6 ms·

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

• 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
    Not only everything you mentioned above -- the associations control access to the homes themselves
    • notaustinpowers 3y ago
      Yup! Forgot to mention that. In my area, you have to be a member of the local Association & NAR to access the lockboxes.
• conductr 3y ago
  My problem has always been with the percentages used on certain things; like commissions. Just make it a flat fee. Things that require agent's time like open houses; bill for that. It's the essentially the same effort on a $100K house and a $500K house and a $1M house. Maybe once you get to $5M+ houses the fees need to increase since this is a different class of RE with much smaller pool of buyers. But still should be fixed amount and not percentages. In my area, since I bought my first house 10 years ago house prices have 4X'd. I don't think the wages of most professions have, the demand for housing makes it easier to sell, so why should agents be making 4X more?
  • salamanderss 3y ago
    Yeah it also causes the problem of making it a real pain in the ass to buy cheaper plots of land. Realtor often don't give a flying fuck about the sale of stuff under 50k, not worth it for them. Can be hard to get representation.
  • semiquaver 3y ago
    Is there anything else in real estate that’s normally priced in terms of percentages other than the realtor cut? I’m not aware of any.
    • lttlrck 3y ago
      Property tax.
    • deelowe 3y ago
      Everything is negotiable, but sellers often get asked to pay some portion of closing costs.
  • sizzle 3y ago
    This was the business model for PurpleBricks that exited the US market after failing to disrupt the Realtor mafia in control.
  • firstplacelast 3y ago
    Maybe we should all learn from real estate agents and price our labor at a % of the median home price within 1 hour commute to our offices? While I do think RE agents are overpaid in expensive markets, I also kind of think...good for them. Pegging your wages to your most expensive living cost is a supremely intelligent move.
• Willish42 3y ago
  Dumb, uninformed question here, but are there not some sort of For Sale By Owner systems that cut into the huge percents in closing costs? Or is the issue that you have to pay the buyers' realtor fees too and that's unavoidable? I'm trying to figure out why nobody's figured out "DIY MLS listing as a service without having to pay for a realtor". Maybe everyone who does this just gets a realtor's license or something.
  • 404mm 3y ago
    I’m not a realtor but I considered selling my home myself once. Two issues I hit immediately: 1. I could not list the home in MLS as That system requires annual fees to use and you need to have a realtor license. 2. You still need to pay the purchasing side’s realtor otherwise they will simply not consider your home for their clients. That’s 3% that’s hard to get any lower. I ended up negotiating my realtor’s selling fee down to 1.5% with the promise of using them for my purchase as well.
    • macNchz 3y ago
      > 1. I could not list the home in MLS as That system requires annual fees to use and you need to have a realtor license. Additionally, if you were to decide to list "For Sale by Owner" and market it yourself, you can submit it to the major aggregators (Zillow et al), but their contracts with the MLS systems often disallow them from mixing MLS and FSBO listings in the same search result set, so the FSBO listings are hidden behind a toggle or something and go unseen by the great majority of people browsing.
      • pb7 3y ago
        Further blatant abuse of their monopoly.
        • justinclift 3y ago
          Hmmm, sounds like a cartel that could be ripe for a bit of legal action. ;)
• OJFord 3y ago
  The problem is 'buying agents'. Looks totally bonkers from over here (UK, I think it's foreign to at least most of Europe too).
  • aeternum 3y ago
    Yes, this is where the collusion comes in. Many seller agents will simply ignore buyers without a buying agent.
    • lloyddobbler 3y ago
      In the U.S., at least, I've never known a seller's agent to do that (having done a good number of real estate transactions). In fact, in my experience I find it to be the exact opposite. Seller's agents are incentivized to not work with buyer's agents, if the situation arises where they're approached directly by a buyer. If the seller's agent is comfortable acting as the intermediary, and recognizing the limits of conflict of interest, then it's in their best interest to keep all of the 6% commission instead of giving half of it to the buyer's agent.
      • fatnoah 3y ago
        Correct, and this is something I've used to my advantage before. It's not a huge one, but when all othet things are equal...
      • tetromino_ 3y ago
        When looking for a place in New York, we were straight up ignored by most sellers until we signed a contract with a buyer's agent. Apparently, people without an agent are perceived as window shoppers / tire kickers who are not serious about buying and whose presence wastes everyone's time. A buyer's agent signals that you have serious intentions. Your area might be different, of course.
        • lloyddobbler 3y ago
          Interesting. Yeah, in Los Angeles, Denver, and Atlanta, it’s always worked to my advantage as the buyer. ¯\_(ツ)_/¯
• kelnos 3y ago
  Yep. And a lot of it is of dubious value; I think for many (most?) properties, title insurance is a scam. Most houses, especially those built (or at least having changed hands) in the last, oh, 50 years (or more?) should be fine. It also just seems kinda dumb that realtors get paid a percentage rather than a flat fee. On the buyer side, it's essentially the same amount of work to help someone find and buy a $200k house as it is for a $1M house. For the two properties I've purchased, things moved so quickly that I don't think the realtors had to do all that much. Conservatively, the first one made at least $2k/hr, and the second at least $1k/hr (and I'm probably underestimating there). I'm not saying their services weren't valuable -- they certainly were -- but I can't see most people agreeing to pay that rate if it were presented to them that way. And I'm not convinced there's all that much of a difference on the seller side, either. The staging is going to cost more for a larger/nicer house, but the sellers are paying separately for the staging anyway. I was also reading somewhere recently that orgs that control access to the MLS will not even allow you to list if there's no buyer's realtor's commission, and there's a floor, like it has to be at least 2% or something. From the buyer's perspective, I really liked Redfin's pre-pandemic model, where they'd give you part of the buyer's commission as a "refund", because their realtors are salaried. I assume they figure out from the traditional commission how much they need in order to pay their own operating costs (plus whatever profit margin they've decided to take), and then give you the rest. Of course, they stopped doing that during the pandemic, and now pocket the entire buyer's commission. Granted, the realtors we've worked with through Redfin were hit-or-miss. One we worked with was fantastic and knowledgeable, and helped a ton, but another (in a different region) let us put an offer on a home that we wouldn't have been able to rent out legally in the way we wanted to, which is something she absolutely should have known (a non-realtor friend alerted us to the issue; fortunately we were able to rescind the offer before it was acted upon). I haven't listed anything on Redfin as a seller, but they charge 1% of the sale price, which is a lot better than the 2.5%-3% traditional realtors take. Still, the percentage model seems unnecessary there too; the amount of work needed to sell houses of different values shouldn't necessarily be directly linked to the eventual sale price. > But if you think about that wholistically, that means sellers are paying 8-10% of the cost of a house every time they sell! I can only assume this also is part of our housing affordability issues. Sellers need to see some minimum amount of appreciation (and a fairly large amount at that) in order to break even (without even taking inflation into account), so homes sell for higher than they would otherwise, especially in markets where sellers have the upper hand.
• tootie 3y ago
  Paying a percentage to realtors is just theft. They add so little value in my experience. The fact that a fee can be split between two brokers or kept by one just shows they are extracting rents for ambiguous value.