4 ms·

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 expensi

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?
    - prepend 8y ago
      I disagree a bit as when you’re buying the realtor doesn’t care which home you buy. So the incentive seems to demonstrate max value to you. I think a realtor is not incentived to get you the best price once you select a home and are in negotiation because a few thousand doesn’t matter if the deal is skunked. I’ve bought 3 properties and every time my realtor was really good about showing value and basis for valuation on tons of houses before we visited or offered. I think it’s very different for selling because you only have one house to sell.
    - hilbertseries 8y ago
      A good realtor will tell you if you're overpaying, because they want repeat business and referrals. Same for selling.
    - sbov 8y ago
      There's lots of things like this spoken about real estate agents that kinda make sense if you view humans as 100% money driven logic machines, but these are not the way humans necessarily behave. Our real estate agent certainly told us if she thought a house was overpriced. And she told us when she thought we should avoid a house and why - e.g. one was a questionable "flip", another had a huge tree a bit close to the house that we didn't notice (think of the foundation). We ultimately went for the cheapest house we saw. We had 20% more in our budget but the real estate agent was fine showing us houses that fit our parameters but were less expensive than what we could afford. I did some looking for houses to see too, and when I asked her about those she would say why she didn't show them to us.
  - jpollock 8y ago
    In the Bay Area, you're looking at 3% of at least $1 million. Your annual property taxes (In San Jose) on that USD$1m will be on the order of $14,000. Your mortgage payment with a 10% mortgage will be another $4,255/month. That's $65,000/yr just to hold the house, with insurance adding another $3k (earthquake insurance!). Don't forget a maintenance budget of 1%/yr! Additionally, you're going to be spending ~$8,500 in tax and fees just to close. To repeat, if 3% is going to make or break your ability to buy the house, you can not afford that house. Imagine what happens when it drops 10% in value? What happens if it drops 10% in value, you need to move and market rents don't cover your mortgage[1]? The Bay Area has 30% swings from peak to trough, 10% is (slightly exaggerating) the peak to trough swing in a single year. I never said that people who chose to go without an agent were stupid. I said agents were there to keep you from making stupid mistakes - but that was my experience. I had no concept of what the prices were in the area, or how to deal with selling agents who didn't want to close. The agent talked my partner down off the ledge a couple of times. However, that doesn't mean that other people shouldn't consider managing their own purchase or sale. My comment was purely around the statement that saving 3% would allow you to buy a home. [1] SF rent - https://medium.com/@mccannatron/1979-to-2015-average-rent-in-san-francisco-33aaea22de0e https://medium.com/@mccannatron/1979-to-2015-average-rent-in...
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

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?
  - prepend 8y ago
    I disagree a bit as when you’re buying the realtor doesn’t care which home you buy. So the incentive seems to demonstrate max value to you. I think a realtor is not incentived to get you the best price once you select a home and are in negotiation because a few thousand doesn’t matter if the deal is skunked. I’ve bought 3 properties and every time my realtor was really good about showing value and basis for valuation on tons of houses before we visited or offered. I think it’s very different for selling because you only have one house to sell.
  - hilbertseries 8y ago
    A good realtor will tell you if you're overpaying, because they want repeat business and referrals. Same for selling.
  - sbov 8y ago
    There's lots of things like this spoken about real estate agents that kinda make sense if you view humans as 100% money driven logic machines, but these are not the way humans necessarily behave. Our real estate agent certainly told us if she thought a house was overpriced. And she told us when she thought we should avoid a house and why - e.g. one was a questionable "flip", another had a huge tree a bit close to the house that we didn't notice (think of the foundation). We ultimately went for the cheapest house we saw. We had 20% more in our budget but the real estate agent was fine showing us houses that fit our parameters but were less expensive than what we could afford. I did some looking for houses to see too, and when I asked her about those she would say why she didn't show them to us.
- jpollock 8y ago
  In the Bay Area, you're looking at 3% of at least $1 million. Your annual property taxes (In San Jose) on that USD$1m will be on the order of $14,000. Your mortgage payment with a 10% mortgage will be another $4,255/month. That's $65,000/yr just to hold the house, with insurance adding another $3k (earthquake insurance!). Don't forget a maintenance budget of 1%/yr! Additionally, you're going to be spending ~$8,500 in tax and fees just to close. To repeat, if 3% is going to make or break your ability to buy the house, you can not afford that house. Imagine what happens when it drops 10% in value? What happens if it drops 10% in value, you need to move and market rents don't cover your mortgage[1]? The Bay Area has 30% swings from peak to trough, 10% is (slightly exaggerating) the peak to trough swing in a single year. I never said that people who chose to go without an agent were stupid. I said agents were there to keep you from making stupid mistakes - but that was my experience. I had no concept of what the prices were in the area, or how to deal with selling agents who didn't want to close. The agent talked my partner down off the ledge a couple of times. However, that doesn't mean that other people shouldn't consider managing their own purchase or sale. My comment was purely around the statement that saving 3% would allow you to buy a home. [1] SF rent - https://medium.com/@mccannatron/1979-to-2015-average-rent-in-san-francisco-33aaea22de0e https://medium.com/@mccannatron/1979-to-2015-average-rent-in...

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