12 ms·

I don't know how much value agents added over the past few years, navigating bidding wars, pocket listing access, etc. but I've never understood the justificati

by ssharp 3y ago

I don't know how much value agents added over the past few years, navigating bidding wars, pocket listing access, etc. but I've never understood the justification for spending so much money on these fees. The last time I sold a house was 2011, when the housing market was still down from the 2008/09 crash. I talked with multiple agents and never got a sense of them doing much to push the house other than listing it on MLS and coordinating showings. For the seller agent, they didn't even really want to be at the showings -- they'd just provide a lockbox and give the code to the buyer agent. So where is the value there? On a median home sale, the seller side agent/broker is netting $12,400. A lockbox and MLS listing are in the sub-$500 cost range, so where is the additional $12,000 in value? I at least understand the incentive on the buyer side. A buyer can just ring up an agent and have them do their home search for them and coordinate everything. The buyer doesn't bear the cost at all, so why not utilize that convenience? Anyway, after talking with a few agents in 2011, I had one recommended to me. He could get deals done quickly and was great to work with, so I was told. I met with him and he wanted to list the house at 8% below the price I thought the house was worth (no bidding wars back then so this was no good) and flat-out refused to reduce the total commission from 6% to 5%. I said "good riddance" to the agents and did an MLS self-list for like $400. I set the buyer-side commission at 1.5%. I still got plenty of people looking at the house and sold it for the value I initially established it was worth. So I ended up saving over 10% from what the whiz-kid agent would have cost me in lost value and fees. So back to my original point -- where is that seller value coming from? There isn't much legal stuff the agents help with. You need a purchase contract (boilerplate in most cases), some standard state/federal disclosure forms, and then the title agency handles everything else.

WXLCKNO 3y ago
The extra value is not there. Anyone can do this job, it's literally filling out boilerplate documents, you can ask gpt 4 vision to do it for you.
- AndrewKemendo 3y ago
  Sounds like a business opportunity if I’ve ever heard one
- danielvaughn 3y ago
  I agree and disagree with this. Contracts (which is what I assume you're talking about) are only "boilerplate" in fair-weather deals. But if literally anything goes wrong during the escrow period, then the wording of that contract suddenly becomes critical. When tens of thousands of dollars are at stake, I'd never rely on AI-generated output. That being said, I also agree with you as for the value of agents, because they're the ones who write these contracts and to be honest, most of them are pretty stupid. We really need real estate lawyers to be drafting these things, not relying on templates. A good contract is worth a hefty fee.
  - mnky9800n 3y ago
    why would i want a real estate agent to help me with a contract problem instead of a lawyer?
    - danielvaughn 3y ago
      That's my point - I'm saying a real estate lawyer should be the ones handling these things, not agents. But by some kind of weird historical convention, agents are typically the ones that draft up the contracts, and they usually rely on a template.
      - semiquaver 3y ago
        The bizarre thing is that real estate lawyers are quite cheap since transactions are so standardized. I’ve always used one for home sales. The fee has always been between $500-650 regardless of the home price.
      - judge2020 3y ago
        Agents must use a template approved by their broker (who has their own lawyers who drafted that contract, of course). Typically they can't do anything custom.
    - brianwawok 3y ago
      It varies by state. In IL both sides must have a lawyer. In IN everyone has the agent do boilerplate. I can say the IN way saved me a few thousand bucks…
- salamandersss 3y ago
  It was worth it for me when buying cheap land. Since it's percentage based the amount was quite low; cheaper than a lawyer and I had a license to use the realtor association buyer contracts and connections to helpful people in the title office etc without having to hunt down and get these myself. When I calculate all the time I would have spent hunting down the right people, contracts etc it was a bargain against the buyer commission. I wouldn't want to use a realtor for land worth more than 50k though. Use the percentage commission to work for you not against you.
voisin 3y ago
> The buyer doesn't bear the cost at all This is the issue. If both sides had to pay their own agent, significantly fewer agents would be used. Instead the buyer externalizes the cost, and many sellers aren’t confident enough to deal with the buyer’s agent directly so they arm themselves with an agent.
- koolba 3y ago
  The buyer is paying the agent in the addition to the sale price. The buyer is also paying additional taxes for many years afterward on the higher assessed value (as it includes the commission!).
  - voisin 3y ago
    > The buyer is paying the agent in the addition to the sale price. Well I guess this gets a bit philosophical. Who pays the cost (the actual payment goes from the buyer to the seller’s lawyer which remits a portion to the agent) differs from who bears the cost (called the “incidence” [0]), which depends on the price elasticity of demand versus the price elasticity of supply, and this burden obviously shifts depending on the cycle of the housing market. You are correct that the incidence would fall to the buyer for quite some time now but perhaps this is shifting now. [0] https://en.m.wikipedia.org/wiki/Tax_incidence https://en.m.wikipedia.org/wiki/Tax_incidence
  - seanmcdirmid 3y ago
    Home assessments are based on property value, not sales prices, in many jurisdictions.
    - koolba 3y ago
      Sales prices (for an arms length sale) are de facto assessments. Every jurisdiction accepts or at least factors them in if you request an assessment to lower your property taxes. In some jurisdictions where the growth rate is capped (like CA), a 3-6% drop in price will be locked in essentially forever.
plagiarist 3y ago
You encountered a great example of how not only is the fee ridiculous, but also the agents are not incentivized to work for you. They are incentivized to move houses as fast as they can.
- ProllyInfamous 3y ago
  After turning-out IBEW, I spent the remainder of my electrician career specialized in residential pre-sale renovations ("make ready"). Despite peak earning years just pre-CoVid, essentially just updating circuit panel violations and replacing GFCIs [read: well-paid work without much mental strife], I hung up the towel. Realtors are nice simple people, the masters of soft skills (which I lack) — but ultimately I realized that "when you're the only person that gives a shit, you're gonna have a bad time." For their efforts, I think total sale comp should be 1-3% (both sides), depending upon their accessibility. >They are incentivized to move houses as fast as they can. Being told to "not worry about other sub-contractor craftsmanship, especially don't POINT IT OUT TO CLIENTS" — I just couldn't be part of a team that cared so little as to hand over duds for [typically] seven-figure homes/investments. "We carry professional insurance FOR A REASON."
  - plagiarist 3y ago
    It truly is a racket. You get several hours to vet a 7-figure purchase in a zero-sum game against a seller with information arbitrage. Nobody is liable for anything short of actual deliberate fraud. For everything you didn't guess to ask, you're doing the repairs after you buy. Of course they won't spend money on craftsmanship. I doubt they would even fix dangerous shit like bad circuit panels if it weren't for government inspections to certify habitability.
    - ProllyInfamous 3y ago
      >I doubt they would even fix dangerous shit like bad circuit panels A retired NFL player was purchasing this house and multiple inspectors indicated that the entire main panel would require replacement [note: NOT in contract to update any branch circuits; panel only]. Any pre-existing branch circuits unable to be update "to code" were to be de-activated. Previous homeowner had made all sorts of "specials" [i.e. crappy work] within this home, and many of the branch circuits were just hots with neutrals tapped off other shared circuits [not multibranch; it was hack-work]. One such disabled circuit —per our contract— was for a TV above the kitchen sink, which had its own 15A hot — but jaked off another neutral [melt/burn/fire hazard; not "to code"]. ---- What does one do on a multiple thousand $$$ contract for a multimillion dollar property, when your lifeblood brokerage is telling YOU [the EXPERT] that "no permits are required, just make that TV work!!!" ? Or other such new-homeowner surprises as: "please disable the garage door safety sensors even though I have over ten young children that could be crushed by one of the most dangerous items in a typical home [garage door]" —okay, I added that latter half. ---- Firms don't often care if your house fetches slightly less, because to them it isn't really reflected much differently in their [already bloated] commissions. Any future land purchases I make will be lawyer only, up-front flat-fee [where possible].
sokoloff 3y ago
> The buyer doesn't bear the cost at all, so why not utilize that convenience? The buyer is (typically) the only one bringing money to the table at closing. They're paying for that convenience one way or the other. (To partially counter this, I negotiated a rebate of the commission I was paying [as a buyer] on our current house purchase. IIRC, the check I got back was four figures and started with a 8.)
stephencanon 3y ago
We’ve bought two houses, sold one, bought a lot to built a house for my parents. We’ve never hired a real estate agent. The seller had an agent for the first transaction, none of the other counterparties had an agent. Paying a lawyer by the hour to handle things is simpler, cheaper, and a random lawyer is dramatically more competent than a random agent (the most complex transaction ended up costing us maybe $4k in lawyer fees-the standard 6% on that sale would have been $40k!)
- WirelessGigabit 3y ago
  The problem in this case is that the seller's agent takes the whole 6%. It's not that they only take 3% (which is the most disgusting part here).
  - arcticgeek 3y ago
    It is customary, at least in some locales (US-AK), that the commission is split evenly between the agents.
    - poulsbohemian 3y ago
      I would caution against assuming that anything related to commissions is actually customary, including an even split. All of this really is negotiable, and when I think about the past year, I've seen multiple occasions where different splits were offered. For example - I referred some business to an agent in Tennessee, who in order to pay my referral* convinced seller to offer a lesser split to the buyer's agent. I know of at least one agent in my market who does similar. I know of another agent who charges at least 10% on any land deal, while others are flat-fee. * If I were a member of the public, I'd be more upset about referral fees than commissions. This is a far more grey / nebulous area of real estate compensation. We have to disclose and discuss commissions up front, but referral fees are often in the shadows and definitely can cause buyers / sellers to pay more.
      - arcticgeek 3y ago
japanuspus 3y ago
Where I live (Denmark), the real estate guild has captured the market by building the de-facto listing portal and only making it available to registered brokers. Sounds great if the US portal (MLS?) is available to all listings. For selling a small plot of land I got so angry about the fees for nothing that I paid an obviously rogue broker to proxy-list the thing. This guy was charging half of what the other brokers were (still way too much), and did not do anything except upload documents from me.
- aabajian 3y ago
  The MLSes in the US are all under the Realtor group. The selling agent has to agree to pay the buyer agent's fee in order to list. This is one of the main points of the trial. Sellers cannot list a house in the most popular (only?) listing system without committing to the buyer's-agent fee.
  - Keyframe 3y ago
    At least there are seller and buyer agents. In Croatia it's one agent that is between buyer and the seller. What could go wrong, right? It's a scam.
jasode 3y ago
>I said "good riddance" to the agents and did an MLS self-list for like $400. [...] So back to my original point -- where is that seller value coming from? It's a puzzle to you because you had the personality & motivation to do the work of marketing+showing+negotiating the house yourself. You have inadvertently projected your DIY savvy onto other homeowners to do the same thing. But, a lot of home sellers don't want to DIY a home listing. - some homeowners don't want to deal directly with potential buyers (pre-qualify buyer's bank financials, show them around the property, etc). Some homeowners are uncomfortable wearing a "salesmen" hat. - some homeowners are not savvy about how to present and market their home. Sure there are endless books and youtube videos on jazzing up "curb appeal" but some people simply want a "professional" to advise them. - some homeowners feel uncomfortable with legal aspects and even hiring an attorney specializing in real estate feels "weird". It's just more "normal and easier" to use a real estate agent. Analogous situation in people selling things on ebay. What's the value in a service like iSoldIt[1] charging a commission for ebaying on sellers behalf when the seller can save money by DIY by taking own photos, using ebay website to upload the photos and list the item, and then pack & ship the item themselves?!? The value is that some people don't want to DIY certain tasks. I had a friend sell his camera via iSoldIt. I sell stuff myself on ebay all the time and thought he was crazy for paying the iSoldIt commission. He was a young programmer so he's not an old grandfather that would find ebay's website intimidating. He simply didn't want to deal with the whole ebay workflow and wanted some cash as quickly as possible. Consider that ebaying a camera is way simpler than selling a house and yet some still offload it to a service to handle it for them. EDIT to replies: >, but I don't think most people would be willing to spend 12k just to be more comfortable, >Agents provide value. [...] Do agents provide tens of thousands of dollars of value? To be clear, I wasn't trying to justify their 6% commission rate. I was explaining why most homeowners don't go the DIY route to save money which seemed more "logical" to the gp. For decades, I saw endless commercials on tv for FSBO (For Sale Buy Owner) services trying to educate viewers on "don't pay seller commissions and pocket the thousands in savings yourself!" And yet, real estate agents persist. People are already aware of "selling by owner"; they just don't want to do it and would rather pay a commission. [1] https://www.i-soldit.com/how-it-works/ https://www.i-soldit.com/how-it-works/
- Amezarak 3y ago
brvsft 3y ago
I had to sell my home while coordinating a cross-country move. The agent handled everything for me and did a good job on the negotiation given the fact that prices were coming down while this happened.
- dkjaudyeqooe 3y ago
  So did mine! But I paid 1.5% total.
foobarian 3y ago
> I don't know how much value agents added over the past few years, navigating bidding wars, pocket listing access, etc. but I've never understood the justification for spending so much money on these fees. The question that this raises is even more puzzling: why hasn't there arisen agents that undercut the status quo? Are there guild or cartel effects at play?
- no_wizard 3y ago
  This was the Redfin model and it had mixed results, I think they thought their non commissioned agents would upend the market, but that didn't really happen. The staying power of the Realtor Association may have something to do with it as well
  - PaulDavisThe1st 3y ago
    It's not so much staying power as "access to the MLS"
  - deleted 3y ago
    [deleted]
- thedougd 3y ago
  I've been using a flat fee agent since 2012. $500 to list, $500 to close, but still have to pay the conventional 2.5-3% to the buyer's agent. Still a huge improvement.
- dg08 3y ago
  They do exist. When I sold in NYC a few years ago, I paid 2.5% all in. When I bought, I used the same broker and got a 2/3 buyer's commission rebated to me at closing. It was a decent chunk of money and helped me pay the closing costs. I recommended it to all my friends and several got the rebates as well. There are a bunch of these brokers now.
  - avn2109 3y ago
    What do I type into google to find this?
yesimahuman 3y ago
I just sold a house in the US and the thought of listing it ourselves did cross my mind, but in the end we used an agent and they did _everything_ for us while I was out of the country, and got us a great price. In the end the amount of commission we paid to our agent (3%) didn't feel excessive at all since I barely had to lift a finger (besides moving). Now, 3% for the buyer's agent? _that_ felt excessive.
- brianwawok 3y ago
  It’s almost like an out of the country agent deserves 3% and an in agent selling agent deserves $2000. Vs a single fixed price they all get. I had an agent get halfway through listing my house for sale and tell me his fee was 7%. Noped out of that one.
- Navarr 3y ago
  The buyer's agent fee is basically subsidizing the hard work of buyer's agents (which is taking their clients to multiple properties, discussions about what they want, using time browsing MLS to find houses that meet criteria and arranging tours of them) When I was looking to buy a house, my agent received no financial compensation from me at any point. Their work was entirely subsidized by the buyer's agent fee - and we looked at a lot of houses trying to find the right one. The negative effect of that is that they're incentivized to offload us asap.
  - yesimahuman 3y ago
    Yes but from the perspective of the seller, the buyer's agent fee feels like you're subsidizing the realtor market to make it viable. Now, don't get me wrong, when I _bought_, I was very happy my agent made money, because she deserved it. I can just understand the attitude to sellers over agent commission (not saying I agree with it)
  - nordsieck 3y ago
    > The buyer's agent fee is basically subsidizing the hard work of buyer's agents (which is taking their clients to multiple properties, discussions about what they want, using time browsing MLS to find houses that meet criteria and arranging tours of them) Since Zillow and Redfin have existed for quite some time how, that service seems a lot less valuable. I'm sure it can be worth it in the right circumstances, though.
foogazi 3y ago
> The buyer doesn't bear the cost at all The buyer is the only one bringing money into the deal so they pay for both agents
- DOSUser67 3y ago
  That's not true, the agent fees come from the seller's money. It's only true if you consider your employer to be paying for everything you have in your house, because they gave you the money you used to pay for your stuff.
  - ilikehurdles 3y ago
    I think their view is that money is fungible, and ultimately factored into the price the buyer pays. The agents aren’t getting paid unless there’s a buyer, so everything in a real estate transaction (the commissions and the property) is paid for using the buyer’s liquid assets. When I’ve been a seller I’d have been willing to lower the price in a slow market more, had commissions not been a factor. Instead I shelved the listing until the market improved because I reached the lowest price I was willing to close at. So in that sense, the buyer is definitely paying for that commission via inflated price.
  - hn_throwaway_99 3y ago
    Whether it's "true" or not obviously depends on the point of view of "when in the transaction that the transfer of money ownership takes place", but I definitely agree with the parent comment. The problem with your house analogy is that (a) there can be long time spans between when your employer pays you and when you buy stuff in your house, and (b) you presumably have complete control over everything you decide to purchase in your house. That's not really true in the real estate example, where everything is part of a single transaction to which only one party is bringing any actual money. A better analogy would be social security taxes in the US. In the US, the fiction is that the employer pays for half of an employee's social security taxes, and the employee pays for the other half out of their paycheck deductions. But basically every economist considers this a work of fiction, and since the true cost of an employee is everything the employer needs to pay, they basically consider all the social security taxes as costs to the employer.
lawlessone 3y ago
>navigating bidding wars, A lot of anecdotal evidence they encourage this.
ineptech 3y ago
For the buyer, the value is clear: someone to go out with you to house after house, let you in, walk around with you, talk about whether you could fit a king-sized bed in that room, etc. It's a lot of work and the buyer gets a lot of value from it. But for the seller, who pays the tab, the only value is that some buyers' agents will steer their clients away from you unless you offer a large commission. The individual realtors I know are nice people who work hard, but the industry as a whole is pretty obviously maintained by collusion, and I'm glad it finally seems to be crumbling.
- komadori 3y ago
  That system seems very convoluted to me. In the UK, only the seller pays a commission on the sale price (typically ~1.5%) and the seller's estate agent is responsible for showing buyers around the property. The buyer doesn't need their own estate agent unless they're also selling a previous property at the same time.
  - aftbit 3y ago
    That seems backwards. Only the buyer should need an agent, as they are the one who is searching. The seller is just sitting around waiting for offers.
    - travem 3y ago
      Think of this in the context of what happens with the majority of other purchases you are making? How many of those have a "buyers agent" vs a sales person? I've bought houses in both the UK and the US, I preferred the UK approach where I found the houses myself (and in the US it's not that different with tools like Zillow etc.) and paid for a lawyer to handle the paper work for much less than the real estate commission that was paid (and part of the house price I ultimately paid). In fact, you could really view the commission split paid to the buyers agent (from the seller) as part of that expense of the seller marketing their property.
    - cyanydeez 3y ago
      if it were just an object, it makes more sense that the seller does the leg work. they know the object, the market, etc. they're the expert. why does a buyer need a expert on all the objects out there? I know there's technical examinations like a home inspection that the buyer would have done, but if you're just talking about navigating the property and legal docs, seems like the buyer isn't going to need an agent to do that other than once to accept the price.
kelnos 3y ago
Hell, realtors have not provided anywhere near that much value to me on that buying side, either. Certainly things were easier than without them, but not $20k easier. For my most recent home purchase, my realtor easily made $1k/hour, even after taking into account whatever percentage her firm takes. I'm strongly considering a DIY approach the next time I buy a house. I may eventually give up and get a realtor, but I'm curious to see if I really need one.
gitfan86 3y ago
The worst part of an agent is that they will not show you a house that is for sale by owner. They are actively limiting your options and you are paying them for that service
Spooky23 3y ago
Like any sales profession, the median salesperson is a moron. Many of the listing agents just try to sign as many as possible to get the shared commission. They’re easy to find because theirs is a volume game and they market heavily. If you don’t ask for what you want or know what you want, you get those guys. If you do, you pay for the big leagues. You’re not going to find their business card at the coffee shop bulletin board or church bulletin. When I sold my first house, I paid the full commission plus 50% of anything over ask if it closed within 45 days of signing. This lady was a beast. She hung out at divorcee support groups and had a file of recently divorced women with cash settlements. All-cash offer, well over list, accepted the day before listing with no contingency; closed 10 days later. Did I feel like a horrible person? Yes. Was the place sold to my needs? Yes.
- poulsbohemian 3y ago
  >Like any profession, the median is a moron. Fixed that for you. I wish when real estate comes up on HN, as it seems to weekly, that more members of this community would reflect upon the 10x programmer conversation. In any given profession, there are going to be skilled people and less skilled people, in the same way that Pareto's principle tells us that 20% of the people are doing 80% of the work. So I appreciate you making this observation. May I ask - why did you feel like a horrible person? Sounds to me like you had a good sense of what you wanted to accomplish and you found someone who could help you reach your goals.
  - Spooky23 3y ago
    Fair point. The thing about real estate is that cost doesn’t correlate with anything, and the principal of the brokerage has an incentive that doesn’t align with any other stakeholder. I found the idea that a salesperson was cultivating people in therapy as sales leads repulsive. But I cashed the check nonetheless.
fishywang 3y ago
My understanding is that in a common American setup, the commission seller paid is split by seller's and buyer's agents half/half.
bilsbie 3y ago
I got overrun by phone calls when I tried this. 10+ per day with 90% being agents trying to scam me into listing with them. How did you handle that? I finally got a traditional agent just to field the phone calls.
akomtu 3y ago
The buyer agents are useless in nearly all cases. The useful ones are called real estate attorneys, and only when it's the buyer's market. A standard buyer agent is a kid who finished a 2 week course on how to fool the buyer. His or her core competencies include: subscribing your email to an automated mls search that spams you with irrelevant listings every week, actually reviewing the listings according to your criteria is beneath them because it's real work; on the showings the agent persuades you to write an offer for the listed price, and never bothers to look for possible defects that may ruin the deal, such as foundation cracks; the agent has a inspector buddy who can write a stellar inspection report, after having inspected its lawn only; the agents are gravely offended by the idea of reducing their commission to something more sensible; they show a great resolve at pushing you to sign an exclusive contract for a very long term, and insist on bearing no responsibility.

by ssharp 3y ago

WXLCKNO 3y ago

The extra value is not there. Anyone can do this job, it's literally filling out boilerplate documents, you can ask gpt 4 vision to do it for you.

AndrewKemendo 3y ago
Sounds like a business opportunity if I’ve ever heard one
danielvaughn 3y ago
I agree and disagree with this. Contracts (which is what I assume you're talking about) are only "boilerplate" in fair-weather deals. But if literally anything goes wrong during the escrow period, then the wording of that contract suddenly becomes critical. When tens of thousands of dollars are at stake, I'd never rely on AI-generated output. That being said, I also agree with you as for the value of agents, because they're the ones who write these contracts and to be honest, most of them are pretty stupid. We really need real estate lawyers to be drafting these things, not relying on templates. A good contract is worth a hefty fee.
- mnky9800n 3y ago
  why would i want a real estate agent to help me with a contract problem instead of a lawyer?
  - danielvaughn 3y ago
    That's my point - I'm saying a real estate lawyer should be the ones handling these things, not agents. But by some kind of weird historical convention, agents are typically the ones that draft up the contracts, and they usually rely on a template.
    - semiquaver 3y ago
      The bizarre thing is that real estate lawyers are quite cheap since transactions are so standardized. I’ve always used one for home sales. The fee has always been between $500-650 regardless of the home price.
    - judge2020 3y ago
      Agents must use a template approved by their broker (who has their own lawyers who drafted that contract, of course). Typically they can't do anything custom.
  - brianwawok 3y ago
    It varies by state. In IL both sides must have a lawyer. In IN everyone has the agent do boilerplate. I can say the IN way saved me a few thousand bucks…
salamandersss 3y ago
It was worth it for me when buying cheap land. Since it's percentage based the amount was quite low; cheaper than a lawyer and I had a license to use the realtor association buyer contracts and connections to helpful people in the title office etc without having to hunt down and get these myself. When I calculate all the time I would have spent hunting down the right people, contracts etc it was a bargain against the buyer commission. I wouldn't want to use a realtor for land worth more than 50k though. Use the percentage commission to work for you not against you.

voisin 3y ago

> The buyer doesn't bear the cost at all This is the issue. If both sides had to pay their own agent, significantly fewer agents would be used. Instead the buyer externalizes the cost, and many sellers aren’t confident enough to deal with the buyer’s agent directly so they arm themselves with an agent.

koolba 3y ago
The buyer is paying the agent in the addition to the sale price. The buyer is also paying additional taxes for many years afterward on the higher assessed value (as it includes the commission!).
- voisin 3y ago
  > The buyer is paying the agent in the addition to the sale price. Well I guess this gets a bit philosophical. Who pays the cost (the actual payment goes from the buyer to the seller’s lawyer which remits a portion to the agent) differs from who bears the cost (called the “incidence” [0]), which depends on the price elasticity of demand versus the price elasticity of supply, and this burden obviously shifts depending on the cycle of the housing market. You are correct that the incidence would fall to the buyer for quite some time now but perhaps this is shifting now. [0] https://en.m.wikipedia.org/wiki/Tax_incidence https://en.m.wikipedia.org/wiki/Tax_incidence
- seanmcdirmid 3y ago
  Home assessments are based on property value, not sales prices, in many jurisdictions.
  - koolba 3y ago
    Sales prices (for an arms length sale) are de facto assessments. Every jurisdiction accepts or at least factors them in if you request an assessment to lower your property taxes. In some jurisdictions where the growth rate is capped (like CA), a 3-6% drop in price will be locked in essentially forever.

plagiarist 3y ago

You encountered a great example of how not only is the fee ridiculous, but also the agents are not incentivized to work for you. They are incentivized to move houses as fast as they can.

ProllyInfamous 3y ago
After turning-out IBEW, I spent the remainder of my electrician career specialized in residential pre-sale renovations ("make ready"). Despite peak earning years just pre-CoVid, essentially just updating circuit panel violations and replacing GFCIs [read: well-paid work without much mental strife], I hung up the towel. Realtors are nice simple people, the masters of soft skills (which I lack) — but ultimately I realized that "when you're the only person that gives a shit, you're gonna have a bad time." For their efforts, I think total sale comp should be 1-3% (both sides), depending upon their accessibility. >They are incentivized to move houses as fast as they can. Being told to "not worry about other sub-contractor craftsmanship, especially don't POINT IT OUT TO CLIENTS" — I just couldn't be part of a team that cared so little as to hand over duds for [typically] seven-figure homes/investments. "We carry professional insurance FOR A REASON."
- plagiarist 3y ago
  It truly is a racket. You get several hours to vet a 7-figure purchase in a zero-sum game against a seller with information arbitrage. Nobody is liable for anything short of actual deliberate fraud. For everything you didn't guess to ask, you're doing the repairs after you buy. Of course they won't spend money on craftsmanship. I doubt they would even fix dangerous shit like bad circuit panels if it weren't for government inspections to certify habitability.
  - ProllyInfamous 3y ago
    >I doubt they would even fix dangerous shit like bad circuit panels A retired NFL player was purchasing this house and multiple inspectors indicated that the entire main panel would require replacement [note: NOT in contract to update any branch circuits; panel only]. Any pre-existing branch circuits unable to be update "to code" were to be de-activated. Previous homeowner had made all sorts of "specials" [i.e. crappy work] within this home, and many of the branch circuits were just hots with neutrals tapped off other shared circuits [not multibranch; it was hack-work]. One such disabled circuit —per our contract— was for a TV above the kitchen sink, which had its own 15A hot — but jaked off another neutral [melt/burn/fire hazard; not "to code"]. ---- What does one do on a multiple thousand $$$ contract for a multimillion dollar property, when your lifeblood brokerage is telling YOU [the EXPERT] that "no permits are required, just make that TV work!!!" ? Or other such new-homeowner surprises as: "please disable the garage door safety sensors even though I have over ten young children that could be crushed by one of the most dangerous items in a typical home [garage door]" —okay, I added that latter half. ---- Firms don't often care if your house fetches slightly less, because to them it isn't really reflected much differently in their [already bloated] commissions. Any future land purchases I make will be lawyer only, up-front flat-fee [where possible].

sokoloff 3y ago

> The buyer doesn't bear the cost at all, so why not utilize that convenience? The buyer is (typically) the only one bringing money to the table at closing. They're paying for that convenience one way or the other. (To partially counter this, I negotiated a rebate of the commission I was paying [as a buyer] on our current house purchase. IIRC, the check I got back was four figures and started with a 8.)

stephencanon 3y ago

We’ve bought two houses, sold one, bought a lot to built a house for my parents. We’ve never hired a real estate agent. The seller had an agent for the first transaction, none of the other counterparties had an agent. Paying a lawyer by the hour to handle things is simpler, cheaper, and a random lawyer is dramatically more competent than a random agent (the most complex transaction ended up costing us maybe $4k in lawyer fees-the standard 6% on that sale would have been $40k!)

WirelessGigabit 3y ago
The problem in this case is that the seller's agent takes the whole 6%. It's not that they only take 3% (which is the most disgusting part here).
- arcticgeek 3y ago
  It is customary, at least in some locales (US-AK), that the commission is split evenly between the agents.
  - poulsbohemian 3y ago
    I would caution against assuming that anything related to commissions is actually customary, including an even split. All of this really is negotiable, and when I think about the past year, I've seen multiple occasions where different splits were offered. For example - I referred some business to an agent in Tennessee, who in order to pay my referral* convinced seller to offer a lesser split to the buyer's agent. I know of at least one agent in my market who does similar. I know of another agent who charges at least 10% on any land deal, while others are flat-fee. * If I were a member of the public, I'd be more upset about referral fees than commissions. This is a far more grey / nebulous area of real estate compensation. We have to disclose and discuss commissions up front, but referral fees are often in the shadows and definitely can cause buyers / sellers to pay more.
    - arcticgeek 3y ago

japanuspus 3y ago

Where I live (Denmark), the real estate guild has captured the market by building the de-facto listing portal and only making it available to registered brokers. Sounds great if the US portal (MLS?) is available to all listings. For selling a small plot of land I got so angry about the fees for nothing that I paid an obviously rogue broker to proxy-list the thing. This guy was charging half of what the other brokers were (still way too much), and did not do anything except upload documents from me.

aabajian 3y ago
The MLSes in the US are all under the Realtor group. The selling agent has to agree to pay the buyer agent's fee in order to list. This is one of the main points of the trial. Sellers cannot list a house in the most popular (only?) listing system without committing to the buyer's-agent fee.
- Keyframe 3y ago
  At least there are seller and buyer agents. In Croatia it's one agent that is between buyer and the seller. What could go wrong, right? It's a scam.

jasode 3y ago

>I said "good riddance" to the agents and did an MLS self-list for like $400. [...] So back to my original point -- where is that seller value coming from? It's a puzzle to you because you had the personality & motivation to do the work of marketing+showing+negotiating the house yourself. You have inadvertently projected your DIY savvy onto other homeowners to do the same thing. But, a lot of home sellers don't want to DIY a home listing. - some homeowners don't want to deal directly with potential buyers (pre-qualify buyer's bank financials, show them around the property, etc). Some homeowners are uncomfortable wearing a "salesmen" hat. - some homeowners are not savvy about how to present and market their home. Sure there are endless books and youtube videos on jazzing up "curb appeal" but some people simply want a "professional" to advise them. - some homeowners feel uncomfortable with legal aspects and even hiring an attorney specializing in real estate feels "weird". It's just more "normal and easier" to use a real estate agent. Analogous situation in people selling things on ebay. What's the value in a service like iSoldIt[1] charging a commission for ebaying on sellers behalf when the seller can save money by DIY by taking own photos, using ebay website to upload the photos and list the item, and then pack & ship the item themselves?!? The value is that some people don't want to DIY certain tasks. I had a friend sell his camera via iSoldIt. I sell stuff myself on ebay all the time and thought he was crazy for paying the iSoldIt commission. He was a young programmer so he's not an old grandfather that would find ebay's website intimidating. He simply didn't want to deal with the whole ebay workflow and wanted some cash as quickly as possible. Consider that ebaying a camera is way simpler than selling a house and yet some still offload it to a service to handle it for them. EDIT to replies: >, but I don't think most people would be willing to spend 12k just to be more comfortable, >Agents provide value. [...] Do agents provide tens of thousands of dollars of value? To be clear, I wasn't trying to justify their 6% commission rate. I was explaining why most homeowners don't go the DIY route to save money which seemed more "logical" to the gp. For decades, I saw endless commercials on tv for FSBO (For Sale Buy Owner) services trying to educate viewers on "don't pay seller commissions and pocket the thousands in savings yourself!" And yet, real estate agents persist. People are already aware of "selling by owner"; they just don't want to do it and would rather pay a commission. [1] https://www.i-soldit.com/how-it-works/ https://www.i-soldit.com/how-it-works/

Amezarak 3y ago

brvsft 3y ago

I had to sell my home while coordinating a cross-country move. The agent handled everything for me and did a good job on the negotiation given the fact that prices were coming down while this happened.

dkjaudyeqooe 3y ago
So did mine! But I paid 1.5% total.

foobarian 3y ago

> I don't know how much value agents added over the past few years, navigating bidding wars, pocket listing access, etc. but I've never understood the justification for spending so much money on these fees. The question that this raises is even more puzzling: why hasn't there arisen agents that undercut the status quo? Are there guild or cartel effects at play?

no_wizard 3y ago
This was the Redfin model and it had mixed results, I think they thought their non commissioned agents would upend the market, but that didn't really happen. The staying power of the Realtor Association may have something to do with it as well
- PaulDavisThe1st 3y ago
  It's not so much staying power as "access to the MLS"
- deleted 3y ago
  [deleted]
thedougd 3y ago
I've been using a flat fee agent since 2012. $500 to list, $500 to close, but still have to pay the conventional 2.5-3% to the buyer's agent. Still a huge improvement.
dg08 3y ago
They do exist. When I sold in NYC a few years ago, I paid 2.5% all in. When I bought, I used the same broker and got a 2/3 buyer's commission rebated to me at closing. It was a decent chunk of money and helped me pay the closing costs. I recommended it to all my friends and several got the rebates as well. There are a bunch of these brokers now.
- avn2109 3y ago
  What do I type into google to find this?

yesimahuman 3y ago

I just sold a house in the US and the thought of listing it ourselves did cross my mind, but in the end we used an agent and they did _everything_ for us while I was out of the country, and got us a great price. In the end the amount of commission we paid to our agent (3%) didn't feel excessive at all since I barely had to lift a finger (besides moving). Now, 3% for the buyer's agent? _that_ felt excessive.

brianwawok 3y ago
It’s almost like an out of the country agent deserves 3% and an in agent selling agent deserves $2000. Vs a single fixed price they all get. I had an agent get halfway through listing my house for sale and tell me his fee was 7%. Noped out of that one.
Navarr 3y ago
The buyer's agent fee is basically subsidizing the hard work of buyer's agents (which is taking their clients to multiple properties, discussions about what they want, using time browsing MLS to find houses that meet criteria and arranging tours of them) When I was looking to buy a house, my agent received no financial compensation from me at any point. Their work was entirely subsidized by the buyer's agent fee - and we looked at a lot of houses trying to find the right one. The negative effect of that is that they're incentivized to offload us asap.
- yesimahuman 3y ago
  Yes but from the perspective of the seller, the buyer's agent fee feels like you're subsidizing the realtor market to make it viable. Now, don't get me wrong, when I _bought_, I was very happy my agent made money, because she deserved it. I can just understand the attitude to sellers over agent commission (not saying I agree with it)
- nordsieck 3y ago
  > The buyer's agent fee is basically subsidizing the hard work of buyer's agents (which is taking their clients to multiple properties, discussions about what they want, using time browsing MLS to find houses that meet criteria and arranging tours of them) Since Zillow and Redfin have existed for quite some time how, that service seems a lot less valuable. I'm sure it can be worth it in the right circumstances, though.

foogazi 3y ago

> The buyer doesn't bear the cost at all The buyer is the only one bringing money into the deal so they pay for both agents

DOSUser67 3y ago
That's not true, the agent fees come from the seller's money. It's only true if you consider your employer to be paying for everything you have in your house, because they gave you the money you used to pay for your stuff.
- ilikehurdles 3y ago
  I think their view is that money is fungible, and ultimately factored into the price the buyer pays. The agents aren’t getting paid unless there’s a buyer, so everything in a real estate transaction (the commissions and the property) is paid for using the buyer’s liquid assets. When I’ve been a seller I’d have been willing to lower the price in a slow market more, had commissions not been a factor. Instead I shelved the listing until the market improved because I reached the lowest price I was willing to close at. So in that sense, the buyer is definitely paying for that commission via inflated price.
- hn_throwaway_99 3y ago
  Whether it's "true" or not obviously depends on the point of view of "when in the transaction that the transfer of money ownership takes place", but I definitely agree with the parent comment. The problem with your house analogy is that (a) there can be long time spans between when your employer pays you and when you buy stuff in your house, and (b) you presumably have complete control over everything you decide to purchase in your house. That's not really true in the real estate example, where everything is part of a single transaction to which only one party is bringing any actual money. A better analogy would be social security taxes in the US. In the US, the fiction is that the employer pays for half of an employee's social security taxes, and the employee pays for the other half out of their paycheck deductions. But basically every economist considers this a work of fiction, and since the true cost of an employee is everything the employer needs to pay, they basically consider all the social security taxes as costs to the employer.

lawlessone 3y ago

>navigating bidding wars, A lot of anecdotal evidence they encourage this.

ineptech 3y ago

For the buyer, the value is clear: someone to go out with you to house after house, let you in, walk around with you, talk about whether you could fit a king-sized bed in that room, etc. It's a lot of work and the buyer gets a lot of value from it. But for the seller, who pays the tab, the only value is that some buyers' agents will steer their clients away from you unless you offer a large commission. The individual realtors I know are nice people who work hard, but the industry as a whole is pretty obviously maintained by collusion, and I'm glad it finally seems to be crumbling.

komadori 3y ago
That system seems very convoluted to me. In the UK, only the seller pays a commission on the sale price (typically ~1.5%) and the seller's estate agent is responsible for showing buyers around the property. The buyer doesn't need their own estate agent unless they're also selling a previous property at the same time.
- aftbit 3y ago
  That seems backwards. Only the buyer should need an agent, as they are the one who is searching. The seller is just sitting around waiting for offers.
  - travem 3y ago
    Think of this in the context of what happens with the majority of other purchases you are making? How many of those have a "buyers agent" vs a sales person? I've bought houses in both the UK and the US, I preferred the UK approach where I found the houses myself (and in the US it's not that different with tools like Zillow etc.) and paid for a lawyer to handle the paper work for much less than the real estate commission that was paid (and part of the house price I ultimately paid). In fact, you could really view the commission split paid to the buyers agent (from the seller) as part of that expense of the seller marketing their property.
  - cyanydeez 3y ago
    if it were just an object, it makes more sense that the seller does the leg work. they know the object, the market, etc. they're the expert. why does a buyer need a expert on all the objects out there? I know there's technical examinations like a home inspection that the buyer would have done, but if you're just talking about navigating the property and legal docs, seems like the buyer isn't going to need an agent to do that other than once to accept the price.

kelnos 3y ago

Hell, realtors have not provided anywhere near that much value to me on that buying side, either. Certainly things were easier than without them, but not $20k easier. For my most recent home purchase, my realtor easily made $1k/hour, even after taking into account whatever percentage her firm takes. I'm strongly considering a DIY approach the next time I buy a house. I may eventually give up and get a realtor, but I'm curious to see if I really need one.

gitfan86 3y ago

The worst part of an agent is that they will not show you a house that is for sale by owner. They are actively limiting your options and you are paying them for that service

Spooky23 3y ago

Like any sales profession, the median salesperson is a moron. Many of the listing agents just try to sign as many as possible to get the shared commission. They’re easy to find because theirs is a volume game and they market heavily. If you don’t ask for what you want or know what you want, you get those guys. If you do, you pay for the big leagues. You’re not going to find their business card at the coffee shop bulletin board or church bulletin. When I sold my first house, I paid the full commission plus 50% of anything over ask if it closed within 45 days of signing. This lady was a beast. She hung out at divorcee support groups and had a file of recently divorced women with cash settlements. All-cash offer, well over list, accepted the day before listing with no contingency; closed 10 days later. Did I feel like a horrible person? Yes. Was the place sold to my needs? Yes.

poulsbohemian 3y ago
>Like any profession, the median is a moron. Fixed that for you. I wish when real estate comes up on HN, as it seems to weekly, that more members of this community would reflect upon the 10x programmer conversation. In any given profession, there are going to be skilled people and less skilled people, in the same way that Pareto's principle tells us that 20% of the people are doing 80% of the work. So I appreciate you making this observation. May I ask - why did you feel like a horrible person? Sounds to me like you had a good sense of what you wanted to accomplish and you found someone who could help you reach your goals.
- Spooky23 3y ago
  Fair point. The thing about real estate is that cost doesn’t correlate with anything, and the principal of the brokerage has an incentive that doesn’t align with any other stakeholder. I found the idea that a salesperson was cultivating people in therapy as sales leads repulsive. But I cashed the check nonetheless.

fishywang 3y ago

My understanding is that in a common American setup, the commission seller paid is split by seller's and buyer's agents half/half.

bilsbie 3y ago

I got overrun by phone calls when I tried this. 10+ per day with 90% being agents trying to scam me into listing with them. How did you handle that? I finally got a traditional agent just to field the phone calls.

akomtu 3y ago

The buyer agents are useless in nearly all cases. The useful ones are called real estate attorneys, and only when it's the buyer's market. A standard buyer agent is a kid who finished a 2 week course on how to fool the buyer. His or her core competencies include: subscribing your email to an automated mls search that spams you with irrelevant listings every week, actually reviewing the listings according to your criteria is beneath them because it's real work; on the showings the agent persuades you to write an offer for the listed price, and never bothers to look for possible defects that may ruin the deal, such as foundation cracks; the agent has a inspector buddy who can write a stellar inspection report, after having inspected its lawn only; the agents are gravely offended by the idea of reducing their commission to something more sensible; they show a great resolve at pushing you to sign an exclusive contract for a very long term, and insist on bearing no responsibility.