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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

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...

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...