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The use of the word cartel seems inappropriate here, it's pretty loaded and biased. The trial just started, perhaps the media should wait until the verdict befo

The use of the word cartel seems inappropriate here, it's pretty loaded and biased. The trial just started, perhaps the media should wait until the verdict before pushing their opinion.

prepend 3y ago
Seems like a cartel to me. In my state commissions are 6% almost universally. Id expect 99.9% of listings and sales with agents charge the same amount. I think that’s only possible due to cartel behavior. Of course, we’ll see how the trial goes but it seems like a valid opinion to me.
- sgc 3y ago
  It is mainly internal to the companies. I have my license and did not use it for a long time because the hypermarketing in the brokerages I was affiliated with was unbearable. I decided to hop back into it because I had the opportunity to start my own brokerage, an important part of which is I am no longer forced to have a minimum commission. My first decision starting back up was to offer all clients 25%+ off, something I could not do because of agent-broker agreements in my past affiliations. I have to say it is very expensive to be an agent, mainly because you need a huge marketing budget and most people are wasting your time - either because they can't afford a house and don't realize it until you sit down and walk them through the numbers, or are intentionally just using you with no intention to have you even potentially represent them. There is also a lot more work involved in listing a house or representing a buyer than people give credit to, which is often discounted as almost nothing (as I see in this thread as "just do X or Y" - exactly like people do with devs thinking they should have an advanced website for $200. BTW, 90% of FSBO wind up being sold with an agent. It is not as straightforward as it seems.) I would not be able to operate offering 50% off. So yes, I think fair trade is a bit lower than the typical 5% (2.5% per side) charged in northern California, but it is not 2-3% either. My personal lowest commission is 1.5% for one side, and that is for extremely high value property. I am without a doubt one of the poorer Americans on this site, and have a family to feed, so I cannot be convinced my work has no value but everybody else's work here is worth 10x. There is no doubt a real problem in the industry and I refused to work in it for many, many years until I found a way to sidestep it. But purely monetarily, it is not of the magnitude that is naively assumed. For me, the far bigger problem is in attitude; in marketing at all costs.
  - prepend 3y ago
    > I would not be able to operate offering 50% off. You might not be, but others might be able to optimize out the costs you describe. Right now there’s not much incentive because most everyone charged that. Personally it seems odd to me that everything is percent based. It’s not 10x cost and work to sell a $100k house than a $1M.
    - sgc 3y ago
      It is percent based, like the vast majority of sales in almost all market sectors, because the amount of work is unpredictable. It largely depends on the fickle nature of your clients and those on the other side, as well as for example lenders messing things up, etc, as has happened to me recently. So pricing needs to take into account the law of averages, it can't optimize as much as would be possible if all people were strictly rational actors. Not one person likes high costs and there are millions of professionals attempting to optimize every day. There is plenty of incentive. It is a lot of money. But maybe walmart will come and make everything ~~better~~ cheaper and unbearable.
arthurofbabylon 3y ago
Cartel has a precise definition: “an association of manufacturers or suppliers with the purpose of maintaining prices at a high level and restricting competition”. It is often the unsavory industries that get hit with this label, but there also exist cartels supported by governments/public. Diamonds and wine are two obvious examples.
huitzitziltzin 3y ago
This is literally and exactly a cartel! The realtors deserve to lose. Sincerely, An antitrust economist.

The use of the word cartel seems inappropriate here, it's pretty loaded and biased. The trial just started, perhaps the media should wait until the verdict before pushing their opinion.

prepend 3y ago

Seems like a cartel to me. In my state commissions are 6% almost universally. Id expect 99.9% of listings and sales with agents charge the same amount. I think that’s only possible due to cartel behavior. Of course, we’ll see how the trial goes but it seems like a valid opinion to me.

sgc 3y ago
It is mainly internal to the companies. I have my license and did not use it for a long time because the hypermarketing in the brokerages I was affiliated with was unbearable. I decided to hop back into it because I had the opportunity to start my own brokerage, an important part of which is I am no longer forced to have a minimum commission. My first decision starting back up was to offer all clients 25%+ off, something I could not do because of agent-broker agreements in my past affiliations. I have to say it is very expensive to be an agent, mainly because you need a huge marketing budget and most people are wasting your time - either because they can't afford a house and don't realize it until you sit down and walk them through the numbers, or are intentionally just using you with no intention to have you even potentially represent them. There is also a lot more work involved in listing a house or representing a buyer than people give credit to, which is often discounted as almost nothing (as I see in this thread as "just do X or Y" - exactly like people do with devs thinking they should have an advanced website for $200. BTW, 90% of FSBO wind up being sold with an agent. It is not as straightforward as it seems.) I would not be able to operate offering 50% off. So yes, I think fair trade is a bit lower than the typical 5% (2.5% per side) charged in northern California, but it is not 2-3% either. My personal lowest commission is 1.5% for one side, and that is for extremely high value property. I am without a doubt one of the poorer Americans on this site, and have a family to feed, so I cannot be convinced my work has no value but everybody else's work here is worth 10x. There is no doubt a real problem in the industry and I refused to work in it for many, many years until I found a way to sidestep it. But purely monetarily, it is not of the magnitude that is naively assumed. For me, the far bigger problem is in attitude; in marketing at all costs.
- prepend 3y ago
  > I would not be able to operate offering 50% off. You might not be, but others might be able to optimize out the costs you describe. Right now there’s not much incentive because most everyone charged that. Personally it seems odd to me that everything is percent based. It’s not 10x cost and work to sell a $100k house than a $1M.
  - sgc 3y ago
    It is percent based, like the vast majority of sales in almost all market sectors, because the amount of work is unpredictable. It largely depends on the fickle nature of your clients and those on the other side, as well as for example lenders messing things up, etc, as has happened to me recently. So pricing needs to take into account the law of averages, it can't optimize as much as would be possible if all people were strictly rational actors. Not one person likes high costs and there are millions of professionals attempting to optimize every day. There is plenty of incentive. It is a lot of money. But maybe walmart will come and make everything ~~better~~ cheaper and unbearable.

arthurofbabylon 3y ago

Cartel has a precise definition: “an association of manufacturers or suppliers with the purpose of maintaining prices at a high level and restricting competition”. It is often the unsavory industries that get hit with this label, but there also exist cartels supported by governments/public. Diamonds and wine are two obvious examples.

huitzitziltzin 3y ago

This is literally and exactly a cartel! The realtors deserve to lose. Sincerely, An antitrust economist.