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There are some shady incentives for realtors when buying a home in the US. The seller and buyer agents often know each other and talk to each other in particula

There are some shady incentives for realtors when buying a home in the US. The seller and buyer agents often know each other and talk to each other in particular areas. They do favors for one another. Sometimes it helps you, sometimes it hurts you. I consider them very similar to car dealers, but slightly better because good ones have a network to help buyers out. The commission they get is too high though.

ethbr1 3y ago
The biggest counter-incentive for realtors is that they make more money on volume than added-value-over-replacement. Both sides are incentivized to move each house ASAP, rather than for the best price, as they make 3% of any marginal price difference, but 3% of the total price of an additional sale. Consequently, you're really only getting value from a realtor if "getting the deal done ASAP" is your priority.
- jncfhnb 3y ago
  Perhaps this perspective varies depending on the market but I don’t really expect the agent to do any negotiating on the price? So long as they’re not actively working with the other side to abuse an elevator or something, I think it’s fine. I just want them to help me get the house. Or sell the house. Do I think that’s worth 3% if my home value? Probably not. It’s strange there’s not flat fee agents.
  - bunchman 3y ago
    [dead]
  - runako 3y ago
    > It’s strange there’s not flat fee agents. Essentially the cartel prevents this. If you started a flat-fee agency, you would not be allowed access to MLS listings to show your buyers. Homes you represented to sell would not be allowed into MLS, and Realtors would not bring buyers to your home (because you're not prepared to give them 3% of the deal). This is not an accident of the free market.
    - calmworm 3y ago
      This is either ignorant nonsense or an outright lie. There absolutely are flat-fee agents and there is no “cartel” or anything preventing any agent or brokerage from charging anything they wish.
      - ethbr1 3y ago
        > there is no “cartel” or anything preventing any agent or brokerage from charging anything they wish. Redfin literally just removed itself from the NAR for that reason (and also alleged sexual harassment in the organization). https://www.redfin.com/news/redfin-is-leaving-nar/ https://www.redfin.com/news/redfin-is-leaving-nar/ >> In the many marketplaces governed by its policies, NAR still blocks sellers from listing homes that don’t pay a commission to the buyer’s agent, and it blocks websites like Redfin.com from showing for-sale-by-owner listings alongside agent-listed homes. >> In about half the U.S., including in cities like Charlotte, Dallas, Houston, Las Vegas, Long Island, Minneapolis, Nashville, Phoenix and Salt Lake City, we can’t quit NAR individually or en masse, because NAR membership is required for agents to access listing databases, lockboxes, and industry-standard contracts. It’s impossible to be an agent if you can’t see which homes are for sale, or unlock the door to those homes, or even write an offer. The DoJ also alleged exactly that in 2019. https://www.justice.gov/media/1105806/dl?inline https://www.justice.gov/media/1105806/dl?inline >> These NAR rules, policies, and practices include: (a) prohibiting NAR-affiliated multiple-listing services (“MLSs”) from disclosing to prospective buyers the amount of commission that the buyer broker will earn if the buyer purchases a home listed on the MLS; (b) allowing buyer brokers to misrepresent to buyers that a buyer broker’s services are free; (c) enabling buyer brokers to filter MLS listings based on the level of buyer broker commissions offered and to exclude homes with lower commissions from consideration by potential home buyers; and (d) limiting access to the lockboxes that provide licensed brokers with physical access to a home that is for sale to only brokers who are members of a NAR-affiliated MLS And then there was People v. National Association of Realtors, 1981 https://law.justia.com/cases/california/court-of-appeal/3d/120/459.html https://law.justia.com/cases/california/court-of-appeal/3d/1... >> The original three-count complaint alleged: (1) unlawful restrictions of trade under the Cartwright Act through certain restrictive regulations of the multiple listing service (MLS) operated by SDBR, including the fact only board members were entitled to access to that necessary service; (2) restraint of trade because of commission rate price fixing; [...] >> On the first cause of action the court found a group boycott and issued an injunction guaranteeing access, on conditions, to the residential portion of the MLS to all licensed brokers and their salespersons without regard to SDBR membership. The court found no such boycott as to the MLS investment property portion. All other MLS operating rules were found to be reasonable, including a requirement excluding all listings except exclusive-right-to-sell agreements. >> [On the second] Based in part on [expert witness] testimony, the trial court found the standard rates prevailing over a long period of time to be evidence of collusive price setting or other artificial influence. It also found four activities attributable to SDBR policies which are useful to maintain such uniformity: publishing and distributing sample literature using 6 percent and 50/50 split as examples; requiring the listing commission to be included in the published MLS, thus aiding those who would bring pressure to bear on price cutters; entertaining complaints against undercutters through its ethics or arbitration machinery brought by persons motivated by the undercutter's deviation from the usual 6 percent rate and 50/50 commission split, and continuing the foregoing practices even after it ceased publicly recommending adherence to the standard rate it had developed and maintained for many years. Each of the above findings is supported by substantial evidence.
- voisin 3y ago
  It would be nice if it was a sliding scale that decreased as the value went up. It is essentially no more work to transact an $800k house than a $400k house yet the commission doubles.
- joshstrange 3y ago
  > The biggest counter-incentive for realtors is that they make more money on volume than added-value-over-replacement. Only if you don't care about your reputation or repeat/referral business (which is the lifeblood of a successful realtor)
WarOnPrivacy 3y ago
I had a listing agent who refused to pass my offer onto the homeowner. That listing agent was representing a competing buyer who had put in an lower offer. I drove to the property and made my offer in person. I lived there for 7 years.
- voisin 3y ago
  You were lucky that you were made aware of the agent’s intentions such that you could circumvent them. Quite often this is not the case.
  - WarOnPrivacy 3y ago
    My agent talked to him at length and sussed out enough details to assemble the pieces. IIRC, there was a point where the lister got frustrated and revealed more than he intended.
- xn 3y ago
  I had a listing agent that refused to pass my offer onto the buyer because it wasn't on the local Realtor organization's standard purchase agreement form, despite state (Oregon) law requiring that they do so. Use of the standard form (https://orforms.org/forms/ https://orforms.org/forms/) requires purchasing a license to the form, and licenses are only sold to licensed real estate agents and lawyers. I ended up buying the license to the form and a license for software required to fill out the form. (The website selling licenses didn't actually validate that you entered a valid state license id.) It cost me a couple hundred bucks, but the seller accepted my offer. I doubt that the seller's agent gave the seller back the 2.5-3% that didn't have to be paid to a buyer's agent.
voisin 3y ago
> The commission they get is too high though. I concur! The amount of work they need to do has declined significantly since the days of faxing and phone calls (now most tours are scheduled via app, and the MLS database is easily searchable), and yet their commissions are still a percentage. Oh, and they are a percentage of assets that have gone up way faster than inflation!
- LapsangGuzzler 3y ago
  I disagree with this. My agent basically had to always be on-call to send me listings that we could go see and offer to place calls at odd hours so we get everything scheduled since houses move so fast now. My agent basically picked up all of that admin for me and I never once questioned his commission. Buying a house is basically a part-time job for the buyer now and being able to respond instantly is so important. The job has changed, just like all jobs have, but good agents get shit done because the market is so competitive. Real estate is a very high-turnover industry with little long-term stability for those that don’t absolutely kill it.
  - Sodman 3y ago
    Ok but you could replace the "Sending notifications about new listings in real time" duty by subscribing to zillow/redfin etc with specific filters... for free. It's hard to make the argument that that's worth 6% of a of half million dollar purchase? I agree it's a part time job to be a buyer in this market, but I don't think the buyer's agent really makes that job much easier in my experience. "Answers a call at any time of the day" is definitely a great nice to have, but I suspect that puts your particular agent in the top 10% of the field. Most agents I have used will just let all phone calls go to voicemail and then text back or call you back hours or days later. YMMV a lot on this one.
    - LapsangGuzzler 3y ago
      Yeah, but a crucial part of getting those listings from him involved talking through the ways in which the house might have problems that weren’t disclosed, etc. Home listings are ads and it’s great to have someone who knows how to call BS when I don’t. There are so many tricks in home listings that can trip buyers up and that’s not an easily Googleable problem. As far as agents you’ve worked with, that’s partially on you for choosing to work with bad people. I had several agents and I wasn’t afraid to drop them when I found the one that worked for me. Given that 87% of agents quit in the first 5 years, I definitely suspect my agent was top of his field, which is why he got my business.

ethbr1 3y ago

The biggest counter-incentive for realtors is that they make more money on volume than added-value-over-replacement. Both sides are incentivized to move each house ASAP, rather than for the best price, as they make 3% of any marginal price difference, but 3% of the total price of an additional sale. Consequently, you're really only getting value from a realtor if "getting the deal done ASAP" is your priority.

jncfhnb 3y ago
Perhaps this perspective varies depending on the market but I don’t really expect the agent to do any negotiating on the price? So long as they’re not actively working with the other side to abuse an elevator or something, I think it’s fine. I just want them to help me get the house. Or sell the house. Do I think that’s worth 3% if my home value? Probably not. It’s strange there’s not flat fee agents.
- bunchman 3y ago
  [dead]
- runako 3y ago
  > It’s strange there’s not flat fee agents. Essentially the cartel prevents this. If you started a flat-fee agency, you would not be allowed access to MLS listings to show your buyers. Homes you represented to sell would not be allowed into MLS, and Realtors would not bring buyers to your home (because you're not prepared to give them 3% of the deal). This is not an accident of the free market.
  - calmworm 3y ago
    This is either ignorant nonsense or an outright lie. There absolutely are flat-fee agents and there is no “cartel” or anything preventing any agent or brokerage from charging anything they wish.
    - ethbr1 3y ago
      > there is no “cartel” or anything preventing any agent or brokerage from charging anything they wish. Redfin literally just removed itself from the NAR for that reason (and also alleged sexual harassment in the organization). https://www.redfin.com/news/redfin-is-leaving-nar/ https://www.redfin.com/news/redfin-is-leaving-nar/ >> In the many marketplaces governed by its policies, NAR still blocks sellers from listing homes that don’t pay a commission to the buyer’s agent, and it blocks websites like Redfin.com from showing for-sale-by-owner listings alongside agent-listed homes. >> In about half the U.S., including in cities like Charlotte, Dallas, Houston, Las Vegas, Long Island, Minneapolis, Nashville, Phoenix and Salt Lake City, we can’t quit NAR individually or en masse, because NAR membership is required for agents to access listing databases, lockboxes, and industry-standard contracts. It’s impossible to be an agent if you can’t see which homes are for sale, or unlock the door to those homes, or even write an offer. The DoJ also alleged exactly that in 2019. https://www.justice.gov/media/1105806/dl?inline https://www.justice.gov/media/1105806/dl?inline >> These NAR rules, policies, and practices include: (a) prohibiting NAR-affiliated multiple-listing services (“MLSs”) from disclosing to prospective buyers the amount of commission that the buyer broker will earn if the buyer purchases a home listed on the MLS; (b) allowing buyer brokers to misrepresent to buyers that a buyer broker’s services are free; (c) enabling buyer brokers to filter MLS listings based on the level of buyer broker commissions offered and to exclude homes with lower commissions from consideration by potential home buyers; and (d) limiting access to the lockboxes that provide licensed brokers with physical access to a home that is for sale to only brokers who are members of a NAR-affiliated MLS And then there was People v. National Association of Realtors, 1981 https://law.justia.com/cases/california/court-of-appeal/3d/120/459.html https://law.justia.com/cases/california/court-of-appeal/3d/1... >> The original three-count complaint alleged: (1) unlawful restrictions of trade under the Cartwright Act through certain restrictive regulations of the multiple listing service (MLS) operated by SDBR, including the fact only board members were entitled to access to that necessary service; (2) restraint of trade because of commission rate price fixing; [...] >> On the first cause of action the court found a group boycott and issued an injunction guaranteeing access, on conditions, to the residential portion of the MLS to all licensed brokers and their salespersons without regard to SDBR membership. The court found no such boycott as to the MLS investment property portion. All other MLS operating rules were found to be reasonable, including a requirement excluding all listings except exclusive-right-to-sell agreements. >> [On the second] Based in part on [expert witness] testimony, the trial court found the standard rates prevailing over a long period of time to be evidence of collusive price setting or other artificial influence. It also found four activities attributable to SDBR policies which are useful to maintain such uniformity: publishing and distributing sample literature using 6 percent and 50/50 split as examples; requiring the listing commission to be included in the published MLS, thus aiding those who would bring pressure to bear on price cutters; entertaining complaints against undercutters through its ethics or arbitration machinery brought by persons motivated by the undercutter's deviation from the usual 6 percent rate and 50/50 commission split, and continuing the foregoing practices even after it ceased publicly recommending adherence to the standard rate it had developed and maintained for many years. Each of the above findings is supported by substantial evidence.
voisin 3y ago
It would be nice if it was a sliding scale that decreased as the value went up. It is essentially no more work to transact an $800k house than a $400k house yet the commission doubles.
joshstrange 3y ago
> The biggest counter-incentive for realtors is that they make more money on volume than added-value-over-replacement. Only if you don't care about your reputation or repeat/referral business (which is the lifeblood of a successful realtor)

WarOnPrivacy 3y ago

I had a listing agent who refused to pass my offer onto the homeowner. That listing agent was representing a competing buyer who had put in an lower offer. I drove to the property and made my offer in person. I lived there for 7 years.

voisin 3y ago
You were lucky that you were made aware of the agent’s intentions such that you could circumvent them. Quite often this is not the case.
- WarOnPrivacy 3y ago
  My agent talked to him at length and sussed out enough details to assemble the pieces. IIRC, there was a point where the lister got frustrated and revealed more than he intended.
xn 3y ago
I had a listing agent that refused to pass my offer onto the buyer because it wasn't on the local Realtor organization's standard purchase agreement form, despite state (Oregon) law requiring that they do so. Use of the standard form (https://orforms.org/forms/ https://orforms.org/forms/) requires purchasing a license to the form, and licenses are only sold to licensed real estate agents and lawyers. I ended up buying the license to the form and a license for software required to fill out the form. (The website selling licenses didn't actually validate that you entered a valid state license id.) It cost me a couple hundred bucks, but the seller accepted my offer. I doubt that the seller's agent gave the seller back the 2.5-3% that didn't have to be paid to a buyer's agent.

voisin 3y ago

> The commission they get is too high though. I concur! The amount of work they need to do has declined significantly since the days of faxing and phone calls (now most tours are scheduled via app, and the MLS database is easily searchable), and yet their commissions are still a percentage. Oh, and they are a percentage of assets that have gone up way faster than inflation!

LapsangGuzzler 3y ago
I disagree with this. My agent basically had to always be on-call to send me listings that we could go see and offer to place calls at odd hours so we get everything scheduled since houses move so fast now. My agent basically picked up all of that admin for me and I never once questioned his commission. Buying a house is basically a part-time job for the buyer now and being able to respond instantly is so important. The job has changed, just like all jobs have, but good agents get shit done because the market is so competitive. Real estate is a very high-turnover industry with little long-term stability for those that don’t absolutely kill it.
- Sodman 3y ago
  Ok but you could replace the "Sending notifications about new listings in real time" duty by subscribing to zillow/redfin etc with specific filters... for free. It's hard to make the argument that that's worth 6% of a of half million dollar purchase? I agree it's a part time job to be a buyer in this market, but I don't think the buyer's agent really makes that job much easier in my experience. "Answers a call at any time of the day" is definitely a great nice to have, but I suspect that puts your particular agent in the top 10% of the field. Most agents I have used will just let all phone calls go to voicemail and then text back or call you back hours or days later. YMMV a lot on this one.
  - LapsangGuzzler 3y ago
    Yeah, but a crucial part of getting those listings from him involved talking through the ways in which the house might have problems that weren’t disclosed, etc. Home listings are ads and it’s great to have someone who knows how to call BS when I don’t. There are so many tricks in home listings that can trip buyers up and that’s not an easily Googleable problem. As far as agents you’ve worked with, that’s partially on you for choosing to work with bad people. I had several agents and I wasn’t afraid to drop them when I found the one that worked for me. Given that 87% of agents quit in the first 5 years, I definitely suspect my agent was top of his field, which is why he got my business.