7 ms·

I used to think the same way, but then I bought my first house and my realtor was insanely helpful. The entire process is filled with random quagmires that I wo

I used to think the same way, but then I bought my first house and my realtor was insanely helpful. The entire process is filled with random quagmires that I would have never known how to manage otherwise. Someone with more experience may be more able to go it alone obviously, but my realtor was invaluable.

japhyr 9y ago
I agree. I live in a small isolated town, and I thought realtors were artificially increasing the home prices (not values, but prices) in the small pool of housing available here. But their local knowledge was invaluable in both buying and selling a home. That said, if a buyer and seller agree on a sale independently of any realtor here, we can go to a local realtor and they'll happily facilitate the sale for a flat fee of around $1000. I've done that once, and had a number of friends who also did so. Most of the realtors recognize that the bulk of their commission comes from the listing and marketing process, and the paperwork is just something they know how to do correctly. $1000 is a fair price for knowing that's all being done correctly and fairly.
- ericb 9y ago
  You don't need a realtor, fyi, just a good real estate lawyer, which you generally need anyway when buying/selling a house. A lot of the apparent value of realtors disappears when you do the process yourself. source: have FSBO bought, and FSBO sold, and redfin bought, and worked for Coldwell Banker. Getting on the MLS is cheap/easy now with discount MLS listings--I wouldn't do fsbo without it, even though you usually pay buyer's agents.
  - ferentchak 9y ago
    Do they make you sign a contract or can you put 3% discount for person to person sale? That way they are paying their agent if they decide to use one.
    - ericb 9y ago
      In the MLS listing, you put the amount of commission you are offering for buyer's agent. Then the real estate lawyer draws up the final contract with that included and it comes out of what you get. For direct person to person, I imagine you can just skip that part. If you put that you are willing to pay 0% commission, I think what will happen is that everyone who is actually relying on their buyer's agent to source houses to look at will not be brought to your property, as there is nothing in it for them. You might lose out on a profitable bidding war, or the one customer who might buy the house coming through by doing that, but you might get an extra 2.5% if it works out.
  - opo 9y ago
    >You don't need a realtor, fyi, just a good real estate lawyer, Lawyer prices will obviously be different in different parts of the country, (so maybe a lot cheaper where you are) but I knew someone who arranged a transaction without a realtor and paid a lawyer a lot more than $1,000 to put together all the necessary documents. One thousand seems like a good deal. >...which you generally need anyway when buying/selling a house. You've found it necessary to always consult a lawyer when buying/selling even though realtors were involved? Why? What value did they add?
    - abawany 9y ago
      In my case, there was always a lawyer involved in the contract with a fixed for dealing with documentation, as part of the closing costs. I never explicitly involved a lawyer but have always been intrigued by the idea of doing a FSBO deal with a lawyer generating all of the real estate contracts for a fixed fee.
    - ericb 9y ago
      A house sale is really a large contract agreement with a number of finer points. The legal fees were maybe $750 - 1200 but memory is sketchy on that. There are filings necessary with the state and other items that make it legal, and at least in Massachusetts USA, it is a lot different than say selling a mountain bike. Banks need certain info for loans, there's the deed, etc, inspections, etc. When you are signing your 20th piece of paper, you realize you needed the lawyer. One dirty secret of realtors is that all this work is handled by lawyers, and the impossible-looking parts of a real estate transaction are handled by lawyers who understand it and have it down to a fixed-price cookie-cutter process for their locality. They did "consult" with me a bit and gave some "free" advice, but I just paid the fix price for doc generation mainly.
      - opo 9y ago
        I agree it would be a bit risky to buy/sell real estate without any outside help. My point was just that if you are already using a realtor, it shouldn't generally be necessary to also hire a lawyer.
  - bubbleRefuge 9y ago
    Or just a title company. I have twice gone without realtors in transactions. Sales contracts in my state, Florida, have a uniform structure. The title company, if its large enough, probably has a staff attorney. In one case, I was able to escalate issues to the attorney when the seller was tussling with me about changes to the contract. No additional costs other than normal closing fee's associated with title insurance and such.
- lighthazard 9y ago
  It seems the takeaway from all these comments here is that there needs to be more education in the home buying experience.
  - just4themoney 9y ago
    Agents and brokers tend to make the home buying process as complicated and as murky as possible on purpose, job security.
- kelukelugames 9y ago
  Bulk of commission actually covers prospecting. This is how the Redfin model works. It saves the agents time by funneling customers to them through the website :)
goshx 9y ago
Have you used TurboTax or an alternative to file your taxes? Would something like that, with step by step and explaining why's and how's not be enough for this purpose?
- dlp211 9y ago
  I think for stable markets; ie: markets where neither the buyer or seller has a distinct advantage; probably. But I just bought in a market where the sellers have a clear advantage and buyers are competing aggressively against one another. Houses in my market have an average listing time of 8 days, almost all with multiple offers, many with dozens of offers. I thought my RE agent wasn't really worth what I knew I would be paying him until we actually went to make an offer. Their knowledge of our circumstance and the local market let us put together an offer that despite not being the highest offer, nor the most favorable closing (I used a VA loan which takes on average 50% longer to close), we still were able to come out on top. My agent helped us get an inspection on the property the day we saw it so that we could wave inspection contingency, knew that we needed to put up more than the standard earnest money to account for our weak closing position, and they were able to accurately predict what the house would appraise for so that we could ensure that we didn't overbid and waive the under appraisal contingency.
dublinben 9y ago
That doesn't explain why they should earn a percentage of the purchase price, and not a flat fee.
- jrs235 9y ago
  They don't get paid unless there is a successful sale. Listing contracts are for a fixed period. There are marketing expenses and time invested to list and market a property. If they don't successfully sell your home they don't get paid and they are out any of their time invested and marketing expenses. High risk, high reward.
  - notadoc 9y ago
    > There are marketing expenses and time invested to list and market a property Putting a house on Zillow takes, what, 15 minutes? Perhaps the exception is very high end real estate, but from what I've seen most of the high end realtors are just really good at networking and schmoozing.
    - jrs235 9y ago
      Add up all the time an agent spends previewing the property before listing, taking calls (especially from crazies) and arranging for showings, showings (including driving to and from), negotiating (writing up offers and counter offers), after acceptance arrangements such as coordinating inspections, final readings, closing arrangements. They only get paid if the deal closes. The amount of effort is variable and unknown upfront (high risk, high reward). Would you be willing to pay an hourly rate or per service rendered UPFRONT fee? I'm sure there are some brokers that offer such things. Most people don't want to part ways with their money before they know they actually sold their home (another nice thing about not having to pay until closing... the seller only pays if and at closing!) How much do knowledgeable and experienced consultants make per hour?
      - bhandziuk 9y ago
        Knowledgeable and experienced consultants typically don't make more than maybe 250 per hour (as a cost the client) that I've seen. That's pretty high at that.
notadoc 9y ago
> The entire process is filled with random quagmires OK, but why is that? And how many of those "random quagmires" are coming from realtors? The real estate industry reminds me of the tax preparation industry or car sales in the USA. My opinion is they are all (by design) intentionally annoying, cumbersome, overly complex, overly expensive, and excessively time consuming, seemingly for no reason other than to protect vested interests. These areas are ripe for dramatic disruption.
- Balgair 9y ago
  They usually come from City Councils, county boards, school levies, HOAs, insurance requirements on page 192.PGP.168, etc. that are changing all the time. Depending on where you are in the US, it really can be that bad very quickly. Ever buy a house? The contract you sign is literally thousands of pages of legalese that may or may not contradict everything else in it. The Real Estate Agents (REAs) give you 'cover' and smooth out all bumps. Joan knows Frank on XYZ council, therefore you'll never ever catch any flack. Freddy is a REA you used and therefore everything is 'above board' as far as a judge cares, next case please. Ahmed knows good and bad home inspectors, it'll take you 3 months of 8 hour days to begin to figure them out. Etc. Yes, corruption/nepotism sucks, PM me when it has passed from the face of the Earth. If you are buying a home in anywhere near a 'desirable' market, use a REA. 5k for 'peace of mind' is more than worth it.
  - abawany 9y ago
    In the 10 or so real estate deals that I have done over the past few years, I have to say that the realtor (even the exceptionally good ones) never pointed out any of the nuances of the perils related to the entities you mentioned above. In all cases, it was me, due to bad past experiences with HOAs for example, who was proactively demanding that I be given the HOA restrictions before making the contract; there were plenty of deals I walked away from when I thought the HOA was power hungry and ridiculous. EDIT: I am not dismissing the role of realtors - they had good tips that I use to this day. Here is one: start the homeowner's insurance purchase/quotes during the option period to ensure that any related surprises here will enable you to walk away during the option period than trying to deal with killing the deal with the much-higher earnest money amount at stake. I have to say that the most insightful article I have ever read about realtors came from the controversial Freakonomics. It clearly outlined the separation of concerns and interests and made it clear to me that if a real estate deal is to work well, the only person responsible is me and me alone.
mox1 9y ago
Agreed, for most people this is by far the single largest monetary transaction they will make (aside from another home purchase) in their entire life. Some form of "assistance" during the process is necessary. I'm a big DIYer and will go to great length to research and do things on my own. My Realtor (Redfin agent) payed for himself and then some during the home buying process. Your paying for their experience and knowledge. My agent making statements like "I had our lawyer review our signed purchase agreement and because of X,Y,Z we are still ok" helped me understand why I'm paying a big company a lot of money to help me out.
ovulator 9y ago
As someone who bought my first house without a realtor involved at all. I don't know what value they could have added. Thanks to Zillow, Redfin and the like it was a piece of cake to locate a house. I found one that was for sale by owner that I liked, we negotiated on a price and came to an agreement. There was a lot of paperwork, but I'm literate and can read. Most of the complex stuff was with the loan and the title company, both of which were more than happy to walk me through the steps of each. I really have no idea what tens of thousands of dollars extra would have bought me. I don't need someone to hold my hand and look at cars with me either.
- duderific 9y ago
  > I found one that was for sale by owner that I liked, we negotiated on a price and came to an agreement. Sounds like you don't live in a very competitive market. Here in the Bay Area, you don't even talk to the owner of the house, as they will have a seller's agent. Generally if a house is desirable, there will be anywhere from 5 to 20 offers on a house. The only way to get your foot in the door is to have your buyer's agent go to bat for you. Ideally they will have a prior relationship with the seller's agent, and have insight as to what kind of offer to make to make you competitive with other offers. I can't imagine buying a house around here without having the expertise that an agent can offer. > I really have no idea what tens of thousands of dollars extra would have bought me. As a buyer, you are not paying anything extra. The commission comes out of the seller's fees. > I don't need someone to hold my hand and look at cars with me either. Buying a house is an order of magnitude more complex and expensive than buying a car. Not really a fair comparison.
  - ryuker16 9y ago
    Actually some would prefer no agent buyers due to contract arrangement. For example, the buyer and seller will split commission but in some cases one side can collect all of it.
- rhodysurf 9y ago
  If i didnt have my realtor I would not have landed my house because of how competitive my market is. My realtor called me at 6 am on a Saturday morning before the listing was even up on zillow or redfin. I was there to see the house that afternoon and had a P&S agreement accepted before Monday morning before anyone else even had a chance to see the house. Also the realtor had contacts of contractors and inspectors that she trusted so that the inspection and repair stages all went way more smoothly than if I was calling random contractors for quotes. Again this doesnt apply depending on the market and price range that you are in.

japhyr 9y ago

I agree. I live in a small isolated town, and I thought realtors were artificially increasing the home prices (not values, but prices) in the small pool of housing available here. But their local knowledge was invaluable in both buying and selling a home. That said, if a buyer and seller agree on a sale independently of any realtor here, we can go to a local realtor and they'll happily facilitate the sale for a flat fee of around $1000. I've done that once, and had a number of friends who also did so. Most of the realtors recognize that the bulk of their commission comes from the listing and marketing process, and the paperwork is just something they know how to do correctly. $1000 is a fair price for knowing that's all being done correctly and fairly.

ericb 9y ago
You don't need a realtor, fyi, just a good real estate lawyer, which you generally need anyway when buying/selling a house. A lot of the apparent value of realtors disappears when you do the process yourself. source: have FSBO bought, and FSBO sold, and redfin bought, and worked for Coldwell Banker. Getting on the MLS is cheap/easy now with discount MLS listings--I wouldn't do fsbo without it, even though you usually pay buyer's agents.
- ferentchak 9y ago
  Do they make you sign a contract or can you put 3% discount for person to person sale? That way they are paying their agent if they decide to use one.
  - ericb 9y ago
    In the MLS listing, you put the amount of commission you are offering for buyer's agent. Then the real estate lawyer draws up the final contract with that included and it comes out of what you get. For direct person to person, I imagine you can just skip that part. If you put that you are willing to pay 0% commission, I think what will happen is that everyone who is actually relying on their buyer's agent to source houses to look at will not be brought to your property, as there is nothing in it for them. You might lose out on a profitable bidding war, or the one customer who might buy the house coming through by doing that, but you might get an extra 2.5% if it works out.
- opo 9y ago
  >You don't need a realtor, fyi, just a good real estate lawyer, Lawyer prices will obviously be different in different parts of the country, (so maybe a lot cheaper where you are) but I knew someone who arranged a transaction without a realtor and paid a lawyer a lot more than $1,000 to put together all the necessary documents. One thousand seems like a good deal. >...which you generally need anyway when buying/selling a house. You've found it necessary to always consult a lawyer when buying/selling even though realtors were involved? Why? What value did they add?
  - abawany 9y ago
    In my case, there was always a lawyer involved in the contract with a fixed for dealing with documentation, as part of the closing costs. I never explicitly involved a lawyer but have always been intrigued by the idea of doing a FSBO deal with a lawyer generating all of the real estate contracts for a fixed fee.
  - ericb 9y ago
    A house sale is really a large contract agreement with a number of finer points. The legal fees were maybe $750 - 1200 but memory is sketchy on that. There are filings necessary with the state and other items that make it legal, and at least in Massachusetts USA, it is a lot different than say selling a mountain bike. Banks need certain info for loans, there's the deed, etc, inspections, etc. When you are signing your 20th piece of paper, you realize you needed the lawyer. One dirty secret of realtors is that all this work is handled by lawyers, and the impossible-looking parts of a real estate transaction are handled by lawyers who understand it and have it down to a fixed-price cookie-cutter process for their locality. They did "consult" with me a bit and gave some "free" advice, but I just paid the fix price for doc generation mainly.
    - opo 9y ago
      I agree it would be a bit risky to buy/sell real estate without any outside help. My point was just that if you are already using a realtor, it shouldn't generally be necessary to also hire a lawyer.
- bubbleRefuge 9y ago
  Or just a title company. I have twice gone without realtors in transactions. Sales contracts in my state, Florida, have a uniform structure. The title company, if its large enough, probably has a staff attorney. In one case, I was able to escalate issues to the attorney when the seller was tussling with me about changes to the contract. No additional costs other than normal closing fee's associated with title insurance and such.
lighthazard 9y ago
It seems the takeaway from all these comments here is that there needs to be more education in the home buying experience.
- just4themoney 9y ago
  Agents and brokers tend to make the home buying process as complicated and as murky as possible on purpose, job security.
kelukelugames 9y ago
Bulk of commission actually covers prospecting. This is how the Redfin model works. It saves the agents time by funneling customers to them through the website :)

goshx 9y ago

Have you used TurboTax or an alternative to file your taxes? Would something like that, with step by step and explaining why's and how's not be enough for this purpose?

dlp211 9y ago
I think for stable markets; ie: markets where neither the buyer or seller has a distinct advantage; probably. But I just bought in a market where the sellers have a clear advantage and buyers are competing aggressively against one another. Houses in my market have an average listing time of 8 days, almost all with multiple offers, many with dozens of offers. I thought my RE agent wasn't really worth what I knew I would be paying him until we actually went to make an offer. Their knowledge of our circumstance and the local market let us put together an offer that despite not being the highest offer, nor the most favorable closing (I used a VA loan which takes on average 50% longer to close), we still were able to come out on top. My agent helped us get an inspection on the property the day we saw it so that we could wave inspection contingency, knew that we needed to put up more than the standard earnest money to account for our weak closing position, and they were able to accurately predict what the house would appraise for so that we could ensure that we didn't overbid and waive the under appraisal contingency.

dublinben 9y ago

That doesn't explain why they should earn a percentage of the purchase price, and not a flat fee.

jrs235 9y ago
They don't get paid unless there is a successful sale. Listing contracts are for a fixed period. There are marketing expenses and time invested to list and market a property. If they don't successfully sell your home they don't get paid and they are out any of their time invested and marketing expenses. High risk, high reward.
- notadoc 9y ago
  > There are marketing expenses and time invested to list and market a property Putting a house on Zillow takes, what, 15 minutes? Perhaps the exception is very high end real estate, but from what I've seen most of the high end realtors are just really good at networking and schmoozing.
  - jrs235 9y ago
    Add up all the time an agent spends previewing the property before listing, taking calls (especially from crazies) and arranging for showings, showings (including driving to and from), negotiating (writing up offers and counter offers), after acceptance arrangements such as coordinating inspections, final readings, closing arrangements. They only get paid if the deal closes. The amount of effort is variable and unknown upfront (high risk, high reward). Would you be willing to pay an hourly rate or per service rendered UPFRONT fee? I'm sure there are some brokers that offer such things. Most people don't want to part ways with their money before they know they actually sold their home (another nice thing about not having to pay until closing... the seller only pays if and at closing!) How much do knowledgeable and experienced consultants make per hour?
    - bhandziuk 9y ago
      Knowledgeable and experienced consultants typically don't make more than maybe 250 per hour (as a cost the client) that I've seen. That's pretty high at that.

notadoc 9y ago

> The entire process is filled with random quagmires OK, but why is that? And how many of those "random quagmires" are coming from realtors? The real estate industry reminds me of the tax preparation industry or car sales in the USA. My opinion is they are all (by design) intentionally annoying, cumbersome, overly complex, overly expensive, and excessively time consuming, seemingly for no reason other than to protect vested interests. These areas are ripe for dramatic disruption.

Balgair 9y ago
They usually come from City Councils, county boards, school levies, HOAs, insurance requirements on page 192.PGP.168, etc. that are changing all the time. Depending on where you are in the US, it really can be that bad very quickly. Ever buy a house? The contract you sign is literally thousands of pages of legalese that may or may not contradict everything else in it. The Real Estate Agents (REAs) give you 'cover' and smooth out all bumps. Joan knows Frank on XYZ council, therefore you'll never ever catch any flack. Freddy is a REA you used and therefore everything is 'above board' as far as a judge cares, next case please. Ahmed knows good and bad home inspectors, it'll take you 3 months of 8 hour days to begin to figure them out. Etc. Yes, corruption/nepotism sucks, PM me when it has passed from the face of the Earth. If you are buying a home in anywhere near a 'desirable' market, use a REA. 5k for 'peace of mind' is more than worth it.
- abawany 9y ago
  In the 10 or so real estate deals that I have done over the past few years, I have to say that the realtor (even the exceptionally good ones) never pointed out any of the nuances of the perils related to the entities you mentioned above. In all cases, it was me, due to bad past experiences with HOAs for example, who was proactively demanding that I be given the HOA restrictions before making the contract; there were plenty of deals I walked away from when I thought the HOA was power hungry and ridiculous. EDIT: I am not dismissing the role of realtors - they had good tips that I use to this day. Here is one: start the homeowner's insurance purchase/quotes during the option period to ensure that any related surprises here will enable you to walk away during the option period than trying to deal with killing the deal with the much-higher earnest money amount at stake. I have to say that the most insightful article I have ever read about realtors came from the controversial Freakonomics. It clearly outlined the separation of concerns and interests and made it clear to me that if a real estate deal is to work well, the only person responsible is me and me alone.

mox1 9y ago

Agreed, for most people this is by far the single largest monetary transaction they will make (aside from another home purchase) in their entire life. Some form of "assistance" during the process is necessary. I'm a big DIYer and will go to great length to research and do things on my own. My Realtor (Redfin agent) payed for himself and then some during the home buying process. Your paying for their experience and knowledge. My agent making statements like "I had our lawyer review our signed purchase agreement and because of X,Y,Z we are still ok" helped me understand why I'm paying a big company a lot of money to help me out.

ovulator 9y ago

As someone who bought my first house without a realtor involved at all. I don't know what value they could have added. Thanks to Zillow, Redfin and the like it was a piece of cake to locate a house. I found one that was for sale by owner that I liked, we negotiated on a price and came to an agreement. There was a lot of paperwork, but I'm literate and can read. Most of the complex stuff was with the loan and the title company, both of which were more than happy to walk me through the steps of each. I really have no idea what tens of thousands of dollars extra would have bought me. I don't need someone to hold my hand and look at cars with me either.

duderific 9y ago
> I found one that was for sale by owner that I liked, we negotiated on a price and came to an agreement. Sounds like you don't live in a very competitive market. Here in the Bay Area, you don't even talk to the owner of the house, as they will have a seller's agent. Generally if a house is desirable, there will be anywhere from 5 to 20 offers on a house. The only way to get your foot in the door is to have your buyer's agent go to bat for you. Ideally they will have a prior relationship with the seller's agent, and have insight as to what kind of offer to make to make you competitive with other offers. I can't imagine buying a house around here without having the expertise that an agent can offer. > I really have no idea what tens of thousands of dollars extra would have bought me. As a buyer, you are not paying anything extra. The commission comes out of the seller's fees. > I don't need someone to hold my hand and look at cars with me either. Buying a house is an order of magnitude more complex and expensive than buying a car. Not really a fair comparison.
- ryuker16 9y ago
  Actually some would prefer no agent buyers due to contract arrangement. For example, the buyer and seller will split commission but in some cases one side can collect all of it.
rhodysurf 9y ago
If i didnt have my realtor I would not have landed my house because of how competitive my market is. My realtor called me at 6 am on a Saturday morning before the listing was even up on zillow or redfin. I was there to see the house that afternoon and had a P&S agreement accepted before Monday morning before anyone else even had a chance to see the house. Also the realtor had contacts of contractors and inspectors that she trusted so that the inspection and repair stages all went way more smoothly than if I was calling random contractors for quotes. Again this doesnt apply depending on the market and price range that you are in.