6 ms·

As a realtor for the past 6 years I can say a couple of quick things as to why I don't see the real estate industry going anywhere, even though I think that rea

As a realtor for the past 6 years I can say a couple of quick things as to why I don't see the real estate industry going anywhere, even though I think that real estate brokers are extremely overpaid. - selling your house, at the end of the day, is quite the undertaking. A lot goes into it, it can get emotional, messy, and sometimes quite complicated. Having someone that does it on a daily basis can be nice and really smooth things out. - people are too attached to their homes emotionally. More often than not, when trying to sell on their home without a realtor they will not have it in a saleable condition and price it too high for the marketplace. It will sit and not sell, or they will get an offer that is appropriate and be offended and not sell it. A GOOD broker will bring facts, data, and logic to the table so that a person that is actually committed to selling their home will get the job done. If people saw their homes for what they were when they decided to sell them, a product or a piece of property and nothing more, the real estate industry would die in no time at all. Then again, there are a lot of swindlers out there too, so it's nice to have someone as back-up to watch out for those types of things as well.

germinalphrase 8y ago
Do realtors have any advantage when it comes to seeing the listing for properties before they are visible on the common real estate website (zillow et al)? I always assumed it was so, but I’d love to hear one way or another.
- aidenn0 8y ago
  Usually they do; specifically the MLS has a listing type for before the house is on the market that only agents can see.
- SteveGerencser 8y ago
  Every property we have ever purchased, except the first one, was not on the open market and the result of an agent/broker "knowing someone" that had what we wanted and managing to work out a deal for us.
imbusy111 8y ago
I fail to see how they are overpaid. If someone sells 4 houses per year for 1M for 1.5% fee, that's only $60k per year. That sounds like a mediocre income in markets where houses even go for 1M. I am using numbers for the Bay Area that I have heard of. Maybe other markets are different.
- jonny_eh 8y ago
  The going rate is 2.5% to both the selling agent and the buying agent, each.
  - imbusy111 8y ago
    Even if we ignore the expenses, that's only $100k/yr in an area where $117k/yr is below poverty line for 4 person family.
    - goseeastarwar 8y ago
      Where is your 4 homes per year stat coming from? It's extremely low.
      - scarface74 8y ago
        Quick search on Zillow shows 12: https://www.zillow.com/agent-resources/blog/commission-referral-fees/ https://www.zillow.com/agent-resources/blog/commission-refer...
    - KingMachiavelli 8y ago
      The key factor is that you don't have to sell houses where you yourself live.
- irq 8y ago
  All of the full time real estate agents I know sell WAY more than 4 hours per year.
  - 8y ago
xahrepap 8y ago
What you said reminds me of what the piano guy told us when we asked him to bid out my wife's childhood piano for a full restoration. "If Pianos weren't sentimental, I'd be out of business." We could buy a decent babygrand or a really nice upright for the same price. But there's just something about having a home with furniture from your past in it. When I sell my house, it'll be 100% with a realtor. Is it expensive? Yes. But my home is quite sentimental to me. I don't know enough to break down that barrier. I'd rather pay someone else to do it for me. I look at comparable homes in my area and I think, "my house is $50k better than that." But I honestly don't know. :)
njarboe 8y ago
Seems to me that having the commission as a % of the sale price is not the right way to go. You lock in with an agent for 3 months and agree to pay them a set fee when they/you sell it. You should pay as a buyer for an agent to represent you. Currently, if I'm not mistaken, all most all agents get paid by the seller and, if you are a buyer, the agent has no legal responsibility to watch out for your interests. The current situation exist due to a slow long-term evolution of events but seems like won't change any time soon. Sort of like how wage controls during WWII encouraged businesses to pay for your health care and it is not taxed, but you don't get that tax break when you pay for it yourself. An insane situation, but next to impossible to change.
- scarface74 8y ago
  You are free to get a buyers agent that does represent you. In that case, the buyer’s agent and seller’s agent split the cost.
  - setr 8y ago
    I still don't understand this mechanism... the buying agent takes his fee as a percentage of the total house price? Doesn't this mean that both the selling and buying agents are incentivized to drive up the price?
    - scarface74 8y ago
      In reality, neither is incentivized to drive up the price of the house. It’s all about selling fast. Freakonomics talks about this all of the time. http://freakonomics.com/2008/02/26/real-estate-agents-revisited/ http://freakonomics.com/2008/02/26/real-estate-agents-revisi...
    - scarface74 8y ago
      A better link. https://www.nachi.org/forum/f11/exerpt-freakonomics-book-regarding-real-estate-agents-57929/ https://www.nachi.org/forum/f11/exerpt-freakonomics-book-reg...
- 8y ago
lxe 8y ago
Expecting 3%/$30,000 k for being "someone that smoothes things out" on a sale of, let's say a $1M home in CA, is theft.
- everythingswan 8y ago
  What if their knowledge of the market and negotiating helped you get an extra $60k in value on the sale of your home vs. selling it yourself?
  - gnicholas 8y ago
    Then it would make sense to have a model where the agent gets a very small percent up to a certain price, and a much larger percent above that threshold. Does this ever happen?
  - rb808 8y ago
    Someone is paying. If the agent charges $30k + extra $60k you're saying buyers should avoid RE listed properties and buy direct.
- sgc 8y ago
  Given the amount of weird and unrealistic expectations of both buyers and sellers nonstop in a transaction " the one smoothing things out" can be translated to "the essential element to actually closing the deal". There is a reason why most FSBOs wind up with an agent. They fuck it up.
  - stirbot 8y ago
    I would argue that the reason is because they're tired of being pestered by would-be listing agents. I have a property listed as FSBO for the last 4 weeks and so far I have received 67 calls from listing agents, all documented in a spreadsheet so I can block them via Google Voice. Or it may be that buyer's agents actively steer their clients away from FSBO properties which one person revealed to me during a showing even though the listing states I'll pay 2.5% to the buyer. I requested and now have that in writing from this buyer in case I feel like filing a complaint. You should have seen the agent's face when I said my email was in the listing and she could ask me any questions directly if she liked. An agent mortified by the thought of direct communication between buyer and the person who knows the property best. Actual potential buyers send emails. Agents seem to only communicate via phone, probably because they believe they can charm you.
burfog 8y ago
The trouble is, your incentives are all wrong. If the house would not sell at $900000, would sell in 15 months at $800000, or would sell in 3 months at $700000, or would sell in 2 weeks at $600000, what do you do? You try to sell it for $600000. You tell the owner that that is what the home is worth, even if the owner is not in a hurry. Getting your share of the 6% (likely 1.5%) of $600000 in 2 weeks is better than any of the other alternatives FOR YOU. A better way to align the incentives would be to give the seller's agent a percentage of the amount by which the sale price exceeds the price determined by an independent appraiser. The buyer's agent gets the opposite, getting paid only if the price is lower than the appraisal, and you don't get to be both agents at the same time.
- cwyers 8y ago
  You're not wrong about the incentives, but I think you miss a few things in practice: 1) If everyone else in the market is priced to move, and you aren't doing it, there is always going to be new housing stock that undercuts you. 2) A seller has to maintain insurance and the property, and typically maintains utilities (a house without water/electricity doesn't show as well). They sometimes have to pay a mortgage. And often people who are selling a house are also buying a house, and intend to use the proceeds from the sale to finance the down payment on their next house. Most people cannot treat the extra money from waiting on a better offer as 100% profit. 3) The primary purpose of an appraisal is to ensure that the underlying asset is sufficient collateral for the loan. If you manage to sell a house for significantly over the appraise value... guess what, the loan falls through.
- robnagler 8y ago
  This Freakonomics-style argument doesn't work. The only price that matters is the market clearing price. Appraisers don't know that more than anybody else. The only thing an independent appraiser would do is use (well-known) comps to anchor the price, which is not something a seller wants. Rather, a seller wants competition among buyers. I used to think that real estate agents were a waste of time until I lived through several difficult transactions. Each real estate transaction involves negotiations for loans, inspection objections, and various legal details. For example, a good real estate agent will make sure the title commitment documents are in hand early enough that you have time to review them, because they often have a lot of mistakes. This can kill a closing and/or require post-transaction work to correct. I bought a house in the middle of a flood (Boulder 2013). The inspection objection had already been negotiated before the flood occurred. Getting the deal done was a huge task, because the seller was lying about the house being affected by the flood. I still wanted the house, but I needed proper compensation for the remediation. My real estate agent did an amazing job of bringing the deal together by tossing in some money and getting the other broker and seller to contribute a bit. I'm now living with the above real estate agent, and she's on the phone right now at 7:45p working on a deal. I have watched her pull together deals, and the important thing is that all her clients are happy. I have met many of them, and they are very grateful for her work. I know there are many other agents out there like her (maybe not quite as good :-).

germinalphrase 8y ago

Do realtors have any advantage when it comes to seeing the listing for properties before they are visible on the common real estate website (zillow et al)? I always assumed it was so, but I’d love to hear one way or another.

aidenn0 8y ago
Usually they do; specifically the MLS has a listing type for before the house is on the market that only agents can see.
SteveGerencser 8y ago
Every property we have ever purchased, except the first one, was not on the open market and the result of an agent/broker "knowing someone" that had what we wanted and managing to work out a deal for us.

imbusy111 8y ago

I fail to see how they are overpaid. If someone sells 4 houses per year for 1M for 1.5% fee, that's only $60k per year. That sounds like a mediocre income in markets where houses even go for 1M. I am using numbers for the Bay Area that I have heard of. Maybe other markets are different.

jonny_eh 8y ago
The going rate is 2.5% to both the selling agent and the buying agent, each.
- imbusy111 8y ago
  Even if we ignore the expenses, that's only $100k/yr in an area where $117k/yr is below poverty line for 4 person family.
  - goseeastarwar 8y ago
    Where is your 4 homes per year stat coming from? It's extremely low.
    - scarface74 8y ago
      Quick search on Zillow shows 12: https://www.zillow.com/agent-resources/blog/commission-referral-fees/ https://www.zillow.com/agent-resources/blog/commission-refer...
  - KingMachiavelli 8y ago
    The key factor is that you don't have to sell houses where you yourself live.
irq 8y ago
All of the full time real estate agents I know sell WAY more than 4 hours per year.
- 8y ago

xahrepap 8y ago

What you said reminds me of what the piano guy told us when we asked him to bid out my wife's childhood piano for a full restoration. "If Pianos weren't sentimental, I'd be out of business." We could buy a decent babygrand or a really nice upright for the same price. But there's just something about having a home with furniture from your past in it. When I sell my house, it'll be 100% with a realtor. Is it expensive? Yes. But my home is quite sentimental to me. I don't know enough to break down that barrier. I'd rather pay someone else to do it for me. I look at comparable homes in my area and I think, "my house is $50k better than that." But I honestly don't know. :)

njarboe 8y ago

Seems to me that having the commission as a % of the sale price is not the right way to go. You lock in with an agent for 3 months and agree to pay them a set fee when they/you sell it. You should pay as a buyer for an agent to represent you. Currently, if I'm not mistaken, all most all agents get paid by the seller and, if you are a buyer, the agent has no legal responsibility to watch out for your interests. The current situation exist due to a slow long-term evolution of events but seems like won't change any time soon. Sort of like how wage controls during WWII encouraged businesses to pay for your health care and it is not taxed, but you don't get that tax break when you pay for it yourself. An insane situation, but next to impossible to change.

scarface74 8y ago
You are free to get a buyers agent that does represent you. In that case, the buyer’s agent and seller’s agent split the cost.
- setr 8y ago
  I still don't understand this mechanism... the buying agent takes his fee as a percentage of the total house price? Doesn't this mean that both the selling and buying agents are incentivized to drive up the price?
  - scarface74 8y ago
    In reality, neither is incentivized to drive up the price of the house. It’s all about selling fast. Freakonomics talks about this all of the time. http://freakonomics.com/2008/02/26/real-estate-agents-revisited/ http://freakonomics.com/2008/02/26/real-estate-agents-revisi...
  - scarface74 8y ago
    A better link. https://www.nachi.org/forum/f11/exerpt-freakonomics-book-regarding-real-estate-agents-57929/ https://www.nachi.org/forum/f11/exerpt-freakonomics-book-reg...
8y ago

lxe 8y ago

Expecting 3%/$30,000 k for being "someone that smoothes things out" on a sale of, let's say a $1M home in CA, is theft.

everythingswan 8y ago
What if their knowledge of the market and negotiating helped you get an extra $60k in value on the sale of your home vs. selling it yourself?
- gnicholas 8y ago
  Then it would make sense to have a model where the agent gets a very small percent up to a certain price, and a much larger percent above that threshold. Does this ever happen?
- rb808 8y ago
  Someone is paying. If the agent charges $30k + extra $60k you're saying buyers should avoid RE listed properties and buy direct.
sgc 8y ago
Given the amount of weird and unrealistic expectations of both buyers and sellers nonstop in a transaction " the one smoothing things out" can be translated to "the essential element to actually closing the deal". There is a reason why most FSBOs wind up with an agent. They fuck it up.
- stirbot 8y ago
  I would argue that the reason is because they're tired of being pestered by would-be listing agents. I have a property listed as FSBO for the last 4 weeks and so far I have received 67 calls from listing agents, all documented in a spreadsheet so I can block them via Google Voice. Or it may be that buyer's agents actively steer their clients away from FSBO properties which one person revealed to me during a showing even though the listing states I'll pay 2.5% to the buyer. I requested and now have that in writing from this buyer in case I feel like filing a complaint. You should have seen the agent's face when I said my email was in the listing and she could ask me any questions directly if she liked. An agent mortified by the thought of direct communication between buyer and the person who knows the property best. Actual potential buyers send emails. Agents seem to only communicate via phone, probably because they believe they can charm you.

burfog 8y ago

The trouble is, your incentives are all wrong. If the house would not sell at $900000, would sell in 15 months at $800000, or would sell in 3 months at $700000, or would sell in 2 weeks at $600000, what do you do? You try to sell it for $600000. You tell the owner that that is what the home is worth, even if the owner is not in a hurry. Getting your share of the 6% (likely 1.5%) of $600000 in 2 weeks is better than any of the other alternatives FOR YOU. A better way to align the incentives would be to give the seller's agent a percentage of the amount by which the sale price exceeds the price determined by an independent appraiser. The buyer's agent gets the opposite, getting paid only if the price is lower than the appraisal, and you don't get to be both agents at the same time.

cwyers 8y ago
You're not wrong about the incentives, but I think you miss a few things in practice: 1) If everyone else in the market is priced to move, and you aren't doing it, there is always going to be new housing stock that undercuts you. 2) A seller has to maintain insurance and the property, and typically maintains utilities (a house without water/electricity doesn't show as well). They sometimes have to pay a mortgage. And often people who are selling a house are also buying a house, and intend to use the proceeds from the sale to finance the down payment on their next house. Most people cannot treat the extra money from waiting on a better offer as 100% profit. 3) The primary purpose of an appraisal is to ensure that the underlying asset is sufficient collateral for the loan. If you manage to sell a house for significantly over the appraise value... guess what, the loan falls through.
robnagler 8y ago
This Freakonomics-style argument doesn't work. The only price that matters is the market clearing price. Appraisers don't know that more than anybody else. The only thing an independent appraiser would do is use (well-known) comps to anchor the price, which is not something a seller wants. Rather, a seller wants competition among buyers. I used to think that real estate agents were a waste of time until I lived through several difficult transactions. Each real estate transaction involves negotiations for loans, inspection objections, and various legal details. For example, a good real estate agent will make sure the title commitment documents are in hand early enough that you have time to review them, because they often have a lot of mistakes. This can kill a closing and/or require post-transaction work to correct. I bought a house in the middle of a flood (Boulder 2013). The inspection objection had already been negotiated before the flood occurred. Getting the deal done was a huge task, because the seller was lying about the house being affected by the flood. I still wanted the house, but I needed proper compensation for the remediation. My real estate agent did an amazing job of bringing the deal together by tossing in some money and getting the other broker and seller to contribute a bit. I'm now living with the above real estate agent, and she's on the phone right now at 7:45p working on a deal. I have watched her pull together deals, and the important thing is that all her clients are happy. I have met many of them, and they are very grateful for her work. I know there are many other agents out there like her (maybe not quite as good :-).