5 ms·

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 ma

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.
- imbusy111 8y ago
  It is an approximate number I have heard myself from agents directly.
aidenn0 8y ago
What realtors are you using that only charge 1.5%? It was 3% each to the seller's and buyer's agent last time I moved. They do end up not being too rich on an annual pay basis where I live because the number of realtors actively working adjusts to the volume and pricing.
- mobilefriendly 8y ago
  A realtor's income might be 1.5% (or less) because they split the 3% commission with their brokerage house, and sometimes with supporting agents.
whyaduck 8y ago
An average of 3 months to sell a single $1M house in the Bay Area? $60k sounds like it would translate to a pretty good hourly rate.
- imbusy111 8y ago
  Better than $15/h minimum in some cities, but definitely not 'extremely overpaid'. Note the 60k is for a year, not a single house.
  - whyaduck 8y ago
    Not my point. How could anyone possibly spend 40 hours a week for 3 months to sell a single home at that price in that market? It's not a realistic characterization of the job.
- conanbatt 8y ago
  You are not counting how many realtors there are, and how hard it is to get that listing. A new agent might not get a listing in an entire first year. In places like SF, its all about how good you are about generating leads, the house sells itself.
negativez 8y ago
It's more that they are collectively overpaid. As house prices rise the %-based commission causes new agents to flood the market, lowering the number of houses sold per agent. Agents then spend a lot of time acquiring clients in competition with each other. If you think about what an efficient use of realtor labor would look like it would be ~2 houses a month or more with agents spending all their time on showings and contracts. In a market with $1M houses this would yield roughly 24M * 0.025 = $600K/yr and up. Hence the market becomes flooded with people that would like to make $600K/yr on a educational investment period of 6 months or less (plus an apprenticeship-like paying job for a few years). The industry is weird because the price of agent service is resistant to supply&demand forces for various reasons but the main reason is that it's impossible to know what the selling agent's contribution to the house price is, since you can't sell the same house twice under the same conditions. In principle, a good agent can easily recoup their commission by adding a few percent to the house price, but in practice agents have a counter-incentive to this because the homeowner will never know what the added amount was and raising the house price a small amount adds less to the agent's bottom line than moving on to the next house more quickly. In most cases the agent is simply setting the price that will sell the house quickly for the local market. As a seller, you'd probably prefer to make an extra 20K on that 1M house by showing for a month instead of a week, but this makes the agent do 4x the showings to make 2% more commission. Ironically, the buyers' mortgage lender will have an impartial professional estimate done after they've already agreed on a price with you. In a perfect world, the seller would get this estimate done up front and then the seller's agent would be be paid on a structure that incentivizes beating that estimate. But wait - if the mortgaged portion of the price is greater than the estimate then the buyer's lender will back out ($collateral < $loan). So if your market is mostly buyers doing 20% down then the price is soft-capped at no more than 125% of the estimate even for the best agents. Quite the free market, eh?
tradertef 8y ago
Think about the amount of work that you would do to sell (ignoring buys) 4 houses.. At most 2 months of work for them.

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.

imbusy111 8y ago
It is an approximate number I have heard myself from agents directly.

aidenn0 8y ago

What realtors are you using that only charge 1.5%? It was 3% each to the seller's and buyer's agent last time I moved. They do end up not being too rich on an annual pay basis where I live because the number of realtors actively working adjusts to the volume and pricing.

mobilefriendly 8y ago
A realtor's income might be 1.5% (or less) because they split the 3% commission with their brokerage house, and sometimes with supporting agents.

whyaduck 8y ago

An average of 3 months to sell a single $1M house in the Bay Area? $60k sounds like it would translate to a pretty good hourly rate.

imbusy111 8y ago
Better than $15/h minimum in some cities, but definitely not 'extremely overpaid'. Note the 60k is for a year, not a single house.
- whyaduck 8y ago
  Not my point. How could anyone possibly spend 40 hours a week for 3 months to sell a single home at that price in that market? It's not a realistic characterization of the job.
conanbatt 8y ago
You are not counting how many realtors there are, and how hard it is to get that listing. A new agent might not get a listing in an entire first year. In places like SF, its all about how good you are about generating leads, the house sells itself.

negativez 8y ago

It's more that they are collectively overpaid. As house prices rise the %-based commission causes new agents to flood the market, lowering the number of houses sold per agent. Agents then spend a lot of time acquiring clients in competition with each other. If you think about what an efficient use of realtor labor would look like it would be ~2 houses a month or more with agents spending all their time on showings and contracts. In a market with $1M houses this would yield roughly 24M * 0.025 = $600K/yr and up. Hence the market becomes flooded with people that would like to make $600K/yr on a educational investment period of 6 months or less (plus an apprenticeship-like paying job for a few years). The industry is weird because the price of agent service is resistant to supply&demand forces for various reasons but the main reason is that it's impossible to know what the selling agent's contribution to the house price is, since you can't sell the same house twice under the same conditions. In principle, a good agent can easily recoup their commission by adding a few percent to the house price, but in practice agents have a counter-incentive to this because the homeowner will never know what the added amount was and raising the house price a small amount adds less to the agent's bottom line than moving on to the next house more quickly. In most cases the agent is simply setting the price that will sell the house quickly for the local market. As a seller, you'd probably prefer to make an extra 20K on that 1M house by showing for a month instead of a week, but this makes the agent do 4x the showings to make 2% more commission. Ironically, the buyers' mortgage lender will have an impartial professional estimate done after they've already agreed on a price with you. In a perfect world, the seller would get this estimate done up front and then the seller's agent would be be paid on a structure that incentivizes beating that estimate. But wait - if the mortgaged portion of the price is greater than the estimate then the buyer's lender will back out ($collateral < $loan). So if your market is mostly buyers doing 20% down then the price is soft-capped at no more than 125% of the estimate even for the best agents. Quite the free market, eh?

tradertef 8y ago

Think about the amount of work that you would do to sell (ignoring buys) 4 houses.. At most 2 months of work for them.