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Jury Finds Realtors Conspired, Awards Nearly $1.8B in Damages

318 points by nerdo 3y ago

a-posteriori 3y ago
Does anyone know what this actually means for real estate brokerage fees? There are few markets which have supported 3-5% brokerage fees (even i-banking is <100bps at scale now) so I'm curious where the fees will settle.
- notaustinpowers 3y ago
  This could change the process to this: 1) Seller gives a portion of their home price to their Agent as a commission (let's say 3%). The seller only paid 3% in commissions. 2) The Buyer negotiated a commission with their Agent (let's say $10,000). Which the buyer pays out-of-pocket, or has paid out of their financing for the home. This allows the Seller's Agent to maintain their duty to maximizing the value of their client's home by reducing the commission the seller pays. While also ensuring the Seller's Agent doesn't bend to the Buyer's Agent's wishes for a higher commission to secure a deal. This also allows the Buyer's Agent to maintain their duty to their client by negotiating their commission up-front, regardless of the price of the property. They could negotiate a percentage with their client, but that percentage is the Buyer's responsibility, not the seller. It gives the Buyer more power in the commission paid to their Agent. TLDR: Seller's had more power in pricing and commission payments to Agent's on both sides of the transaction, skewing home values higher to offset their (commonly) 6% commission payments. This segments the Seller's commission to just their Agent, and the Buyer's commission to just the buyer.
  - jfk13 3y ago
    These US fees always seem astonishingly high to me. Here, something more like 1.5% would be typical.
    - notaustinpowers 3y ago
      Yeah, it is very high. Although, the real estate industry in the US is vastly different. - Agents do not receive salary, benefits, etc. Their only payment is when they close a deal. - Real Estate Agents are a dime a dozen since the licensing and training is pretty minimal. So lots of competition fighting over small supply, so it can be difficult to consistently get clients. - Agents can pay around $100/month to their Brokerage for E&O insurance, maybe access to legal forms, and a Broker for questions/insight. So they start spending money from the get-go. - Agents, typically, pay all expenses related to the job (advertising, signage, listing fees, etc).
      - jandrese 3y ago
        Yeah, it's tough on both sides. Competition is fierce for leads, but the rates have to be sky high to support the enormous mass of realtors. If the fees drop a lot of people are going to need to find new jobs.
        idontpost 3y ago
        [dead]
        flkiwi 3y ago
        If competition is fierce for leads because there is a glut of workers due to nearly zero requirements to become one, one would expect rates to plummet. Which, I suppose, is why we have a collusion situation here.
      - manuelabeledo 3y ago
        This reads like the reason why one shouldn't become an agent in the US. It's honestly hard to feel sympathy for people who are basically gambling their professional careers on the real estate market.
    - jjtheblunt 3y ago
      For what definition of "Here"?
  - sokoloff 3y ago
    > maximizing the value of their client's home by reducing the commission the seller pays. Selling a house quickly (convincing the seller to take a qualified and likely-to-close offer) still dominates as a strategy over eeking out a few extra points of contract price. As an agent, taking 1.25% or 1.5% of a $950K sale quickly is way better than holding out for a $1M offer. The difference in commission at 1.5% on a $50K delta in sales price is $750. Freeing up your time to work on the next listing is more valuable.
    - efitz 3y ago
      I always thought the right strategy would be to have a sellers agent contract that was tiered, eg agent gets 1-2% of selling price up to average comps, and then 20% of excess selling price over that. Maybe a bonus or penalty for timing, to prevent waiting forever for a good offer.
    - notaustinpowers 3y ago
      The main issue with that possibility is many brokerages (at least ones in my area) do not allow a Seller's Agent to reduce their commission without prior Broker authorization. Regardless of what the Seller themselves wants. So while that deal may be advantageous for the Seller (sell quickly) and the Agent (get the deal over with and move on to the next), the Broker is the one getting paid a lower sum and will not allow that contract to be ratified.
      - sokoloff 3y ago
        Nothing in my comment is about changing the percentage of the commission. (The 1.25% or 1.5% is simply the listing agent's personal split of a 5% or 6% total commission [whichever is customary in the local area]).
        notaustinpowers 3y ago
        Sorry, I didn't explain enough. The total commission remains 6%, but if the Seller's Agent split is only 1.25%, the Seller Agent's Broker (most likely) will deny that as the Broker would receive a reduced cut of the commission. The Seller and the Seller's Agent may be cool with the reduction, but the Broker would ultimately have the final say since it's, legally, their contract.
  - robocat 3y ago
    We don't really have buyer's agents in New Zealand (the idea exists but used extremely rarely in my experience). I'm rather suspicious of the US system that creates a place for two agents getting 3% each for little gain (and a lot of scope for collusion against the buyer and/or seller!) The New Zealand system has its flaws. The major problem is that vendor real estate agents are financially incentivised to turn over sales as quickly as possible and so smart agents do not represent their vendors properly. I've seen lots of house sales where an offer is made and the agent recommends the seller take it. An early sale costs the agent much less time and they make way more money per year. New Zealanders are generally too trusting, so we get screwed over by people that take advantage of that.
- rubymancer 3y ago
  Nothing yet. I'd imagine it will go through appeals for a few years before anything actually happens, and U.S. antitrust enforcement has not exactly been a powerful force for the last few decades.
- bozhark 3y ago
  Nothing over 1.5%. Ever.
toomuchtodo 3y ago
Related: https://news.ycombinator.com/item?id=38088740 https://news.ycombinator.com/item?id=38088740
stuff4ben 3y ago
Commission based on home value is a joke. Realtors should earn a flat-rate.
- Kirby64 3y ago
  You can. It's just a bit of a racket (hence, conspiracy judgment) and nobody will work with you if you only offer a flat rate. Since MLS is mostly limited to Realtors in most markets, you're basically locked out from posting there. There's ways around it, and flat fee brokers that exist, but you hamper your sales ability. Not an issue when its a sellers market, but can be rough in a buyers market.
  - bluGill 3y ago
    There are flat rate realtors where I live. However they are only 50%, the still give the same 3.5% to the buyers agent, but they take for themselves a fixed rate to get you on MLS. I'm not sure if it is a good deal - they still charge high prices relative for what they do for you. (it is cheaper than a full agent, but they also do much less)
    - Kirby64 3y ago
      You just don't sign a contract where you give a buyers agent commission, although again this limits the pool. Frankly, buyers agents are largely a scam in my view. With MLS, Zillow, Redfin, etc, their 'experience' seems mostly worthless. It certainly is not worth 3% of the cost of a house. If anything, sellers agents are more useful since they actually offer something valuable to the real estate experience (e.g., listing housing, photos, providing buyers access, etc).
      - bluGill 3y ago
        Buyers agents know better how to search the MLS system (though only a few do this). They also line up times to see houses, and take time to drive you to each. So a good buyers agent has spent about 8 hours of time to each buyer, plus expenses. I agree they are getting far too much, but they still are valuable.
albroland 3y ago
https://archive.ph/Ahzio https://archive.ph/Ahzio
rubymancer 3y ago
There's not much to the article. > KANSAS CITY, Mo.—A federal jury on Tuesday found the National Association of Realtors and large residential brokerages liable for about $1.8 billion in damages after determining they conspired to keep commissions for home sales artificially high. > The verdict comes in the first of two major antitrust lawsuits that target decades-old industry practices and seek to drive down commissions and change the way agents are compensated. The two-week trial involved claims by home sellers in several Midwestern states. The jury issued its verdict after just hours of deliberations. > Under antitrust rules, the presiding judge could triple the damages verdict, which would total more than $5 billion. The plaintiffs also have asked the judge to order changes to how the industry operates. > For several years NAR has been fending off accusations by U.S. antitrust officials and private litigants that it has conspired to keep home-sale costs high in the face of major technological upheavals. This verdict is by far the group’s biggest setback yet. > An NAR spokesman said, “This matter is not close to being final as we will appeal the jury’s verdict.” I would love for there to be some sort of competition injected into real estate commissions. I've bought and sold twice now and you get the same rate from everyone (within 1%) regardless of what they end up doing.
- ransom1538 3y ago
  Just sell it / or buy it yourself. It isn't hard by any stretch. You can use a $200 listing broker on a MLS site. That is the big secret. Then it gets on zillow,redfin, etc automatically.
  - bozhark 3y ago
    What if you own the title?
  - SoftTalker 3y ago
    You might not even need to do that much. I sold a home in a desirable neighborhood (I don't mean high-end, just a nice solid middle-class area with good schools, etc) by just putting a "for sale" sign in the front yard. Having commission be a percent of sales has some theoretical advantages. For example you might think the agent is motivated to get you the highest selling price. But in reality they are much more interested in making a sale at any price, because that lets them get paid and lets them move on from marketing your property. Residential real-estate transactions with a mortgage are about as regulated and standardized as it gets. The listing agent actually does very little beyond getting the property listed in the MLS. The difference in the amount of work they do in selling a $100K house vs. a $900K house is small (in fact the $100K house might take a lot more work because at that price it's probably got some serious drawbacks), so why should the higher sale price pay them much more?
poulsbohemian 3y ago
Here's the brief response I offered earlier today when asked what this actual does: I don’t really expect significant changes. We are in a more balanced market today than when these lawsuits were first filed. Many sellers will find it advantageous to offer buyer agent compensation. If/when we return to a seller-advantaged market, some buyers may need to pay their agents directly, which could involve rolling those costs into their financing. Lenders are more of an expert than myself on any issues in doing that, but it appears to happen in other states already. One of the problems of these lawsuits is the conflation of agency with payment. States - both WA and OR, for example - are working to fix the agency problem that wasn’t made explicit to buyers post-subagency. But, I don’t think there’s any question that buyer’s having to directly pay buyer’s agent compensation will be a higher cost to buyers.
- riku_iki 3y ago
  > Many sellers will find it advantageous to offer buyer agent compensation so, now conspired realtors charge seller and not buyer. Still looks broken.
  - poulsbohemian 3y ago
    I guess you aren't familiar with this having been the system in most markets for decades?
    - riku_iki 3y ago
      your guess is incorrect
    - manuelabeledo 3y ago
      > I guess you aren't familiar with this having been the system in most markets for decades? Definitely not in most markets. This is very unique to the US. Also, what's the advantage of paying someone whose goals don't quite align with yours? And isn't it a massive conflict of interest?
    - jjoonathan 3y ago
underseacables 3y ago
I know people will knock on realtors, but I've had nothing but good experiences with them. There's so much stuff I don't know that I don't know, and the ones I've had have been very helpful. Worth every penny, in my opinion.
- asah 3y ago
  not sure why you're getting downvoted. If realtors add more value than their commission, then great. Consider normies who don't understand why all this "tech stuff" costs so much money.
  - kstrauser 3y ago
    The average home sale price around here is around $1M. Realtors simply do not provide $60K worth of value to the sale of one.
    - asah 3y ago
      To me the question is what actual price I would've gotten.
      - kstrauser 3y ago
        Or conversely, how much more you’ve paid. Even your own buyer’s agent has the financial incentive to get you to pay the most they can talk you into.
    - xyzelement 3y ago
      My buyer's agent worked with us for probably 5 months. Saves us from visiting dozens of houses that looked good on listing but wouldn't work for us, brought us to properties that were good that we wouldn't have thought about, saved our ass a few times with local knowledge (eg: this street seems quiet now but this is where school busses queue up in the morning) and finally helped us structure the right offer on the right house (we ended up bidding way higher than we would have, but it was just enough to beat the next best offer - we would have missed it w/o her.) As first time home buyers, she also held our hand through the psychology of the process which in retrospect was helpful. I think she got $40K commission out of that, which seems totally fair given the amount of effort and at the end of the day, she made a 1M+ transaction successful for us. Yeah maybe if we ended up bidding and buying the 1st house we ever saw, I'd feel differently, but this woman really worked her ass off and was well worth the fee.
denton-scratch 3y ago
https://archive.ph/Ahzio https://archive.ph/Ahzio
semiquaver 3y ago
Also known as Sitzer/Burnett. Docket at https://www.courtlistener.com/docket/15018641/sitzer-v-national-association-of-realtors https://www.courtlistener.com/docket/15018641/sitzer-v-natio...
bozhark 3y ago
Realtors are a scam. Use brokers, fixed 1.5% from both sides to the same person.
scottwick 3y ago
Not really related to the article but something I've been wondering... In recent years the housing market has been so competitive that escalation clauses are often written into offers. They typically include a base offer of $X and then an agreement to escalate that value by increments (maybe $1-5k at a time) up to some cap. All the offers are collected by a certain date and then an auction is run behind the scenes by the realtors involved. What's to stop a seller from having one of their friends enter into one of these escalations? Submit a non-serious offer with a high escalation and include a minimal deposit which would be forfeited if that fake offer happens to win but otherwise hope it comes in 2nd to push everyone else's escalation up.
- tehlike 3y ago
  sadly the answer is honor code. There are also a lot of shenanigans realtors could be pulling. Example: Few years ago, we wanted to buy a house, we made a bid for 2.6, the realtor said they would not accept anything less than 2.8 as this was their competing offer. We said no, the house sold for 2.4. I suspected the realtor might have been double dipping, or bluffing, i don't know. But what I do know is they did not present the offer to the seller. (numbers are not exactly precise, but directionally and somewhat magnitude wise, it should be similar).
  - FireBeyond 3y ago
    > But what I do know is they did not present the offer to the buyer. I believe in most states a real estate agent (I despise 'Realtor(TM)') is obliged to present an offer (at least by the Realtor's Code of Conduct/Membership Agreement). Edited to add: I'm not sure if this refers to seller agents (who cannot hold back an offer from their client), or to buyer agents, presenting that to the seller side, or both. I think at least the first.
    - nordsieck 3y ago
      > I believe in most states a real estate agent (I despise 'Realtor(TM)') is obliged to present an offer Sure. But enforcement is the soul of the law. And it's pretty tough to catch stuff like that. Most people who put in offers and don't "win" aren't sitting around monitoring how much the winning bid ended up being.
koolba 3y ago
Good for them. On the list pointless middlemen, they’re definitely at the top. One of the dumbest parts of the real estate commission scam is purporting the lie that “the seller pays the commission”. Anyone with half a brain knows that if money is coming out of a transaction, it’s a transaction cost being eventually passed onto the buyer.
- senorrib 3y ago
  Anyone with microeconomics knowledge would tell you that it depends on the elasticity on each side of the transaction.
  - pxmpxm 3y ago
    Someone took econ!
  - Spivak 3y ago
    See: Doordash, Amazon, Apple, Visa, ... for seller side elasticity. See: Ticketmaster for buyer side elasticity.
- loosescrews 3y ago
  I think this assumes that the price of real estate is set by the post-fees price that sellers receive. I don't think that is true. I think the strongest factor in real estate pricing is what buyers are willing to pay. In some cases that is influenced by how much the buyer was able to keep after selling a previous property, but I don't think that is the most significant factor. Another factor that influences the sale price is the psychology surrounding the pre-fee sale price. Many sellers become fixated on a particular sale price. A common strategy for getting a lower effective sale price is getting sellers to include more in the sale price. One particularly notable example is seller financing.
- deleted 3y ago
  [deleted]
elyobo 3y ago
US fees seem very high; Australia & New Zealand have a selling agent fee in the 2-3% range (+ variable vendor paid advertising on top) and buyers agents are uncommon so not a fee most pay at all.
hackerfooze 3y ago
Why not just link your house to an NFT and transfer that? Easy, no intermediary needed
- havefunbesafe 3y ago
  Sounds great! Let us know when you do that!
- seattle_spring 3y ago
  I can't tell if this is a legitimate suggestion, or a satirical comment poking fun at crypto-folk.
  - hackerfooze 3y ago
    Crypto is decentralized so it eliminates the middleman
- nextworddev 3y ago
  why not use Postgres in append only mode?
_ea1k 3y ago
The problem isn't just realtors, it is that the whole system is designed to maximize transaction costs. Who cares how much the attorney and loan paperwork cost when they are only 1-2%, you are already paying 5-6% to realtors, ~.5-1% in repair costs, and often a part of the buyer's closing costs too? But if you think about that wholistically, that means sellers are paying 8-10% of the cost of a house every time they sell! Surely that means someone could cut the cost in half and make a much more attractive platform, right? Opendoor comes kind of close, but they end up shouldering a lot of the risk of the transaction and therefore tend to lowball.
- notaustinpowers 3y ago
  A huge hurdle with trying to cut costs is because of NAR themselves, and local Realtor Associations. Any Realtor is with NAR and a local Association, which heavily restricts what they can do. Not being in a local Association can remove your access to the MLS, reducing your visibility to other agents, and remove your access to the state-specific legal forms. Add in closing attorneys and home inspectors being brought in-house to reduce costs, it can be a very expensive start-up cost that would require lots of capital to achieve. Zillow/Opendoor got REALLY close, but they stopped (Zillow) or, like you said, lowball offers because they're fronting all of the backend costs that used to be spread across 4 or 5 different services.
  - _ea1k 3y ago
    Good points. I totally forgot about the whole home inspection process and how ridiculous it tends to be. Even when they aren't in house, you know it will be someone that the realtor has worked with before. It will certainly catch things because it has to demonstrate its value, and those things will be worth at least hundreds of $$s. Unfortunately, it will also offer no real guarantee that those things were worth catching or that other things weren't missed. You are right, a party trying to fix this will need great funding, large scale, and they can't be someone that will just sell out (ala zillow). With the NAR's ability to block out parties that they don't like, it might not even be practically possible.
  - tylergetsay 3y ago
johnea 3y ago
A side note: archive.ph didn't overcome the wsj paywall on this article...
r00fus 3y ago
I'm just as worried about the conspiracy among landlords to ratchet up rents and home sale prices. https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent https://www.propublica.org/article/yieldstar-rent-increase-r...
WalterBright 3y ago
> by making it difficult for buyers and sellers to negotiate for lower rates. I've negotiated lower commissions with real estate agents. They always say it's non-negotiable, and always cave.
Xeoncross 3y ago
Real Estate in the US is like a bunch of little MLS fiefdoms still angry you have access to the internet. Eventually the Real Estate market will adopt like the music industry and others had to. Welcome to the 21st century. Brokers and agents are mostly sales people that drive around showing places. Its the lawyers, inspectors, insurance underwriters, loan originators, and title companies that do the real and/or legal work. It's time for broker/agents to take a more fitting role instead of charging 6% for posting cell phone pictures of your house on their regional MLS.
- harrisonjackson 3y ago
  Inspectors maybe since they go on site and climb around etc... but every other profession you listed uses the same documents/software for every single deal so I don't know what you mean by "real" work.
- Root_Denied 3y ago
  > Its the lawyers, inspectors, insurance underwriters, loan originators, and title companies that do the real/legal work. And they get paid a flat rate to do that work (hourly or per contract). There should be no reason for commission based compensation for brokers and RE agents in the residential market. I could see an argument in the commercial market for it though.
- brentm 3y ago
  The music industry didn't have a patch work of local laws protecting it's thiefdom, unwinding Real Estate is a much more difficult challenge. If it was not I think we would have seen some real inroads by now, it's obviously a massive market.
- matt-attack 3y ago
  I don't even understand the idea of "showing places". Every time I purchased a home, I scoured Zillow, drove myself to open houses, and when I was ready to make an offer, called my Agent. Sure occasionally there is a property that doesn't have open houses and it on lockbox and you have to have your agent let you in, but honestly the last thing I want it them following me around the house (that's not even their own listing). They were always there just b/c they could open the door.
fsckboy 3y ago
my beef with the commissioned agents is that paying them a commission does not actually influence them to work on your behalf; they still work on their own behalf. For example, keeping your house for sale on the market longer (by rejecting offers) tends to eventually bring a higher price. A study or two has shown that real estate agents keep their own houses on the market for longer than average. But longer on the market is more work for the agent, while the small percentage increase in a higher price doesn't enhance their commission by nearly as much as it does the homeowner's, especially considering there is frequently a substantial mortgage on the house (meaning, the homeowner gets to collect the "bank's share" of any additional sale price) but what will your realtor recommend? "list it at a low price to generate interest and start a bidding war", pretty much the opposite of what you should do. In the grand scheme of things, a commission for making a large, complex selling process go smoothly is not a ridiculous notion, but when your agent is participating in plucking your feathers it's pretty annoying.
- ajhurliman 3y ago
  You’re not forced into taking any deal you don’t want to; your real estate agent can’t accept deals without your consent. I agree, agents are usually more focused on deal flow than particular outcomes, but it’s sort of a fundamental issue with agency in general. A software consultant is more focused on you signing off on the work than your bottom line, it’s hard to get people to not act in their best interest, and for the average person the home buying/ selling process is probably too complicated for them to navigate without going through some training. I think the biggest reform that could be passed is to disentangle NAR and MLS.
  - fsckboy 3y ago
    when I am paying somebody handsomely for their domain expertise, I don't want to become as educated as they are in order to evaluate what they throw in front of me. I want advice that I can trust from a fiduciary.
- userinanother 3y ago
  The incentive is to close the deal asap the extra 100k for the seller isn’t much for the realtor
osigurdson 3y ago
If you think about the problems to solve in a real estate transaction are roughly as follows: Seller problems: 1) Maximize selling price 2) Minimize damage to property / theft 3) Minimize cleaning / preparation for showings Buyer problems: 1) Minimize purchase price 2) Minimize number of hidden problems with house One would think that realtors might help to maximize selling price but their incentives are much more aligned with selling a property quickly as it is less work that way. For the most part, they solve seller problem #2 by acting as a kind of well dressed (and likely not very tough) security guard. The pricing problem could arguably be solved by having something along the lines of a Dutch auction. Many of the uncertainties (largely not addressed with the current system) could be solved via insurance.
karaterobot 3y ago
> For several years NAR has been fending off accusations by U.S. antitrust officials and private litigants that it has conspired to keep home-sale costs high in the face of major technological upheavals. This verdict is by far the group’s biggest setback yet. Buying or selling a home involves paying numerous middlemen thousands of dollars without having a clear idea what value they are providing in the process, except that if you don't pay them, you can't pay the next person in the line. Burn that whole industry to the ground as far as I'm concerned.
1vuio0pswjnm7 3y ago
The opinion: https://ecf.ca8.uscourts.gov/opndir/23/08/222664P.pdf https://ecf.ca8.uscourts.gov/opndir/23/08/222664P.pdf
IronWolve 3y ago
They are also doing the same thing with apartment rents by all using the same rent pricing company that keeps raising rents across the city. It's all collusion to raise prices.
underseacables 3y ago
I've had very good experiences with realtors.
thedougd 3y ago
I’ve had success a few times with flat fee agents. $1000 to sell plus the buying agents 2.5-3%. Their argument was compelling, it’s not as much work to sell a house in the Internet age.

318 points by nerdo 3y ago

Does anyone know what this actually means for real estate brokerage fees? There are few markets which have supported 3-5% brokerage fees (even i-banking is <100bps at scale now) so I'm curious where the fees will settle.

notaustinpowers 3y ago
This could change the process to this: 1) Seller gives a portion of their home price to their Agent as a commission (let's say 3%). The seller only paid 3% in commissions. 2) The Buyer negotiated a commission with their Agent (let's say $10,000). Which the buyer pays out-of-pocket, or has paid out of their financing for the home. This allows the Seller's Agent to maintain their duty to maximizing the value of their client's home by reducing the commission the seller pays. While also ensuring the Seller's Agent doesn't bend to the Buyer's Agent's wishes for a higher commission to secure a deal. This also allows the Buyer's Agent to maintain their duty to their client by negotiating their commission up-front, regardless of the price of the property. They could negotiate a percentage with their client, but that percentage is the Buyer's responsibility, not the seller. It gives the Buyer more power in the commission paid to their Agent. TLDR: Seller's had more power in pricing and commission payments to Agent's on both sides of the transaction, skewing home values higher to offset their (commonly) 6% commission payments. This segments the Seller's commission to just their Agent, and the Buyer's commission to just the buyer.
- jfk13 3y ago
  These US fees always seem astonishingly high to me. Here, something more like 1.5% would be typical.
  - notaustinpowers 3y ago
    Yeah, it is very high. Although, the real estate industry in the US is vastly different. - Agents do not receive salary, benefits, etc. Their only payment is when they close a deal. - Real Estate Agents are a dime a dozen since the licensing and training is pretty minimal. So lots of competition fighting over small supply, so it can be difficult to consistently get clients. - Agents can pay around $100/month to their Brokerage for E&O insurance, maybe access to legal forms, and a Broker for questions/insight. So they start spending money from the get-go. - Agents, typically, pay all expenses related to the job (advertising, signage, listing fees, etc).
    - jandrese 3y ago
      Yeah, it's tough on both sides. Competition is fierce for leads, but the rates have to be sky high to support the enormous mass of realtors. If the fees drop a lot of people are going to need to find new jobs.
      - idontpost 3y ago
        [dead]
      - flkiwi 3y ago
        If competition is fierce for leads because there is a glut of workers due to nearly zero requirements to become one, one would expect rates to plummet. Which, I suppose, is why we have a collusion situation here.
    - manuelabeledo 3y ago
      This reads like the reason why one shouldn't become an agent in the US. It's honestly hard to feel sympathy for people who are basically gambling their professional careers on the real estate market.
  - jjtheblunt 3y ago
    For what definition of "Here"?
- sokoloff 3y ago
  > maximizing the value of their client's home by reducing the commission the seller pays. Selling a house quickly (convincing the seller to take a qualified and likely-to-close offer) still dominates as a strategy over eeking out a few extra points of contract price. As an agent, taking 1.25% or 1.5% of a $950K sale quickly is way better than holding out for a $1M offer. The difference in commission at 1.5% on a $50K delta in sales price is $750. Freeing up your time to work on the next listing is more valuable.
  - efitz 3y ago
    I always thought the right strategy would be to have a sellers agent contract that was tiered, eg agent gets 1-2% of selling price up to average comps, and then 20% of excess selling price over that. Maybe a bonus or penalty for timing, to prevent waiting forever for a good offer.
  - notaustinpowers 3y ago
    The main issue with that possibility is many brokerages (at least ones in my area) do not allow a Seller's Agent to reduce their commission without prior Broker authorization. Regardless of what the Seller themselves wants. So while that deal may be advantageous for the Seller (sell quickly) and the Agent (get the deal over with and move on to the next), the Broker is the one getting paid a lower sum and will not allow that contract to be ratified.
    - sokoloff 3y ago
      Nothing in my comment is about changing the percentage of the commission. (The 1.25% or 1.5% is simply the listing agent's personal split of a 5% or 6% total commission [whichever is customary in the local area]).
      - notaustinpowers 3y ago
        Sorry, I didn't explain enough. The total commission remains 6%, but if the Seller's Agent split is only 1.25%, the Seller Agent's Broker (most likely) will deny that as the Broker would receive a reduced cut of the commission. The Seller and the Seller's Agent may be cool with the reduction, but the Broker would ultimately have the final say since it's, legally, their contract.
- robocat 3y ago
  We don't really have buyer's agents in New Zealand (the idea exists but used extremely rarely in my experience). I'm rather suspicious of the US system that creates a place for two agents getting 3% each for little gain (and a lot of scope for collusion against the buyer and/or seller!) The New Zealand system has its flaws. The major problem is that vendor real estate agents are financially incentivised to turn over sales as quickly as possible and so smart agents do not represent their vendors properly. I've seen lots of house sales where an offer is made and the agent recommends the seller take it. An early sale costs the agent much less time and they make way more money per year. New Zealanders are generally too trusting, so we get screwed over by people that take advantage of that.
rubymancer 3y ago
Nothing yet. I'd imagine it will go through appeals for a few years before anything actually happens, and U.S. antitrust enforcement has not exactly been a powerful force for the last few decades.
bozhark 3y ago
Nothing over 1.5%. Ever.

toomuchtodo 3y ago

Related: https://news.ycombinator.com/item?id=38088740 https://news.ycombinator.com/item?id=38088740

stuff4ben 3y ago

Commission based on home value is a joke. Realtors should earn a flat-rate.

Kirby64 3y ago
You can. It's just a bit of a racket (hence, conspiracy judgment) and nobody will work with you if you only offer a flat rate. Since MLS is mostly limited to Realtors in most markets, you're basically locked out from posting there. There's ways around it, and flat fee brokers that exist, but you hamper your sales ability. Not an issue when its a sellers market, but can be rough in a buyers market.
- bluGill 3y ago
  There are flat rate realtors where I live. However they are only 50%, the still give the same 3.5% to the buyers agent, but they take for themselves a fixed rate to get you on MLS. I'm not sure if it is a good deal - they still charge high prices relative for what they do for you. (it is cheaper than a full agent, but they also do much less)
  - Kirby64 3y ago
    You just don't sign a contract where you give a buyers agent commission, although again this limits the pool. Frankly, buyers agents are largely a scam in my view. With MLS, Zillow, Redfin, etc, their 'experience' seems mostly worthless. It certainly is not worth 3% of the cost of a house. If anything, sellers agents are more useful since they actually offer something valuable to the real estate experience (e.g., listing housing, photos, providing buyers access, etc).
    - bluGill 3y ago
      Buyers agents know better how to search the MLS system (though only a few do this). They also line up times to see houses, and take time to drive you to each. So a good buyers agent has spent about 8 hours of time to each buyer, plus expenses. I agree they are getting far too much, but they still are valuable.

albroland 3y ago

https://archive.ph/Ahzio https://archive.ph/Ahzio

rubymancer 3y ago

There's not much to the article. > KANSAS CITY, Mo.—A federal jury on Tuesday found the National Association of Realtors and large residential brokerages liable for about $1.8 billion in damages after determining they conspired to keep commissions for home sales artificially high. > The verdict comes in the first of two major antitrust lawsuits that target decades-old industry practices and seek to drive down commissions and change the way agents are compensated. The two-week trial involved claims by home sellers in several Midwestern states. The jury issued its verdict after just hours of deliberations. > Under antitrust rules, the presiding judge could triple the damages verdict, which would total more than $5 billion. The plaintiffs also have asked the judge to order changes to how the industry operates. > For several years NAR has been fending off accusations by U.S. antitrust officials and private litigants that it has conspired to keep home-sale costs high in the face of major technological upheavals. This verdict is by far the group’s biggest setback yet. > An NAR spokesman said, “This matter is not close to being final as we will appeal the jury’s verdict.” I would love for there to be some sort of competition injected into real estate commissions. I've bought and sold twice now and you get the same rate from everyone (within 1%) regardless of what they end up doing.

ransom1538 3y ago
Just sell it / or buy it yourself. It isn't hard by any stretch. You can use a $200 listing broker on a MLS site. That is the big secret. Then it gets on zillow,redfin, etc automatically.
- bozhark 3y ago
  What if you own the title?
- SoftTalker 3y ago
  You might not even need to do that much. I sold a home in a desirable neighborhood (I don't mean high-end, just a nice solid middle-class area with good schools, etc) by just putting a "for sale" sign in the front yard. Having commission be a percent of sales has some theoretical advantages. For example you might think the agent is motivated to get you the highest selling price. But in reality they are much more interested in making a sale at any price, because that lets them get paid and lets them move on from marketing your property. Residential real-estate transactions with a mortgage are about as regulated and standardized as it gets. The listing agent actually does very little beyond getting the property listed in the MLS. The difference in the amount of work they do in selling a $100K house vs. a $900K house is small (in fact the $100K house might take a lot more work because at that price it's probably got some serious drawbacks), so why should the higher sale price pay them much more?

poulsbohemian 3y ago

Here's the brief response I offered earlier today when asked what this actual does: I don’t really expect significant changes. We are in a more balanced market today than when these lawsuits were first filed. Many sellers will find it advantageous to offer buyer agent compensation. If/when we return to a seller-advantaged market, some buyers may need to pay their agents directly, which could involve rolling those costs into their financing. Lenders are more of an expert than myself on any issues in doing that, but it appears to happen in other states already. One of the problems of these lawsuits is the conflation of agency with payment. States - both WA and OR, for example - are working to fix the agency problem that wasn’t made explicit to buyers post-subagency. But, I don’t think there’s any question that buyer’s having to directly pay buyer’s agent compensation will be a higher cost to buyers.

riku_iki 3y ago
> Many sellers will find it advantageous to offer buyer agent compensation so, now conspired realtors charge seller and not buyer. Still looks broken.
- poulsbohemian 3y ago
  I guess you aren't familiar with this having been the system in most markets for decades?
  - riku_iki 3y ago
    your guess is incorrect
  - manuelabeledo 3y ago
    > I guess you aren't familiar with this having been the system in most markets for decades? Definitely not in most markets. This is very unique to the US. Also, what's the advantage of paying someone whose goals don't quite align with yours? And isn't it a massive conflict of interest?
  - jjoonathan 3y ago

underseacables 3y ago

I know people will knock on realtors, but I've had nothing but good experiences with them. There's so much stuff I don't know that I don't know, and the ones I've had have been very helpful. Worth every penny, in my opinion.

asah 3y ago
not sure why you're getting downvoted. If realtors add more value than their commission, then great. Consider normies who don't understand why all this "tech stuff" costs so much money.
- kstrauser 3y ago
  The average home sale price around here is around $1M. Realtors simply do not provide $60K worth of value to the sale of one.
  - asah 3y ago
    To me the question is what actual price I would've gotten.
    - kstrauser 3y ago
      Or conversely, how much more you’ve paid. Even your own buyer’s agent has the financial incentive to get you to pay the most they can talk you into.
  - xyzelement 3y ago
    My buyer's agent worked with us for probably 5 months. Saves us from visiting dozens of houses that looked good on listing but wouldn't work for us, brought us to properties that were good that we wouldn't have thought about, saved our ass a few times with local knowledge (eg: this street seems quiet now but this is where school busses queue up in the morning) and finally helped us structure the right offer on the right house (we ended up bidding way higher than we would have, but it was just enough to beat the next best offer - we would have missed it w/o her.) As first time home buyers, she also held our hand through the psychology of the process which in retrospect was helpful. I think she got $40K commission out of that, which seems totally fair given the amount of effort and at the end of the day, she made a 1M+ transaction successful for us. Yeah maybe if we ended up bidding and buying the 1st house we ever saw, I'd feel differently, but this woman really worked her ass off and was well worth the fee.

denton-scratch 3y ago

https://archive.ph/Ahzio https://archive.ph/Ahzio

semiquaver 3y ago

Also known as Sitzer/Burnett. Docket at https://www.courtlistener.com/docket/15018641/sitzer-v-national-association-of-realtors https://www.courtlistener.com/docket/15018641/sitzer-v-natio...

bozhark 3y ago

Realtors are a scam. Use brokers, fixed 1.5% from both sides to the same person.

scottwick 3y ago

Not really related to the article but something I've been wondering... In recent years the housing market has been so competitive that escalation clauses are often written into offers. They typically include a base offer of $X and then an agreement to escalate that value by increments (maybe $1-5k at a time) up to some cap. All the offers are collected by a certain date and then an auction is run behind the scenes by the realtors involved. What's to stop a seller from having one of their friends enter into one of these escalations? Submit a non-serious offer with a high escalation and include a minimal deposit which would be forfeited if that fake offer happens to win but otherwise hope it comes in 2nd to push everyone else's escalation up.

tehlike 3y ago
sadly the answer is honor code. There are also a lot of shenanigans realtors could be pulling. Example: Few years ago, we wanted to buy a house, we made a bid for 2.6, the realtor said they would not accept anything less than 2.8 as this was their competing offer. We said no, the house sold for 2.4. I suspected the realtor might have been double dipping, or bluffing, i don't know. But what I do know is they did not present the offer to the seller. (numbers are not exactly precise, but directionally and somewhat magnitude wise, it should be similar).
- FireBeyond 3y ago
  > But what I do know is they did not present the offer to the buyer. I believe in most states a real estate agent (I despise 'Realtor(TM)') is obliged to present an offer (at least by the Realtor's Code of Conduct/Membership Agreement). Edited to add: I'm not sure if this refers to seller agents (who cannot hold back an offer from their client), or to buyer agents, presenting that to the seller side, or both. I think at least the first.
  - nordsieck 3y ago
    > I believe in most states a real estate agent (I despise 'Realtor(TM)') is obliged to present an offer Sure. But enforcement is the soul of the law. And it's pretty tough to catch stuff like that. Most people who put in offers and don't "win" aren't sitting around monitoring how much the winning bid ended up being.

koolba 3y ago

Good for them. On the list pointless middlemen, they’re definitely at the top. One of the dumbest parts of the real estate commission scam is purporting the lie that “the seller pays the commission”. Anyone with half a brain knows that if money is coming out of a transaction, it’s a transaction cost being eventually passed onto the buyer.

senorrib 3y ago
Anyone with microeconomics knowledge would tell you that it depends on the elasticity on each side of the transaction.
- pxmpxm 3y ago
  Someone took econ!
- Spivak 3y ago
  See: Doordash, Amazon, Apple, Visa, ... for seller side elasticity. See: Ticketmaster for buyer side elasticity.
loosescrews 3y ago
I think this assumes that the price of real estate is set by the post-fees price that sellers receive. I don't think that is true. I think the strongest factor in real estate pricing is what buyers are willing to pay. In some cases that is influenced by how much the buyer was able to keep after selling a previous property, but I don't think that is the most significant factor. Another factor that influences the sale price is the psychology surrounding the pre-fee sale price. Many sellers become fixated on a particular sale price. A common strategy for getting a lower effective sale price is getting sellers to include more in the sale price. One particularly notable example is seller financing.
deleted 3y ago
[deleted]

elyobo 3y ago

US fees seem very high; Australia & New Zealand have a selling agent fee in the 2-3% range (+ variable vendor paid advertising on top) and buyers agents are uncommon so not a fee most pay at all.

hackerfooze 3y ago

Why not just link your house to an NFT and transfer that? Easy, no intermediary needed

havefunbesafe 3y ago
Sounds great! Let us know when you do that!
seattle_spring 3y ago
I can't tell if this is a legitimate suggestion, or a satirical comment poking fun at crypto-folk.
- hackerfooze 3y ago
  Crypto is decentralized so it eliminates the middleman
nextworddev 3y ago
why not use Postgres in append only mode?

_ea1k 3y ago

The problem isn't just realtors, it is that the whole system is designed to maximize transaction costs. Who cares how much the attorney and loan paperwork cost when they are only 1-2%, you are already paying 5-6% to realtors, ~.5-1% in repair costs, and often a part of the buyer's closing costs too? But if you think about that wholistically, that means sellers are paying 8-10% of the cost of a house every time they sell! Surely that means someone could cut the cost in half and make a much more attractive platform, right? Opendoor comes kind of close, but they end up shouldering a lot of the risk of the transaction and therefore tend to lowball.

notaustinpowers 3y ago
A huge hurdle with trying to cut costs is because of NAR themselves, and local Realtor Associations. Any Realtor is with NAR and a local Association, which heavily restricts what they can do. Not being in a local Association can remove your access to the MLS, reducing your visibility to other agents, and remove your access to the state-specific legal forms. Add in closing attorneys and home inspectors being brought in-house to reduce costs, it can be a very expensive start-up cost that would require lots of capital to achieve. Zillow/Opendoor got REALLY close, but they stopped (Zillow) or, like you said, lowball offers because they're fronting all of the backend costs that used to be spread across 4 or 5 different services.
- _ea1k 3y ago
  Good points. I totally forgot about the whole home inspection process and how ridiculous it tends to be. Even when they aren't in house, you know it will be someone that the realtor has worked with before. It will certainly catch things because it has to demonstrate its value, and those things will be worth at least hundreds of $$s. Unfortunately, it will also offer no real guarantee that those things were worth catching or that other things weren't missed. You are right, a party trying to fix this will need great funding, large scale, and they can't be someone that will just sell out (ala zillow). With the NAR's ability to block out parties that they don't like, it might not even be practically possible.
- tylergetsay 3y ago

johnea 3y ago

A side note: archive.ph didn't overcome the wsj paywall on this article...

r00fus 3y ago

I'm just as worried about the conspiracy among landlords to ratchet up rents and home sale prices. https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent https://www.propublica.org/article/yieldstar-rent-increase-r...

WalterBright 3y ago

> by making it difficult for buyers and sellers to negotiate for lower rates. I've negotiated lower commissions with real estate agents. They always say it's non-negotiable, and always cave.

Xeoncross 3y ago

Real Estate in the US is like a bunch of little MLS fiefdoms still angry you have access to the internet. Eventually the Real Estate market will adopt like the music industry and others had to. Welcome to the 21st century. Brokers and agents are mostly sales people that drive around showing places. Its the lawyers, inspectors, insurance underwriters, loan originators, and title companies that do the real and/or legal work. It's time for broker/agents to take a more fitting role instead of charging 6% for posting cell phone pictures of your house on their regional MLS.

harrisonjackson 3y ago
Inspectors maybe since they go on site and climb around etc... but every other profession you listed uses the same documents/software for every single deal so I don't know what you mean by "real" work.
Root_Denied 3y ago
> Its the lawyers, inspectors, insurance underwriters, loan originators, and title companies that do the real/legal work. And they get paid a flat rate to do that work (hourly or per contract). There should be no reason for commission based compensation for brokers and RE agents in the residential market. I could see an argument in the commercial market for it though.
brentm 3y ago
The music industry didn't have a patch work of local laws protecting it's thiefdom, unwinding Real Estate is a much more difficult challenge. If it was not I think we would have seen some real inroads by now, it's obviously a massive market.
matt-attack 3y ago
I don't even understand the idea of "showing places". Every time I purchased a home, I scoured Zillow, drove myself to open houses, and when I was ready to make an offer, called my Agent. Sure occasionally there is a property that doesn't have open houses and it on lockbox and you have to have your agent let you in, but honestly the last thing I want it them following me around the house (that's not even their own listing). They were always there just b/c they could open the door.

fsckboy 3y ago

my beef with the commissioned agents is that paying them a commission does not actually influence them to work on your behalf; they still work on their own behalf. For example, keeping your house for sale on the market longer (by rejecting offers) tends to eventually bring a higher price. A study or two has shown that real estate agents keep their own houses on the market for longer than average. But longer on the market is more work for the agent, while the small percentage increase in a higher price doesn't enhance their commission by nearly as much as it does the homeowner's, especially considering there is frequently a substantial mortgage on the house (meaning, the homeowner gets to collect the "bank's share" of any additional sale price) but what will your realtor recommend? "list it at a low price to generate interest and start a bidding war", pretty much the opposite of what you should do. In the grand scheme of things, a commission for making a large, complex selling process go smoothly is not a ridiculous notion, but when your agent is participating in plucking your feathers it's pretty annoying.

ajhurliman 3y ago
You’re not forced into taking any deal you don’t want to; your real estate agent can’t accept deals without your consent. I agree, agents are usually more focused on deal flow than particular outcomes, but it’s sort of a fundamental issue with agency in general. A software consultant is more focused on you signing off on the work than your bottom line, it’s hard to get people to not act in their best interest, and for the average person the home buying/ selling process is probably too complicated for them to navigate without going through some training. I think the biggest reform that could be passed is to disentangle NAR and MLS.
- fsckboy 3y ago
  when I am paying somebody handsomely for their domain expertise, I don't want to become as educated as they are in order to evaluate what they throw in front of me. I want advice that I can trust from a fiduciary.
userinanother 3y ago
The incentive is to close the deal asap the extra 100k for the seller isn’t much for the realtor

osigurdson 3y ago

If you think about the problems to solve in a real estate transaction are roughly as follows: Seller problems: 1) Maximize selling price 2) Minimize damage to property / theft 3) Minimize cleaning / preparation for showings Buyer problems: 1) Minimize purchase price 2) Minimize number of hidden problems with house One would think that realtors might help to maximize selling price but their incentives are much more aligned with selling a property quickly as it is less work that way. For the most part, they solve seller problem #2 by acting as a kind of well dressed (and likely not very tough) security guard. The pricing problem could arguably be solved by having something along the lines of a Dutch auction. Many of the uncertainties (largely not addressed with the current system) could be solved via insurance.

karaterobot 3y ago

> For several years NAR has been fending off accusations by U.S. antitrust officials and private litigants that it has conspired to keep home-sale costs high in the face of major technological upheavals. This verdict is by far the group’s biggest setback yet. Buying or selling a home involves paying numerous middlemen thousands of dollars without having a clear idea what value they are providing in the process, except that if you don't pay them, you can't pay the next person in the line. Burn that whole industry to the ground as far as I'm concerned.

1vuio0pswjnm7 3y ago

The opinion: https://ecf.ca8.uscourts.gov/opndir/23/08/222664P.pdf https://ecf.ca8.uscourts.gov/opndir/23/08/222664P.pdf

IronWolve 3y ago

They are also doing the same thing with apartment rents by all using the same rent pricing company that keeps raising rents across the city. It's all collusion to raise prices.

underseacables 3y ago

I've had very good experiences with realtors.

thedougd 3y ago

I’ve had success a few times with flat fee agents. $1000 to sell plus the buying agents 2.5-3%. Their argument was compelling, it’s not as much work to sell a house in the Internet age.