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A new class-action lawsuit takes aim at real estate agents and their 6% fee

345 points by mudil 8y ago

andrewtbham 8y ago
currently, it is illegal to pay anyone a commission for selling your house except a licensed real estate agent. If you got rid of that restriction, imagine the opportunities. you could let your friends sell your house by sharing a link on social media and they could get the commission. Also in England, real estate commission fees are about 1% vs. 6% in US. As the article states, in the US a lot of agents won't show FSBO (for sale by owner). I have personal experience with this where they trash talk or flat out refuse to show you fsbo.
- jayess 8y ago
  This is a state-level law. And real estate agent lobbying is extremely powerful. I don't see it changing any time soon.
  - andrewtbham 8y ago
    It is state level laws. NAR is one of the most powerful lobbying groups in the US. This lawsuit is interesting because as the article states... this is the first time a highly credible law firm has taken on the NAR. The courts are definitely a better place to fight because the lawmakers are easily influenced by powerful lobbyists.
  - siggen 8y ago
    The issue is more complex and nuanced than simply paying agents 6% commission and feeling you did not get your money's worth. One could argue that a lot of buyers agents and sellers agents are horrible at their jobs. However, having met an exceptional agent, I would gladly pay this fee than deal with long term non-obvious issues that come with a property and then being upset with everyone involved in the purchase of the house. I don't think my "friends" know enough about what to look for in a house to recommend whether it is a good or a bad purchase for me. There's more to than just showing a property around to a buyer. Also, all the marketing that a seller's agent does to sell the property, including renting furniture, artwork, presentation, print material, etc. is going out of that 3%. There's also an agency fee that the agent pays out of that 3%.
    - lallysingh 8y ago
      Yes, this. Good agents are the ones you come back to when you want another house. Good agents know this, and live off of referrals from happy customers. The fees are fixed w.r.t. the price of the home, but the agent is exposed to the risk of how much work is involved in getting a buyer/seller pair matched up. Both agents can be on the hook for some time -- houses may not sell for a while, or either buyer/seller decide to stop trying to transact. That's sunk cost by the agents. So if you're not asking very much of the agent, or giving much risk to them, it's not worth 6%. But that risk has to be accounted for somewhere, and spread across clients like any other risk. Also, if you're doing a sale + purchase, you can usually negotiate that 6% down with your agent.
- oconnor663 8y ago
  I assume there's some kind of fraud or expensive mistake that this law is designed to address, apart from just rent seeking for realtors. Does anyone have a sense of what those problems are, and whether the market would be better at addressing them now than it was when the laws were passed?
- cwyers 8y ago
  If I was a realtor, I probably would refuse to show FSBO as well. I bought a house about a month ago, and when I was looking at houses, it was fun to go to a neighborhood, see five houses for sale, and to try to figure out why the FSBO house was selling for 25% more than every other house in the neighborhood. Spoiler: It's because the people who go FSBO often are FSBOing specifically because they want to get a higher price than what a seller's agent thinks the house should list for.
- noneeeed 8y ago
  Is there a significant difference between what an "estate agent" (UK) and a "realtor" (US) do? Are they more involved in the actual legal side of things (the sort of thing a conveyancing solicitor would do in the UK), or are they still just there to advertise the property and show people round? If they were doing a lot more of the legal side of things I could understand the difference, but a four or five percentage-point difference seems ludicrous if they are basically doing the same job. For context for those outside the UK, an estate agent here just works for the seller, and normally gets a 1 to 1.5% fee (paid by the seller) for advertising the property and showing people round (and good ones will give you advice on tarting the house up etc). Once you make an offer on a house it's pretty much all in the hands of the solicitors and mortgage company from then on.
  - chrisseaton 8y ago
    Realtor is a brand name - it's a registered trademark. The generic version is estate agent.
    - noneeeed 8y ago
      TIL! I've only ever seen it used in the generic sense online, a bit like the way we talk about "a hoover" when we mean "a vacuum cleaner".
  - NeedMoreTea 8y ago
    Especially as the agency work and cost required, both sides of the Atlantic, is far less than twenty years ago before sites like Right Move and easy production of details via DTP and colour printing.
  - matthewowen 8y ago
    Depends on the state. For instance, in PA yes, they cover the legal side of things (at least to the extent that there isn't usually another lawyer involved in the process). The other piece to this is that this 6% is split between the buyers agent and sellers agent. Typically, as a buyer, the person showing the house to you is _your_ agent (versus the UK where it is the seller's agent). Put another way, there's effectively a whole extra person involved who (at least legally) has a specific fiduciary responsibility to the buyer, and who takes on _some_ of the tasks that otherwise might fall to a selling agent. It's also worth noting that there _do_ exist "discount agents". For instance, Redfin will charge sellers 1-1.5%, and if you use them as a buyer's agent, they will still charge 3% (since it is effectively baked into all prices) but then rebate you 1.5%. But this is less common. So yes, overall, realtors here are doing more overall, but honestly it's largely (I think) just that they make more here because they've been effective at establishing norms, and also because small percentage point differences are easy to discount away. For instance, I'm currently buying using a traditional agent, because honestly the 1.5% fee difference is outweighed by the savings you can get with someone who can work better on offer price and post-inspection negotiations, and who is going to be someone the listing agent _wants_ to work with (which they will pitch to their clients as "this person is reliable and will ensure we close, whereas Redfin are useless and the deal might fall apart"). Not saying it's good, just giving more of the landscape.
- mbesto 8y ago
  > Also in England, real estate commission fees are about 1% vs. 6% in US. Also in England...stamp duty.[0] Yaaaaa....no thanks. https://www.gov.uk/stamp-duty-land-tax/residential-property-rates https://www.gov.uk/stamp-duty-land-tax/residential-property-...
  - matthewowen 8y ago
    worth noting that a) transfer taxes exist in the US too and b) property taxes in the US are typically _much_ higher than council tax in the UK (though this isn't apples to apples, especially as council tax is usually also paid by tenants).
  - asciident 8y ago
    You know that most states have a stamp tax as well? It's just hidden in closing documents, and sometimes named something else. Basically a percentage of your sale price goes to the state.
    - mbesto 8y ago
      Ya but 6.5% though?
      - asciident 8y ago
        Fair point. The US stamp tax is way lower than 6.5%. I think closer to about 1% or a bit less.
- jiveturkey 8y ago
  > currently, it is illegal to pay anyone a commission for selling your house except a licensed real estate agent. I think you are confused about a realtor not being able to pay a finder's fee to anyone but a licensed agent. You, as a seller, are free to pay anyone any commission you like. Unless of course you've contracted that right away in an agreement with a seller's agent. But that's just normal contract law.
  - andrewtbham 8y ago
    It's a gray area... https://www.inman.com/2015/08/25/referrals-from-non-real-estate-agents-can-be-tricky-or-even-illegal/ https://www.inman.com/2015/08/25/referrals-from-non-real-est...
maerF0x0 8y ago
This is a big deal for "average" americans. Jack bogle took on the fees eating up retirement plans. Now the next biggest asset has an opportunity to be revamped. While real wages have stagnated, we can lower the costs so those wages go further.
- wnissen 8y ago
  There are 1.3 million Realtors(tm) in the U.S. Imagine what a productivity boon it would be if even half of them switched to gainful employment versus rent extraction via their cartel!
  - analog31 8y ago
    Better watch what you ask for. When they switched to no-fault car insurance in my home state, many years ago, the number of non-car-related lawsuits skyrocketed.
    - freewilly1040 8y ago
      All disruptions to complex systems come with side effects, but they are often still worthwhile.
    - maerF0x0 8y ago
      IMO no fault anything sounds like a recipe for abuse. That's generally how society functions -- there are consequences to actions.
      - analog31 8y ago
        There are still consequences under no-fault auto insurance. First of all, you can still get a ticket for causing a crash. Second, your traffic record increases your insurance premium. Also you could get injured yourself. I don't think crashing cars is something sane people would do in the absence of the insurance system. Since everybody has mandatory liability insurance, on average the net money transferred between insurance companies is probably close to zero, whether money changes hands in lawsuits or not. The aim of no-fault in my state was to reduce the number of lawsuits that arose over petty incidents, that were flooding the courts. https://en.wikipedia.org/wiki/No-fault_insurance https://en.wikipedia.org/wiki/No-fault_insurance
jmpman 8y ago
I took advantage of the situation when I last sold my house. I knew what the house would likely sell for, and told my agent that I’d pay him his 3% seller commission for that price, but for anything above that amount, I’d split the incremental amount with him (I believe I proposed 40/60). Ultimately I made an additional $10k.
tacomonstrous 8y ago
The model's pretty broken now, when anyone can look up listings on realtor.com or Redfin, and get customized alerts based on preferences. I mean what special skills do agents even bring on the buy side? I can mediate things with the seller myself, thank you very much. On the sell side, an experienced agent can be much more of a help. Even there, we used Redfin the last time we sold, and the difference in commission was a full 2% when compared to a more conventional broker.
- xfitm3 8y ago
  Agents should be guiding prospective property owners and helping them avoid mistakes. Unfortunately they are motivated by profit instead.
- gnopgnip 8y ago
  Most of the value of a real estate agent is after getting an accepted offer.
- sl1ck731 8y ago
  I purchased my first home in 2017. I absolutely would not have known half of what to do without my agent. In retrospect there are some things that he swept under the rug that I'm paying for now, but all of the paperwork and having someone who knew what to ask for was invaluable. If I was left to my own devices I would have made some probably very stupid offers and lost the chance at my property. This might just be because there is another agent on the other end, but the whole system isn't exactly beginner friendly.
  - tracer4201 8y ago
    What were the things swept under the rug? A home purchase is arguably the largest purchase most people will make in the US. This is an area where I would actually want some laws requiring the agent to work on behalf of/ in the interest of their customer instead of only their own wallet.
    - sl1ck731 8y ago
Shivetya 8y ago
It would be a good change. In Atlanta, I assume many other large markets, we have more than a few flat fee brokers. however it doesn't escape from having the buyer using a realtor expecting their fee being paid by you the seller. When I bought my last house I used the same realtor for the home sold and was able to get a reduced fees on my sale.
benj111 8y ago
I'm from the UK where it works differently. If you're a buyer, what does the realtor do? Do they sort the legal stuff? Or are you (/seller) paying 3% to find you a house? How does the legal mechanics of this work, do realtors have an obligation to work in the interests of the person that engaged them, or the person that's paying them? Presumably its who engaged them, as they won't know who's paying them. Why then are they allowed to not show certain homes???
- vkou 8y ago
  > Do they sort the legal stuff? No, you pay a lawyer to do that.
  - benj111 8y ago
    3% seems a lot just for finding a house then, what's the value add? Or is just that buyers aren't paying (directly) so they don't care?
    - Latteland 8y ago
      They usually don't add any value unless you are maybe a naive buyer. They goal is complete the sale at any cost, otherwise they get nothing, and that's a bad incentive. At this point there's no real basis for a percentage commission.
- gnopgnip 8y ago
  In contrast to other systems used, The US system ensures the buyers are able to make a competitive offer without forgoing representation(because the buyers agent is paid for even if the buyers are unrepresented), and that almost all transactions have both the buyer and seller represented by separate agents. If the buyer is unrepresented, the listing agent is in practice representing them, and the seller still pays 5-6% so most buyers would want their own agent. Buyers agents usually sign an exclusive representation agreement outlining their duties to the buyer, and state law also covers their responsibilities to the buyer even if the buyer is not paying them directly. Real estate agents are only compensated when a sale closes, unlike real estate attorneys, or most everyone else in the real estate industry who are compensated when a service is rendered. This aligns the incentives of the real estate agents with the home buyers and sellers. Real estate agents are spending a lot of money on marketing, which is what allows for sites like Zillow to exist and for buyers to find homes for sale without directly involving an agent.
madengr 8y ago
Good! I find realtors to be parasites. We sold my wife’s house FSBO, which was not hard at all. My mother just bought a house also FSBO. No parasites involved, and everyone comes out the better. You can always get a real estate lawyer to bless everything.
- jvreagan 8y ago
  Exactly what I’ve done over the last 20 years. I FSBO and pay a lawyer by the hour at the doc signing. Not to mention I sell at a higher price than what realtors who try to land my business state I could sell for.
squozzer 8y ago
As someone who has bought a couple of houses, a buyer's agent mostly provides convenience because they can access the property just as easily as the listing agent. While agent fees usually run in the thousands of USD, probably the larger source of tacked-on fees is on the mortgage side, especially when the buyer does not have the 20% down. So not sure if transferring more of the fee load to buyers will help move real estate. After all, except for strong seller's markets or when shopping for a specific type of home, the seller usually has more incentive to sell their home than a buyer has to buy it. Regarding selling, I'm not sure this development is the realtor kill-shot - I would argue outfits such as Opendoor (convenience) or even Redfin (eliminate realtor fees) probably will inflict more damage to a realtor's income. Because selling a house is a 100x greater PITA than buying.
- bluedevil2k 8y ago
  Convenience shouldn’t cost 3% though. When I was looking for a house I was able to find houses I liked on search engines and then call the aeller’s realtor directly to set up a viewing. When time came for an offer, paying a real estate lawyer an hourly fee ends up saving $10k+.
rhacker 8y ago
This may lead to banks and realtors colluding. Instead or the current model we'll get realtor/banks buying properties that go up for sale. Then the realtor/banks will upgrade the cost to a 50% markup. That will of course be after flippers fix the house and other things. But in general, we're see the rich buying out the poor. And that model will be 100% legal.
- Someone1234 8y ago
  They could do this right now.
- newhotelowner 8y ago
  > Then the realtor/banks will upgrade the cost to a 50% markup. What stopping them right now?
bkohlmann 8y ago
Where you stand really depends on where you sit. My wife recently became an agent, and prior to that I was all about disrupting the industry. But I’ve come to see the 3% on each side as an almost market clearing price. It’s really hard work, with low barriers to entry, and significant upfront costs. In a tight market, being a buyers agent can be a blessing or a curse. She’s been working with one client for nearly a year, submitting over 20 offers and going all over the metroplex with nothing to show for it. On the other hand, she’s had buyers who found something within a month. It works out to a decent standard of living, but it takes a long time to develop a pipeline. Most agents quit within a year. I’m all for disruption, and it’s an industry with a lot of legacy, slow moving players. Buts it also a complex one with lots of challenges on the individual agent level.
- tehlike 8y ago
  Similar story. We ended up beingvery undecisive buyers, and our agent ended up working really hard. I felt sorry. She is doing honest work, and there are too many agents in the market who is in it for the quick buck. I would consider getting a license myself for my own investments, nothing more.
- pseudometa 8y ago
  Wouldn't it make more sense to charge by the hour? Or perhaps you live in a location with low housing prices. In either case, it seems to highlight the fact that the system is broken.
- freewilly1040 8y ago
  It'd be less work if the tools and information were more open and transparent. It might be hard work, but a lot of it doesn't need to exist and only does because of the information asymmetry that realtors maintain
- bkohlmann 8y ago
  I’ll also add value I’ve seen she adds from a buyers perspective: -she has access to a lot of off market listings via her networks. Sellers will somethings keep things off market so that when they sell, the tax base stays relatively the same - the appraisers don’t see a sale in the official pipeline -my wife also is really good at sending bespoke letters to target homes of folks not yet willing to sell. She’ll ID a group of homes in the buyers range, send them letters, and usually gets a 5%+ response rate. These are from folks who wouldn’t have sold otherwise
newhotelowner 8y ago
I couldn't buy a house without a realtor even though its a house that found myself and was paying 100% cash. 3%-3% is a lot of money if I don't use any service from a realtor.
- elteto 8y ago
  What prevented you from buying it yourself?
  - runako 8y ago
    Not the OP, but some things I've seen: - seller is using a realtor, so it doesn't matter whether the buyer is using a realtor or not. - seller is locked into a 6% commission, whether or not you choose a realtor. So there's no way to get the 3% buyer's commission back as a rebate.
    - jefftk 8y ago
      You can get half of the buyer's commission back as a rebate if you work with Redfin. (That's what we did when we bought our house in 2015)
  - ses1984 8y ago
    Even when you buy it yourself the seller's agent thinks they are entitled to the entire 6% fee unless you negotiate.
  - planteen 8y ago
    In a hot market (e.g., Denver last year), the seller's agent would not return your calls for a showing if you didn't have an agent. I suppose you could visit an open house and then submit an offer. Some houses never do open houses, or will already have offers before the open house. You would probably be competing with 2-3 other offers all over asking for a properly priced house. The odds of them choosing your offer would be lower since the seller's agent would not like it (it would be a lower offer on paper, since it has 3% less commission). They might go for it if it was all cash, but probably not with a mortgage.
pseudometa 8y ago
It blows my mind that the fees are percentage based. The amount of work required for an agent on a 100K house is very similar to that of a 2 Mill house. Presumably the seller agent wishes to get compensation for increasing the value of the house, but for both the seller and buyer agents, the number of deals done far outweighs slight incremental selling prices. In which case, both would prefer to settle on a lower price and move to the next deal. So frustrating. I wish the lawyers all the best!
- nrclark 8y ago
  Agreed 100%. Realtors do legitimate work, and deserve to be compensated for sure. But I think the pay is grossly disproportionate to the amount of value provided, and it's propped up by Realtor-sponsored laws and kickbacks. A lot of Realtors won't even deal with non-Realtor(tm) real-estate agents, which promotes their monopoly stranglehold on the real-estate market. I'm not sure where I fall on what a real-estate agent's cut should be for selling a house. But for the buyer's agent, it's really over-valued IMO. And why should a buyer's agent in San Jose make 4x more than somebody in Des Moines for the exact same value-add? When I bought my house, my Realtor found some good listings, arranged viewings, did the paperwork, and set everything up for me. All useful services, and worth paying for. But was it worth $12k for less than 40 hours of total work? I don't think so. That's a higher hourly rate than I'd be charged by a good doctor. And my house was a pretty cheap one by modern standards. Those are monopoly prices charged by people who know they've got you over a barrel.
  - pmoriarty 8y ago
    "When I bought my house, my Realtor found some good listings, arranged viewings, did the paperwork, and set everything up for me. All useful services, and worth paying for. But was it worth $12k for less than 40 hours of total work? I don't think so." A lot depends on the realtor. One realtor I know not only does everything you mention, but also gives their clients lots of advice (based on many decades of experience in the industry) -- for instance, telling them if the prices they're setting on their home or bidding for are likely too high or too low, or what to do with a house in order to make it more likely to be sold. How much is such advice worth -- advice that could get them the house they're dreaming of or sell the house they desperately need to sell? They also explain everything related to real-estate in great detail, tell them about the neighborhoods they're considering, drive them around all over the place (paying for their own gas, car, maintenance and insurance), sit in with them during the closing to go over the entire contract with them and explain everything and make sure they're not getting screwed. For sellers, the agent provides free advertising, spends a ton of time sitting at open houses waiting for people to show up and then showing them around, and trying to sell them the home, etc, etc. They negotiate deals and are the buyer's or seller's representative to the other party. All this work is done for free unless the house is sold. Again and again, I've heard how clients take months and months of this work done for free and then switch to go to another agent, paying the agent not a single dime for all the time they spent working for them. Or they'll just change their mind and no longer want to buy or sell. I've heard so many horror stories from them: clients are often incredibly inconsiderate, calling at all hours of the night and on weekends (this is not a 9-5 job), expecting them to work when sick, or just being super abrasive assholes or liars. Personally, I would never put up with any of that, but agents have to make ends meet, so are often forced to work with those kinds of people or starve. Watch the movie Glengarry Glen Ross sometime. The life of a typical real estate agent really is that bad, or worse. Real estate agents also risk their own lives doing their jobs: they routinely go alone in to empty houses with complete strangers. It's not common, but real estate agents have been assaulted, raped, or killed while showing homes. How many people think of that: that being a real estate agent is actually a dangerous profession? I didn't until I got to know an agent well and they started telling me the horror stories of what they have to go through and put up with.
lifehacked 8y ago
I bought my house, at age 19 without the help of an agent, all the have to do is coordinate: home appraisal, home inspection, title company. If you can make 10 phone calls you can buy a house without an agent.
- mertd 8y ago
  You still paid the seller's agent.
  - low_key 8y ago
    Not necessarily. I bought my first house without an agent from a seller who was selling by owner. It's quick and simple. We sat down at a table and negotiated a price in about 15 minutes, then had an inspection and paid a title company to do the rest.
o_nate 8y ago
When we sold our house, it was obvious that our realtor's incentive was to get a deal done. They had no incentive to go for a higher price if it lowered the chances of a deal getting done. If you really want an incentive to get the best price, you should have a base fee and an incentive fee, similar to how hedge funds operate. E.g. 2% of total price, plus 20% of difference of price above some baseline (e.g. assessed value).
- 0x0000000 8y ago
  The Freakonomics guys found that "when real estate agents sell their own homes, they tend to keep them on the market longer (about 10 days) and get a higher sale price (by about 3%) than when they sell homes for their clients." https://www.investopedia.com/financial-edge/0311/how-real-estate-agents-sell-their-homes-for-more.aspx https://www.investopedia.com/financial-edge/0311/how-real-es...
  - teachrdan 8y ago
    I know the obvious takeaway is (to exaggerate) that all realtors are crooks who are selling your house for too little because they don't care about you. But are we to expect that every realtor should spend as much time and effort selling every home as they do on their own? They presumably only sell their own home every few years, if that, and sell other people's homes every week. I'm actually surprised the numbers aren't "worse" for realtor's own homes. Never mind that realtor's are, presumably, the most aware of local market conditions and are then in a position to best prepare their own homes for a higher sale price, i.e.: more likely to do home improvements that reap a higher return, to know how to best show the house, etc.
    - abduhl 8y ago
      Yes, we should actually expect them to spend more time and effort. It’s their job! Would you be happy with the local plumber spending more time and effort fixing their own water valve or yours? Do you expect construction crews to spend more time or less time and effort when building a concrete bridge as compared to when they pour their own driveway? These are even examples where we should expect the person to care less about their job than their own personal stuff. Realtors have a fiduciary duty to their client.
xparco 8y ago
Real estate agents...selling debt slavery one house at a time to entitled Americans and debt addicts
paradygm 8y ago
So, who is going to go after the lawyers and the exorbitant fees they will surely extract from this lawsuit?
rplst8 8y ago
I'm generally OK with commission based sales - if there are guarantees. There's very little due diligence on the part of the Realtor or real estate agent. They can't really be held responsible for anything related the to condition of the house if something was hidden or missed by a home inspector. They'll put anything on the market, and typically make suggestions to sellers that while intended to improve "curb appeal" and "showability" often cover up bigger problems that the property might have. Purchasing a home is always "buyer beware."
- tathougies 8y ago
  > Purchasing a home is always "buyer beware." I mean, as a rule of thumb sure (because who wants to have to depend on the legal system for restitution), but not legally. Legally, the seller can't make any false representations. If you're worried about accidentally doing so, it's best to hire an agent who then takes on the responsibility for it.
Latteland 8y ago
I just realized this is about the same situation as "financial advisors" that you pay a percentage of your assests to to "manage them" and that get hidden commissions when you buy things. They insist that they are doing all for your benefit, and they further insist they shouldn't be held responsible for making advice that helps you (it's too restraining or some other bs). This field is just like that. Unneeded middlemen who could help but in the vast majority of cases just soak up your money.
Jocund 8y ago
The 6% fee needs to end! I'm a Co-founder of a new firm in NYC who rebates 50%+ of the buyer side commission back to the buyer. The average buyer doesn't a ton of assistance and giving them 1.5% of the purchase price back at closing just makes sense.
- opportune 8y ago
  Just curious - why use a percent fee rather than a flat fee?
kevindong 8y ago
I'm about to graduate college and move to NYC for a job. The unfortunate norm there is to pay a 15% fee (of the annual rent) to brokers to get a rental apartment. The cheapest the broker's fee gets is one month's rent, so about 8.33% of the annual rent. High end apartments sometimes pay the broker's fee on the renter's behalf [2]. Large apartment complexes sometimes have their own leasing offices, so there's no fee there either. To be clear, this is a one time fee paid when you initially move into the apartment. If you renew the lease, you don't owe another broker's fee. Meaning if the rent on an apartment is $2,000/month = $24,000/year, the broker's fee on that would be $24,000 * 15% = $3,600. The cheaper apartment are usually owned by small landlords who use brokers to vet applicants. For those apartments, you're required to use brokers. There's no way to opt out by working with the landlord directly as the broker's fee is paid by the renter. The broker provides their services to the landlord for free. I'm trying my absolute best to find a no fee apartment, but it pretty severely limits my options. For studio or 1 bedroom apartments under $2,500/month, there's currently 1,362 no-fee apartments [0] and 3,395 apartments at large (so, 2,033 for-fee apartments) [1]. [0]: https://streeteasy.com/for-rent/nyc/status:open%7Cprice:-2500%7Cbeds%3C=1%7Cno_fee:1 https://streeteasy.com/for-rent/nyc/status:open%7Cprice:-250... [1]: https://streeteasy.com/for-rent/nyc/status:open%7Cprice:-2500%7Cbeds%3C=1 https://streeteasy.com/for-rent/nyc/status:open%7Cprice:-250... [2]: https://www.brickunderground.com/blog/2015/12/in_case_you_missed_it_high_broker_fees https://www.brickunderground.com/blog/2015/12/in_case_you_mi...
- michaelper22 8y ago
  I don't understand how this racket is allowed to operate. From my experience (three NYC apartments through realtors), the landlord's realtor provides pre-screening of "desirable" tenants for the landlord, showings, collecting paperwork from the prospect, and handing over the keys. None of this adds value from the (prospective) tenant's perspective, but the tenant must pay the fees (in all three cases, one month's rent).
  - tootie 8y ago
    I recently worked on a financial website that does a full credit, background and fraud check online and in real time for issuing small loans. There's some amount of manual auditing that can happen in the background for anyone that raises a yellow flag, but otherwise you can get a loan approved and disbursed with no fees and it happens in a few days and is fully automated.
seltzered_ 8y ago
Fwiw a16z did a video on the realtor setup and ideas around interacting with companies more in the future for real estate: https://m.youtube.com/watch?v=IRPH3K1GXj0 https://m.youtube.com/watch?v=IRPH3K1GXj0 I haven’t looked into the details of the article, but it seems interesting that the RE startups may have some shared interest in changing the 6% rule, although one could speculate their goals may be to replace an “organic monopoly” of many agents with a (scaled techno-geographic?) monopoly. Edit: the Hahn blogpost (https://www.inman.com/2019/03/08/what-the-bombshell-buyer-side-lawsuit-means-for-realtors/amp/ https://www.inman.com/2019/03/08/what-the-bombshell-buyer-si...) linked by the article posits the suit could be expanded to also involve larger RE brokerages and not just franchise orgs: “The lawyers picked the top four largest real estate brokerages in their Complaint; I assume that they will quickly realize that RE/MAX and Keller Williams are not brokerages, but franchise companies, and will either amend the Complaint to include some other large brokerages (Howard Hanna? Compass? HomeSmart? eXp Realty?) and/or other large franchisors (Realogy brands, Exit, NextHome, etc.). The basic claim is that the MLS rule of unilateral offer of compensation is a violation of the Sherman Antitrust Act.“
lcfcjs2 8y ago
My wife would frequently find better houses than our agent, just using free online resources.
deckar01 8y ago
One of the strangest parts about mortgages to me is the "point" system lenders use to sell buyers lower interest rates. They offer a lower interest rate if you "buy points" rather than applying it towards your down payment. It seems like lenders are prioritizing their short term profit over their customers' long term financial stability.
- jiveturkey 8y ago
  Why is this strange? The majority of lenders repackage and sell off loans that they originate. Of course they are prioritizing short term profit. As for buyers, also what's not to love? Buying points gets you more cash flow than the reduced principal. There's some math to do, and some financial projection, where you expect to be in 5 years, etc. It's great to have the option.
altmind 8y ago
Is 6% realtor fee a norm in USA? Isn't 2% the old, established base?
eutropia 8y ago
Recently bought my first home without an agent on either side. If you were able to take away the complexities of applying for a mortgage, then the transaction would be as follows: buyer and seller sign a purchase contract(which defines what is being sold, for how much, and under what circumstances), establish escrow, have the property officially assessed for value (for tax purposes), have a title agent validate that the deed to the property is legally the seller's to sell, and finally file the deed with the local recorder's office. You can pay a lawyer to draft the purchase agreement for you or write one yourself. To me, its the closing costs and lending instruments that need an overhaul -- but yeah, get rid of the realtors too.
berdon 8y ago
We bought our house with a realtor who found and walked us through listings. Ultimately, we found the house we ended up buying. Our buying agent was helpful and did a good job but the questions she answered and information she gave was available online. We sold our house without a realtor and had no real issues. Buying agents tended to stray from our listing and most would communicate with us first to make sure we would "pay their fee". Most also tried to sell us on their agency. Overall, I probably won't use a realtor again. The value for my price point was not worth the %.
- gangstead 8y ago
  This was my experience as well. I've bought two homes and both times we found it ourselves. Used the real estate agent friend of a family member (there's always one) to show us a couple houses and relay offers, but I never felt like they did something I couldn't have done myself. I went along to both home inspections and found things the inspector missed. At all 3 closings (buying and years later selling the first house, buying second house) I've been sitting there in a room full of people sighing and tapping their feet while I read all the paperwork they want me to sign and all three times I've caught mistakes, two of which were several thousand dollars in the other party's favor. All in all it's not just the realtors that are doing mediocre work to extract a percentage, but a whole industry (agents, inspectors, title companies). I couldn't agree more that selling my house by myself was also a breeze. Maybe the experience is different in a down economy. I paid a flat $175 fee to a website for an MLS listing (which farmed the listing out to an agent in our MLS region 5 hours away) plus the 3% buyers agent fee and people started calling. I'm not a great photographer but I took pictures that were 100X better than a realtor walking around with a cell phone and put the Zillow "zestimate" as the listing price because I did a lot of research and took an honest look at my house and couldn't come up with a reason to go higher or lower. I definitely got the "will you pay my fee" calls despite already putting the buyer's agent fee on the MLS listing. As an experiment I tried to negotiate that with an agent and I realized that wasn't going to go anywhere. The only annoying part of the process was the buyer's agent clumsily slipping in some clauses in the contract that would have made it a terrible deal for me. If anyone is reading this and wants to try going without an agent I'd recommend asking a friend who recently closed on a house to see their contract. That will help you spot any tricks an agent is trying to slip past you.
om3n 8y ago
I'm a software engineer, and I started my career at a well known mortgage company in Detroit. Views are my own, BTW. I bought a house a couple years after I started working there, and I wanted the full home-purchaser experience. I used my company's services for everything, and as an employee they hooked me up with a real estate agent (among other things). I was honestly appalled at what little my real estate agent did for me through the whole process. I had what seemed like simple requirements: I wanted to live west of the city, I wanted at least 1 acre, and an outbuilding. The outbuilding is what threw off the search tool the agent was using to find houses for me; he rarely found good ones in my price range that had outbuildings. I ended up finding the house I purchased. I'm honestly not sure what he did at all. When it came time to sell my house, I did it by owner. It was super easy to do everything, including getting my home on the MLS with a service called Reozom, for a couple hundred bucks. I used several sources to come up with comps for pricing. However, the purchasing agent who represented the buyers of my home was an absolute MONSTER to me; extremely rude in nearly every email or phone call. I think she was so horrible because I was proving how absolutely unnecessary she was in the whole process. I sold the house for a little under asking price, plus I paid her a 2% commission instead of 3%, and of course not 6% as if she represented me as well. The funny thing- she didn't notice the 2% in the purchasing contract until after it was already signed. What I've anecdotally learned is this: real estate agents don't provide enough useful benefit for me to use them, and can be hostile as their industry is increasingly proven to be built on little or nothing.
- Justin_K 8y ago
  She was hostile because a real estate agent's approach is to black ball any for sale by owner listing, or any for sale by Redfin / Zillow, etc. Agents around my area always blackball these listings and will NOT tell buyers about these listings unless buyers specifically ask. This is nonsense and not in favor of buyers and is an attempt to bring failure to reform. Fortunately, more and more buyers are realizing they can do the research themselves online.
  - mrtweetyhack 8y ago
    Then they've failed their principal/agent fudicary duty and should be sued.
alehul 8y ago
Adding onto the complaints of economic inefficiency here: one of the worst things I found living in Boston (not sure how many other major cities this applies to) is that it's completely standard for the renter of a property to pay a broker's fee, generally equivalent to one month's rent, to the landlord's agent. In most (healthy, cheaper) rental markets, the landlord will pay a real estate agent a fee (one month's rent, again) to find a renter. This intuitively makes sense, as the landlord requires some number of hours of effort from the agent to list the home, show the apartment to a ton of people, and find one willing to rent it. It seems economically so incorrect that the renter should bear the cost of the fee the rental agent charges for showing the home to like 10 potential renters— they spend maybe 10 minutes of their time showing the individual renter, and they're late more often than not! Edit: below commenter rightly pointed out that this is economically perfectly correct— unjust from a value perspective would be better phrasing
- cde-v 8y ago
  New York is the same way, except the fee can be up to 20% of yearly rent. You hope you only have to pay one month broker's fee.
- xyzzyz 8y ago
  Standard economic theory predicts that the tax incidence falls more on the party that has lower elasticity — that is, fewer alternative options to make a deal. If it is hard to find an apartment, the renter will pay most of the fee. If it is hard to find a renter, it’s the opposite.
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duwease 8y ago
Yeah, I've never quite understood the value proposition of that fee myself. Between that and the gatekeeping that happens to become an agent, it seems like it's a bit inflated and held up by tradition. At least the iBuyers like Opendoor provide a service whose value I can see, even if it might not apply to every individual. Having someone else take on the hassle of dealing with shady vendors and house showing, repair negotiations and flaky buyers, while letting me move out cash-in-hand whenever I want? I get that.. especially after experiencing my good friends hit every one of those nightmares themselves, ending up having to waste thousands on AirBnB's after contractor issues left them without either home for months.
obelos 8y ago
I've bought houses using an agent and not, and the latter was in every way more pleasant and predictable. The agent (and their supervising broker) overlooked fundamental items in the contract which ought to have been obvious, like ensuring the current renters would be out before close. Even with the seller picking up the tab for both agents, as a buyer I would prefer doing it myself. The only drawback is, of course, that it's much more difficult to get into houses without being represented by an agent.
robocat 8y ago
Sellers fees mostly average 3% to 4% in Christchurch, New Zealand - https://www.thepropertymarket.co.nz/compare-our-fees https://www.thepropertymarket.co.nz/compare-our-fees The fee structure is X+1% for the first $350000, and X% above that. One company advertises 1% fees, but they make it up with other charges. From my experience, few people use a buyer's agent (maybe because property details are well recorded centrally, and often they are not part of a building, and so there are fewer legal risks in NZ).
intrasight 8y ago
We tried selling our first house ourselves. Ran ads in paper. Put up fliers. Etc. This was before the internet mind you. Tried this for 3 months and literally had no serious interest. We gave the listing to an agent and a week later had two full price offers. Sure, the internet has changed things a bit, but since then I always use a realtor. 6% is fair for the good ones. More challenging in some markets near me is where 6% isn't enough. Lots of $50K houses still. That's only $1500 for each agent.
- JMTQp8lwXL 8y ago
  I think the internet changed things a bit more than a little since then.
cmancini 8y ago
There are some startups trying to fix these issues and price at flat fees to mixed effect (Trelora in Denver comes to mind as an example). I think the true solution will come not by lawsuit but by mass scale market-making by companies like OpenDoor and Zillow. When you want to sell your home you can go to these companies and get a check within a few days, and when you want to buy a home these will have built software and systems to make purchasing a straightforward process. They'll provide liquidity and take a cut, but with a couple of companies in the market the 'spread' will probably be lower than buyer+seller broker fees. They may not serve unique and luxury real estate in the near future, but for the 'typical' suburban home it seems like consumers could see a benefit.
Waterluvian 8y ago
Im buying a house right now. The work my agent is doing surely deserves the 2.5% she gets. Not that this doesn't mean it's still broken somewhere. Don't be afraid to be pushy though if you think you're not getting your money's worth. Or just do it yourself.
brightball 8y ago
The agents themselves have little control over it. What people should take aim at is the licensing process itself. It’s basically an MLM.
- btkramer9 8y ago
  It's no surprise most the MLMers move on to real estate afterwards
cmancini 8y ago
There are some startups trying to fix these issues and price at flat fees to mixed effect (Trelora in Denver comes to mind as an example). I think the true solution will come not by lawsuit but by mass scale market-making by companies like OpenDoor and Zillow. When you want to sell your home you can go to these companies and get a check within a few days, and when you want to buy a home these will have built software and systems to make purchasing a straightforward processes. They may not serve unique and luxury real estate in the near future, but for the 'typical' suburban home it seems like consumers could see a benefit.
legohead 8y ago
When I was in OK the 6% seemed like a lot, but it was workable. Now in CA, after selling my first home, this 6% is simply absurd. After selling and buying a new house, even with considerable equity, if I were to sell my house again I would actually be losing money. We had several major life events at once recently (job loss, family death, and a couple others), and almost had to sell the house. Doing so would have been like starting over after building up equity for 30 years.
opportune 8y ago
One thing I haven't seen yet in this thread is that buyers' agents actually make use of some pretty anti-competitive behavior on top of the regular cartel stuff. Not only do they get access to MLS listings a few days before they go "public" in most areas, but they also are starting to deal with "pre-listed" houses that they are able to know are about to go on sale via their personal networks. Of course, that's probably been happening forever, but in hot markets it's becoming more popular simply due to the low average time on market for appropriately-priced homes. Also, I've taken a few classes on real estate (free) from real estate agents before and one of them told me that he often gets solicited by crooked inspectors who will exchange references for a-ok inspection results. Plus agents on neither side / inspectors can easily be held responsible unless there is provable, outright fraud. I think maybe real estate agents would be worth it if they also carried some kind of transactional liability but since they don't...
mensetmanusman 8y ago
I found this recent publication to be an amazing account of how real estate is being used to launder: https://www.theatlantic.com/magazine/archive/2019/03/how-kleptocracy-came-to-america/580471/ https://www.theatlantic.com/magazine/archive/2019/03/how-kle... I wish class-action lawsuits were aimed at the source...
dd36 8y ago
This won’t succeed for a lot of reasons. I suspect they’re after a settlement.
ryanmarsh 8y ago
Your local real estate listing service (also useful for competitive price analysis) is only accessible by real estate agents. This is anti-competitive. Real estate agents are one of the last bastions of rent-seeking bastards that will fall, and not a day too soon.
fma 8y ago
I always wondered who represents home owners who have cheap houses... Like a $50k house. Whether you are selling a 50k house or 500k, there's a similar amount of work. But those houses do get sold. Also as a rental property owner I hate how realtors charge by the monthly fee. Meaning, if I rent out my house for $2k a month, I need to pay them that amount for a new tenant. A $2k a month property with tenants that have jobs is easier to maintain than $500 property with tenants that barely hold a job. They also take a 10% cut per month of the rent... $200 for $2000 rent... $50 for $500...just to do the same thing. Real estate fees make no sense!
TaylorGood 8y ago
Residential real estate is an odd one. Countless times I’ve seen it warp the ego of agents and their perception of value being provided. A friend was looking to buy a $15m house, so I vouched for a childhood friend that was newer to real estate. Agent friend was able to make it happen by tracking down the owner who lived an hour away and convinced her to sell. After close the agent friend then complained to me that he got hosed on the deal because of the “100 hours” he put in and only receiving 1% - $150,000 ($1,500/hr). A year prior he was delivering pizzas (!!).
stopasking 8y ago
I just wish they could keep real estate companies from asking to buy the house I just bought a week ago. These people have access to all the listing and sales data. They know I just moved in. Why are they asking to buy my house?
kazinator 8y ago
> cost that would be borne by the buyer in a competitive market There is no such thing; any such cost is a parasitic loss that comes out of the value of the transaction. Two parties are transacting, and in comes this little vampire and sucks away a bit of it, leaving both of them poorer. Reasoning such as "the other party pays it so it makes no difference to me" is horribly irrational and innumerate.

345 points by mudil 8y ago

currently, it is illegal to pay anyone a commission for selling your house except a licensed real estate agent. If you got rid of that restriction, imagine the opportunities. you could let your friends sell your house by sharing a link on social media and they could get the commission. Also in England, real estate commission fees are about 1% vs. 6% in US. As the article states, in the US a lot of agents won't show FSBO (for sale by owner). I have personal experience with this where they trash talk or flat out refuse to show you fsbo.

jayess 8y ago
This is a state-level law. And real estate agent lobbying is extremely powerful. I don't see it changing any time soon.
- andrewtbham 8y ago
  It is state level laws. NAR is one of the most powerful lobbying groups in the US. This lawsuit is interesting because as the article states... this is the first time a highly credible law firm has taken on the NAR. The courts are definitely a better place to fight because the lawmakers are easily influenced by powerful lobbyists.
- siggen 8y ago
  The issue is more complex and nuanced than simply paying agents 6% commission and feeling you did not get your money's worth. One could argue that a lot of buyers agents and sellers agents are horrible at their jobs. However, having met an exceptional agent, I would gladly pay this fee than deal with long term non-obvious issues that come with a property and then being upset with everyone involved in the purchase of the house. I don't think my "friends" know enough about what to look for in a house to recommend whether it is a good or a bad purchase for me. There's more to than just showing a property around to a buyer. Also, all the marketing that a seller's agent does to sell the property, including renting furniture, artwork, presentation, print material, etc. is going out of that 3%. There's also an agency fee that the agent pays out of that 3%.
  - lallysingh 8y ago
    Yes, this. Good agents are the ones you come back to when you want another house. Good agents know this, and live off of referrals from happy customers. The fees are fixed w.r.t. the price of the home, but the agent is exposed to the risk of how much work is involved in getting a buyer/seller pair matched up. Both agents can be on the hook for some time -- houses may not sell for a while, or either buyer/seller decide to stop trying to transact. That's sunk cost by the agents. So if you're not asking very much of the agent, or giving much risk to them, it's not worth 6%. But that risk has to be accounted for somewhere, and spread across clients like any other risk. Also, if you're doing a sale + purchase, you can usually negotiate that 6% down with your agent.
oconnor663 8y ago
I assume there's some kind of fraud or expensive mistake that this law is designed to address, apart from just rent seeking for realtors. Does anyone have a sense of what those problems are, and whether the market would be better at addressing them now than it was when the laws were passed?
cwyers 8y ago
If I was a realtor, I probably would refuse to show FSBO as well. I bought a house about a month ago, and when I was looking at houses, it was fun to go to a neighborhood, see five houses for sale, and to try to figure out why the FSBO house was selling for 25% more than every other house in the neighborhood. Spoiler: It's because the people who go FSBO often are FSBOing specifically because they want to get a higher price than what a seller's agent thinks the house should list for.
noneeeed 8y ago
Is there a significant difference between what an "estate agent" (UK) and a "realtor" (US) do? Are they more involved in the actual legal side of things (the sort of thing a conveyancing solicitor would do in the UK), or are they still just there to advertise the property and show people round? If they were doing a lot more of the legal side of things I could understand the difference, but a four or five percentage-point difference seems ludicrous if they are basically doing the same job. For context for those outside the UK, an estate agent here just works for the seller, and normally gets a 1 to 1.5% fee (paid by the seller) for advertising the property and showing people round (and good ones will give you advice on tarting the house up etc). Once you make an offer on a house it's pretty much all in the hands of the solicitors and mortgage company from then on.
- chrisseaton 8y ago
  Realtor is a brand name - it's a registered trademark. The generic version is estate agent.
  - noneeeed 8y ago
    TIL! I've only ever seen it used in the generic sense online, a bit like the way we talk about "a hoover" when we mean "a vacuum cleaner".
- NeedMoreTea 8y ago
  Especially as the agency work and cost required, both sides of the Atlantic, is far less than twenty years ago before sites like Right Move and easy production of details via DTP and colour printing.
- matthewowen 8y ago
  Depends on the state. For instance, in PA yes, they cover the legal side of things (at least to the extent that there isn't usually another lawyer involved in the process). The other piece to this is that this 6% is split between the buyers agent and sellers agent. Typically, as a buyer, the person showing the house to you is _your_ agent (versus the UK where it is the seller's agent). Put another way, there's effectively a whole extra person involved who (at least legally) has a specific fiduciary responsibility to the buyer, and who takes on _some_ of the tasks that otherwise might fall to a selling agent. It's also worth noting that there _do_ exist "discount agents". For instance, Redfin will charge sellers 1-1.5%, and if you use them as a buyer's agent, they will still charge 3% (since it is effectively baked into all prices) but then rebate you 1.5%. But this is less common. So yes, overall, realtors here are doing more overall, but honestly it's largely (I think) just that they make more here because they've been effective at establishing norms, and also because small percentage point differences are easy to discount away. For instance, I'm currently buying using a traditional agent, because honestly the 1.5% fee difference is outweighed by the savings you can get with someone who can work better on offer price and post-inspection negotiations, and who is going to be someone the listing agent _wants_ to work with (which they will pitch to their clients as "this person is reliable and will ensure we close, whereas Redfin are useless and the deal might fall apart"). Not saying it's good, just giving more of the landscape.
mbesto 8y ago
> Also in England, real estate commission fees are about 1% vs. 6% in US. Also in England...stamp duty.[0] Yaaaaa....no thanks. https://www.gov.uk/stamp-duty-land-tax/residential-property-rates https://www.gov.uk/stamp-duty-land-tax/residential-property-...
- matthewowen 8y ago
  worth noting that a) transfer taxes exist in the US too and b) property taxes in the US are typically _much_ higher than council tax in the UK (though this isn't apples to apples, especially as council tax is usually also paid by tenants).
- asciident 8y ago
  You know that most states have a stamp tax as well? It's just hidden in closing documents, and sometimes named something else. Basically a percentage of your sale price goes to the state.
  - mbesto 8y ago
    Ya but 6.5% though?
    - asciident 8y ago
      Fair point. The US stamp tax is way lower than 6.5%. I think closer to about 1% or a bit less.
jiveturkey 8y ago
> currently, it is illegal to pay anyone a commission for selling your house except a licensed real estate agent. I think you are confused about a realtor not being able to pay a finder's fee to anyone but a licensed agent. You, as a seller, are free to pay anyone any commission you like. Unless of course you've contracted that right away in an agreement with a seller's agent. But that's just normal contract law.
- andrewtbham 8y ago
  It's a gray area... https://www.inman.com/2015/08/25/referrals-from-non-real-estate-agents-can-be-tricky-or-even-illegal/ https://www.inman.com/2015/08/25/referrals-from-non-real-est...

maerF0x0 8y ago

This is a big deal for "average" americans. Jack bogle took on the fees eating up retirement plans. Now the next biggest asset has an opportunity to be revamped. While real wages have stagnated, we can lower the costs so those wages go further.

wnissen 8y ago
There are 1.3 million Realtors(tm) in the U.S. Imagine what a productivity boon it would be if even half of them switched to gainful employment versus rent extraction via their cartel!
- analog31 8y ago
  Better watch what you ask for. When they switched to no-fault car insurance in my home state, many years ago, the number of non-car-related lawsuits skyrocketed.
  - freewilly1040 8y ago
    All disruptions to complex systems come with side effects, but they are often still worthwhile.
  - maerF0x0 8y ago
    IMO no fault anything sounds like a recipe for abuse. That's generally how society functions -- there are consequences to actions.
    - analog31 8y ago
      There are still consequences under no-fault auto insurance. First of all, you can still get a ticket for causing a crash. Second, your traffic record increases your insurance premium. Also you could get injured yourself. I don't think crashing cars is something sane people would do in the absence of the insurance system. Since everybody has mandatory liability insurance, on average the net money transferred between insurance companies is probably close to zero, whether money changes hands in lawsuits or not. The aim of no-fault in my state was to reduce the number of lawsuits that arose over petty incidents, that were flooding the courts. https://en.wikipedia.org/wiki/No-fault_insurance https://en.wikipedia.org/wiki/No-fault_insurance

jmpman 8y ago

I took advantage of the situation when I last sold my house. I knew what the house would likely sell for, and told my agent that I’d pay him his 3% seller commission for that price, but for anything above that amount, I’d split the incremental amount with him (I believe I proposed 40/60). Ultimately I made an additional $10k.

tacomonstrous 8y ago

The model's pretty broken now, when anyone can look up listings on realtor.com or Redfin, and get customized alerts based on preferences. I mean what special skills do agents even bring on the buy side? I can mediate things with the seller myself, thank you very much. On the sell side, an experienced agent can be much more of a help. Even there, we used Redfin the last time we sold, and the difference in commission was a full 2% when compared to a more conventional broker.

xfitm3 8y ago
Agents should be guiding prospective property owners and helping them avoid mistakes. Unfortunately they are motivated by profit instead.
gnopgnip 8y ago
Most of the value of a real estate agent is after getting an accepted offer.
sl1ck731 8y ago
I purchased my first home in 2017. I absolutely would not have known half of what to do without my agent. In retrospect there are some things that he swept under the rug that I'm paying for now, but all of the paperwork and having someone who knew what to ask for was invaluable. If I was left to my own devices I would have made some probably very stupid offers and lost the chance at my property. This might just be because there is another agent on the other end, but the whole system isn't exactly beginner friendly.
- tracer4201 8y ago
  What were the things swept under the rug? A home purchase is arguably the largest purchase most people will make in the US. This is an area where I would actually want some laws requiring the agent to work on behalf of/ in the interest of their customer instead of only their own wallet.
  - sl1ck731 8y ago

Shivetya 8y ago

It would be a good change. In Atlanta, I assume many other large markets, we have more than a few flat fee brokers. however it doesn't escape from having the buyer using a realtor expecting their fee being paid by you the seller. When I bought my last house I used the same realtor for the home sold and was able to get a reduced fees on my sale.

benj111 8y ago

I'm from the UK where it works differently. If you're a buyer, what does the realtor do? Do they sort the legal stuff? Or are you (/seller) paying 3% to find you a house? How does the legal mechanics of this work, do realtors have an obligation to work in the interests of the person that engaged them, or the person that's paying them? Presumably its who engaged them, as they won't know who's paying them. Why then are they allowed to not show certain homes???

vkou 8y ago
> Do they sort the legal stuff? No, you pay a lawyer to do that.
- benj111 8y ago
  3% seems a lot just for finding a house then, what's the value add? Or is just that buyers aren't paying (directly) so they don't care?
  - Latteland 8y ago
    They usually don't add any value unless you are maybe a naive buyer. They goal is complete the sale at any cost, otherwise they get nothing, and that's a bad incentive. At this point there's no real basis for a percentage commission.
gnopgnip 8y ago
In contrast to other systems used, The US system ensures the buyers are able to make a competitive offer without forgoing representation(because the buyers agent is paid for even if the buyers are unrepresented), and that almost all transactions have both the buyer and seller represented by separate agents. If the buyer is unrepresented, the listing agent is in practice representing them, and the seller still pays 5-6% so most buyers would want their own agent. Buyers agents usually sign an exclusive representation agreement outlining their duties to the buyer, and state law also covers their responsibilities to the buyer even if the buyer is not paying them directly. Real estate agents are only compensated when a sale closes, unlike real estate attorneys, or most everyone else in the real estate industry who are compensated when a service is rendered. This aligns the incentives of the real estate agents with the home buyers and sellers. Real estate agents are spending a lot of money on marketing, which is what allows for sites like Zillow to exist and for buyers to find homes for sale without directly involving an agent.

madengr 8y ago

Good! I find realtors to be parasites. We sold my wife’s house FSBO, which was not hard at all. My mother just bought a house also FSBO. No parasites involved, and everyone comes out the better. You can always get a real estate lawyer to bless everything.

jvreagan 8y ago
Exactly what I’ve done over the last 20 years. I FSBO and pay a lawyer by the hour at the doc signing. Not to mention I sell at a higher price than what realtors who try to land my business state I could sell for.

squozzer 8y ago

As someone who has bought a couple of houses, a buyer's agent mostly provides convenience because they can access the property just as easily as the listing agent. While agent fees usually run in the thousands of USD, probably the larger source of tacked-on fees is on the mortgage side, especially when the buyer does not have the 20% down. So not sure if transferring more of the fee load to buyers will help move real estate. After all, except for strong seller's markets or when shopping for a specific type of home, the seller usually has more incentive to sell their home than a buyer has to buy it. Regarding selling, I'm not sure this development is the realtor kill-shot - I would argue outfits such as Opendoor (convenience) or even Redfin (eliminate realtor fees) probably will inflict more damage to a realtor's income. Because selling a house is a 100x greater PITA than buying.

bluedevil2k 8y ago
Convenience shouldn’t cost 3% though. When I was looking for a house I was able to find houses I liked on search engines and then call the aeller’s realtor directly to set up a viewing. When time came for an offer, paying a real estate lawyer an hourly fee ends up saving $10k+.

rhacker 8y ago

This may lead to banks and realtors colluding. Instead or the current model we'll get realtor/banks buying properties that go up for sale. Then the realtor/banks will upgrade the cost to a 50% markup. That will of course be after flippers fix the house and other things. But in general, we're see the rich buying out the poor. And that model will be 100% legal.

Someone1234 8y ago
They could do this right now.
newhotelowner 8y ago
> Then the realtor/banks will upgrade the cost to a 50% markup. What stopping them right now?

bkohlmann 8y ago

Where you stand really depends on where you sit. My wife recently became an agent, and prior to that I was all about disrupting the industry. But I’ve come to see the 3% on each side as an almost market clearing price. It’s really hard work, with low barriers to entry, and significant upfront costs. In a tight market, being a buyers agent can be a blessing or a curse. She’s been working with one client for nearly a year, submitting over 20 offers and going all over the metroplex with nothing to show for it. On the other hand, she’s had buyers who found something within a month. It works out to a decent standard of living, but it takes a long time to develop a pipeline. Most agents quit within a year. I’m all for disruption, and it’s an industry with a lot of legacy, slow moving players. Buts it also a complex one with lots of challenges on the individual agent level.

tehlike 8y ago
Similar story. We ended up beingvery undecisive buyers, and our agent ended up working really hard. I felt sorry. She is doing honest work, and there are too many agents in the market who is in it for the quick buck. I would consider getting a license myself for my own investments, nothing more.
pseudometa 8y ago
Wouldn't it make more sense to charge by the hour? Or perhaps you live in a location with low housing prices. In either case, it seems to highlight the fact that the system is broken.
freewilly1040 8y ago
It'd be less work if the tools and information were more open and transparent. It might be hard work, but a lot of it doesn't need to exist and only does because of the information asymmetry that realtors maintain
bkohlmann 8y ago
I’ll also add value I’ve seen she adds from a buyers perspective: -she has access to a lot of off market listings via her networks. Sellers will somethings keep things off market so that when they sell, the tax base stays relatively the same - the appraisers don’t see a sale in the official pipeline -my wife also is really good at sending bespoke letters to target homes of folks not yet willing to sell. She’ll ID a group of homes in the buyers range, send them letters, and usually gets a 5%+ response rate. These are from folks who wouldn’t have sold otherwise

newhotelowner 8y ago

I couldn't buy a house without a realtor even though its a house that found myself and was paying 100% cash. 3%-3% is a lot of money if I don't use any service from a realtor.

elteto 8y ago
What prevented you from buying it yourself?
- runako 8y ago
  Not the OP, but some things I've seen: - seller is using a realtor, so it doesn't matter whether the buyer is using a realtor or not. - seller is locked into a 6% commission, whether or not you choose a realtor. So there's no way to get the 3% buyer's commission back as a rebate.
  - jefftk 8y ago
    You can get half of the buyer's commission back as a rebate if you work with Redfin. (That's what we did when we bought our house in 2015)
- ses1984 8y ago
  Even when you buy it yourself the seller's agent thinks they are entitled to the entire 6% fee unless you negotiate.
- planteen 8y ago
  In a hot market (e.g., Denver last year), the seller's agent would not return your calls for a showing if you didn't have an agent. I suppose you could visit an open house and then submit an offer. Some houses never do open houses, or will already have offers before the open house. You would probably be competing with 2-3 other offers all over asking for a properly priced house. The odds of them choosing your offer would be lower since the seller's agent would not like it (it would be a lower offer on paper, since it has 3% less commission). They might go for it if it was all cash, but probably not with a mortgage.

pseudometa 8y ago

It blows my mind that the fees are percentage based. The amount of work required for an agent on a 100K house is very similar to that of a 2 Mill house. Presumably the seller agent wishes to get compensation for increasing the value of the house, but for both the seller and buyer agents, the number of deals done far outweighs slight incremental selling prices. In which case, both would prefer to settle on a lower price and move to the next deal. So frustrating. I wish the lawyers all the best!

nrclark 8y ago
Agreed 100%. Realtors do legitimate work, and deserve to be compensated for sure. But I think the pay is grossly disproportionate to the amount of value provided, and it's propped up by Realtor-sponsored laws and kickbacks. A lot of Realtors won't even deal with non-Realtor(tm) real-estate agents, which promotes their monopoly stranglehold on the real-estate market. I'm not sure where I fall on what a real-estate agent's cut should be for selling a house. But for the buyer's agent, it's really over-valued IMO. And why should a buyer's agent in San Jose make 4x more than somebody in Des Moines for the exact same value-add? When I bought my house, my Realtor found some good listings, arranged viewings, did the paperwork, and set everything up for me. All useful services, and worth paying for. But was it worth $12k for less than 40 hours of total work? I don't think so. That's a higher hourly rate than I'd be charged by a good doctor. And my house was a pretty cheap one by modern standards. Those are monopoly prices charged by people who know they've got you over a barrel.
- pmoriarty 8y ago
  "When I bought my house, my Realtor found some good listings, arranged viewings, did the paperwork, and set everything up for me. All useful services, and worth paying for. But was it worth $12k for less than 40 hours of total work? I don't think so." A lot depends on the realtor. One realtor I know not only does everything you mention, but also gives their clients lots of advice (based on many decades of experience in the industry) -- for instance, telling them if the prices they're setting on their home or bidding for are likely too high or too low, or what to do with a house in order to make it more likely to be sold. How much is such advice worth -- advice that could get them the house they're dreaming of or sell the house they desperately need to sell? They also explain everything related to real-estate in great detail, tell them about the neighborhoods they're considering, drive them around all over the place (paying for their own gas, car, maintenance and insurance), sit in with them during the closing to go over the entire contract with them and explain everything and make sure they're not getting screwed. For sellers, the agent provides free advertising, spends a ton of time sitting at open houses waiting for people to show up and then showing them around, and trying to sell them the home, etc, etc. They negotiate deals and are the buyer's or seller's representative to the other party. All this work is done for free unless the house is sold. Again and again, I've heard how clients take months and months of this work done for free and then switch to go to another agent, paying the agent not a single dime for all the time they spent working for them. Or they'll just change their mind and no longer want to buy or sell. I've heard so many horror stories from them: clients are often incredibly inconsiderate, calling at all hours of the night and on weekends (this is not a 9-5 job), expecting them to work when sick, or just being super abrasive assholes or liars. Personally, I would never put up with any of that, but agents have to make ends meet, so are often forced to work with those kinds of people or starve. Watch the movie Glengarry Glen Ross sometime. The life of a typical real estate agent really is that bad, or worse. Real estate agents also risk their own lives doing their jobs: they routinely go alone in to empty houses with complete strangers. It's not common, but real estate agents have been assaulted, raped, or killed while showing homes. How many people think of that: that being a real estate agent is actually a dangerous profession? I didn't until I got to know an agent well and they started telling me the horror stories of what they have to go through and put up with.

lifehacked 8y ago

I bought my house, at age 19 without the help of an agent, all the have to do is coordinate: home appraisal, home inspection, title company. If you can make 10 phone calls you can buy a house without an agent.

mertd 8y ago
You still paid the seller's agent.
- low_key 8y ago
  Not necessarily. I bought my first house without an agent from a seller who was selling by owner. It's quick and simple. We sat down at a table and negotiated a price in about 15 minutes, then had an inspection and paid a title company to do the rest.

o_nate 8y ago

When we sold our house, it was obvious that our realtor's incentive was to get a deal done. They had no incentive to go for a higher price if it lowered the chances of a deal getting done. If you really want an incentive to get the best price, you should have a base fee and an incentive fee, similar to how hedge funds operate. E.g. 2% of total price, plus 20% of difference of price above some baseline (e.g. assessed value).

0x0000000 8y ago
The Freakonomics guys found that "when real estate agents sell their own homes, they tend to keep them on the market longer (about 10 days) and get a higher sale price (by about 3%) than when they sell homes for their clients." https://www.investopedia.com/financial-edge/0311/how-real-estate-agents-sell-their-homes-for-more.aspx https://www.investopedia.com/financial-edge/0311/how-real-es...
- teachrdan 8y ago
  I know the obvious takeaway is (to exaggerate) that all realtors are crooks who are selling your house for too little because they don't care about you. But are we to expect that every realtor should spend as much time and effort selling every home as they do on their own? They presumably only sell their own home every few years, if that, and sell other people's homes every week. I'm actually surprised the numbers aren't "worse" for realtor's own homes. Never mind that realtor's are, presumably, the most aware of local market conditions and are then in a position to best prepare their own homes for a higher sale price, i.e.: more likely to do home improvements that reap a higher return, to know how to best show the house, etc.
  - abduhl 8y ago
    Yes, we should actually expect them to spend more time and effort. It’s their job! Would you be happy with the local plumber spending more time and effort fixing their own water valve or yours? Do you expect construction crews to spend more time or less time and effort when building a concrete bridge as compared to when they pour their own driveway? These are even examples where we should expect the person to care less about their job than their own personal stuff. Realtors have a fiduciary duty to their client.

xparco 8y ago

Real estate agents...selling debt slavery one house at a time to entitled Americans and debt addicts

paradygm 8y ago

So, who is going to go after the lawyers and the exorbitant fees they will surely extract from this lawsuit?

rplst8 8y ago

I'm generally OK with commission based sales - if there are guarantees. There's very little due diligence on the part of the Realtor or real estate agent. They can't really be held responsible for anything related the to condition of the house if something was hidden or missed by a home inspector. They'll put anything on the market, and typically make suggestions to sellers that while intended to improve "curb appeal" and "showability" often cover up bigger problems that the property might have. Purchasing a home is always "buyer beware."

tathougies 8y ago
> Purchasing a home is always "buyer beware." I mean, as a rule of thumb sure (because who wants to have to depend on the legal system for restitution), but not legally. Legally, the seller can't make any false representations. If you're worried about accidentally doing so, it's best to hire an agent who then takes on the responsibility for it.

Latteland 8y ago

I just realized this is about the same situation as "financial advisors" that you pay a percentage of your assests to to "manage them" and that get hidden commissions when you buy things. They insist that they are doing all for your benefit, and they further insist they shouldn't be held responsible for making advice that helps you (it's too restraining or some other bs). This field is just like that. Unneeded middlemen who could help but in the vast majority of cases just soak up your money.

Jocund 8y ago

The 6% fee needs to end! I'm a Co-founder of a new firm in NYC who rebates 50%+ of the buyer side commission back to the buyer. The average buyer doesn't a ton of assistance and giving them 1.5% of the purchase price back at closing just makes sense.

opportune 8y ago
Just curious - why use a percent fee rather than a flat fee?

kevindong 8y ago

I'm about to graduate college and move to NYC for a job. The unfortunate norm there is to pay a 15% fee (of the annual rent) to brokers to get a rental apartment. The cheapest the broker's fee gets is one month's rent, so about 8.33% of the annual rent. High end apartments sometimes pay the broker's fee on the renter's behalf [2]. Large apartment complexes sometimes have their own leasing offices, so there's no fee there either. To be clear, this is a one time fee paid when you initially move into the apartment. If you renew the lease, you don't owe another broker's fee. Meaning if the rent on an apartment is $2,000/month = $24,000/year, the broker's fee on that would be $24,000 * 15% = $3,600. The cheaper apartment are usually owned by small landlords who use brokers to vet applicants. For those apartments, you're required to use brokers. There's no way to opt out by working with the landlord directly as the broker's fee is paid by the renter. The broker provides their services to the landlord for free. I'm trying my absolute best to find a no fee apartment, but it pretty severely limits my options. For studio or 1 bedroom apartments under $2,500/month, there's currently 1,362 no-fee apartments [0] and 3,395 apartments at large (so, 2,033 for-fee apartments) [1]. [0]: https://streeteasy.com/for-rent/nyc/status:open%7Cprice:-2500%7Cbeds%3C=1%7Cno_fee:1 https://streeteasy.com/for-rent/nyc/status:open%7Cprice:-250... [1]: https://streeteasy.com/for-rent/nyc/status:open%7Cprice:-2500%7Cbeds%3C=1 https://streeteasy.com/for-rent/nyc/status:open%7Cprice:-250... [2]: https://www.brickunderground.com/blog/2015/12/in_case_you_missed_it_high_broker_fees https://www.brickunderground.com/blog/2015/12/in_case_you_mi...

michaelper22 8y ago
I don't understand how this racket is allowed to operate. From my experience (three NYC apartments through realtors), the landlord's realtor provides pre-screening of "desirable" tenants for the landlord, showings, collecting paperwork from the prospect, and handing over the keys. None of this adds value from the (prospective) tenant's perspective, but the tenant must pay the fees (in all three cases, one month's rent).
- tootie 8y ago
  I recently worked on a financial website that does a full credit, background and fraud check online and in real time for issuing small loans. There's some amount of manual auditing that can happen in the background for anyone that raises a yellow flag, but otherwise you can get a loan approved and disbursed with no fees and it happens in a few days and is fully automated.

seltzered_ 8y ago

Fwiw a16z did a video on the realtor setup and ideas around interacting with companies more in the future for real estate: https://m.youtube.com/watch?v=IRPH3K1GXj0 https://m.youtube.com/watch?v=IRPH3K1GXj0 I haven’t looked into the details of the article, but it seems interesting that the RE startups may have some shared interest in changing the 6% rule, although one could speculate their goals may be to replace an “organic monopoly” of many agents with a (scaled techno-geographic?) monopoly. Edit: the Hahn blogpost (https://www.inman.com/2019/03/08/what-the-bombshell-buyer-side-lawsuit-means-for-realtors/amp/ https://www.inman.com/2019/03/08/what-the-bombshell-buyer-si...) linked by the article posits the suit could be expanded to also involve larger RE brokerages and not just franchise orgs: “The lawyers picked the top four largest real estate brokerages in their Complaint; I assume that they will quickly realize that RE/MAX and Keller Williams are not brokerages, but franchise companies, and will either amend the Complaint to include some other large brokerages (Howard Hanna? Compass? HomeSmart? eXp Realty?) and/or other large franchisors (Realogy brands, Exit, NextHome, etc.). The basic claim is that the MLS rule of unilateral offer of compensation is a violation of the Sherman Antitrust Act.“

lcfcjs2 8y ago

My wife would frequently find better houses than our agent, just using free online resources.

deckar01 8y ago

One of the strangest parts about mortgages to me is the "point" system lenders use to sell buyers lower interest rates. They offer a lower interest rate if you "buy points" rather than applying it towards your down payment. It seems like lenders are prioritizing their short term profit over their customers' long term financial stability.

jiveturkey 8y ago
Why is this strange? The majority of lenders repackage and sell off loans that they originate. Of course they are prioritizing short term profit. As for buyers, also what's not to love? Buying points gets you more cash flow than the reduced principal. There's some math to do, and some financial projection, where you expect to be in 5 years, etc. It's great to have the option.

altmind 8y ago

Is 6% realtor fee a norm in USA? Isn't 2% the old, established base?

eutropia 8y ago

Recently bought my first home without an agent on either side. If you were able to take away the complexities of applying for a mortgage, then the transaction would be as follows: buyer and seller sign a purchase contract(which defines what is being sold, for how much, and under what circumstances), establish escrow, have the property officially assessed for value (for tax purposes), have a title agent validate that the deed to the property is legally the seller's to sell, and finally file the deed with the local recorder's office. You can pay a lawyer to draft the purchase agreement for you or write one yourself. To me, its the closing costs and lending instruments that need an overhaul -- but yeah, get rid of the realtors too.

berdon 8y ago

We bought our house with a realtor who found and walked us through listings. Ultimately, we found the house we ended up buying. Our buying agent was helpful and did a good job but the questions she answered and information she gave was available online. We sold our house without a realtor and had no real issues. Buying agents tended to stray from our listing and most would communicate with us first to make sure we would "pay their fee". Most also tried to sell us on their agency. Overall, I probably won't use a realtor again. The value for my price point was not worth the %.

gangstead 8y ago
This was my experience as well. I've bought two homes and both times we found it ourselves. Used the real estate agent friend of a family member (there's always one) to show us a couple houses and relay offers, but I never felt like they did something I couldn't have done myself. I went along to both home inspections and found things the inspector missed. At all 3 closings (buying and years later selling the first house, buying second house) I've been sitting there in a room full of people sighing and tapping their feet while I read all the paperwork they want me to sign and all three times I've caught mistakes, two of which were several thousand dollars in the other party's favor. All in all it's not just the realtors that are doing mediocre work to extract a percentage, but a whole industry (agents, inspectors, title companies). I couldn't agree more that selling my house by myself was also a breeze. Maybe the experience is different in a down economy. I paid a flat $175 fee to a website for an MLS listing (which farmed the listing out to an agent in our MLS region 5 hours away) plus the 3% buyers agent fee and people started calling. I'm not a great photographer but I took pictures that were 100X better than a realtor walking around with a cell phone and put the Zillow "zestimate" as the listing price because I did a lot of research and took an honest look at my house and couldn't come up with a reason to go higher or lower. I definitely got the "will you pay my fee" calls despite already putting the buyer's agent fee on the MLS listing. As an experiment I tried to negotiate that with an agent and I realized that wasn't going to go anywhere. The only annoying part of the process was the buyer's agent clumsily slipping in some clauses in the contract that would have made it a terrible deal for me. If anyone is reading this and wants to try going without an agent I'd recommend asking a friend who recently closed on a house to see their contract. That will help you spot any tricks an agent is trying to slip past you.

om3n 8y ago

I'm a software engineer, and I started my career at a well known mortgage company in Detroit. Views are my own, BTW. I bought a house a couple years after I started working there, and I wanted the full home-purchaser experience. I used my company's services for everything, and as an employee they hooked me up with a real estate agent (among other things). I was honestly appalled at what little my real estate agent did for me through the whole process. I had what seemed like simple requirements: I wanted to live west of the city, I wanted at least 1 acre, and an outbuilding. The outbuilding is what threw off the search tool the agent was using to find houses for me; he rarely found good ones in my price range that had outbuildings. I ended up finding the house I purchased. I'm honestly not sure what he did at all. When it came time to sell my house, I did it by owner. It was super easy to do everything, including getting my home on the MLS with a service called Reozom, for a couple hundred bucks. I used several sources to come up with comps for pricing. However, the purchasing agent who represented the buyers of my home was an absolute MONSTER to me; extremely rude in nearly every email or phone call. I think she was so horrible because I was proving how absolutely unnecessary she was in the whole process. I sold the house for a little under asking price, plus I paid her a 2% commission instead of 3%, and of course not 6% as if she represented me as well. The funny thing- she didn't notice the 2% in the purchasing contract until after it was already signed. What I've anecdotally learned is this: real estate agents don't provide enough useful benefit for me to use them, and can be hostile as their industry is increasingly proven to be built on little or nothing.

Justin_K 8y ago
She was hostile because a real estate agent's approach is to black ball any for sale by owner listing, or any for sale by Redfin / Zillow, etc. Agents around my area always blackball these listings and will NOT tell buyers about these listings unless buyers specifically ask. This is nonsense and not in favor of buyers and is an attempt to bring failure to reform. Fortunately, more and more buyers are realizing they can do the research themselves online.
- mrtweetyhack 8y ago
  Then they've failed their principal/agent fudicary duty and should be sued.

alehul 8y ago

Adding onto the complaints of economic inefficiency here: one of the worst things I found living in Boston (not sure how many other major cities this applies to) is that it's completely standard for the renter of a property to pay a broker's fee, generally equivalent to one month's rent, to the landlord's agent. In most (healthy, cheaper) rental markets, the landlord will pay a real estate agent a fee (one month's rent, again) to find a renter. This intuitively makes sense, as the landlord requires some number of hours of effort from the agent to list the home, show the apartment to a ton of people, and find one willing to rent it. It seems economically so incorrect that the renter should bear the cost of the fee the rental agent charges for showing the home to like 10 potential renters— they spend maybe 10 minutes of their time showing the individual renter, and they're late more often than not! Edit: below commenter rightly pointed out that this is economically perfectly correct— unjust from a value perspective would be better phrasing

cde-v 8y ago
New York is the same way, except the fee can be up to 20% of yearly rent. You hope you only have to pay one month broker's fee.
xyzzyz 8y ago
Standard economic theory predicts that the tax incidence falls more on the party that has lower elasticity — that is, fewer alternative options to make a deal. If it is hard to find an apartment, the renter will pay most of the fee. If it is hard to find a renter, it’s the opposite.

deleted 8y ago

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duwease 8y ago

Yeah, I've never quite understood the value proposition of that fee myself. Between that and the gatekeeping that happens to become an agent, it seems like it's a bit inflated and held up by tradition. At least the iBuyers like Opendoor provide a service whose value I can see, even if it might not apply to every individual. Having someone else take on the hassle of dealing with shady vendors and house showing, repair negotiations and flaky buyers, while letting me move out cash-in-hand whenever I want? I get that.. especially after experiencing my good friends hit every one of those nightmares themselves, ending up having to waste thousands on AirBnB's after contractor issues left them without either home for months.

obelos 8y ago

I've bought houses using an agent and not, and the latter was in every way more pleasant and predictable. The agent (and their supervising broker) overlooked fundamental items in the contract which ought to have been obvious, like ensuring the current renters would be out before close. Even with the seller picking up the tab for both agents, as a buyer I would prefer doing it myself. The only drawback is, of course, that it's much more difficult to get into houses without being represented by an agent.

robocat 8y ago

Sellers fees mostly average 3% to 4% in Christchurch, New Zealand - https://www.thepropertymarket.co.nz/compare-our-fees https://www.thepropertymarket.co.nz/compare-our-fees The fee structure is X+1% for the first $350000, and X% above that. One company advertises 1% fees, but they make it up with other charges. From my experience, few people use a buyer's agent (maybe because property details are well recorded centrally, and often they are not part of a building, and so there are fewer legal risks in NZ).

intrasight 8y ago

We tried selling our first house ourselves. Ran ads in paper. Put up fliers. Etc. This was before the internet mind you. Tried this for 3 months and literally had no serious interest. We gave the listing to an agent and a week later had two full price offers. Sure, the internet has changed things a bit, but since then I always use a realtor. 6% is fair for the good ones. More challenging in some markets near me is where 6% isn't enough. Lots of $50K houses still. That's only $1500 for each agent.

JMTQp8lwXL 8y ago
I think the internet changed things a bit more than a little since then.

cmancini 8y ago

There are some startups trying to fix these issues and price at flat fees to mixed effect (Trelora in Denver comes to mind as an example). I think the true solution will come not by lawsuit but by mass scale market-making by companies like OpenDoor and Zillow. When you want to sell your home you can go to these companies and get a check within a few days, and when you want to buy a home these will have built software and systems to make purchasing a straightforward process. They'll provide liquidity and take a cut, but with a couple of companies in the market the 'spread' will probably be lower than buyer+seller broker fees. They may not serve unique and luxury real estate in the near future, but for the 'typical' suburban home it seems like consumers could see a benefit.

Waterluvian 8y ago

Im buying a house right now. The work my agent is doing surely deserves the 2.5% she gets. Not that this doesn't mean it's still broken somewhere. Don't be afraid to be pushy though if you think you're not getting your money's worth. Or just do it yourself.

brightball 8y ago

The agents themselves have little control over it. What people should take aim at is the licensing process itself. It’s basically an MLM.

btkramer9 8y ago
It's no surprise most the MLMers move on to real estate afterwards

cmancini 8y ago

There are some startups trying to fix these issues and price at flat fees to mixed effect (Trelora in Denver comes to mind as an example). I think the true solution will come not by lawsuit but by mass scale market-making by companies like OpenDoor and Zillow. When you want to sell your home you can go to these companies and get a check within a few days, and when you want to buy a home these will have built software and systems to make purchasing a straightforward processes. They may not serve unique and luxury real estate in the near future, but for the 'typical' suburban home it seems like consumers could see a benefit.

legohead 8y ago

When I was in OK the 6% seemed like a lot, but it was workable. Now in CA, after selling my first home, this 6% is simply absurd. After selling and buying a new house, even with considerable equity, if I were to sell my house again I would actually be losing money. We had several major life events at once recently (job loss, family death, and a couple others), and almost had to sell the house. Doing so would have been like starting over after building up equity for 30 years.

opportune 8y ago

One thing I haven't seen yet in this thread is that buyers' agents actually make use of some pretty anti-competitive behavior on top of the regular cartel stuff. Not only do they get access to MLS listings a few days before they go "public" in most areas, but they also are starting to deal with "pre-listed" houses that they are able to know are about to go on sale via their personal networks. Of course, that's probably been happening forever, but in hot markets it's becoming more popular simply due to the low average time on market for appropriately-priced homes. Also, I've taken a few classes on real estate (free) from real estate agents before and one of them told me that he often gets solicited by crooked inspectors who will exchange references for a-ok inspection results. Plus agents on neither side / inspectors can easily be held responsible unless there is provable, outright fraud. I think maybe real estate agents would be worth it if they also carried some kind of transactional liability but since they don't...

mensetmanusman 8y ago

I found this recent publication to be an amazing account of how real estate is being used to launder: https://www.theatlantic.com/magazine/archive/2019/03/how-kleptocracy-came-to-america/580471/ https://www.theatlantic.com/magazine/archive/2019/03/how-kle... I wish class-action lawsuits were aimed at the source...

dd36 8y ago

This won’t succeed for a lot of reasons. I suspect they’re after a settlement.

ryanmarsh 8y ago

Your local real estate listing service (also useful for competitive price analysis) is only accessible by real estate agents. This is anti-competitive. Real estate agents are one of the last bastions of rent-seeking bastards that will fall, and not a day too soon.

fma 8y ago

I always wondered who represents home owners who have cheap houses... Like a $50k house. Whether you are selling a 50k house or 500k, there's a similar amount of work. But those houses do get sold. Also as a rental property owner I hate how realtors charge by the monthly fee. Meaning, if I rent out my house for $2k a month, I need to pay them that amount for a new tenant. A $2k a month property with tenants that have jobs is easier to maintain than $500 property with tenants that barely hold a job. They also take a 10% cut per month of the rent... $200 for $2000 rent... $50 for $500...just to do the same thing. Real estate fees make no sense!

TaylorGood 8y ago

Residential real estate is an odd one. Countless times I’ve seen it warp the ego of agents and their perception of value being provided. A friend was looking to buy a $15m house, so I vouched for a childhood friend that was newer to real estate. Agent friend was able to make it happen by tracking down the owner who lived an hour away and convinced her to sell. After close the agent friend then complained to me that he got hosed on the deal because of the “100 hours” he put in and only receiving 1% - $150,000 ($1,500/hr). A year prior he was delivering pizzas (!!).

stopasking 8y ago

I just wish they could keep real estate companies from asking to buy the house I just bought a week ago. These people have access to all the listing and sales data. They know I just moved in. Why are they asking to buy my house?

kazinator 8y ago

> cost that would be borne by the buyer in a competitive market There is no such thing; any such cost is a parasitic loss that comes out of the value of the transaction. Two parties are transacting, and in comes this little vampire and sucks away a bit of it, leaving both of them poorer. Reasoning such as "the other party pays it so it makes no difference to me" is horribly irrational and innumerate.