5 ms·

You shouldn't need an agent but in the US when the listing is put on market (on the MLS) the seller allocates 5-6 percent for the buyer's and seller's agent to

by rgbrgb 10y ago

You shouldn't need an agent but in the US when the listing is put on market (on the MLS) the seller allocates 5-6 percent for the buyer's and seller's agent to split. If you make an offer without an agent, the seller's agent is entitled to the whole thing (though they may be less likely to take your offer because you won't have an agent pushing along the close). That said, I've heard of people negotiating refunds directly with the seller's agent -- it's just less likely to work in competitive areas where they have the option to work with another agent on the deal. If you're looking to buy a home without the full concierge agent experience and you want a clear savings, I'd be remiss not to plug Open Listings (YC W15) [0] (disclaimer: I'm a cofounder). We refund half the commission back to the buyer, write, submit, and negotiate all the contracts, and make sure the close is smooth. While all of the contract generation is super efficient and online, we have a superb team of (human) agents who work hard to feel out the seller and get your offer accepted at the best terms. We coordinate showings, inspections, and answer your questions but we won't drive you around in a cadillac telling you what neighborhood is "safe". [0]: https://www.openlistings.com/ https://www.openlistings.com/

gist 10y ago
Fwiw in theory the selling agent getting the entire commission should be more willing to twist a seller to accept your offer, than if they are splitting with the buyers agent. Plus independent of ethics, they might be more willing to hold off another realtor asking about the property for their client (who they will have to pay a commission to) if your offer is in process. By hold off I mean not return a phone call immediately or try to stall in a way that wasn't obvious. Otoh there is a disadvantage to not having a realtor as an agent in the sense that the selling agent should be able to more accurately read your intent because they hear your voice and what you are saying. Now if you are good at the game you can get beyond that but most people aren't up to that skill level for home buying.
- rgbrgb 10y ago
  We thought that would be the case, but in practice we've found that listing agents usually refuse to double-end deals. Instead they tend to refer clients that approach them to a friend (often another agent working under the same broker). I think the reasoning is that there's a higher chance of the deal falling through if the buyer doesn't have their own representation coaching them through it. There's a lot that's not intuitive about real estate deals (or at least violated our initial assumptions).
  - gist 10y ago
    > deal falling through if the buyer doesn't have their own representation coaching them through it I believe that. It's possible because perhaps the buyer is under the impression that the agent is working in their interest and doesn't have a bias. (Similar to the way you might believe the restaurant waiter if they tell you a few things that you don't expect to hear from them..)
cylinder 10y ago
That's why you list for 2% and tell buyers you won't split the fee. We do it in commercial real estate all the time and the rest of the world does it that way for residential too. Why do we always seem to do things the scammiest way and ignore how other countries do things?
- rgbrgb 10y ago
  I see how this could work in the future, but in the current market how do you attract buyers without a commission?
eru 10y ago
5-6% of the sells price for the agent is crazy inefficient! Why is noone undercutting them? (To cite the UK market again, I think it's usually 2-3% there? I remember the Economist had an article on the difference.)
- brbsix 10y ago
  I've been trying to figure this out as well. I'm not familiar with the real estate market but this smells of rent-seeking (e.g. regulatory capture) or a price-fixing cartel.
  - michaelt 10y ago
    Assume there's some bullshit legislation that will take $10 off 10,000 people and give $1,000 to 100 people. And assume the cost of lobbying for or against some legislation is $20. A bit of your time, a letter or two, travel costs to lobby your representative or attend a demonstration, whatever. For the people who are going to get $1,000 it makes sense to spend $20 lobbying for the bullshit legislation. The people who are going to lose $10 barely bother lobbying against it. I figure this is the reason the home buying process involves so much bullshit compared to buying anything else.
  - Spooky23 10y ago
    It's a cartel. The local "Realtor" association operates the MLS.
  - ZoeZoeBee 10y ago
    The National Association Of Realtors is one of the largest spenders on lobbying every year in the US. They spend tens of millions of dollars every year lobbying members of congress. This is an industry prime for disruption. As Millenials begin to garner a larger share of the housing market I would not be surprised to see the involvement of realtors waining http://www.opensecrets.org/lobby/top.php?indexType=s&showYear=2016 http://www.opensecrets.org/lobby/top.php?indexType=s&showYea... http://www.opensecrets.org/lobby/clientsum.php?id=D000000062&year=2016 http://www.opensecrets.org/lobby/clientsum.php?id=D000000062...
- 10y ago
shostack 10y ago
See, this is what I never got...if the seller pays the buying agent's fee, isn't that agent in fact working for the seller by the very definition of how they are getting paid? How could they ever be operating in the interest of the buyer?
- skewart 10y ago
  Who exactly pays for what - whether buyer or seller - is often negotiated. It's tied to the price of the house, but if the price ends up a little higher to cover those costs then the buyer is paying for it. Of course, both the buyer's and the seller's agents are once incentivised to achieve as high a price as possible, everything else equal.
- jameshart 10y ago
  The seller pays using the buyer's money.

by rgbrgb 10y ago

gist 10y ago

Fwiw in theory the selling agent getting the entire commission should be more willing to twist a seller to accept your offer, than if they are splitting with the buyers agent. Plus independent of ethics, they might be more willing to hold off another realtor asking about the property for their client (who they will have to pay a commission to) if your offer is in process. By hold off I mean not return a phone call immediately or try to stall in a way that wasn't obvious. Otoh there is a disadvantage to not having a realtor as an agent in the sense that the selling agent should be able to more accurately read your intent because they hear your voice and what you are saying. Now if you are good at the game you can get beyond that but most people aren't up to that skill level for home buying.

rgbrgb 10y ago
We thought that would be the case, but in practice we've found that listing agents usually refuse to double-end deals. Instead they tend to refer clients that approach them to a friend (often another agent working under the same broker). I think the reasoning is that there's a higher chance of the deal falling through if the buyer doesn't have their own representation coaching them through it. There's a lot that's not intuitive about real estate deals (or at least violated our initial assumptions).
- gist 10y ago
  > deal falling through if the buyer doesn't have their own representation coaching them through it I believe that. It's possible because perhaps the buyer is under the impression that the agent is working in their interest and doesn't have a bias. (Similar to the way you might believe the restaurant waiter if they tell you a few things that you don't expect to hear from them..)

cylinder 10y ago

That's why you list for 2% and tell buyers you won't split the fee. We do it in commercial real estate all the time and the rest of the world does it that way for residential too. Why do we always seem to do things the scammiest way and ignore how other countries do things?

rgbrgb 10y ago
I see how this could work in the future, but in the current market how do you attract buyers without a commission?

eru 10y ago

5-6% of the sells price for the agent is crazy inefficient! Why is noone undercutting them? (To cite the UK market again, I think it's usually 2-3% there? I remember the Economist had an article on the difference.)

brbsix 10y ago
I've been trying to figure this out as well. I'm not familiar with the real estate market but this smells of rent-seeking (e.g. regulatory capture) or a price-fixing cartel.
- michaelt 10y ago
  Assume there's some bullshit legislation that will take $10 off 10,000 people and give $1,000 to 100 people. And assume the cost of lobbying for or against some legislation is $20. A bit of your time, a letter or two, travel costs to lobby your representative or attend a demonstration, whatever. For the people who are going to get $1,000 it makes sense to spend $20 lobbying for the bullshit legislation. The people who are going to lose $10 barely bother lobbying against it. I figure this is the reason the home buying process involves so much bullshit compared to buying anything else.
- Spooky23 10y ago
  It's a cartel. The local "Realtor" association operates the MLS.
- ZoeZoeBee 10y ago
  The National Association Of Realtors is one of the largest spenders on lobbying every year in the US. They spend tens of millions of dollars every year lobbying members of congress. This is an industry prime for disruption. As Millenials begin to garner a larger share of the housing market I would not be surprised to see the involvement of realtors waining http://www.opensecrets.org/lobby/top.php?indexType=s&showYear=2016 http://www.opensecrets.org/lobby/top.php?indexType=s&showYea... http://www.opensecrets.org/lobby/clientsum.php?id=D000000062&year=2016 http://www.opensecrets.org/lobby/clientsum.php?id=D000000062...
10y ago

shostack 10y ago

See, this is what I never got...if the seller pays the buying agent's fee, isn't that agent in fact working for the seller by the very definition of how they are getting paid? How could they ever be operating in the interest of the buyer?

skewart 10y ago
Who exactly pays for what - whether buyer or seller - is often negotiated. It's tied to the price of the house, but if the price ends up a little higher to cover those costs then the buyer is paying for it. Of course, both the buyer's and the seller's agents are once incentivised to achieve as high a price as possible, everything else equal.
jameshart 10y ago
The seller pays using the buyer's money.