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After a $1.8B verdict, the clock is ticking on the 6% realtor commission
- sidlls 3y agoReal estate sales is an industry rife with anti-competitive and corrupt practices. Appraisals, home inspections, lending, and sales are all in it together on this. I absolutely loathe them.
- userinanother 3y agoAdd mortgage insurance in there too
- choppaface 3y agoAnd title insurance
- lotsofpulp 3y agoI feel like we have had electronic databases with backup capability for so long that errors in titles should have long been a thing that does not happen anymore.
- calciphus 3y agoSame thought. You'd think title insurance would only kick in if the last title transfer predates say 1980, or some other relatively-likely-to-have-county-digital-records date
- gpm 3y agoMy parents bought a house in ~2003 new from the builder that ended up having a title issue when they tried to sell it (work orders of some kind)... in a big city that I certainly assume was using digital records by then.
- pixl97 3y agoI did computer support and had a couple of title companies all though the 2007 boom and 2008 crash. I may seem impossible, and yet suits brining up chain of title going back into the 1800s do happen more commonly than one would think. In the rural south there are some insane claims of title across families. I've seen title work where they had thousands of pages of paperwork involved with hundreds of possible heirs that had to be located.
- idlewords 3y agoAnd the underbody coat that totally failed to rustproof my home
- koolba 3y agoOf all the scams associated with real estate transactions, title insurance is kind of legitimate. The title chain itself may be recorded, but there may be some lien against the property that was not properly recorded. That’s the situation you protecting against. Now whether that’s worth .5-1% is debatable.
- photonbeam 3y agoThe seller really should be liable for all of that
- echelon 3y agoThey'll just pass the cost on to the buyer in the price.
- gpm 3y agoYes, but if you only discover a decade later and the seller is long gone...
- latency-guy2 3y agoIf so then there are laws to consider that any property that is not protected becomes legally owned by the one who has been servicing/inhabiting it, which is a bit before that decade would end. The core problem of the lien is solved, the only thing left is to ensure the lawyers who seem to always get their cake no matter what aren't bloodthirsty enough.
- danans 3y ago> Of all the scams associated with real estate transactions, title insurance is kind of legitimate As someone who has submitted (and failed to collect) on a claim against title insurance for legal fees incurred to correct a mistake in the original title that the title company missed, I'm skeptical of its value, at least for things like erroneous lot lines.
- 3y ago
- bmitc 3y agoI find that it's very similar to mob tactics. Prospective homeowners just get passed and funneled from person to person that they effectively have no choice but to interact with. And each of those people take a piece of the pie.
- SoftTalker 3y agoAnd there are a lot of fear tactics used as well. Or FUD, at least. "Don't skip the inspection, what if something is wrong" sounds sensible but pre-purchase home inspections are quite surface level, will only find visible, obvious problems, and in the fine print they disclaim responsibility if they miss anything.
- pixl97 3y agoI mean yea, but also not yea. It's definitely you get what you pay for. If you have a good home inspector they may be able to tell you something like "Yea, the roof is fucked", or "That crack you didn't notice in the foundation is really bad news". I don't build homes nor do I troubleshoot them on a daily basis. Someone that does, and has a at least a modicum of experience will still notice more than I.
- hibikir 3y agoIt definitely isn't: There is little repeat business, and realtors do a lot of the recommendations. So you absolutely can end up paying top dollar for an inspection that appears thorough, but is nowhere near good enough. It's just a very inefficient market, fraught with dark corners. That's why people hate it. A world where an expensive inspector actually meant higher quality would be far better than what we have
- bmitc 3y agoIn my area, you won't get an offer accepted if you don't waive the home inspection. In fact, it's basically required to waive all inspections, such as radon and others. So the state says you have a so-called right to these, which divests the state from liability, but on a practical level, you need to waive these. Buyers end up having to buy ~$1M homes based upon just looking at them once or twice over just a couple of hours with basically no history given at all. It's such a messed up process. I get to do more due diligence buying something off of Reverb or eBay than I did with our home. And as you say, all of the people you're forced to interact with force you to sign papers that says that they have no responsibility for anything whatsoever.
- brandall10 3y agoI recall reading a section in the California DRE salesperson training book 20 years back on canvassing for new clients. They actually discussed perusing local obituaries and contacting next of kin, because you know, there's a likely sale to be had. But they cautioned waiting 2-3 days as it could be seen as being insensitive.
- lotsofpulp 3y agoWhat is wrong with that? It is a fact that many homes are sold when their occupants die, and offering your services to a potential customer when the customer likely needs it does not seem out of bounds.
- lcnPylGDnU4H9OF 3y agoA phone call is a request for the person on the other end to stop what they’re doing and pay attention to the phone conversation. Plenty of people are annoyed when that happens in many contexts, not least of which includes telemarketers. Add on top of that the fact that the advice is to allow 2-3 days’ bereavement before the unsolicited possible annoyance... I genuinely don’t get the question. Be available as a realtor and market well; allow such customers to find you instead of chasing this particular kind of lead.
- lotsofpulp 3y agoI did not realize contact meant phone call. It could be as simple as leaving your business card or sending them mail.
- zeusk 3y agoYou'll realize when you lose a parent but some schmuck just wants to be the first to get that 3% off of you.
- saxonww 3y agoBut you're not offering your services. You're trying to get a potential customer to pay you for your services. And you're doing this during, presumably, a time of grief when the potential customer already has a lot to deal with physically and emotionally. And you're doing it because of the event that put them in this state. So in that way, it's not so much kind as it is exploitative.
- wyldfire 3y agoHome inspections aren't compulsory are they? I thought that they weren't even required by lenders. Of all the things listed they sure seem like real value to the buyer. If you're not borrowing to purchase a home you probably wouldn't need an appraisal. I think lenders just want objective evaluation of the collateral. Who can blame them?
- Libcat99 3y agoSome lenders do require inspection, and FHA loans do require one. They have some value buyers for sure but inspectors also have an interest in finding something to make it seem worthwhile.
- wredue 3y agoThey won’t catch much anyway. Most inspectors take a short stroll through the house, test one or two receptacles and call it a free $400 after that. Their visit is shorter than when you looked at the house. Maybe there’s good reputable inspectors. Ours weren’t
- deleted 3y ago[deleted]
- RoboticCloud 3y agoswwwwweeeeeeeet. But who's going to fill in the address on the boiler plate purchase agreement?
- khazhoux 3y agoThey'll just have to find a way to do that after they've finished taking 10 photos at 320x240 resolution (of which the last four are of the same room).
- mynameisash 3y agoI don't know about lo-res, but the HDR images are always a big tell when I look at postings.
- ant6n 3y agoTell of what?
- ceejayoz 3y agoThat there's a reason they need the HDR to make it look better.
- Auracle 3y agoThe reason is to not have the windows be absolutely blown out. They both look better that way and you can see the view, of the house has one. Of course, there’s tastefully doing it and…not. When I did real estate photography I (almost always) solved that problem by using additional lighting inside to somewhat equalize the interior and exterior brightness. It looks a lot better in the end but it’s also a lot more work and requires more equipment.
- Auracle 3y agoI did real estate photography for a bit. It wasn’t worth it because realtors are terrible penny pinchers. I did quite a few homes directly for sellers because their realtor’s photos were absolutely terrible. It looked like they took 2 minutes to zoom around the house, only putting their arm through doorways, taking everything vertically and tilted. For what it’s worth at least at the time the MLS had a pretty low max resolution.
- SeanAnderson 3y agoThis is pretty interesting timing, no? Mortgage interest rates quite high, housing inventory not moving a lot, and now the National Realtor Association getting disrupted. I feel like this sets the stage for some serious change, but no idea to what end.
- steveBK123 3y agoIt's wild for an industry with such a low barrier to entry, overfilled with such jokers in the good times, and starving for business in the bad times.. they managed to protect their 6% fee so long. Cartels really do work.
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- k2xl 3y agoEver since I bought my first house I have always hated the concept of realtors. Maybe before the internet it made sense because it wasn't easy finding houses. But what value does a realtor actually bring in the age of Zillow, Redfin, etc... Also - the percent structure has never made sense to me. Why should a realtor make more money just because the house is more expensive? Does a realtor really deserve to make 60k on a 2 million dollar home sale? Did they really bring twice as much value as a 1 million dollar home sale? I'm not saying that realtors don't have _any_ value. Yes if you are unfamiliar with an area it is nice to have someone who is familiar with the area help you look for a home. But with the internet this is nowhere near worth points of a sale of a home. And yes, they can negotiate for you - this has value too... But is the delta of their negotiation skills worth 6% of the home value?? When I sold my home I was also frustrated. I remember when I looked for a realtor to sell my home they tried to convince me they have additional avenues they would sell beyond what me listing myself could do. "We will get your home on our LinkedIn page! On our monthly magazine!" Really? Have you ever heard of anyone buying a home from a LinkedIn page?
- SV_BubbleTime 3y agoI bought on short sale and my realtor made it happen. Made $180,000 when I sold that place. Used the same realtor buying the next place, it was down to 8 people that put offers in on the only day showing. We got it because she knew a couple of tricks, one not exactly ethical. She is a family friend and normal people would have got 1/2 the work from her. A hardworking realtor can absolutely make a difference. Good luck finding one!
- quickthrower2 3y agoOf course it is very zero sum and sharky. If you get a place below market value or sell it above that is great for you but someone else has to lose. So all these commissions are taken from all and the mean average person has no advantage. Bad value for money on average.
- haiwbndnd 3y ago[flagged]
- ChrisArchitect 3y agoSome more discussion a few days ago: https://news.ycombinator.com/item?id=38156557 https://news.ycombinator.com/item?id=38156557
- dang 3y agoThanks! Macroexpanded: Home Sellers Win $1.8B After Jury Finds Conspiracy Among Realtors - https://news.ycombinator.com/item?id=38156557 https://news.ycombinator.com/item?id=38156557 - Nov 2023 (7 comments) Jury Finds Realtors Conspired, Awards Nearly $1.8B in Damages - https://news.ycombinator.com/item?id=38089356 https://news.ycombinator.com/item?id=38089356 - Oct 2023 (273 comments)
- akavi 3y agoI read the article, but I still don't understand how the National Association of Retailers enforce the 5-6% total commission. Does anyone know? The incidence question (is the fee "paid" by the buyer or seller) is a semantic one, but if the cartel is able to inflate the total fees, that's something else entirely.
- x86x87 3y agoIt's mostly due to the fact that in order to list a house or find a house you need to use a system called MLS. In order to use the system you need to be a realtor. It's quite simple actually
- lotsofpulp 3y agoTechnically, you don’t need to use MLS. You can put your house up on Craigslist, Facebook marketplace, make your own website, put a sign on your front lawn, etc. But most people predict they will earn per time they invest in selling by going with MLS, where the home buying audience is largest.
- x86x87 3y agoTechnically no. But it's an uphill battle. Technically you can sell your own house without an agent.
- akavi 3y agoBut what's preventing realtors from defecting and offering their services for a lower rate?
- deleted 3y ago[deleted]
- hiatus 3y agoThe other agent won't bring clients to you if the cut is too low.
- pradn 3y agoA good realtor can guide you through the market, inspections, and negotiation - all of which hugely affect the largest investment most people make. But that's no reason for them to demand a PERCENTAGE off the sale of the home! Closing fees plus realtor fees are a big reason why it takes so long for a home to break even for most people - something like 7 years in NYC. And one reason why there's so much pressure for home prices to keep going up. The cost of selling a home and buying another one also makes the labor market less dynamic - people find it harder to move to where there's better opportunities.
- 4death4 3y ago> A good realtor can guide you through the market Sure they can, but the entire incentive structure creates a situation where it's in the agent's best interest to get the sale done regardless or the outcome to the buyer/seller.
- DANmode 3y agoYes. Why give a complete picture to a seller when they may turn into a non-seller, or a later-seller, if you do?!
- deleted 3y ago[deleted]
- civilitty 3y agoEspecially in competitive markets where everyone waves inspections and stuff to even get a deal considered. Build quality basically had no impact on housing prices because no one could do a proper inspection.
- pradn 3y agoThere's also the Principal Agent problem here. If the seller's agent gets the home sold for an extra $50,000, the agent only makes an extra $1500. If this takes an extra month of work, it may not be worth it. And what guarantee does the agent have that their extra work will actually pay off? Good agents do get referrals, which is a good incentive to do a good job. But are homeowners even able to tell apart a good agent from a bad one? If someone's slick and kind, the bed-side manner might be enough to be considered a great agent. But they might just be less competent compared to a more gruff one.
- intrasight 3y agoI see this changing really fast. Real estate firms and individual real estate agents are not gonna want to get sued for hundreds of millions of dollars. They are going to be SUPER careful to avoid that. I foresee the quick dilution of the power of the realtor trademark. I foresee new real estate agents entering the market and not using the realtor trademark. I see those real estate agents using very different business models than what are use now. Lower percentages or fixed-price - but they'll find other ways to make money by being intermediaries with the other players in a transaction. Whatever is our cost for this cartel, the cost of the MD cartel is at least 10x higher. So perspective is needed.
- rrrrrrrrrrrryan 3y agoMy prediction: In 8-10 years... Seller's agents will get paid a flat rate, then X% commission for just the amount above some certain price. Basically they'll be rewarded if (and only if) they can successfully create a bidding war that sells the place for more than it's probably worth. If they're just doing their normal job of selling the thing for the appropriate amount, they'll get their flat rate. Buyer's agents will be paid per hour of work, like lawyers.
- dangus 3y agoBuyer’s agents should logically cease to exist. They’ve been replaced by real estate websites, they’ve just been hanging on through an artificial monopoly. Everything my last realtor showed me was worse than what I found on Zillow on my own, and the formatting of the information was so user-unfriendly that it was basically worthless.
- kangaroozach 3y agoOn point! Been saying this for years. I bought my house and had sellers agent represent me. The seller went with our offer because agent made more commission. We were not the highest offer.
- 3y ago
- roflyear 3y agoLots of people hating on realtors here, but my buying realtor: - Put up with me through several offers that fell through due to issues with the house - Met me quickly several times to see houses in a very hot market (covid) - Constantly found me homes that met my criteria - Was able to "get the dirt" on the homes and give me good advice for the homes that fell through, not pressuring me to buy And my selling realtor, for a home where they will probably only get 2-3k: - Took outstanding photos of my home - Constantly fought for me on a few issues and gave me great advice - Stuck through some legal issues related to the home - Received and passed along info from other realtors to help me improve the value of the home and quickly get a sale For the buying realtor, it is true I had to go through 2-3 realtors before meeting her. There were some SHIT realtors I worked with, for sure. Racists, assholes, lazy fucks. But I don't see the issue paying a realtor for their work - though maybe 6% ends up being quite a bit in this day and age.
- UncleMeat 3y agoOkay so that's a good service. Is that worth $20,000? $40,000? I'd love to pay by the hour for service. There aren't many such realtors.
- roflyear 3y agoWell, you're paying TWO realtors. Buyer and seller, so it's really half that. But yeah, I would say $10k is a pretty sweet deal in a lot of cases.
- lazide 3y ago$10k is 6% of $166k. Not many homes selling for that now a days. The median home sale price in June was $426k. Or $25.6k of commission. Typical Sunnyvale prices were about 2.4million, or $144k commission.
- roflyear 3y agoThey each get $10k - buyer and seller. For very expensive homes realtors will often "take a hit" to secure a sale.
- Nursie 3y ago6%! That's a huge amount on a house sale. In the UK your estate agent (seller's agent) usually takes 1-2%, and there are cheaper ways to do it like self-listing. You then get a conveyancer (a lawyer) on each side to actually do the work, and they usually work for a fixed fee. 6% is huge.
- comechao 3y agoIn Brazil, it is also 6%. It's ridiculous, 6% on top of what families spend decades saving for a limited amount of hours of _consulting_. A home is probably the most expensive thing a family will ever buy. Unfortunately, they don't get money if they don't sell, even if they spend hours helping a customer. IMHO, this is bad. A buyer will pay for all the deals that weren't closed.
- manicennui 3y agoGreat news! You also pay a lawyer at closing in the US. They are far, far cheaper than realtors but have much more liability. You can list your home and refuse to pay buyers' agents, but it generally takes much longer to sell a home that way. Not uncommon for a home for sale by owner to later be listed by a realtor when the owner loses patience. As you can read elsewhere in this discussion, real estate agents hate homes for sale by owners because those people generally don't want to pay their commission.
- switch007 3y agoThough if TV shows are anything to go by, it seems US realtors actually do something which can be classed as work. UK estate agents do the absolute bare minimum and often less. When it comes to viewings they really are just key holders and nothing else. Still, 6% is huge
- _heimdall 3y agoNow we just need an explanation of how the hell appraisers come up with their numbers. Not only is it functionally useless to ask someone to measure fair market value of an asset that already has someone offering to buy it at a specific price, the appraisals seem to come in ridiculously close to offer price every time. I've had to deal with around 8 appraisals over the years as buyer or seller, I only had one that didn't come bad within 1% of the sale price. Either markets are impressively efficient and we don't need appraisals, or the appraiser already knows exactly what number to put on it and goes through the motions of finding a few hundred dollars worth of random plumbing and electrical nitpicks and moves on.
- jandrese 3y agoWhen I was looking to sell my previous house the market was in turmoil and I didn't have a good idea of what the price should be so I called an appraisal company to ask what they would appraise it for and they refused. Their job is to basically rubber stamp whatever the realtor gives them to appease the bank. At the most they'll check a couple of comps in the area to make sure it's not totally out of whack.
- zdragnar 3y agoThe job of the appraiser is to demonstrate to the bank signing a mortgage that the deal isn't a scam. If a house would reasonably be sold for $250k, but the buyer is buying at $2 million, there's probably some very good questions that need to be asked about where the money is going. On the other hand, if an appraiser can demonstrate that: - properties with similar features have been sold in a similar price range in somewhat recent time frame - if no close match exists, then identifying the price differential from past sales might justify a good guess Generally speaking, if someone is making an offer, then they are participating in the market and setting the fair market value of the home. IME yes, appraisers DO know the offer that is being made, and they'll come up with a similar number if they don't have reason to believe that the buyer and seller are doing something shady.
- lazide 3y agoThe last deal I did, the appraiser asked me (the buyer) if I was okay with the appraisal, or wanted a different number.
- RecycledEle 3y agoGood job. Now do the Collective Refusal to Deal commited by the Texas Apartment Association. They require every apartment complex in Texas to use the same contract. That's a criminal violation of Texas' anti-trust laws, specifically it's a Collective Refusal to Deal.
- deleted 3y ago[deleted]
- CSMastermind 3y agoThere's an article I've been meaning to write for a while called Death to the Salesmen. I've spent a large part of my career working on products for insurance agents, real estate agents, and car salesmen. My experience has left me with one conclusion: we should eliminate most of these jobs. They're about as predatory toward the customer as they come, adding little value in most cases. There are certainly cases where they do add a lot of value but mostly because of government regulations, cartels, and monopolies they have a much bigger footprint than they should have in anything resembling a just world.
- lazide 3y agoThey’re also a huge part of the economy.
- deleted 3y ago[deleted]
- dpierce9 3y agoIf a buyer’s agent gets any percentage of a sale, the buyer’s agent and the buyer have misaligned interests. They might ‘represent’ the buyer, but the buyer’s agent has the same economic incentives as the seller (higher price, faster sale, fewer contingencies).
- deleted 3y ago[deleted]
- evancox100 3y agoFundamentally you’re correct, but the much bigger incentive on BOTH sides is to close the deal quickly. If they spend twice the amount of time on the transaction, their earnings per hour get cut in half. That’s a much bigger impact then a few percentage points in price swings.
- dpierce9 3y agoThe point about speed would be true under pretty much any incentive model except an hourly rate for the buy side. My point is when you are buying, your agent wants you to pay more. This is not what you want generally. It is fundamentally flawed. I agree, on the sell side it creates an incentive for an agent to not push for marginal price improvements. The incentives are misaligned on both sides of the transaction. On net you get round-tripped on misaligned incentives with the percentage model.
- KRAKRISMOTT 3y agoLina Khan, what are you waiting for? Do the realtors need to start making mean tweets before you will take action?
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- BXlnt2EachOther 3y agoThe FTC has a page on it [1] but I wish there was more there given it's the biggest purchase of most of their taxpayers' lives. The reports section comprises three reports, two from 2007 and one from... 1983. Clicking "view more reports" links to a page with those same three. I know they've done more in this area but I thought that was worth a laugh at least. [1] https://www.ftc.gov/news-events/topics/competition-enforcement/real-estate-competition https://www.ftc.gov/news-events/topics/competition-enforceme... Fun fact: NAR was the top lobbying spender in 2020 with $84B. Second place was Chamber of Commerce at $82B. Third place was $26B, or less than one third of NAR's spend. https://infogram.com/1pyy66emdxryq1c3yez9wqvxp2by3p7pgn3 https://infogram.com/1pyy66emdxryq1c3yez9wqvxp2by3p7pgn3 I only saw those stats recently but felt realtors are likely a very vocal and substantial constituency for every representative.
- b20000 3y agowhen i came to the US the idea of a person making a commission on the sale of real estate was foreign to me. in my home country most ppl sell and buy real estate themselves. agents are used for special situations. when i tried to call an owner in the bay area to buy from them directly and offered to pay for any lawyer of their choice to have paperwork drafted and reviewed they pooped their pants. i never understood why a well educated person cannot handle this here in CA themselves.
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- networkchad 3y ago[dead]
- pas 3y agotell them you are an agent representing [your name here]
- djha-skin 3y agoThis article reads as if hiring a person to help broker a deal worth several hundred thousand dollars on something as intimate as a house is silly when it's not. I don't use a travel agent to buy a $250 plane ticket because I know exactly what I want and I know exactly what I'm getting and there's not a third party involved (there's no seller of the seat, just the airline.) The realtor isn't there because you don't have information, like a travel agent would be. The realtor is there to broker a deal between two parties that really don't like each other and are trying to hose each other. I paid the full 6% when I sold my house. Worth the money.
- JumpCrisscross 3y agoMy buy-side broker was phenomenal. But many aren’t. This should be negotiated, and the party to whom duty is owed should be paying the agent (and negotiating their fee).
- publicmail 3y agoI can see it being useful for sellers, but not buyers. I do think you should have someone help broker a deal of this magnitude, but it shouldn’t be a realtor. It should be an attorney. You can get a real estate attorney to do the same thing for like $1500 or less where I’m located (north east). That’s a lot cheaper than what the commission would be for a realtor. Anyone can find their own houses on Zillow now, and the inspector is separate from the realtor, so from my perspective, all the buyer’s realtor really does is call the other agent to arrange a time for a showing. That’s all they did in my case and they took 3% of the total value of the house (or their agency did - they didn’t pocket all the $ directly themselves).
- kangaroozach 3y agoThe agents should be put against each other such that one will get a greater share of the overall pot based on how good they are at creating a bidding war. More bids, more commission share to the seller agent. Less bids, more commission to the buyer agent. Align the incentives beyond just getting a deal. Money should fought for at the margin.
- amluto 3y ago> “There are buyers that aren’t going to know the steps to buy a home,” Davis said. “They have to pay for a down payment, closing costs, appraisals, inspections. If they also have to come up with money to pay for a buyer’s agent, some just won’t and they’ll get in over their heads or they won’t buy at all. Not having representation will make the market less inclusive.” The entire buyer’s agent system is absurd right now. The buyer’s agent supposedly represents the buyer, but they have an extremely strong incentive to get their client to close on a purchase at all, and a secondary incentive to get their client to pay as much as possible. If anything, it seems to me that this is the wrong kind of inclusive — if anything, it pushes people to buy a house even when they shouldn’t. There should absolutely be agents of a sort who can represent a person or family who is considering buying a house and for whom buying at all is not obviously the right decision, but the current fee structure does not encourage good representation of this sort.
- bigtex 3y agoI worked with Redfin years ago to sell my house. The agent came in, shared his analysis and wrote down on a piece of paper what the house would sell for and how much I would make at closing. We officially listed the house on Friday at the previous suggested number, had 3 offers by the end of the weekend and accepted the only realistic offer a few days later for almost exactly the price he stated. Mind you this was back in 2014 so the market wasn't white hot and our house was just another house on a street where most looked the same. I can't recall why we did not qualify for the 1% rebate back then but I believe he deserved every penny of his commission. However I have been on the mortgage side of the business as a loan processor and it seemed to me that for the most part realtors were lazy. It seemed crazy to me no matter the work involved they expect that 3% commission. In the end you are having to pay to access MLS, and that access costs 3%, even if the house could sale itself due to the area or market. I have seen realtors advertise that if they don't sell your house in 30 days, then they reduced the commission, which I think is probably the best way to go about it. I would rather get the sale done quickly than what usually happens where the realtor lists the house for what the sellers want and then they have to keep dropping the price because its too expensive.