. So there is an overt battle for the pot between buyer and seller agent incentivizing them to advocate for their client, not just get the deal done.
I've never seen or heard of a real estate agent negotiating to transact a property below its previous sale price, even from the buy side. That says a lot.
> I've never seen or heard of a real estate agent negotiating to transact a property below its previous sale price
You've never heard of a short sale in which there was an agent involved? (Technically, a short sale is one below the outstanding mortgage, irrespective of the previous sale price, but usually the former will be less than the latter, so...)
They exist. I knew a fantastic agent (now retired, sadly), with a highly unusual business model. His clients would find a house on their own, via Zillow or whatever. Then they would negotiate a fee structure with the agent. The agent would help them inspect the house, help them negotiate effectively, and did not push for a purchase or a high price at all. If the deal closed, he would take his fee and write the client a check for any commissions from the seller in excess of the fee.
(But he would also offer to try to convince the seller to modify the terms to sell at the same effective received price but without paying a commission and the collect the commission from the buyer. This would usually be favorable from a tax perspective, as including the buyer’s agent fees in the “price” increases the transfer taxes.)
In any sale, the buyer is paying for everything on both sides, even if it is characterized as the seller paying for it.
But it benefits the buyer for it to be characterized as an add-on fee rather than part of the basic purchase price, at least in jurisdictions with property tax where an actual sale price is also presumptively the initial property tax assessed value (and even more so in places that have annual limits on tax basis value increase as well.)
> Closing fees plus realtor fees are a big reason why it takes so long for a home to break even for most people - something like 7 years in NYC. And one reason why there's so much pressure for home prices to keep going up. The cost of selling a home and buying another one also makes the labor market less dynamic - people find it harder to move to where there's better opportunities.
I 1000% agree with this. I finally bought a house just under a month ago, but I would have done this years ago if the transaction costs weren't so stupid high (because I was never 100% sure I would be staying in the same area for a while).
The main issue is the listing agent splitting the commission with the buyer's agent, not that the seller has to pay some % of the sale price as a commission.
Aren't fees in most countries higher than they are in the US?
I know there are many countries with lower fees - but my understanding is that realtors in the US aren't exactly highway robbers, comparatively speaking...
No, and this was evidence used in the trial I believe. Commissions in peer countries have gone way down since the introduction of the internet to the process. Not so in the US.
in my experience buy side realtors are really on the selling side team. each time i wanted to offer below asking they refused and never presented my offer. there was no negotiation and i had to arm wrestle to see documents before making an offer. one realtor wanted a BLANKET SIGNED offer form. “i’ll fill it out for you”. no thanks.
Maybe there should be a corresponding lawsuit of home buyers vs NAR and buyer’s agents. I bet the damages are far in excess of $1.8B, and there might be juicier legal grounds for a suit.
People who routinely paid 20% to tip a waitress for a meal but don't want to pay a tip for someone who hugely affect the largest investment people make, This is just being cheap and rather foolish.
fine, but let's not compare meal cost to a house. that 6% is very arbitrary. i never got how selling a home in a major metropolitan area would require 10 times as much work for a realtor than a house in the middle of nowhere midwest for 200k. the flat percent doesn't make sense.
The same argument goes for buying steak versus buying a chicken meal. The costs are wildly different but the work is the same, why should I pay the waitress more for one versus the other?
well maybe you personally shouldn't? like i said, not fair to compare a $20 meal where you're probably not going to die on a hill over 50 cents of perceived labor vs. a $1M house. You're also free to buck societal conventions and tip nothing and "only" be seen as an asshole, you can't do that with realtors.
The realtor I used to buy my last house does it as a hobby. She also did one of the most ethical things I have ever seen, and only took her commission at our initial offer, she wouldn't take commission on any of the escalation clause raises.
It at least makes it so that the buying agent doesn't profit from any additional upward movement in price. I guess it's about as good as you can do with such a screwed up incentive structure.
Hi, can you help me get the lowest price possible on a house? Sure, and the lower I can get your price, the less money I make, how does that sound?
Oh, and add to that, not only will I make more if you make more, but offering a higher amount will close the deal faster so I can move on to the next person.
I see this changing really fast. Real estate firms and individual real estate agents are not gonna want to get sued for hundreds of millions of dollars. They are going to be SUPER careful to avoid that. I foresee the quick dilution of the power of the realtor trademark. I foresee new real estate agents entering the market and not using the realtor trademark. I see those real estate agents using very different business models than what are use now. Lower percentages or fixed-price - but they'll find other ways to make money by being intermediaries with the other players in a transaction.
Whatever is our cost for this cartel, the cost of the MD cartel is at least 10x higher. So perspective is needed.
Seller's agents will get paid a flat rate, then X% commission for just the amount above some certain price. Basically they'll be rewarded if (and only if) they can successfully create a bidding war that sells the place for more than it's probably worth. If they're just doing their normal job of selling the thing for the appropriate amount, they'll get their flat rate.
Buyer's agents will be paid per hour of work, like lawyers.
Buyer’s agents should logically cease to exist. They’ve been replaced by real estate websites, they’ve just been hanging on through an artificial monopoly.
Everything my last realtor showed me was worse than what I found on Zillow on my own, and the formatting of the information was so user-unfriendly that it was basically worthless.
On point! Been saying this for years. I bought my house and had sellers agent represent me. The seller went with our offer because agent made more commission. We were not the highest offer.
That’s another good point! Frankly, there’s really nothing stopping your seller’s agent from lying about the offers that are coming in or at least gently pushing sellers toward commission-maximizing offers, and the scenario you described is basically a push in the direction of buyers’ agents disappearing.
I found a house on MLS (20 years ago), and allerted my buyer's agent. She kept refusing to engage for some reason. We pressured her to inquire and ended up buyng the house. I later told this story to a neighbor and he said the builider's (seller's) agent was refusing to pay full commision to the buyer's agents. So I guess that's why my agent was ignoring the listing. :-)
Lots of people hating on realtors here, but my buying realtor:
- Put up with me through several offers that fell through due to issues with the house
- Met me quickly several times to see houses in a very hot market (covid)
- Constantly found me homes that met my criteria
- Was able to "get the dirt" on the homes and give me good advice for the homes that fell through, not pressuring me to buy
And my selling realtor, for a home where they will probably only get 2-3k:
- Took outstanding photos of my home
- Constantly fought for me on a few issues and gave me great advice
- Stuck through some legal issues related to the home
- Received and passed along info from other realtors to help me improve the value of the home and quickly get a sale
For the buying realtor, it is true I had to go through 2-3 realtors before meeting her. There were some SHIT realtors I worked with, for sure. Racists, assholes, lazy fucks. But I don't see the issue paying a realtor for their work - though maybe 6% ends up being quite a bit in this day and age.
5% commission (or even 4%) of a multi-million dollar sale is still a ton of money for the work/expertise/risk I’ve seen Bay Area realtors put in anyway. I’ve never seen anything less than 4%, and the realtors were very cranky.
Rural area realtors can be pieces of work too, but at least they aren’t claiming to be worth as much money. ;)
10k is 3% of 333k. Fewer and fewer houses are available at that price point. You can easily pay double or even quadruple this amount per agent. And two agents are getting paid.
How many hours did your agent spend with you? How did their hourly rate turn out? One of the totally shitty things about realtor pay is that you are subsidizing the pay for all the people who never closed. I'd be happy to pay an excellent agent $100/h for expert advice and to leave out the filler that I can do myself. But this is rarely much of an option, especially as a buyer.
And nobody's saying don't pay realtors for their work.
They're saying, certainly don't pay them 6%, and preferably not a percentage at all. Just pay them like a contractor or anyone else you hire -- either a flat fee or by the hour, depending on the exact services.
I think they’d love to be paid a flat fee or by hour, regardless of whether the transaction goes through or not, just like restaurant staff being well paid and not rely on tip. But such is the commission world and have no idea how it all came to be this way.
Fully agree. Another option would be to add some incentive structure. If I know I can selly home for $200k myself and you sell it for $200k...your value to me was basically $0. If you can sell it for $300k, then I'd be pretty happy to give you a nice chunk of that. 6% no matter what is crazy.
Yes, but it is a bit of work. I wouldn't mind using a realtor for their experience in the field, but 6% is absolutely bonkers for most normal house purchasing processes. Their work simply isn't that valuable and is being kept at that level due to non-competitive practices. If the realtor just shows me the home and does a little negotiating and some paperwork for me....maybe $2k at most for that service, but $12k for a $200k house? Ridiculous.
My realtor drove 160 miles today on my behalf, just to make sure I didn't forget something minor during a pre-closing walk-thru. I've had prior realtors that would have absolutely found an excuse to miss things like that. She also realized that I might not be able to make closing time due to commute logistics with my job and so proactively rescheduled it for 1 hour later in the morning. I found out about the problem in a text message after it was already solved.
My realtor is about saving me time & frustration. I don't have to think about what a title company or MLS is, how many there are, how they work, who to talk to, etc. None of it. I say "I want to look at houses in area XYZ" and next thing I know I have an agenda with route in my inbox and tentative dates for viewing. Even closing feels like it goes warp speed with this person. I've never had it take more than 45 minutes and I'm going on the 4th time. Every part of the experience should feel like cruise control if you are working with good people.
I totally get the arguments on the other side though. If you are looking for something modest/routine & you also don't have a lot of constraints, the 3%+ fees start to look very manipulative. Additionally, if you are willing to spend some of your own time to do legwork on various logistics, then I can understand why you'd rather that money just stay in your pocket.
For me, I'd happily burn thousands of dollars to save half an hour depending on how mentally stressful that 30 minutes is expected to be. Look to tax filing services if you need another example of the same psychology. Turbotax never takes me more than an hour and never comes back weird, but I'd happily cut a check to make the whole notion of doing my own taxes mostly go away.
Totally agree. Honestly reading through the comments they sound a lot like spectator comments: The naysayers don't really sound like they've really sold a house before or bought one either. There's even some commenters steering the conversation toward renting apartments.
Realtors really are awesome when you need to get from one house to another quickly and smoothly.
There's always a better solution, but I always think of the haircut you take at car dealerships: it could be a lot worse for selling your house. Like, you're getting 20-40% under the value of your car at the dealership. 6% isn't a lot considering that.
In the UK your estate agent (seller's agent) usually takes 1-2%, and there are cheaper ways to do it like self-listing. You then get a conveyancer (a lawyer) on each side to actually do the work, and they usually work for a fixed fee.
In Brazil, it is also 6%. It's ridiculous, 6% on top of what families spend decades saving for a limited amount of hours of _consulting_. A home is probably the most expensive thing a family will ever buy.
Unfortunately, they don't get money if they don't sell, even if they spend hours helping a customer. IMHO, this is bad. A buyer will pay for all the deals that weren't closed.
Great news! You also pay a lawyer at closing in the US. They are far, far cheaper than realtors but have much more liability.
You can list your home and refuse to pay buyers' agents, but it generally takes much longer to sell a home that way. Not uncommon for a home for sale by owner to later be listed by a realtor when the owner loses patience. As you can read elsewhere in this discussion, real estate agents hate homes for sale by owners because those people generally don't want to pay their commission.
Now we just need an explanation of how the hell appraisers come up with their numbers.
Not only is it functionally useless to ask someone to measure fair market value of an asset that already has someone offering to buy it at a specific price, the appraisals seem to come in ridiculously close to offer price every time.
I've had to deal with around 8 appraisals over the years as buyer or seller, I only had one that didn't come bad within 1% of the sale price. Either markets are impressively efficient and we don't need appraisals, or the appraiser already knows exactly what number to put on it and goes through the motions of finding a few hundred dollars worth of random plumbing and electrical nitpicks and moves on.
When I was looking to sell my previous house the market was in turmoil and I didn't have a good idea of what the price should be so I called an appraisal company to ask what they would appraise it for and they refused. Their job is to basically rubber stamp whatever the realtor gives them to appease the bank. At the most they'll check a couple of comps in the area to make sure it's not totally out of whack.
The job of the appraiser is to demonstrate to the bank signing a mortgage that the deal isn't a scam.
If a house would reasonably be sold for $250k, but the buyer is buying at $2 million, there's probably some very good questions that need to be asked about where the money is going.
On the other hand, if an appraiser can demonstrate that:
- properties with similar features have been sold in a similar price range in somewhat recent time frame
- if no close match exists, then identifying the price differential from past sales might justify a good guess
Generally speaking, if someone is making an offer, then they are participating in the market and setting the fair market value of the home. IME yes, appraisers DO know the offer that is being made, and they'll come up with a similar number if they don't have reason to believe that the buyer and seller are doing something shady.
the appraisals seem to come in ridiculously close to offer price every time.
Few people make wild offers unrelated to the market price and even if they do, sellers rarely accept them. So it makes sense that the appraisal usually comes close to the offer price since both the buyer and seller usually do at least some research of looking around at comparable sales.
Though I saved $25K on a house once when the appraisal came in $25K under my offer price. I told the sellers that the bank wouldn't give me a loan at the current terms over the appraised price and I didn't have another $25K in cash to put down on the house, so I'd have to withdraw the offer. The seller made an appraisal appeal that went no where, so they reduced the selling price by $25K.
I had similar, however that was 6 years ago or so when the market was just starting to heat up. The appraisal looked at previous sales, but there was such low inventory that there weren't many comps to compare to, and none of them recent. The seller wouldn't come down much, so in order to make up the difference I had to cut into my down payment (which means instead of 20% down it was only 11% down, as only the appraised value counted toward my LTV and I got stuck with PMI for a few years).
Now do the Collective Refusal to Deal commited by the Texas Apartment Association. They require every apartment complex in Texas to use the same contract. That's a criminal violation of Texas' anti-trust laws, specifically it's a Collective Refusal to Deal.
There's an article I've been meaning to write for a while called Death to the Salesmen.
I've spent a large part of my career working on products for insurance agents, real estate agents, and car salesmen.
My experience has left me with one conclusion: we should eliminate most of these jobs. They're about as predatory toward the customer as they come, adding little value in most cases.
There are certainly cases where they do add a lot of value but mostly because of government regulations, cartels, and monopolies they have a much bigger footprint than they should have in anything resembling a just world.
If a buyer’s agent gets any percentage of a sale, the buyer’s agent and the buyer have misaligned interests. They might ‘represent’ the buyer, but the buyer’s agent has the same economic incentives as the seller (higher price, faster sale, fewer contingencies).
Fundamentally you’re correct, but the much bigger incentive on BOTH sides is to close the deal quickly. If they spend twice the amount of time on the transaction, their earnings per hour get cut in half. That’s a much bigger impact then a few percentage points in price swings.
The point about speed would be true under pretty much any incentive model except an hourly rate for the buy side.
My point is when you are buying, your agent wants you to pay more. This is not what you want generally. It is fundamentally flawed.
I agree, on the sell side it creates an incentive for an agent to not push for marginal price improvements. The incentives are misaligned on both sides of the transaction.
On net you get round-tripped on misaligned incentives with the percentage model.
The FTC has a page on it [1] but I wish there was more there given it's the biggest purchase of most of their taxpayers' lives. The reports section comprises three reports, two from 2007 and one from... 1983. Clicking "view more reports" links to a page with those same three. I know they've done more in this area but I thought that was worth a laugh at least.
Fun fact: NAR was the top lobbying spender in 2020 with $84B. Second place was Chamber of Commerce at $82B. Third place was $26B, or less than one third of NAR's spend.
when i came to the US the idea of a person making a commission on the sale of real estate was foreign to me.
in my home country most ppl sell and buy real estate themselves. agents are used for special situations.
when i tried to call an owner in the bay area to buy from them directly and offered to pay for any lawyer of their choice to have paperwork drafted and reviewed they pooped their pants. i never understood why a well educated person cannot handle this here in CA themselves.
This article reads as if hiring a person to help broker a deal worth several hundred thousand dollars on something as intimate as a house is silly when it's not.
I don't use a travel agent to buy a $250 plane ticket because I know exactly what I want and I know exactly what I'm getting and there's not a third party involved (there's no seller of the seat, just the airline.)
The realtor isn't there because you don't have information, like a travel agent would be. The realtor is there to broker a deal between two parties that really don't like each other and are trying to hose each other.
I paid the full 6% when I sold my house. Worth the money.
My buy-side broker was phenomenal. But many aren’t. This should be negotiated, and the party to whom duty is owed should be paying the agent (and negotiating their fee).
I can see it being useful for sellers, but not buyers.
I do think you should have someone help broker a deal of this magnitude, but it shouldn’t be a realtor. It should be an attorney.
You can get a real estate attorney to do the same thing for like $1500 or less where I’m located (north east). That’s a lot cheaper than what the commission would be for a realtor.
Anyone can find their own houses on Zillow now, and the inspector is separate from the realtor, so from my perspective, all the buyer’s realtor really does is call the other agent to arrange a time for a showing. That’s all they did in my case and they took 3% of the total value of the house (or their agency did - they didn’t pocket all the $ directly themselves).
The agents should be put against each other such that one will get a greater share of the overall pot based on how good they are at creating a bidding war. More bids, more commission share to the seller agent. Less bids, more commission to the buyer agent.
> “There are buyers that aren’t going to know the steps to buy a home,” Davis said. “They have to pay for a down payment, closing costs, appraisals, inspections. If they also have to come up with money to pay for a buyer’s agent, some just won’t and they’ll get in over their heads or they won’t buy at all. Not having representation will make the market less inclusive.”
The entire buyer’s agent system is absurd right now. The buyer’s agent supposedly represents the buyer, but they have an extremely strong incentive to get their client to close on a purchase at all, and a secondary incentive to get their client to pay as much as possible. If anything, it seems to me that this is the wrong kind of inclusive — if anything, it pushes people to buy a house even when they shouldn’t.
There should absolutely be agents of a sort who can represent a person or family who is considering buying a house and for whom buying at all is not obviously the right decision, but the current fee structure does not encourage good representation of this sort.
I worked with Redfin years ago to sell my house. The agent came in, shared his analysis and wrote down on a piece of paper what the house would sell for and how much I would make at closing. We officially listed the house on Friday at the previous suggested number, had 3 offers by the end of the weekend and accepted the only realistic offer a few days later for almost exactly the price he stated. Mind you this was back in 2014 so the market wasn't white hot and our house was just another house on a street where most looked the same. I can't recall why we did not qualify for the 1% rebate back then but I believe he deserved every penny of his commission.
However I have been on the mortgage side of the business as a loan processor and it seemed to me that for the most part realtors were lazy. It seemed crazy to me no matter the work involved they expect that 3% commission. In the end you are having to pay to access MLS, and that access costs 3%, even if the house could sale itself due to the area or market. I have seen realtors advertise that if they don't sell your house in 30 days, then they reduced the commission, which I think is probably the best way to go about it. I would rather get the sale done quickly than what usually happens where the realtor lists the house for what the sellers want and then they have to keep dropping the price because its too expensive.
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[ 3.0 ms ] story [ 245 ms ] threadIn the rural south there are some insane claims of title across families. I've seen title work where they had thousands of pages of paperwork involved with hundreds of possible heirs that had to be located.
Now whether that’s worth .5-1% is debatable.
The core problem of the lien is solved, the only thing left is to ensure the lawyers who seem to always get their cake no matter what aren't bloodthirsty enough.
As someone who has submitted (and failed to collect) on a claim against title insurance for legal fees incurred to correct a mistake in the original title that the title company missed, I'm skeptical of its value, at least for things like erroneous lot lines.
They claimed that the seller misrepresented the property by claiming it came with a parking spot.
"Don't skip the inspection, what if something is wrong" sounds sensible but pre-purchase home inspections are quite surface level, will only find visible, obvious problems, and in the fine print they disclaim responsibility if they miss anything.
It's definitely you get what you pay for. If you have a good home inspector they may be able to tell you something like "Yea, the roof is fucked", or "That crack you didn't notice in the foundation is really bad news".
I don't build homes nor do I troubleshoot them on a daily basis. Someone that does, and has a at least a modicum of experience will still notice more than I.
It's just a very inefficient market, fraught with dark corners. That's why people hate it. A world where an expensive inspector actually meant higher quality would be far better than what we have
This is a consequence of an extreme lack of supply in your area rather than some sort of realtor conspiracy though.
The good inspectors told me about a condo loft that had plumbing issues throughout, probably a $5000 repair, and at a house, a sagging pier and beam foundation causing all sorts of problems.
The problem is inherently that most people are buying a home for the first time. Or they buy maybe 3 to 5 homes in their life.
So it's very easy to build up an information asymmetry / cartel there
It is a fact that many homes are sold when their occupants die, and offering your services to a potential customer when the customer likely needs it does not seem out of bounds.
Be available as a realtor and market well; allow such customers to find you instead of chasing this particular kind of lead.
So in that way, it's not so much kind as it is exploitative.
Yes, people usually work in exchange for money.
>And you're doing this during, presumably, a time of grief when the potential customer already has a lot to deal with physically and emotionally. And you're doing it because of the event that put them in this stat
Exactly, a real estate agent can take some of the load off. Keeping a home secure, traveling to it if you live far away, etc are not necessarily easy. People have jobs to get back to, families to attend to that may not be nearby, and things need to happen, regardless of emotional events.
If you're not borrowing to purchase a home you probably wouldn't need an appraisal. I think lenders just want objective evaluation of the collateral. Who can blame them?
Maybe there’s good reputable inspectors. Ours weren’t
Of course, there’s tastefully doing it and…not. When I did real estate photography I (almost always) solved that problem by using additional lighting inside to somewhat equalize the interior and exterior brightness. It looks a lot better in the end but it’s also a lot more work and requires more equipment.
I did quite a few homes directly for sellers because their realtor’s photos were absolutely terrible. It looked like they took 2 minutes to zoom around the house, only putting their arm through doorways, taking everything vertically and tilted.
For what it’s worth at least at the time the MLS had a pretty low max resolution.
They also charge lower listing fees.
1. It has an outdoor rooftop patio with a gas fireplace. This was not mentioned anywhere in the listing.
2. They poorly photoshopped furniture into all of the rooms at incorrect sizes. Whoever was doing the photoshopping assumed it was 8 foot ceilings when they were 10. Made everything look cramped and tiny.
3. Misreported the monthly HOA fees by about +30%.
4. It had been on the market for 4 months with almost zero showings, I happened to be touring another unit in the building when I decided on a whim to check out 'the penthouse' with my realtor. Price hadn't dropped at all in that time, even though the market was fairly quick.
Then my agent let me get 90% through a sale before - "surprise" - such and such construction is required prior to closing due to recent statute in this town.
I had to haggle DOWN to 6% to enjoy effectively no representation or understanding of the market I was selling into.
If this industry is disrupted, even if by charlatans, unfortunately it deserves to be - we deserve it - for allowing the status-quo.
Uber has robbed us of crazy taxi driver stories though.
Mortgage interest rates quite high, housing inventory not moving a lot, and now the National Realtor Association getting disrupted.
I feel like this sets the stage for some serious change, but no idea to what end.
Also - the percent structure has never made sense to me. Why should a realtor make more money just because the house is more expensive? Does a realtor really deserve to make 60k on a 2 million dollar home sale? Did they really bring twice as much value as a 1 million dollar home sale?
I'm not saying that realtors don't have _any_ value. Yes if you are unfamiliar with an area it is nice to have someone who is familiar with the area help you look for a home. But with the internet this is nowhere near worth points of a sale of a home.
And yes, they can negotiate for you - this has value too... But is the delta of their negotiation skills worth 6% of the home value??
When I sold my home I was also frustrated. I remember when I looked for a realtor to sell my home they tried to convince me they have additional avenues they would sell beyond what me listing myself could do. "We will get your home on our LinkedIn page! On our monthly magazine!" Really? Have you ever heard of anyone buying a home from a LinkedIn page?
Used the same realtor buying the next place, it was down to 8 people that put offers in on the only day showing. We got it because she knew a couple of tricks, one not exactly ethical.
She is a family friend and normal people would have got 1/2 the work from her.
A hardworking realtor can absolutely make a difference. Good luck finding one!
There doesn't seem to be any luck available.
Beyond that, 6% is obviously asinine.
Where it gets sketchy is when those agents are friends with each other. A lot of deals get made before the property is even listed online. So, what my parents experienced was that they were quoted valuations of their property that had about a 20% bandwidth. 20% is a lot. Nearly 100K euros in this case They went with the highest valuation in the end. It sold within a week slightly above what they asked. This is normal in the Dutch market currently. Prices briefly dipped last year and then continued growing. Even the increased interest of mortgages has so far not changed that.
So, what was going on with those other agents deliberately low balling the price?
The interests of agents are not always aligned with their clients. They are either working for the buyer or seller. And they do each other favors. Like letting each other know when something hot (i.e. priced below market value) comes up for sale or convincing a seller to agree to a lower valuation. So, there are conflicts of interest. And sometimes they just need the money and getting the property sold quickly is worth more to them than having to put in work to sell at a higher price. Another factor is that when property comes back on the market, the same agents are often involved. So, there's a bit of double dipping happening there. Help a client buy cheap, and a few years later help them sell expensive. In a market with ever growing real estate prices that's the game.
Home Sellers Win $1.8B After Jury Finds Conspiracy Among Realtors - https://news.ycombinator.com/item?id=38156557 - Nov 2023 (7 comments)
Jury Finds Realtors Conspired, Awards Nearly $1.8B in Damages - https://news.ycombinator.com/item?id=38089356 - Oct 2023 (273 comments)
The incidence question (is the fee "paid" by the buyer or seller) is a semantic one, but if the cartel is able to inflate the total fees, that's something else entirely.
You can put your house up on Craigslist, Facebook marketplace, make your own website, put a sign on your front lawn, etc.
But most people predict they will earn per time they invest in selling by going with MLS, where the home buying audience is largest.
I purchased the home without a realtor, and one of the ways I had a much stronger position was because no one else was being shown the property. (As in, realtors weren’t mentioning it to their clients).
I had a friend of mine who is known locally in the area as one of the best realtors look at the mls and listing, and that was the take I got from him.
Most of my realtors said me to look at some sites and get back to them when I liked something.
that's what i hate about realtors. in germany they will gladly invite a hundred interested people for a flat and by that make searching for an appartment a huge waste of time. it's easier for them and probably a nice ego stroke.
That's a win win world for everyone (except the realtor, who are redundant middlemen in the internet eta).
I have no doubt that there is a range of talent for realtors, just like SWEs. The problem is the 6%. Why doesn't your realtor get 10% and everyone else get 1%? The system is rigged.
Neither do you. Am I to believe you know more about one of the houses I owned than I do? Again, I'm all for lifting the fixed commissions. I'm just saying there does exist exceptions that I would still pay 5% for. Although, like I said, her operation isn't just some aspiring salesman acting slick. It's a team of about 4 professionals under her that go over every single angle to prepare it for the market. She's not even that persuasive or talkative. All they do are value-added services, which is how it should be. I wouldn't even know how to update the records to classify it a multi-family, yet they do it all automatically.
Plaintiffs submitted some recordings in either this or a related case of an agent who said she wouldn’t even bother to show a house that didn’t have a guaranteed commission. The NAR is not so stupid as to have a “you must sign here that you will only show houses with a commission” form.
>> the incidence question … is a semantic one
Definitely not semantics. This relates to the elasticity of demand and supply in the market. The incidence can be on the buyer OR the seller OR shared. Depends on the good and the demand.
It’s a huge part of the law that commissions are to be up for negotiation, always. RE agents might forget that but it’s a foundation level principle that there are no set commissions. You could lose your license or at least be fined for even suggesting it to a client
Closing fees plus realtor fees are a big reason why it takes so long for a home to break even for most people - something like 7 years in NYC. And one reason why there's so much pressure for home prices to keep going up. The cost of selling a home and buying another one also makes the labor market less dynamic - people find it harder to move to where there's better opportunities.
Sure they can, but the entire incentive structure creates a situation where it's in the agent's best interest to get the sale done regardless or the outcome to the buyer/seller.
Why give a complete picture to a seller when they may turn into a non-seller, or a later-seller, if you do?!
Build quality basically had no impact on housing prices because no one could do a proper inspection.
Good agents do get referrals, which is a good incentive to do a good job. But are homeowners even able to tell apart a good agent from a bad one? If someone's slick and kind, the bed-side manner might be enough to be considered a great agent. But they might just be less competent compared to a more gruff one.
There should be waterfall hurdles like in Real Estate investing. Or variable commissions above certain thresholds or rolling sqft averages in that location.
If they can get that last $50k then split it 50/50 with them.
All of their money should be made at the margin.
Also there should be full transparency such that the buyer agent loses money when this happens. So there is an overt battle for the pot between buyer and seller agent incentivizing them to advocate for their client, not just get the deal done.
You've never heard of a short sale in which there was an agent involved? (Technically, a short sale is one below the outstanding mortgage, irrespective of the previous sale price, but usually the former will be less than the latter, so...)
(But he would also offer to try to convince the seller to modify the terms to sell at the same effective received price but without paying a commission and the collect the commission from the buyer. This would usually be favorable from a tax perspective, as including the buyer’s agent fees in the “price” increases the transfer taxes.)
But it benefits the buyer for it to be characterized as an add-on fee rather than part of the basic purchase price, at least in jurisdictions with property tax where an actual sale price is also presumptively the initial property tax assessed value (and even more so in places that have annual limits on tax basis value increase as well.)
I 1000% agree with this. I finally bought a house just under a month ago, but I would have done this years ago if the transaction costs weren't so stupid high (because I was never 100% sure I would be staying in the same area for a while).
The main issue is the listing agent splitting the commission with the buyer's agent, not that the seller has to pay some % of the sale price as a commission.
I know there are many countries with lower fees - but my understanding is that realtors in the US aren't exactly highway robbers, comparatively speaking...
(IANAL)
[1]https://www.bankrate.com/personal-finance/tipping-survey/
If preferring not to give an additional $60k as a tip is considered cheap, then call me Mr. Scrooge.
Hi, can you help me get the lowest price possible on a house? Sure, and the lower I can get your price, the less money I make, how does that sound?
Oh, and add to that, not only will I make more if you make more, but offering a higher amount will close the deal faster so I can move on to the next person.
Whatever is our cost for this cartel, the cost of the MD cartel is at least 10x higher. So perspective is needed.
Seller's agents will get paid a flat rate, then X% commission for just the amount above some certain price. Basically they'll be rewarded if (and only if) they can successfully create a bidding war that sells the place for more than it's probably worth. If they're just doing their normal job of selling the thing for the appropriate amount, they'll get their flat rate.
Buyer's agents will be paid per hour of work, like lawyers.
Everything my last realtor showed me was worse than what I found on Zillow on my own, and the formatting of the information was so user-unfriendly that it was basically worthless.
Certainly they would not engage is such questionable ethical behaviour ;)
- Put up with me through several offers that fell through due to issues with the house
- Met me quickly several times to see houses in a very hot market (covid)
- Constantly found me homes that met my criteria
- Was able to "get the dirt" on the homes and give me good advice for the homes that fell through, not pressuring me to buy
And my selling realtor, for a home where they will probably only get 2-3k:
- Took outstanding photos of my home
- Constantly fought for me on a few issues and gave me great advice
- Stuck through some legal issues related to the home
- Received and passed along info from other realtors to help me improve the value of the home and quickly get a sale
For the buying realtor, it is true I had to go through 2-3 realtors before meeting her. There were some SHIT realtors I worked with, for sure. Racists, assholes, lazy fucks. But I don't see the issue paying a realtor for their work - though maybe 6% ends up being quite a bit in this day and age.
I'd love to pay by the hour for service. There aren't many such realtors.
The median home sale price in June was $426k. Or $25.6k of commission.
Typical Sunnyvale prices were about 2.4million, or $144k commission.
Rural area realtors can be pieces of work too, but at least they aren’t claiming to be worth as much money. ;)
Also messy to do halfway through closing. Especially if you don’t want to have to deal with a lawsuit from the realtor.
Easier if you already have the brokers direct line of course. They’re the ones on the hook anyway, the realtors are just the ‘front’.
How many hours did your agent spend with you? How did their hourly rate turn out? One of the totally shitty things about realtor pay is that you are subsidizing the pay for all the people who never closed. I'd be happy to pay an excellent agent $100/h for expert advice and to leave out the filler that I can do myself. But this is rarely much of an option, especially as a buyer.
And nobody's saying don't pay realtors for their work.
They're saying, certainly don't pay them 6%, and preferably not a percentage at all. Just pay them like a contractor or anyone else you hire -- either a flat fee or by the hour, depending on the exact services.
Like, figure the haircut you take bringing your car to a dealership...
My realtor is about saving me time & frustration. I don't have to think about what a title company or MLS is, how many there are, how they work, who to talk to, etc. None of it. I say "I want to look at houses in area XYZ" and next thing I know I have an agenda with route in my inbox and tentative dates for viewing. Even closing feels like it goes warp speed with this person. I've never had it take more than 45 minutes and I'm going on the 4th time. Every part of the experience should feel like cruise control if you are working with good people.
I totally get the arguments on the other side though. If you are looking for something modest/routine & you also don't have a lot of constraints, the 3%+ fees start to look very manipulative. Additionally, if you are willing to spend some of your own time to do legwork on various logistics, then I can understand why you'd rather that money just stay in your pocket.
For me, I'd happily burn thousands of dollars to save half an hour depending on how mentally stressful that 30 minutes is expected to be. Look to tax filing services if you need another example of the same psychology. Turbotax never takes me more than an hour and never comes back weird, but I'd happily cut a check to make the whole notion of doing my own taxes mostly go away.
Realtors really are awesome when you need to get from one house to another quickly and smoothly.
In the UK your estate agent (seller's agent) usually takes 1-2%, and there are cheaper ways to do it like self-listing. You then get a conveyancer (a lawyer) on each side to actually do the work, and they usually work for a fixed fee.
6% is huge.
Unfortunately, they don't get money if they don't sell, even if they spend hours helping a customer. IMHO, this is bad. A buyer will pay for all the deals that weren't closed.
You can list your home and refuse to pay buyers' agents, but it generally takes much longer to sell a home that way. Not uncommon for a home for sale by owner to later be listed by a realtor when the owner loses patience. As you can read elsewhere in this discussion, real estate agents hate homes for sale by owners because those people generally don't want to pay their commission.
UK estate agents do the absolute bare minimum and often less. When it comes to viewings they really are just key holders and nothing else.
Still, 6% is huge
Not only is it functionally useless to ask someone to measure fair market value of an asset that already has someone offering to buy it at a specific price, the appraisals seem to come in ridiculously close to offer price every time.
I've had to deal with around 8 appraisals over the years as buyer or seller, I only had one that didn't come bad within 1% of the sale price. Either markets are impressively efficient and we don't need appraisals, or the appraiser already knows exactly what number to put on it and goes through the motions of finding a few hundred dollars worth of random plumbing and electrical nitpicks and moves on.
If a house would reasonably be sold for $250k, but the buyer is buying at $2 million, there's probably some very good questions that need to be asked about where the money is going.
On the other hand, if an appraiser can demonstrate that:
Generally speaking, if someone is making an offer, then they are participating in the market and setting the fair market value of the home. IME yes, appraisers DO know the offer that is being made, and they'll come up with a similar number if they don't have reason to believe that the buyer and seller are doing something shady.Few people make wild offers unrelated to the market price and even if they do, sellers rarely accept them. So it makes sense that the appraisal usually comes close to the offer price since both the buyer and seller usually do at least some research of looking around at comparable sales.
Though I saved $25K on a house once when the appraisal came in $25K under my offer price. I told the sellers that the bank wouldn't give me a loan at the current terms over the appraised price and I didn't have another $25K in cash to put down on the house, so I'd have to withdraw the offer. The seller made an appraisal appeal that went no where, so they reduced the selling price by $25K.
Now do the Collective Refusal to Deal commited by the Texas Apartment Association. They require every apartment complex in Texas to use the same contract. That's a criminal violation of Texas' anti-trust laws, specifically it's a Collective Refusal to Deal.
I've spent a large part of my career working on products for insurance agents, real estate agents, and car salesmen.
My experience has left me with one conclusion: we should eliminate most of these jobs. They're about as predatory toward the customer as they come, adding little value in most cases.
There are certainly cases where they do add a lot of value but mostly because of government regulations, cartels, and monopolies they have a much bigger footprint than they should have in anything resembling a just world.
My point is when you are buying, your agent wants you to pay more. This is not what you want generally. It is fundamentally flawed.
I agree, on the sell side it creates an incentive for an agent to not push for marginal price improvements. The incentives are misaligned on both sides of the transaction.
On net you get round-tripped on misaligned incentives with the percentage model.
[1] https://www.ftc.gov/news-events/topics/competition-enforceme...
Fun fact: NAR was the top lobbying spender in 2020 with $84B. Second place was Chamber of Commerce at $82B. Third place was $26B, or less than one third of NAR's spend.
https://infogram.com/1pyy66emdxryq1c3yez9wqvxp2by3p7pgn3
I only saw those stats recently but felt realtors are likely a very vocal and substantial constituency for every representative.
in my home country most ppl sell and buy real estate themselves. agents are used for special situations.
when i tried to call an owner in the bay area to buy from them directly and offered to pay for any lawyer of their choice to have paperwork drafted and reviewed they pooped their pants. i never understood why a well educated person cannot handle this here in CA themselves.
I don't use a travel agent to buy a $250 plane ticket because I know exactly what I want and I know exactly what I'm getting and there's not a third party involved (there's no seller of the seat, just the airline.)
The realtor isn't there because you don't have information, like a travel agent would be. The realtor is there to broker a deal between two parties that really don't like each other and are trying to hose each other.
I paid the full 6% when I sold my house. Worth the money.
I do think you should have someone help broker a deal of this magnitude, but it shouldn’t be a realtor. It should be an attorney.
You can get a real estate attorney to do the same thing for like $1500 or less where I’m located (north east). That’s a lot cheaper than what the commission would be for a realtor.
Anyone can find their own houses on Zillow now, and the inspector is separate from the realtor, so from my perspective, all the buyer’s realtor really does is call the other agent to arrange a time for a showing. That’s all they did in my case and they took 3% of the total value of the house (or their agency did - they didn’t pocket all the $ directly themselves).
Align the incentives beyond just getting a deal.
Money should fought for at the margin.
The entire buyer’s agent system is absurd right now. The buyer’s agent supposedly represents the buyer, but they have an extremely strong incentive to get their client to close on a purchase at all, and a secondary incentive to get their client to pay as much as possible. If anything, it seems to me that this is the wrong kind of inclusive — if anything, it pushes people to buy a house even when they shouldn’t.
There should absolutely be agents of a sort who can represent a person or family who is considering buying a house and for whom buying at all is not obviously the right decision, but the current fee structure does not encourage good representation of this sort.
However I have been on the mortgage side of the business as a loan processor and it seemed to me that for the most part realtors were lazy. It seemed crazy to me no matter the work involved they expect that 3% commission. In the end you are having to pay to access MLS, and that access costs 3%, even if the house could sale itself due to the area or market. I have seen realtors advertise that if they don't sell your house in 30 days, then they reduced the commission, which I think is probably the best way to go about it. I would rather get the sale done quickly than what usually happens where the realtor lists the house for what the sellers want and then they have to keep dropping the price because its too expensive.