10 ms·

Over the last two years I've bought a couple of properties and I see the value of realtors as professional negotiators and experts on real estate laws and contr

Over the last two years I've bought a couple of properties and I see the value of realtors as professional negotiators and experts on real estate laws and contracts. That being said, the National Association of Realtors (NAR) and their local branches are the definition of a cartel. My parents owned a real estate agency when I was growing up in the 80s and 90s. Back then, the cost of selling and marketing real estate was much higher. Most real estate advertising was done in print which the broker paid for out of pocket. Cameras used film back then which meant multiple trips to the property to take nice pictures. Someone had to always be manning the telephone because there were no mobile phones. The listing broker would have to arrange a showing with interested buyers and their broker. MLS was a huge printed catalog you would flip through to look for houses your clients may be interested in. Nowadays, the cost of listing a house is nominal for a brokerage. Advertising is free because all of the real estate sites that consumers visit (realtor.com, zillow) pull directly from MLS. All cameras are digital so you can take that perfect picture the first time. There are now phone apps that automate broker access to houses to show their clients. There are all of these productivity improvements for real estate agents on both sides of the negotiating table but the commission structure is almost identical to what it was 30 years ago. I believe the standard commission structure has gone from 7% to 6% in thirty years.

aj24 8y ago
Fee rebates have become really common as well in my experience.
- mrfusion 8y ago
  How do you find that?
  - bronson 8y ago
    Just ask. Or use Redfin.
- pixelpp 8y ago
  Yeah, what are you taking about?
  - no_broker 8y ago
    Go to a broker and say "I'll use you if you split half of your commission with me." Or seek out a company/brokerage in your area that explicitly offers "commission rebates."
clairity 8y ago
> "That being said, the National Association of Realtors (NAR) and their local branches are the definition of a cartel." NAR was actually investigated by the federal government (FTC i think?), who concluded much the same, but lobbying buried the report and nothing came of it. MLS's maintain power by strictly controlling access to information. they have the most up-to-date and the most detailed information about properties, buyers/sellers and sales transactions, among other things. this allows them to be the arbitors of deal flow, giving their members the advantage. and this is the linchpin that props up the 6% commission rate. it's classic rent-seeking, since marketing costs have been dropping, as you mention. a truly competitive market would probably put the commission in the 1-2% range. (i did my MBA thesis on disrupting the real estate industry) edit: here's one, but i don't think it's the one i was thinking of: https://www.justice.gov/atr/competition-real-estate-brokerage-industry https://www.justice.gov/atr/competition-real-estate-brokerag...
- Artistry121 8y ago
  Looks like you've got a lot going on but I'd love to learn more about your thesis and thoughts on RE. I'm working on some projects in the area.
  - clairity 8y ago
    i'm a bit rusty on the details, but happy to help how i can. we were looking at the auction model as a potentially viable alternative to the commission model predominant in the US. we found this stranglehold by NAR & it's MLS network to be a key barrier to entry.
- ams6110 8y ago
  Property transfers, including buyer, seller, and sales price, are public record. It's all published in the newspaper. How can MLS control access to that information? Is it just that nobody else bothers to compile it from the county records?
  - bronson 8y ago
    That's not useful to someone looking to buy. Listing data is held exclusively by the MLS.
walrus01 8y ago
> Nowadays, the cost of listing a house is nominal for a brokerage. Advertising is free because all of the real estate sites that consumers visit (realtor.com, zillow) pull directly from MLS. All cameras are digital so you can take that perfect picture the first time. There are now phone apps that automate broker access to houses to show their clients. There's a brokerage in Canada now called "1% Realty" which pretty much serves the purpose of getting your home onto the MLS, and doing some very basic sellers agent services. Its whole shtick is that its fee is literally one percent. In my opinion that level of sellers-agent fee is much better aligned with the actual hours of effort, and operating costs on the part of the listing agent.
walshemj 8y ago
30 years ago in the UK 2 or 3% was the norm one has to ask why it was double
- laurencerowe 8y ago
  Because interest rates were much higher back then (12% vs 0.5% now) so house prices were a lower multiple of wages. (Mortgage payments tend to be similar to rent, so higher rates mean lower prices.)
  - C1sc0cat 8y ago
    What does that have to do with how much an estate agent/relator charges
    - richardknop 8y ago
      Real estate prices being lower wage multiple means the agent has to charge bigger percentage commission to make same amount of money.
jessaustin 8y ago
Those who are persistent can always eventually find someone willing to sell their property for 3%. That isn't some online discount scam, that's a local realtor with local billboard ads, regular newspaper inserts, and a respectable web presence who is will to take half to do this job. Maybe you're in a hurry, maybe you like gold-plating, maybe you have to use your sister-in-law as a realtor, but if none of those circumstances apply then a 50% discount is well worth pursuing... Of course it's because of all the efficiencies you mention. Their job is significantly easier than it used to be. They can afford to charge less; they just forgot to tell the general public about that.
- ryanackley 8y ago
  Maybe. One problem with listing a house for a 3% commission is the listing agent must put this in MLS. The buyer's agent's commission will be 1.5%. This could possibly put you at a disadvantage among buyers since you are competing with listings that offer a higher commission to a buyer's agent.
  - freedomben 8y ago
    This is absolutely a problem. The buyers agent is a gatekeeper. They will not show your property if the commission is that low. Source: I used to be a real estate agent. I left the industry because of BS economic incentives like that and others that incentivize you to not put your client's best interests ahead. That and the ripoff racket that is most brokerage licensing requirements and the arrangements enforced by law (that is heavily influenced by the NAR).
- paulie_a 8y ago
  20 percent of home sales are due to a sign in the front yard. Open houses are statistically a waste of time. Simply not worth the effort for the agent or seller. It usually is the nosey neighbors that come through.
unclebucknasty 8y ago
>commission structure is almost identical to what it was 30 years ago Not to mention housing prices have greatly outpaced inflation and real wages over that same period.
garagemc2 8y ago
Wow, in the UK it is about 1 - 2%.
- lowercased 8y ago
  Came here to say the same thing. My wife is from UK, and she's ... well, pissed at the expenses here (besides healthcare). We are in the process of selling some land, and the default for land is 8%. WTF. You don't "show" it. You don't stage it, or model it, or deal with keys or codes or anything else. But there were no realtors we spoke to who wavered from 8%. I suppose we could possibly have done DIY, maybe... ? But... 8% for land is just insane. The justification was "oh, it takes longer to sell". Again - you're not doing anything beyond perhaps taking a phone call or email. Granted, there may be exceptional properties that are hundreds of acres, have to deal with wildlife issues or other zoning whatever, and might have a whole lot of headache. Not a 1acre homesite in a subdivision.
  - HumanDrivenDev 8y ago
    If you think 8% is insane, then sell it yourself.
  - ajr0 8y ago
    I recently sold a home through redfin and was able to negotiate down to 3% total (2 for buyer 1 for seller) if you have the time have you attempted hosting/selling yourself? I know it sounds ridiculous at mentioning but I purchased my current home without any real estate agents, we did work through lawyers and there were fees there... but likely minimal (I paid under $1500) and I actually enjoyed working directly with lawyers rather than having real estate agents inbetween, this would be my prefered method if I were to sell/purchase again.
  - pxeboot 8y ago
    That much have been for relatively expensive land. I have seen 10% commissions for land under $50k
    - 8y ago
anonymous5133 8y ago
What about services like redfin? They advertise their fee at only 2%.
- gnopgnip 8y ago
  Redfin advertises a fee as low as 1% in some markets as a listing agent, but this does not include the fees to the buyers agent so it is really more like 3.5-4%. And in markets where Redfin offers the 1% fee you could find full service brokerages that work for 4.5-5%.
- sidlls 8y ago
  How does that work in states where commissions are technically required to be negotiated per contract?

aj24 8y ago

Fee rebates have become really common as well in my experience.

mrfusion 8y ago
How do you find that?
- bronson 8y ago
  Just ask. Or use Redfin.
pixelpp 8y ago
Yeah, what are you taking about?
- no_broker 8y ago
  Go to a broker and say "I'll use you if you split half of your commission with me." Or seek out a company/brokerage in your area that explicitly offers "commission rebates."

clairity 8y ago

> "That being said, the National Association of Realtors (NAR) and their local branches are the definition of a cartel." NAR was actually investigated by the federal government (FTC i think?), who concluded much the same, but lobbying buried the report and nothing came of it. MLS's maintain power by strictly controlling access to information. they have the most up-to-date and the most detailed information about properties, buyers/sellers and sales transactions, among other things. this allows them to be the arbitors of deal flow, giving their members the advantage. and this is the linchpin that props up the 6% commission rate. it's classic rent-seeking, since marketing costs have been dropping, as you mention. a truly competitive market would probably put the commission in the 1-2% range. (i did my MBA thesis on disrupting the real estate industry) edit: here's one, but i don't think it's the one i was thinking of: https://www.justice.gov/atr/competition-real-estate-brokerage-industry https://www.justice.gov/atr/competition-real-estate-brokerag...

Artistry121 8y ago
Looks like you've got a lot going on but I'd love to learn more about your thesis and thoughts on RE. I'm working on some projects in the area.
- clairity 8y ago
  i'm a bit rusty on the details, but happy to help how i can. we were looking at the auction model as a potentially viable alternative to the commission model predominant in the US. we found this stranglehold by NAR & it's MLS network to be a key barrier to entry.
ams6110 8y ago
Property transfers, including buyer, seller, and sales price, are public record. It's all published in the newspaper. How can MLS control access to that information? Is it just that nobody else bothers to compile it from the county records?
- bronson 8y ago
  That's not useful to someone looking to buy. Listing data is held exclusively by the MLS.

walrus01 8y ago

> Nowadays, the cost of listing a house is nominal for a brokerage. Advertising is free because all of the real estate sites that consumers visit (realtor.com, zillow) pull directly from MLS. All cameras are digital so you can take that perfect picture the first time. There are now phone apps that automate broker access to houses to show their clients. There's a brokerage in Canada now called "1% Realty" which pretty much serves the purpose of getting your home onto the MLS, and doing some very basic sellers agent services. Its whole shtick is that its fee is literally one percent. In my opinion that level of sellers-agent fee is much better aligned with the actual hours of effort, and operating costs on the part of the listing agent.

walshemj 8y ago

30 years ago in the UK 2 or 3% was the norm one has to ask why it was double

laurencerowe 8y ago
Because interest rates were much higher back then (12% vs 0.5% now) so house prices were a lower multiple of wages. (Mortgage payments tend to be similar to rent, so higher rates mean lower prices.)
- C1sc0cat 8y ago
  What does that have to do with how much an estate agent/relator charges
  - richardknop 8y ago
    Real estate prices being lower wage multiple means the agent has to charge bigger percentage commission to make same amount of money.

jessaustin 8y ago

Those who are persistent can always eventually find someone willing to sell their property for 3%. That isn't some online discount scam, that's a local realtor with local billboard ads, regular newspaper inserts, and a respectable web presence who is will to take half to do this job. Maybe you're in a hurry, maybe you like gold-plating, maybe you have to use your sister-in-law as a realtor, but if none of those circumstances apply then a 50% discount is well worth pursuing... Of course it's because of all the efficiencies you mention. Their job is significantly easier than it used to be. They can afford to charge less; they just forgot to tell the general public about that.

ryanackley 8y ago
Maybe. One problem with listing a house for a 3% commission is the listing agent must put this in MLS. The buyer's agent's commission will be 1.5%. This could possibly put you at a disadvantage among buyers since you are competing with listings that offer a higher commission to a buyer's agent.
- freedomben 8y ago
  This is absolutely a problem. The buyers agent is a gatekeeper. They will not show your property if the commission is that low. Source: I used to be a real estate agent. I left the industry because of BS economic incentives like that and others that incentivize you to not put your client's best interests ahead. That and the ripoff racket that is most brokerage licensing requirements and the arrangements enforced by law (that is heavily influenced by the NAR).
paulie_a 8y ago
20 percent of home sales are due to a sign in the front yard. Open houses are statistically a waste of time. Simply not worth the effort for the agent or seller. It usually is the nosey neighbors that come through.

unclebucknasty 8y ago

>commission structure is almost identical to what it was 30 years ago Not to mention housing prices have greatly outpaced inflation and real wages over that same period.

garagemc2 8y ago

Wow, in the UK it is about 1 - 2%.

lowercased 8y ago
Came here to say the same thing. My wife is from UK, and she's ... well, pissed at the expenses here (besides healthcare). We are in the process of selling some land, and the default for land is 8%. WTF. You don't "show" it. You don't stage it, or model it, or deal with keys or codes or anything else. But there were no realtors we spoke to who wavered from 8%. I suppose we could possibly have done DIY, maybe... ? But... 8% for land is just insane. The justification was "oh, it takes longer to sell". Again - you're not doing anything beyond perhaps taking a phone call or email. Granted, there may be exceptional properties that are hundreds of acres, have to deal with wildlife issues or other zoning whatever, and might have a whole lot of headache. Not a 1acre homesite in a subdivision.
- HumanDrivenDev 8y ago
  If you think 8% is insane, then sell it yourself.
- ajr0 8y ago
  I recently sold a home through redfin and was able to negotiate down to 3% total (2 for buyer 1 for seller) if you have the time have you attempted hosting/selling yourself? I know it sounds ridiculous at mentioning but I purchased my current home without any real estate agents, we did work through lawyers and there were fees there... but likely minimal (I paid under $1500) and I actually enjoyed working directly with lawyers rather than having real estate agents inbetween, this would be my prefered method if I were to sell/purchase again.
- pxeboot 8y ago
  That much have been for relatively expensive land. I have seen 10% commissions for land under $50k
  - 8y ago

anonymous5133 8y ago

What about services like redfin? They advertise their fee at only 2%.

gnopgnip 8y ago
Redfin advertises a fee as low as 1% in some markets as a listing agent, but this does not include the fees to the buyers agent so it is really more like 3.5-4%. And in markets where Redfin offers the 1% fee you could find full service brokerages that work for 4.5-5%.
sidlls 8y ago
How does that work in states where commissions are technically required to be negotiated per contract?