7 ms·

The ludicrous 6% fee is whats going to drive adoption by end users and in turn by brokers. Move that fee to 1% for buyer agent and you have a massive market.

itake 2y ago
The 6% fee was paid by the sellers, not the buyers. Buyers didn't pay anything to the agents. But even then, the buyer's agents would "refund" the buyer ~2% of the fee as a cashback incentive to use a specific agent. but recently, the rule changed so the sellers are only required to pay the 3% fee to the seller's agent and buyers need to negotiate their own deal with the buyer's agent. Currently, there are many brokerages competing on buyer's fees, dropping the fee to 1% or offering a flat-rate fee. I'm very skeptical that a 1% buyer's agent fee (matching the existing players) would move the needle much.
- gycom 2y ago
  The 6% fee (more normally 5% around these parts, western US) is paid by the sellers, but with the buyer's money. Usually. However, it's important to note that there was never a requirement for anyone to pay anything; it was simply what was commonly put into contracts. The settlement didn't change anything about that in particular. I just sold a house a couple weeks ago. I agreed to pay my seller's agent 2.5% out of the sale price. I also, in the contract, offered to pay 2.5% to the buyer's agent. In the event that my seller's agent was also the buyer's agent, that 2.5% would be refunded to me. What actually ended up happening was that in the offer that we ended up accepting, the buyer asked us to pay 3% instead of 2.5% to their agent. We agreed.
  - greenfish6 2y ago
    The primary driving factor on all these rates is the net take home for the seller. The reason why the total fee of 6% in a 3/3 split is because if this is done, then the seller will net about 10% higher than if they used no realtor. Similarly, for the buy agent half, they will get multiple extra % of home price above that 2.5%. The structure of the MLS / commission system incentivizes sellers to take out these large fees because they will be rewarded for doing so. Only when the system is upgraded to allow sellers and buyers to find each other and pay market rates will the fees go down (we want to provide our own MLS in the longer term future)
    - gycom 2y ago
      "Our own MLS" already exists in multiple forms; getting everyone to agree to use the same one is the problem, and AI isn't going to solve that.
      - aiaiaiaiaiai 2y ago
        As a non american, why arent the other sites getting used? And why does MLS cause this fee structure anyway? Why dont sellers give a 3% discount or cashback to agentless buyers too? It would be in their interest. The cashback would effectively reduce the downpayment.
        throwway120385 2y ago
        The buyer's agent handles some matters of the contract like properly notifying the seller of defects found during an inspection by form. There's a process for that that is meant to prevent the buyer from disadvantaging the seller if the house ends up back on the market. There are other things the buyer's agent does, like ours would sometimes temper our reactions when representing us to the seller's agent. She would also let us know when items on the contingency timeline were expiring and what our options were after those deadlines. That's not something I had the time to figure out on my own.
    - poulsbohemian 2y ago
      >then the seller will net about 10% higher than if they used no realtor See this is the bit where a good Realtor makes their money... on nearly every deal I do, I am saving or making more money for my buyers and sellers over what they could either do on their own or what they would get from another Realtor. Why? Because I have a strong analytical approach to the market and I actually do my job. The typical agent waits for offers to come in and makes no effort to negotiate a better outcome for their seller. Likewise, many agents are lazy and have no idea how to advise their buyers on what to offer or how to create an overall compelling offer, IE: what are the possible levers we can use to create a competitive offer apart from cash on the barrel? It makes me cry when I see agents who don't even know what acting in their client's best interest means - but I don't blame them, I blame the public that makes no effort to interview or get to know their agent. Way easier to pick the person from your church or who you went to high school with than to actually interview and ask questions. I often wonder - does the public also act ignorantly when picking a lawyer, an accountant, a doctor, or other professionals?
- xienze 2y ago
  > The 6% fee was paid by the sellers, not the buyers. Buyers didn't pay anything to the agents. It’s the buyer’s money, which becomes the seller’s money, which gets paid to the agents. Realtors need to stop lying about who pays the fees.
  - cortesoft 2y ago
    The seller is the one who signs the contract with the agent and determines what percentage of the purchase price goes to the agent. It doesn’t matter that the buyer was the source of the money, the seller is who decided what to do with it. If the seller uses 10% of the sale price to buy a boat, are you going to say that the house buyer bought the boat?
    - xienze 2y ago
      That’s a transaction that occurs after the sale. The paying of agents is something that happens as part of the sale, so yes the buyer is very much paying the agent fees.
      - cortesoft 2y ago
        It's coming out of the seller's cut, though. Houses aren't sold at a fixed price. Buyers all put in bids and the seller chooses the best one. The amount paid for the house isn't going to be less if there were no agent fees. The buyer is paying the specific price because there are other buyers who would pay slightly less. It isn't like buyers are adding money to their offer because of agent fees, and sellers aren't going to sell the house for less if they didn't have agent fees. The price point is market equilibrium, which means the agent fees come out of the seller's total. Now, you might try to argue that more sellers would enter the market if sellers made 6% more on selling their house, which would increase supply and decrease price, but that's a big stretch... sellers are usually selling their house for reasons besides making 6 percent more.
  - aiaiaiaiaiai 2y ago
    2 identical appartments in a block. All equal. Both sell for $400k the going rate. One seller pays 6% and hell they pay income tax on it too. The other pays 0%. Which buyer paid for what again?
- koolba 2y ago
  > The 6% fee was paid by the sellers, not the buyers. Buyers didn't pay anything to the agents. Buyers are the ones paying everything. At 6%, that means the seller is willing to accept 94% of the sale price for the deal. So with a lower fee or simply less middle men feasting on low information transacters, a buyer with 94-100% could purchase that house and both parties would be happier.
  - itake 2y ago
    No. Buyers never consent for "their" money to go to the buyer's agent or sellers agent. The selling agent's contract with the seller (not the buyer) is the seller will pay the 3% fee to seller's agent and offer a 3% fee to the buyer's agent. Buyers historically have never negotiated the fee paid to their agent, other than choosing an agent that would refund part of their fee.
    - knodi123 2y ago
      > Buyers historically have never negotiated the fee paid to their agent Negotiated, no. Paid, yes. If the government adds a 6% tax on shoes, I promise that doesn't mean a 6% drop in Nike stock. It just causes the price to go up.
  - cortesoft 2y ago
    You can switch the words “buyer” and “seller” in your statement and it still works. If you want to consider it being paid by the buyer, you can, or you can say the seller pays it. It is all factored into the deal either way. I would argue, though, that it is more accurate to say it is paid by the seller, though, since they are the ones who agree to the percentage with the agent, and who signs the contract to pay the agent.
    - aiaiaiaiaiai 2y ago
      Probably extra true for peoperties owned by salaried employees whose price is in a large part dictacted by income multiples. In other words market sets the price.
- theGnuMe 2y ago
  >The 6% fee was paid by the sellers The buyer is the only source of money. The rest of it is just a shell game.
  - cortesoft 2y ago
    Well, the buyer’s employer is actually the one paying the buyer the money that goes to the mortgage, are we going to start saying the employer is the one buying the house? No, because that is just how the economy works, money changes hands constantly. We say the person who makes the choice for the purchase is the one who paid for something… the seller signs the contract with the agent, so they are the ones paying.
    - pzo 2y ago
      When you selling any kind of product or service the price you gonna charge will take into account expenses that you have to sell or make this product, e.g. if you sell app in appstore and Apple and other taxes will eat 45% of your app price and you know you will break even at $1 per app profit then definitely you will ask user for $2.
      - cortesoft 2y ago
        This doesn’t apply to most people selling a house. Sellers are not setting the price for their house, buyers bidding for it do. Anyone selling a house using an agent isn’t someone who manufactures houses. They are mostly people selling their own home because they are moving to a different home. They are going to put their house up for sale, buyers will make offers, and the seller will choose the best offer. The buyers are making offers based on what they are willing and able to pay; they don’t care whether 100% of that sale price goes to the seller or if only 94% does. They are making the same offer no matter what. And sellers aren’t going to take 6% less if they don’t have an agent. They are going to take the same offer whether they get 94% of it or 100%; they are taking the best offer made. Even your app example isn’t how it works. There is no “break even” price for a digital good that doesn’t have a COG (cost of good). App manufacturing has a fixed price, and then every unit sold costs them zero dollars. They are going to set the price to be what maximizes the value of “cost per unit * units sold”. That equation is going to be the same no matter what the App Store percentage is. The only thing the percentage does will be to change the amount of money the company makes and change the equation on whether it is worth making the app at all; once the app is created, the only thing that will determine the price is the equation above, not the cost per sale. So many people seem to have this idea that prices for things are based on some “cost per good + profit margin = price”, but that isn’t how any good is priced. Many goods end up being priced in a way that is close to that, but that is only because of robust competition. Prices are set by the seller trying to figure out which price will generate them the most profit; the cost to make the good only sets a price floor, where if they can’t get more than that amount, it simply isn’t even worth it to make and sell the good. It has nothing to do with the price ceiling.
Closi 2y ago
Is this the rate in the USA? In the uk it’s a standard 1% for the seller.
- sahmeepee 2y ago
  It actually varies a bit in the UK (always for the seller as you say) with a possibly surprising relationship with property value: properties at the top end typically pay a higher % than those in the middle or at the bottom.
whiplash451 2y ago
If there was a serious opportunity to arbitrage under the 6% fee, you bet that someone would have done it already — and well before the AI era.
- rco8786 2y ago
  To be fair, NAR goes to great lengths to maintain their monopoly and lock out anyone who tries to buy or sell a house without using them....specifically because they know they're priced insanely high for the services they provide and are in real danger of being undercut.
  - DLA 2y ago
    You can buy, for example, literally millions of dollars of corporate bonds for “The smaller of $250 or 1% of Trade Value” at IB. https://www.interactivebrokers.com/en/pricing/commissions-bonds.php https://www.interactivebrokers.com/en/pricing/commissions-bo... The real estate market is still largely price fixed and quite inefficient.
  - ethbr1 2y ago
    > NAR goes to great lengths to maintain their monopoly Went to great lengths, considering they've lost a few major court cases and are now prohibited from their prior shenanigans. https://en.m.wikipedia.org/wiki/National_Association_of_Realtors#Antitrust_lawsuits https://en.m.wikipedia.org/wiki/National_Association_of_Real...
    - rco8786 2y ago
      It’s not stopping them. It’s just causing them to change tactics. NAR still has a stranglehold even after the lawsuits.
  - lotsofpulp 2y ago
    Ever since Zillow/Redfin came out, there hasn’t been a need to use a real estate agent. All buyers are getting push notifications 24/7. If you want to save on commission, then get the pics taken yourself, and pay a listing service a few hundred dollars for your property to show up on Zillow/Redfin.
rco8786 2y ago
IF they can deliver a product that actually works, yes.
homefree 2y ago
It's a corrupt market imo, like car dealerships - they work to legislate their continued existence. Any market structured where you have some people doing many transactions and some doing few ends up skewed to benefit the person doing many while screwing the person doing few. It's true with realtors, IPOs with investment banks, car dealerships, funeral homes etc. and it's a hard problem to fix.
- d0gsg0w00f 2y ago
  How else would a car manufacturer put staff and inventory in every town across the country? They would either build dealerships themselves or franchise it out. Their cost structures don't cover this brick and mortar presence currently so costs would rise across the board. Car dealerships are mostly middlemen between customer, manufacturer, and state government for registration and tax collection. I just can't see how you eliminate the need to have locations to store and move around 5000lb metal objects without them.
  - 0xB31B1B 2y ago
    Tesla does all of this and they do it without dealerships. The problem with dealerships is they’re independent franchised businesses that extract but do not create value, not that they are buildings full of cars.
    - mcmcmc 2y ago
      I think you missed the part about "towns across the country". For almost 20k towns and cities in the US there are 245 Tesla storefronts.
      - nostrebored 2y ago
        The idea that you have to go to a dealership is what’s being challenged. If you have faith in the brand, is it that much more absurd to buy via transfer?
dkasper 2y ago
The fee is already 1% in a lot of places after the NAR ruling earlier this year so that arbitrage is mostly gone.
- imranhou 2y ago
  Is there any data or statistics you could point to? I’m really curious as to how much shift has occurred since the shift by NaR
infecto 2y ago
To tack on what others said, the fee reduction is huge but that is what RedFin has been doing and while I believe it to be a better workfow as a buyer/seller, I do not believe they have been a massive disruption to the market.

itake 2y ago

The 6% fee was paid by the sellers, not the buyers. Buyers didn't pay anything to the agents. But even then, the buyer's agents would "refund" the buyer ~2% of the fee as a cashback incentive to use a specific agent. but recently, the rule changed so the sellers are only required to pay the 3% fee to the seller's agent and buyers need to negotiate their own deal with the buyer's agent. Currently, there are many brokerages competing on buyer's fees, dropping the fee to 1% or offering a flat-rate fee. I'm very skeptical that a 1% buyer's agent fee (matching the existing players) would move the needle much.

gycom 2y ago
The 6% fee (more normally 5% around these parts, western US) is paid by the sellers, but with the buyer's money. Usually. However, it's important to note that there was never a requirement for anyone to pay anything; it was simply what was commonly put into contracts. The settlement didn't change anything about that in particular. I just sold a house a couple weeks ago. I agreed to pay my seller's agent 2.5% out of the sale price. I also, in the contract, offered to pay 2.5% to the buyer's agent. In the event that my seller's agent was also the buyer's agent, that 2.5% would be refunded to me. What actually ended up happening was that in the offer that we ended up accepting, the buyer asked us to pay 3% instead of 2.5% to their agent. We agreed.
- greenfish6 2y ago
  The primary driving factor on all these rates is the net take home for the seller. The reason why the total fee of 6% in a 3/3 split is because if this is done, then the seller will net about 10% higher than if they used no realtor. Similarly, for the buy agent half, they will get multiple extra % of home price above that 2.5%. The structure of the MLS / commission system incentivizes sellers to take out these large fees because they will be rewarded for doing so. Only when the system is upgraded to allow sellers and buyers to find each other and pay market rates will the fees go down (we want to provide our own MLS in the longer term future)
  - gycom 2y ago
    "Our own MLS" already exists in multiple forms; getting everyone to agree to use the same one is the problem, and AI isn't going to solve that.
    - aiaiaiaiaiai 2y ago
      As a non american, why arent the other sites getting used? And why does MLS cause this fee structure anyway? Why dont sellers give a 3% discount or cashback to agentless buyers too? It would be in their interest. The cashback would effectively reduce the downpayment.
      - throwway120385 2y ago
        The buyer's agent handles some matters of the contract like properly notifying the seller of defects found during an inspection by form. There's a process for that that is meant to prevent the buyer from disadvantaging the seller if the house ends up back on the market. There are other things the buyer's agent does, like ours would sometimes temper our reactions when representing us to the seller's agent. She would also let us know when items on the contingency timeline were expiring and what our options were after those deadlines. That's not something I had the time to figure out on my own.
  - poulsbohemian 2y ago
    >then the seller will net about 10% higher than if they used no realtor See this is the bit where a good Realtor makes their money... on nearly every deal I do, I am saving or making more money for my buyers and sellers over what they could either do on their own or what they would get from another Realtor. Why? Because I have a strong analytical approach to the market and I actually do my job. The typical agent waits for offers to come in and makes no effort to negotiate a better outcome for their seller. Likewise, many agents are lazy and have no idea how to advise their buyers on what to offer or how to create an overall compelling offer, IE: what are the possible levers we can use to create a competitive offer apart from cash on the barrel? It makes me cry when I see agents who don't even know what acting in their client's best interest means - but I don't blame them, I blame the public that makes no effort to interview or get to know their agent. Way easier to pick the person from your church or who you went to high school with than to actually interview and ask questions. I often wonder - does the public also act ignorantly when picking a lawyer, an accountant, a doctor, or other professionals?
xienze 2y ago
> The 6% fee was paid by the sellers, not the buyers. Buyers didn't pay anything to the agents. It’s the buyer’s money, which becomes the seller’s money, which gets paid to the agents. Realtors need to stop lying about who pays the fees.
- cortesoft 2y ago
  The seller is the one who signs the contract with the agent and determines what percentage of the purchase price goes to the agent. It doesn’t matter that the buyer was the source of the money, the seller is who decided what to do with it. If the seller uses 10% of the sale price to buy a boat, are you going to say that the house buyer bought the boat?
  - xienze 2y ago
    That’s a transaction that occurs after the sale. The paying of agents is something that happens as part of the sale, so yes the buyer is very much paying the agent fees.
    - cortesoft 2y ago
      It's coming out of the seller's cut, though. Houses aren't sold at a fixed price. Buyers all put in bids and the seller chooses the best one. The amount paid for the house isn't going to be less if there were no agent fees. The buyer is paying the specific price because there are other buyers who would pay slightly less. It isn't like buyers are adding money to their offer because of agent fees, and sellers aren't going to sell the house for less if they didn't have agent fees. The price point is market equilibrium, which means the agent fees come out of the seller's total. Now, you might try to argue that more sellers would enter the market if sellers made 6% more on selling their house, which would increase supply and decrease price, but that's a big stretch... sellers are usually selling their house for reasons besides making 6 percent more.
- aiaiaiaiaiai 2y ago
  2 identical appartments in a block. All equal. Both sell for $400k the going rate. One seller pays 6% and hell they pay income tax on it too. The other pays 0%. Which buyer paid for what again?
koolba 2y ago
> The 6% fee was paid by the sellers, not the buyers. Buyers didn't pay anything to the agents. Buyers are the ones paying everything. At 6%, that means the seller is willing to accept 94% of the sale price for the deal. So with a lower fee or simply less middle men feasting on low information transacters, a buyer with 94-100% could purchase that house and both parties would be happier.
- itake 2y ago
  No. Buyers never consent for "their" money to go to the buyer's agent or sellers agent. The selling agent's contract with the seller (not the buyer) is the seller will pay the 3% fee to seller's agent and offer a 3% fee to the buyer's agent. Buyers historically have never negotiated the fee paid to their agent, other than choosing an agent that would refund part of their fee.
  - knodi123 2y ago
    > Buyers historically have never negotiated the fee paid to their agent Negotiated, no. Paid, yes. If the government adds a 6% tax on shoes, I promise that doesn't mean a 6% drop in Nike stock. It just causes the price to go up.
- cortesoft 2y ago
  You can switch the words “buyer” and “seller” in your statement and it still works. If you want to consider it being paid by the buyer, you can, or you can say the seller pays it. It is all factored into the deal either way. I would argue, though, that it is more accurate to say it is paid by the seller, though, since they are the ones who agree to the percentage with the agent, and who signs the contract to pay the agent.
  - aiaiaiaiaiai 2y ago
    Probably extra true for peoperties owned by salaried employees whose price is in a large part dictacted by income multiples. In other words market sets the price.
theGnuMe 2y ago
>The 6% fee was paid by the sellers The buyer is the only source of money. The rest of it is just a shell game.
- cortesoft 2y ago
  Well, the buyer’s employer is actually the one paying the buyer the money that goes to the mortgage, are we going to start saying the employer is the one buying the house? No, because that is just how the economy works, money changes hands constantly. We say the person who makes the choice for the purchase is the one who paid for something… the seller signs the contract with the agent, so they are the ones paying.
  - pzo 2y ago
    When you selling any kind of product or service the price you gonna charge will take into account expenses that you have to sell or make this product, e.g. if you sell app in appstore and Apple and other taxes will eat 45% of your app price and you know you will break even at $1 per app profit then definitely you will ask user for $2.
    - cortesoft 2y ago
      This doesn’t apply to most people selling a house. Sellers are not setting the price for their house, buyers bidding for it do. Anyone selling a house using an agent isn’t someone who manufactures houses. They are mostly people selling their own home because they are moving to a different home. They are going to put their house up for sale, buyers will make offers, and the seller will choose the best offer. The buyers are making offers based on what they are willing and able to pay; they don’t care whether 100% of that sale price goes to the seller or if only 94% does. They are making the same offer no matter what. And sellers aren’t going to take 6% less if they don’t have an agent. They are going to take the same offer whether they get 94% of it or 100%; they are taking the best offer made. Even your app example isn’t how it works. There is no “break even” price for a digital good that doesn’t have a COG (cost of good). App manufacturing has a fixed price, and then every unit sold costs them zero dollars. They are going to set the price to be what maximizes the value of “cost per unit * units sold”. That equation is going to be the same no matter what the App Store percentage is. The only thing the percentage does will be to change the amount of money the company makes and change the equation on whether it is worth making the app at all; once the app is created, the only thing that will determine the price is the equation above, not the cost per sale. So many people seem to have this idea that prices for things are based on some “cost per good + profit margin = price”, but that isn’t how any good is priced. Many goods end up being priced in a way that is close to that, but that is only because of robust competition. Prices are set by the seller trying to figure out which price will generate them the most profit; the cost to make the good only sets a price floor, where if they can’t get more than that amount, it simply isn’t even worth it to make and sell the good. It has nothing to do with the price ceiling.

Closi 2y ago

Is this the rate in the USA? In the uk it’s a standard 1% for the seller.

sahmeepee 2y ago
It actually varies a bit in the UK (always for the seller as you say) with a possibly surprising relationship with property value: properties at the top end typically pay a higher % than those in the middle or at the bottom.

whiplash451 2y ago

If there was a serious opportunity to arbitrage under the 6% fee, you bet that someone would have done it already — and well before the AI era.

rco8786 2y ago
To be fair, NAR goes to great lengths to maintain their monopoly and lock out anyone who tries to buy or sell a house without using them....specifically because they know they're priced insanely high for the services they provide and are in real danger of being undercut.
- DLA 2y ago
  You can buy, for example, literally millions of dollars of corporate bonds for “The smaller of $250 or 1% of Trade Value” at IB. https://www.interactivebrokers.com/en/pricing/commissions-bonds.php https://www.interactivebrokers.com/en/pricing/commissions-bo... The real estate market is still largely price fixed and quite inefficient.
- ethbr1 2y ago
  > NAR goes to great lengths to maintain their monopoly Went to great lengths, considering they've lost a few major court cases and are now prohibited from their prior shenanigans. https://en.m.wikipedia.org/wiki/National_Association_of_Realtors#Antitrust_lawsuits https://en.m.wikipedia.org/wiki/National_Association_of_Real...
  - rco8786 2y ago
    It’s not stopping them. It’s just causing them to change tactics. NAR still has a stranglehold even after the lawsuits.
- lotsofpulp 2y ago
  Ever since Zillow/Redfin came out, there hasn’t been a need to use a real estate agent. All buyers are getting push notifications 24/7. If you want to save on commission, then get the pics taken yourself, and pay a listing service a few hundred dollars for your property to show up on Zillow/Redfin.

rco8786 2y ago

IF they can deliver a product that actually works, yes.

homefree 2y ago

It's a corrupt market imo, like car dealerships - they work to legislate their continued existence. Any market structured where you have some people doing many transactions and some doing few ends up skewed to benefit the person doing many while screwing the person doing few. It's true with realtors, IPOs with investment banks, car dealerships, funeral homes etc. and it's a hard problem to fix.

d0gsg0w00f 2y ago
How else would a car manufacturer put staff and inventory in every town across the country? They would either build dealerships themselves or franchise it out. Their cost structures don't cover this brick and mortar presence currently so costs would rise across the board. Car dealerships are mostly middlemen between customer, manufacturer, and state government for registration and tax collection. I just can't see how you eliminate the need to have locations to store and move around 5000lb metal objects without them.
- 0xB31B1B 2y ago
  Tesla does all of this and they do it without dealerships. The problem with dealerships is they’re independent franchised businesses that extract but do not create value, not that they are buildings full of cars.
  - mcmcmc 2y ago
    I think you missed the part about "towns across the country". For almost 20k towns and cities in the US there are 245 Tesla storefronts.
    - nostrebored 2y ago
      The idea that you have to go to a dealership is what’s being challenged. If you have faith in the brand, is it that much more absurd to buy via transfer?

dkasper 2y ago

The fee is already 1% in a lot of places after the NAR ruling earlier this year so that arbitrage is mostly gone.

imranhou 2y ago
Is there any data or statistics you could point to? I’m really curious as to how much shift has occurred since the shift by NaR

infecto 2y ago

To tack on what others said, the fee reduction is huge but that is what RedFin has been doing and while I believe it to be a better workfow as a buyer/seller, I do not believe they have been a massive disruption to the market.