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This may seem off topic but bare with me for a sec. I've been shopping for a house and have started to learn about how real estate transactions work. One of the

This may seem off topic but bare with me for a sec. I've been shopping for a house and have started to learn about how real estate transactions work. One of the things I was surprised to discover was the amount of selling costs produced by middlemen (9-12%). Given the pricing of homes, this is far from an insignificant cost. From my calc considering current interest rates, the breakeven time for reselling a home at the price you bought it, is ~ 7 years. Sell before that and you have to jack up the sale price to try not to lose a sizable chunk of change. As I buyer I'm constantly reminded that they are free to me, but as they say "there's no such thing as a free lunch." These costs are just passed on to the buy via a higher price; hence the [now] fallacious "home prices always rise." If the cost of housing rises with each transaction, then it seems logical that the economy must grow to support higher wages to support higher costs of living, right? This got me wondering how much of the necessity for growth is a by-product of unnecessary middlemen taking cuts of various commodities?

alaskamiller 10y ago
All the time on everything. That's how a sustaining economy works. Every one gets a piece by inserting themselves in the pie. But the same time the idea is that everyone in the chain is delivering value or else they wouldn't be there because someone else will provide something better by ruthlessly removing said intermediary out when it is no longer efficient. If you have a better way of selling houses between people without the need for that 9-12% you would be doing it now or you would have done it by now. Literally the definition of a founder. You find opportunities to exploit.
- alistproducer2 10y ago
  From the sellers side, the agent makes sense. Although I would argue a flat or time based fee is more appropriate than a percentage of sale price. The buying agent delivers relatively little value once the purchase agreement has been signed so I would argue they are essentially rent seekers.
nradov 10y ago
That's not how markets work. Clearing prices are set by supply and demand, not by the seller's costs.
- st3v3r 10y ago
  Not entirely. The seller is still going to factor in their costs when deciding what to sell something for.
  - nradov 10y ago
    Sellers do all sorts of irrational things when setting asking prices which have no impact on actual selling prices.
    - st3v3r 10y ago
      I can't agree with saying that trying to sell something for more than it cost you is "irrational"
- alistproducer2 10y ago
  It's certainly not the only factor is cost increase, but that cost will almost certainly be passed onto the buyer if the market will bare it.
  - nradov 10y ago
    You're missing the point. Sellers will charge as much as the market will bear even if they got the property for free and have zero selling costs.
    - alistproducer2 10y ago
      I don't believe I'm missing the point you're trying to make; on the contrary, you're missing mine. Selling costs create and artificial floor. It's a pretty simple point that is in no way mutually exclusive to yours.

alaskamiller 10y ago

All the time on everything. That's how a sustaining economy works. Every one gets a piece by inserting themselves in the pie. But the same time the idea is that everyone in the chain is delivering value or else they wouldn't be there because someone else will provide something better by ruthlessly removing said intermediary out when it is no longer efficient. If you have a better way of selling houses between people without the need for that 9-12% you would be doing it now or you would have done it by now. Literally the definition of a founder. You find opportunities to exploit.

alistproducer2 10y ago
From the sellers side, the agent makes sense. Although I would argue a flat or time based fee is more appropriate than a percentage of sale price. The buying agent delivers relatively little value once the purchase agreement has been signed so I would argue they are essentially rent seekers.

nradov 10y ago

That's not how markets work. Clearing prices are set by supply and demand, not by the seller's costs.

st3v3r 10y ago
Not entirely. The seller is still going to factor in their costs when deciding what to sell something for.
- nradov 10y ago
  Sellers do all sorts of irrational things when setting asking prices which have no impact on actual selling prices.
  - st3v3r 10y ago
    I can't agree with saying that trying to sell something for more than it cost you is "irrational"
alistproducer2 10y ago
It's certainly not the only factor is cost increase, but that cost will almost certainly be passed onto the buyer if the market will bare it.
- nradov 10y ago
  You're missing the point. Sellers will charge as much as the market will bear even if they got the property for free and have zero selling costs.
  - alistproducer2 10y ago
    I don't believe I'm missing the point you're trying to make; on the contrary, you're missing mine. Selling costs create and artificial floor. It's a pretty simple point that is in no way mutually exclusive to yours.