5 ms·

It’s a essentially a giant network effect. Practically, the #1 reason to use a realtor is that if there is an issue with the home that should have been known a

It’s a essentially a giant network effect. Practically, the #1 reason to use a realtor is that if there is an issue with the home that should have been known ahead of time, there is a chain of insured entities that provides legal recourse. The shop and decide part is secondary to their value, but that is how they are so entrenched. The local MLS in any given area has the ability to cut off access to anyone. Some are even privately owned. In order to disrupt an area, you have to get a slice of listing larger than what’s available in the local MLS and then get more people’s eyeballs on those listings than the combined circulation that the existing MLS feeds were getting...and then still have some means of showing the houses in person. And you have to do that for EVERY single market you enter. A young buyer is welcome to shop for a home without using a buying realtor...but there are still very high odds that the seller used a realtor on their end. The only difference in that situation is that the selling realtor doesn’t have to split the commission and pockets more of it. This is ironic too, because realtors are more valuable to a buyer in most cases and there is more work involved for buyer representative realtors with no guarantee of a payoff. The entrenchment remains because realtors will often avoid FSBO showings and sellers aren’t interested in experimenting...they just want their house to sell.

megaman8 8y ago
Not having a realtor as a buyer really helps, because you can add that 3% to the purchase price of the house saving you 3% which can be a huge amount in expensive markets like the bay area.
- jpollock 8y ago
  Frankly, if you're worried about 3% on the purchase price of the house, you can't afford that house, regardless of the amount of money. Particularly in expensive markets in the Bay Area, the real estate agent is there to tell you when you're being stupid - unrealistic with your demands (under or _over_ paying) and keeping you from stomping away in a huff during the stressful negotiations. This is buying and selling the most expensive asset most people will ever own. People hire in help to buy and sell their business, this is equivalent.
  - sauwan 8y ago
    I think this is pretty misguided. 3% of $100,000 is $3,000. Many housing purchases will be more than that, but let's just talk over $3k. Some people will be very comfortable with dealing with negotiations, pricing their house (the quasi-ethical can even talk to a few realtors before hand to get their opinion), and doing the paper legwork. Just because someone chooses to use their time and effort rather than forking out what could amount to several months salary doesn't mean they're stupid. With that said, we've tried to sell a home by owner, with a good realtor, and a bad realtor (same home, different time periods with renting in between). The bad realtor was worse than doing it by myself (got 2 more offers doing it ourselves...we just felt it was worth more to us renting it than selling it at that time). The good realtor was fantastic and easily earned their commission by pitting buyers against each other and creating a bidding frenzy (it was a good market, but we got way more than we expected). I would wholeheartedly recommend a good realtor, and say absolutely avoid bad ones. But how do you know?
    - ams6110 8y ago
      When you're buying, a realtor will never tell you that you are overpaying -- it would be less commission for them and greater chance the seller will reject or counter the offer which creates more work for them. When you're selling, they will always tell you that you are priced too high. They want a quick sale with minimal work. I've used realtors on the buy and sell side of the first house I owned. I was disappointed both times in that they seemed to do almost nothing except show up at the closing for their take. I've bought and sold two other homes FSBO since then, and the process was much easier.
      - deleted 8y ago
        [deleted]
      - gamechangr 8y ago
        >I've bought and sold two other homes FSBO since then, and the process was much easier Respectfully, I'm curious... How would doing it yourself be easier?
      - 8y ago
- hash872 8y ago
  Not in any way a defender of the current real estate system, but I've never understood this mindset. It presupposes completely irrational behavior on the part of the seller- that they will choose to give you a 3% discount for.... no reason at all? Rational agents want to get as much money as they can for their homes, and begrudgingly pay any fees that they are forced to. If the seller gave you a 3% discount here for no reason, it would be the same as if they'd hired an agent- except, they wouldn't be getting anything for it? So why would they discount you the 3%? It's a zero sum transaction where your gain of 3% (very significant money in the Bay Area, as you note!) is the seller's loss. IRL, real sellers will charge as much as they can. They are not giving out 4 or 5 figure discounts randomly or because they're nice. Do you randomly give strangers 4 figures of money for no reason?
  - prepend 8y ago
    In IRL when I bought my house I factored in 3% to the buyer’s agent. I had offers from normal agents who get 3%, all manner of “kickback” agents who collect 3% and give some back to the buyer, and one agent less buyer that included an explicit 3% calculation in their offer. While, sure, I would love to get more and pay less commission, I don’t care how that 3% is distributed. It’s fixed part of the transaction and is in the MLS listing because I was afraid of missing some buyers. When I bought a house, my contract with my buying agent said that 50% of the buying commission came back to me at closing as a prepaid closing cost.
  - megaman8 8y ago
    3% is what the buying agent asks for. Without a buying agent, that's 3% the seller doesn't have to pay.
- iwantedjusttom 8y ago
  in most cases the seller has already agreed to pay 6% to the agent for the sale of their home - then that selling agent agrees to split it with the agent that brings a buyer. If you come in off the sign you're basically handing the seller's agent another 3% commission - even if you "negotiate" 3% off the top of the house the seller is still paying that 3% to the listing agent. In the eyes of the buyer it might not matter if you got your 3% off... but that seller probably isn't saving any money on his/her end.
  - notahacker 8y ago
    The selling agent getting double the commission if the vendor accepts your offer over anyone else's sounds like it could be a lot more help in negotiating a quick and satisfactory deal than any negotiation prowess having your own agent might offer, especially if your own agent would be financially incentivised not to reduce the price...
  - megaman8 8y ago
    No, you're asking the selling agent to give the 3% he would have given to the buyer's agent, and instead give it back to the seller.
- gnopgnip 8y ago
  Even in the best case of a FSBO home, the seller is not going to give you that 3%. The whole reason they are not using a realtor is so that they can avoid paying a commission. And if you are not using a realtor, they can find another buyer who is not using a realtor so it isn't like they would have to pay it if your deal doesn't work
datavirtue 8y ago
Buying agents keep thier mouth shut so the deal closes as quick as possible. Half the commission but a lot of time spent means they cannot afford to throw wrenches into the process by bringing up issues. In my experience, realtors profit off of the ignorance of both buyers and sellers. I have had reputable, realtors decades in the biz lie to me and attempt to break the law on several occasions. I avoid them like the plague.
sokoloff 8y ago
> Practically, the #1 reason to use a realtor is that if there is an issue with the home that should have been known ahead of time, there is a chain of insured entities that provides legal recourse. Other than title insurance (which is separate from and in addition to the 5-7% commission), what's the insured risk that could possibly be worth that percentage?
- brightball 8y ago
  Hidden damage to the house that wasn’t found in an inspection and not disclosed by the seller. Low level water or termite damage that can’t be seen because a layer of wall was built in front of it. Just as an example.
  - sokoloff 8y ago
    How often do those issues come up and what is the typical recovery? I’d guess under 1% and maybe $25K, implying a value of $250. The commission on my house was over 200 times that figure, making for incredibly overpriced insurance if that’s the primary value the fee brings.
    - brightball 8y ago
      I guess it depends on the cost of your house. Everything is relative. You can always negotiate a flat rate with a realtor too.
daveFNbuck 8y ago
> sellers aren’t interested in experimenting...they just want their house to sell Presumably sellers also want to maximize the money they get when selling. Why wouldn't they be willing to experiment on increasing that number?
- brightball 8y ago
  The rate is negotiable. But usually it’s because people need their house to sell while they are still making payments. If there isn’t any urgency to sell, experimentation is fine. In extremely high demand markets, you’re clearly better off experimenting too.

megaman8 8y ago

Not having a realtor as a buyer really helps, because you can add that 3% to the purchase price of the house saving you 3% which can be a huge amount in expensive markets like the bay area.

jpollock 8y ago
Frankly, if you're worried about 3% on the purchase price of the house, you can't afford that house, regardless of the amount of money. Particularly in expensive markets in the Bay Area, the real estate agent is there to tell you when you're being stupid - unrealistic with your demands (under or _over_ paying) and keeping you from stomping away in a huff during the stressful negotiations. This is buying and selling the most expensive asset most people will ever own. People hire in help to buy and sell their business, this is equivalent.
- sauwan 8y ago
  I think this is pretty misguided. 3% of $100,000 is $3,000. Many housing purchases will be more than that, but let's just talk over $3k. Some people will be very comfortable with dealing with negotiations, pricing their house (the quasi-ethical can even talk to a few realtors before hand to get their opinion), and doing the paper legwork. Just because someone chooses to use their time and effort rather than forking out what could amount to several months salary doesn't mean they're stupid. With that said, we've tried to sell a home by owner, with a good realtor, and a bad realtor (same home, different time periods with renting in between). The bad realtor was worse than doing it by myself (got 2 more offers doing it ourselves...we just felt it was worth more to us renting it than selling it at that time). The good realtor was fantastic and easily earned their commission by pitting buyers against each other and creating a bidding frenzy (it was a good market, but we got way more than we expected). I would wholeheartedly recommend a good realtor, and say absolutely avoid bad ones. But how do you know?
  - ams6110 8y ago
    When you're buying, a realtor will never tell you that you are overpaying -- it would be less commission for them and greater chance the seller will reject or counter the offer which creates more work for them. When you're selling, they will always tell you that you are priced too high. They want a quick sale with minimal work. I've used realtors on the buy and sell side of the first house I owned. I was disappointed both times in that they seemed to do almost nothing except show up at the closing for their take. I've bought and sold two other homes FSBO since then, and the process was much easier.
    - deleted 8y ago
      [deleted]
    - gamechangr 8y ago
      >I've bought and sold two other homes FSBO since then, and the process was much easier Respectfully, I'm curious... How would doing it yourself be easier?
    - 8y ago
hash872 8y ago
Not in any way a defender of the current real estate system, but I've never understood this mindset. It presupposes completely irrational behavior on the part of the seller- that they will choose to give you a 3% discount for.... no reason at all? Rational agents want to get as much money as they can for their homes, and begrudgingly pay any fees that they are forced to. If the seller gave you a 3% discount here for no reason, it would be the same as if they'd hired an agent- except, they wouldn't be getting anything for it? So why would they discount you the 3%? It's a zero sum transaction where your gain of 3% (very significant money in the Bay Area, as you note!) is the seller's loss. IRL, real sellers will charge as much as they can. They are not giving out 4 or 5 figure discounts randomly or because they're nice. Do you randomly give strangers 4 figures of money for no reason?
- prepend 8y ago
  In IRL when I bought my house I factored in 3% to the buyer’s agent. I had offers from normal agents who get 3%, all manner of “kickback” agents who collect 3% and give some back to the buyer, and one agent less buyer that included an explicit 3% calculation in their offer. While, sure, I would love to get more and pay less commission, I don’t care how that 3% is distributed. It’s fixed part of the transaction and is in the MLS listing because I was afraid of missing some buyers. When I bought a house, my contract with my buying agent said that 50% of the buying commission came back to me at closing as a prepaid closing cost.
- megaman8 8y ago
  3% is what the buying agent asks for. Without a buying agent, that's 3% the seller doesn't have to pay.
iwantedjusttom 8y ago
in most cases the seller has already agreed to pay 6% to the agent for the sale of their home - then that selling agent agrees to split it with the agent that brings a buyer. If you come in off the sign you're basically handing the seller's agent another 3% commission - even if you "negotiate" 3% off the top of the house the seller is still paying that 3% to the listing agent. In the eyes of the buyer it might not matter if you got your 3% off... but that seller probably isn't saving any money on his/her end.
- notahacker 8y ago
  The selling agent getting double the commission if the vendor accepts your offer over anyone else's sounds like it could be a lot more help in negotiating a quick and satisfactory deal than any negotiation prowess having your own agent might offer, especially if your own agent would be financially incentivised not to reduce the price...
- megaman8 8y ago
  No, you're asking the selling agent to give the 3% he would have given to the buyer's agent, and instead give it back to the seller.
gnopgnip 8y ago
Even in the best case of a FSBO home, the seller is not going to give you that 3%. The whole reason they are not using a realtor is so that they can avoid paying a commission. And if you are not using a realtor, they can find another buyer who is not using a realtor so it isn't like they would have to pay it if your deal doesn't work

datavirtue 8y ago

Buying agents keep thier mouth shut so the deal closes as quick as possible. Half the commission but a lot of time spent means they cannot afford to throw wrenches into the process by bringing up issues. In my experience, realtors profit off of the ignorance of both buyers and sellers. I have had reputable, realtors decades in the biz lie to me and attempt to break the law on several occasions. I avoid them like the plague.

sokoloff 8y ago

> Practically, the #1 reason to use a realtor is that if there is an issue with the home that should have been known ahead of time, there is a chain of insured entities that provides legal recourse. Other than title insurance (which is separate from and in addition to the 5-7% commission), what's the insured risk that could possibly be worth that percentage?

brightball 8y ago
Hidden damage to the house that wasn’t found in an inspection and not disclosed by the seller. Low level water or termite damage that can’t be seen because a layer of wall was built in front of it. Just as an example.
- sokoloff 8y ago
  How often do those issues come up and what is the typical recovery? I’d guess under 1% and maybe $25K, implying a value of $250. The commission on my house was over 200 times that figure, making for incredibly overpriced insurance if that’s the primary value the fee brings.
  - brightball 8y ago
    I guess it depends on the cost of your house. Everything is relative. You can always negotiate a flat rate with a realtor too.

daveFNbuck 8y ago

> sellers aren’t interested in experimenting...they just want their house to sell Presumably sellers also want to maximize the money they get when selling. Why wouldn't they be willing to experiment on increasing that number?

brightball 8y ago
The rate is negotiable. But usually it’s because people need their house to sell while they are still making payments. If there isn’t any urgency to sell, experimentation is fine. In extremely high demand markets, you’re clearly better off experimenting too.