[HN Gopher] Jury Finds Realtors Conspired, Awards Nearly $1.8B i...
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Jury Finds Realtors Conspired, Awards Nearly $1.8B in Damages
Author : nerdo
Score : 255 points
Date : 2023-10-31 18:35 UTC (4 hours ago)
(HTM) web link (www.wsj.com)
(TXT) w3m dump (www.wsj.com)
| a-posteriori wrote:
| Does anyone know what this actually means for real estate
| brokerage fees?
|
| There are few markets which have supported 3-5% brokerage fees
| (even i-banking is <100bps at scale now) so I'm curious where the
| fees will settle.
| notaustinpowers wrote:
| This could change the process to this: 1) Seller gives a
| portion of their home price to their Agent as a commission
| (let's say 3%). The seller only paid 3% in commissions. 2) The
| Buyer negotiated a commission with their Agent (let's say
| $10,000). Which the buyer pays out-of-pocket, or has paid out
| of their financing for the home.
|
| This allows the Seller's Agent to maintain their duty to
| maximizing the value of their client's home by reducing the
| commission the seller pays. While also ensuring the Seller's
| Agent doesn't bend to the Buyer's Agent's wishes for a higher
| commission to secure a deal. This also allows the Buyer's Agent
| to maintain their duty to their client by negotiating their
| commission up-front, regardless of the price of the property.
| They could negotiate a percentage with their client, but that
| percentage is the Buyer's responsibility, not the seller. It
| gives the Buyer more power in the commission paid to their
| Agent.
|
| TLDR: Seller's had more power in pricing and commission
| payments to Agent's on both sides of the transaction, skewing
| home values higher to offset their (commonly) 6% commission
| payments. This segments the Seller's commission to just their
| Agent, and the Buyer's commission to just the buyer.
| jfk13 wrote:
| These US fees always seem astonishingly high to me. Here,
| something more like 1.5% would be typical.
| notaustinpowers wrote:
| Yeah, it is very high. Although, the real estate industry
| in the US is vastly different.
|
| - Agents do not receive salary, benefits, etc. Their only
| payment is when they close a deal. - Real Estate Agents are
| a dime a dozen since the licensing and training is pretty
| minimal. So lots of competition fighting over small supply,
| so it can be difficult to consistently get clients. -
| Agents can pay around $100/month to their Brokerage for E&O
| insurance, maybe access to legal forms, and a Broker for
| questions/insight. So they start spending money from the
| get-go. - Agents, typically, pay all expenses related to
| the job (advertising, signage, listing fees, etc).
| jandrese wrote:
| Yeah, it's tough on both sides. Competition is fierce for
| leads, but the rates have to be sky high to support the
| enormous mass of realtors. If the fees drop a lot of
| people are going to need to find new jobs.
| flkiwi wrote:
| If competition is fierce for leads because there is a
| glut of workers due to nearly zero requirements to become
| one, one would expect rates to plummet. Which, I suppose,
| is why we have a collusion situation here.
| manuelabeledo wrote:
| This reads like the reason why one shouldn't become an
| agent in the US. It's honestly hard to feel sympathy for
| people who are basically gambling their professional
| careers on the real estate market.
| jjtheblunt wrote:
| For what definition of "Here"?
| jfk13 wrote:
| UK
| sokoloff wrote:
| > maximizing the value of their client's home by reducing the
| commission the seller pays.
|
| Selling a house quickly (convincing the seller to take a
| qualified and likely-to-close offer) still dominates as a
| strategy over eeking out a few extra points of contract
| price. As an agent, taking 1.25% or 1.5% of a $950K sale
| quickly is way better than holding out for a $1M offer.
|
| The difference in commission at 1.5% on a $50K delta in sales
| price is $750. Freeing up your time to work on the next
| listing is more valuable.
| efitz wrote:
| I always thought the right strategy would be to have a
| sellers agent contract that was tiered, eg agent gets 1-2%
| of selling price up to average comps, and then 20% of
| excess selling price over that. Maybe a bonus or penalty
| for timing, to prevent waiting forever for a good offer.
| notaustinpowers wrote:
| The main issue with that possibility is many brokerages (at
| least ones in my area) do not allow a Seller's Agent to
| reduce their commission without prior Broker authorization.
| Regardless of what the Seller themselves wants. So while
| that deal may be advantageous for the Seller (sell quickly)
| and the Agent (get the deal over with and move on to the
| next), the Broker is the one getting paid a lower sum and
| will not allow that contract to be ratified.
| sokoloff wrote:
| Nothing in my comment is about _changing_ the percentage
| of the commission. (The 1.25% or 1.5% is simply the
| listing agent 's personal split of a 5% or 6% total
| commission [whichever is customary in the local area]).
| notaustinpowers wrote:
| Sorry, I didn't explain enough. The total commission
| remains 6%, but if the Seller's Agent split is only
| 1.25%, the Seller Agent's Broker (most likely) will deny
| that as the Broker would receive a reduced cut of the
| commission.
|
| The Seller and the Seller's Agent may be cool with the
| reduction, but the Broker would ultimately have the final
| say since it's, legally, their contract.
| sokoloff wrote:
| Ah. I've never seen a percentage-based commission divided
| unequally into the four parts: agent and brokerage
| crossed with listing and buying.
|
| I have seen 6% (1.5% x 4) and 5% (1.25% x 4).
| notaustinpowers wrote:
| Yeah, it's usually unequal in the area I used to work in.
| The Agent's have their own agreements with their Brokers
| that are independent of any sale/purchase they work on.
| I've seen everything from 50/50 all the way to 90/10 (10%
| to Broker).
| robocat wrote:
| We don't really have buyer's agents in New Zealand (the idea
| exists but used extremely rarely in my experience).
|
| I'm rather suspicious of the US system that creates a place
| for two agents getting 3% each for little gain (and a lot of
| scope for collusion against the buyer and/or seller!)
|
| The New Zealand system has its flaws. The major problem is
| that vendor real estate agents are financially incentivised
| to turn over sales as quickly as possible and so smart agents
| do not represent their vendors properly. I've seen lots of
| house sales where an offer is made and the agent recommends
| the seller take it. An early sale costs the agent much less
| time and they make way more money per year. New Zealanders
| are generally too trusting, so we get screwed over by people
| that take advantage of that.
| rubymancer wrote:
| Nothing yet. I'd imagine it will go through appeals for a few
| years before anything actually happens, and U.S. antitrust
| enforcement has not exactly been a powerful force for the last
| few decades.
| bozhark wrote:
| Nothing over 1.5%.
|
| Ever.
| toomuchtodo wrote:
| Related: https://news.ycombinator.com/item?id=38088740
| stuff4ben wrote:
| Commission based on home value is a joke. Realtors should earn a
| flat-rate.
| Kirby64 wrote:
| You can. It's just a bit of a racket (hence, conspiracy
| judgment) and nobody will work with you if you only offer a
| flat rate. Since MLS is mostly limited to Realtors in most
| markets, you're basically locked out from posting there.
|
| There's ways around it, and flat fee brokers that exist, but
| you hamper your sales ability. Not an issue when its a sellers
| market, but can be rough in a buyers market.
| bluGill wrote:
| There are flat rate realtors where I live. However they are
| only 50%, the still give the same 3.5% to the buyers agent,
| but they take for themselves a fixed rate to get you on MLS.
| I'm not sure if it is a good deal - they still charge high
| prices relative for what they do for you. (it is cheaper than
| a full agent, but they also do much less)
| Kirby64 wrote:
| You just don't sign a contract where you give a buyers
| agent commission, although again this limits the pool.
| Frankly, buyers agents are largely a scam in my view. With
| MLS, Zillow, Redfin, etc, their 'experience' seems mostly
| worthless. It certainly is not worth 3% of the cost of a
| house.
|
| If anything, sellers agents are more useful since they
| actually offer something valuable to the real estate
| experience (e.g., listing housing, photos, providing buyers
| access, etc).
| bluGill wrote:
| Buyers agents know better how to search the MLS system
| (though only a few do this). They also line up times to
| see houses, and take time to drive you to each. So a good
| buyers agent has spent about 8 hours of time to each
| buyer, plus expenses. I agree they are getting far too
| much, but they still are valuable.
| Wytwwww wrote:
| > but they still are valuable.
|
| All of those things seem to be pretty simple and worth
| barely of fraction of $2000 per hour (if they actually
| only spend 8 hours in total? I mean at that point it
| might make sense to spend 40-80 hours to do the same
| things yourself instead depending on your income).
| ejb999 wrote:
| I agree - especially for the last few years, when in order to
| sell a house all you had to do was put in on the market - and
| then get 10-15-20 offers at or above listing price - no agent
| deserves a 6% commission for simply getting something listed on
| zillow or MLS where in recent years, the houses just sold
| themselves.
| judge2020 wrote:
| > no agent deserves a 6% commission for simply getting
| something listed on zillow or MLS
|
| Typically 3% is seller agent commission and 3% is buyer agent
| commission - although in the paperwork it's most likely 6% to
| the seller's agent and the seller's agent offers 3% to the
| buyer's agent.
|
| Although 5% total / 2.5% to each realtor is becoming a bit
| more popular as of recent, based on the listing I browse.
| Spooky23 wrote:
| Remember there's no professional responsibility for
| realtors, so they do shady shit like shop the house
| internally to keep the full 6%.
| scarface_74 wrote:
| You choose the buyers agent.
| poulsbohemian wrote:
| I encourage you to report any behavior you believe to be
| illegal or unethical to both your local realtor
| association as well as your state agency. That's why
| those organizations exist and we are all better if people
| are held to professional standards.
| the_optimist wrote:
| Is there a practical way to diligence theoretically
| unethical behavior?
| refulgentis wrote:
| Parsing the question as:
|
| - a broker with a client who is selling
|
| - to pitch buying to another broker who has a client who
| is buying
|
| - and for the brokers to work for the same company
|
| I don't think so? It sounds obviously ethical
| tssva wrote:
| I don't understand why people don't negotiate more on this.
| I paid 3.5% total commission (1.5% listing and 2% buyer
| agent) on the last 2 homes I sold. One in 2012 and one
| earlier this year. In both cases the homes sold quickly and
| above asking.
| scarface_74 wrote:
| That's only true if you are in a competitive market. There is
| a whole swath of land in flyover country and rural America
| where it can take awhile to sell a house.
| pc86 wrote:
| I mean yes, it's sort of tautological that if you are
| trying to sell a home in a place very few people want to
| live, it might be (but isn't by definition!) harder to sell
| than someplace where a lot of people want to live.
| jsight wrote:
| Is that still the case? I feel like rural markets have
| really boomed in the last few years. At least I'm seeing
| that in the southeast. Maybe "flyover country" is
| different.
| hotnfresh wrote:
| Outside cities, yes, but there also aren't many houses
| there.
|
| In flyover country, in the cities, it's been "OMG, this
| house just came on the market four hours ago... quick, send
| a full offer! Damnit, they already sold it for $20k over
| asking, _again_?!?! " for years, only letting up recently.
|
| [EDIT] And I don't just mean like Chicago and Minneapolis,
| either--any metro area a million or larger, it's probably
| been like that, and even in some of the smaller ones.
| poulsbohemian wrote:
| So negotiate that with your agent if that's what you prefer.
| poulsbohemian wrote:
| So why downvote me? We've got this already in our buyer's
| agency agreements - if you as a buyer want to negotiate
| compensation with your agent, you have the ability to do
| that. Similarly, in both states where I work, you as a seller
| have had the ability to choose what, if any, compensation you
| want to offer to a buyer's broker. None of this is actually
| that different from how you negotiate (or not) with any other
| professional - your lawyer, your accountant, your financial
| advisor, etc.
| conjecTech wrote:
| Negotiation is not an effective strategy when there is
| active collusion to fix prices. You are commenting on a
| story where a jury just found that had been systematically
| done.
| staplers wrote:
| Did you forget the context of the article?
| mynameisash wrote:
| I expect that when it comes time to sell my house, I'll hire a
| real estate attorney to make sure all the paperwork is in
| order, and I'll deal with the rest myself. I engaged an
| attorney when I bought my house, and she was super thorough.
| PaulDavisThe1st wrote:
| I've sold 4 houses "by owner". I didn't even use an attorney
| for 3 of them - just a title/escrow service who take care of
| handling the deposit, filing the deeds after the funds
| transfer is complete etc.
| ejb999 wrote:
| buying a house, I would want an attorney - selling the
| house, I agree, no need for a realtor or attorney if you
| are willing to do a bit of work yourself.
| staticman2 wrote:
| Where I live, the real estate agents association has
| model home sale contracts and it's not common or
| necessary for a buyer to have an attorney.
| SoftTalker wrote:
| Same. It's all very standardized and the title/escrow
| company does it 10 times a day and will handle all the
| paperwork and filings.
| sct202 wrote:
| Attorneys are so ridiculously cheap compared to the realtors.
| In my area there are discount real estate attorneys that will
| do sales/purchases for $200, and the normal price is like
| $500 which is nothing compared to the real estate agents
| getting like $10k on an average home in the area.
| fma wrote:
| Agreed. Add to the fact if you're a seller agent the money is
| easy. A buyer's agent struggle. AFAIK usually you start out as
| a buyer's agent and build up a network/reputation before people
| trust you to sell.
|
| In a seller's market, seems like a buyer's agent should be
| compensated more because it's more difficult to win bids now.
| scarface_74 wrote:
| Not every inch of America is in such a competitive market.
| sahila wrote:
| Sure, but then the logical step is to compensate for the
| realtors time as opposed to some national average.
| bozhark wrote:
| Brokers do, 1.5% from seller and buyer.
|
| Don't use realtors.
| balderdash wrote:
| I'd be willing to pay a percentage above some predetermined
| price (e.g. if the realtor produces some sort of above market
| outcome) - but agree, that the value provided does not equal
| 3-6% of home value
| onlyrealcuzzo wrote:
| If you're selling a $2M house, you're willing to pay more for
| someone to get you a good price.
|
| On the flip side, no one is going to pay $5k to sell a $30k
| house.
|
| Flat rates don't make sense. Maybe you think the percentage is
| too high.
| ska wrote:
| Maybe the percentage should be laddered, or there should be a
| floor.
| plagiarist wrote:
| The incentive for the agent selling the $2M house is to price
| it to sell so they can move on to get their cut of the next
| $2M sale.
| seattle_spring wrote:
| min(5000, House.price * 0.03)
| losteric wrote:
| > If you're selling a $2M house, you're willing to pay more
| for someone to get you a good price.
|
| That sounds very last-century... kinda like selling antiques
| to a pawn shop or consignment store that would take of
| finding a buyer.
|
| Why does discovery and bidding justify $200k in overhead for
| the $2MM property? Why does a _person_ need to go out and
| "find a buyer"?
|
| Without this Realtor conspiracy, surely something like Redfin
| meets eBay would be more efficient? Posting online is what
| the cast majority of realtors do anyway, they don't actually
| "find" buyers... At least until you get to 1%er prices where
| golf club chats matter
|
| Heck, this racket gates even access to standardized legal
| forms that states themselves should freely offer.
| zone411 wrote:
| Commissions for the seller's relator are fine, but they
| shouldn't be based on the full price of the house. This setup
| encourages quick sales rather than getting the best price.
| Instead of the realtor earning 3% on a $1,000,000 house, set a
| base amount at, say, $700,000 and calculate the commission only
| on the remainder - 10% on $300,000. The same principle should
| apply to the buyer's agent but in reverse or there should be a
| flat fee. Their current incentive structure is totally screwed
| up.
| wbsun wrote:
| I have always been wondering what kind of work a realtor needs
| to do for selling/buying a $100M mansion and ended up with $5M
| commission...
| plagiarist wrote:
| Nepotism, same as every other million-dollar job.
| albroland wrote:
| https://archive.ph/Ahzio
| rubymancer wrote:
| There's not much to the article.
|
| > KANSAS CITY, Mo.--A federal jury on Tuesday found the National
| Association of Realtors and large residential brokerages liable
| for about $1.8 billion in damages after determining they
| conspired to keep commissions for home sales artificially high.
|
| > The verdict comes in the first of two major antitrust lawsuits
| that target decades-old industry practices and seek to drive down
| commissions and change the way agents are compensated. The two-
| week trial involved claims by home sellers in several Midwestern
| states. The jury issued its verdict after just hours of
| deliberations.
|
| > Under antitrust rules, the presiding judge could triple the
| damages verdict, which would total more than $5 billion. The
| plaintiffs also have asked the judge to order changes to how the
| industry operates.
|
| > For several years NAR has been fending off accusations by U.S.
| antitrust officials and private litigants that it has conspired
| to keep home-sale costs high in the face of major technological
| upheavals. This verdict is by far the group's biggest setback
| yet.
|
| > An NAR spokesman said, "This matter is not close to being final
| as we will appeal the jury's verdict."
|
| I would _love_ for there to be some sort of competition injected
| into real estate commissions. I 've bought and sold twice now and
| you get the same rate from everyone (within 1%) regardless of
| what they end up doing.
| ransom1538 wrote:
| Just sell it / or buy it yourself. It isn't hard by any
| stretch. You can use a $200 listing broker on a MLS site. That
| is the big secret. Then it gets on zillow,redfin, etc
| automatically.
| bozhark wrote:
| What if you own the title?
| SoftTalker wrote:
| You might not even need to do that much. I sold a home in a
| desirable neighborhood (I don't mean high-end, just a nice
| solid middle-class area with good schools, etc) by just
| putting a "for sale" sign in the front yard.
|
| Having commission be a percent of sales has some theoretical
| advantages. For example you might think the agent is
| motivated to get you the highest selling price. But in
| reality they are much more interested in making a sale at any
| price, because that lets them get paid and lets them move on
| from marketing your property.
|
| Residential real-estate transactions with a mortgage are
| about as regulated and standardized as it gets. The listing
| agent actually does very little beyond getting the property
| listed in the MLS. The difference in the amount of work they
| do in selling a $100K house vs. a $900K house is small (in
| fact the $100K house might take a lot more work because at
| that price it's probably got some serious drawbacks), so why
| should the higher sale price pay them much more?
| conductr wrote:
| MLS puts a lot of eyeballs on it and likely can and will
| increase the sales price. A sign in the yard is not likely
| to ignite a bidding war. Although I'm glad this worked out
| for you, it seems like bad advice in general.
|
| > For example you might think the agent is motivated to get
| you the highest selling price. But in reality they are much
| more interested in making a sale at any price, because that
| lets them get paid and lets them move on from marketing
| your property
|
| This is true. Although, it's just important to remember
| your contract with the realtor is to sell it at a Listing
| Price. You have no obligation or liability to except a
| lower offer or reduce your list price, ever. They are
| salespeople and lean into the friendship thing, but
| remember they work for you and treat it as a big important
| financial transaction like it probably is (to you)
| SoftTalker wrote:
| > You have no obligation or liability to except a lower
| offer or reduce your list price, ever
|
| That's true but in my experience they will pressure you
| to do so.
| pc86 wrote:
| In many states that just means the other agent gets all the
| commission instead of splitting it with your agent. You don't
| get any of it, and it isn't discounted anywhere.
| defen wrote:
| The agent's commission is irrelevant. That just means the
| buyer needs to make a higher offer to be competitive with
| someone who is not using an agent.
| pc86 wrote:
| This whole thing is about agent commissions. The comment
| I'm replying to says "just list it yourself" in direct
| response to "I would love for there to be some sort of
| competition injected into real estate commissions."
|
| How in the world in that context is "the agent's
| commission...irrelevant?"
| hn_throwaway_99 wrote:
| That is really not how it works, and goes to show there is
| at least _some_ value in agents, as they do know how the
| process works.
|
| The "standard" in the US is that the sellers pay 6%
| commission, with 3% going to their listing agent, and 3%
| going to the buyers agent. If, as a buyer, you show up
| without a listing agent and don't demand 3%, it is
| _totally_ reasonable, and quite common, to ask for a 3%
| price discount since you have no agent. Any sensible seller
| would take your offer as it means they are getting the same
| amount of money.
|
| I'm not saying this always "works", but sometimes people
| act like these are rules that are set in stone, as opposed
| to things you can negotiate for.
|
| Back in the early 00s I went with a discount listing agent
| who only charged 1%. They recommended I still give 3% to
| the buyers agent, but I said fuck that, and only offered 2%
| (market wasn't crazy strong but also wasn't weak), and the
| buyer's agent accepted that. So all in I sold my house for
| 3% instead of 6%, which I thought was totally fair given
| the amount of work the agents did.
| TedDoesntTalk wrote:
| That doesn't help. The seller does not save money unless BOTH
| buyer and seller have no real estate agent.
|
| If the buyers have a real estate agent and the seller does
| not, the seller pays the buyer's real estate agent double
| their usual payment - at least in the 3 states where I've
| sold properties.
| SoftTalker wrote:
| A buyer's agent _should_ be paid by the buyer, since the
| agent is working _for_ the buyer. You could agree to do it,
| or you could reject their offer if they ask you to pay the
| agent commission.
| plorkyeran wrote:
| That is not a state law thing. All that matters is the
| specific contracts you have with your agent and with the
| buyer. If you're working with an agent they'll nearly
| always require the standard 6% split between agents, but if
| you are not then the buyer's agent commission is something
| that can be negotiated just like any other clause of the
| contract.
|
| It also just doesn't really matter. What you care about as
| a seller is that you get the most net money for your house.
| If one of the buyers wants to have 6% of the money they're
| paying you go to their agent, that just means their offer
| needs to be that much higher than a buyer who doesn't have
| you paying their agent as much.
| hotnfresh wrote:
| Buyer's agent can ask for that, sure. It's not like it's
| automatically that way and the seller _has to_ agree to it.
| hn_throwaway_99 wrote:
| I agree with this sentiment, and I'm especially in favor of
| selling where you purchase services "a la carte" (e.g. pay a
| fee for a real estate attorney, a separate one to the escrow
| company, photographers if needed, etc.).
|
| However, if you say "it isn't hard by any stretch", I invite
| you to take a look at listings in your area and compare for-
| sale-by-owner listings with those listed by an agent. Half
| the time it looks like the photos on FSBO listings were taken
| by a flip phone from the early 00s, often times the pictures
| look like the person didn't even clean or there are garbage
| cans in curbside pics, the descriptions have glaring typos,
| etc. My point being that I believe it _shouldn 't_ be hard,
| but I am often dumbfounded about how the average quality of
| FSBO listings (at least where I live) is abysmal. These
| people are easily losing out on a lot of money by not putting
| a minimal amount of effort into selling the biggest asset
| they own.
| DavidPeiffer wrote:
| We sold our first home with some help of a FSBO service. I
| think it was $1,500. They wrote the property description
| (and passed it by me), created the 3d virtual tour which in
| my experience gives an amazing preview on whether the house
| would work for a buyer and would be worth visiting, listed
| it on their site and zillow, and for another $300 would
| provide an attorney to facilitate the closing.
|
| I agree most FSBO pictures are awful. We were happy to pay
| for a service to help the listing look polished, and we
| firmly believe we got more money/closed faster because of
| it. With 7% interest rates on a 30 year mortgage, it would
| take about 5 years of payments to accumulate 6% equity to
| pay the commission to sell the house, before accounting for
| other fees (and appreciation).
|
| We ended up paying effectively ~0.8% for the FSBO service
| and 2.5% to the agent representing the buyer. The agent was
| apprehensive, but the buyer really wanted our house.
| Everyone acted in good faith after the hail storm a few
| weeks prior to closing and everyone was happy as far as I
| could tell.
| bilsbie wrote:
| Great idea but I got like 20 spam calls a day from realtors
| pretending to have an interested buyer and then trying to
| sell me on their services instead.
|
| Any way around that issue?
| RHSeeger wrote:
| I bought a few years back and we didn't really use an agent to
| find the house at all. Looking into it, I found that a certain
| percentage of the sale amount goes to pay the agent(s); 6% I
| think. If there are two agents, they each get half. If one
| person doesn't use an agent... the other person's agent gets it
| all. The person without an agent doesn't get to keep their
| half... it just all goes to the other agent. Wtf...
|
| So anyways, we wound up bringing in an agent to help us out
| with the last bits, because we had to pay the money anyways, it
| might as well go to someone that helped us in some way.
|
| The real estate process is fairly broken, as far as I'm
| concerned.
| stronglikedan wrote:
| It was 6% when I bought, but I can tell you that my ex put
| our realtor through hell during the process - same questions
| over and over, daily phone calls for status updates once
| under contract, etc. I would have felt bad, but I knew how
| much she stood to make, so I didn't say anything and just let
| it all happen. I feel she earned it, lol.
| majormajor wrote:
| > I bought a few years back and we didn't really use an agent
| to find the house at all. Looking into it, I found that a
| certain percentage of the sale amount goes to pay the
| agent(s); 6% I think. If there are two agents, they each get
| half. If one person doesn't use an agent... the other
| person's agent gets it all. The person without an agent
| doesn't get to keep their half... it just all goes to the
| other agent. Wtf...
|
| In hot markets this is a way people often get an advantage as
| a buyer: tell the selling agent you want to use them as your
| agent too, so they get the whole 6% if the seller picks your
| offer. So if the bids end up being close, the agent ends up
| lobbying for you (or lobbying you to make your offer closer).
|
| Some selling agents refuse to do this because it's pretty
| shady, but definitely not all.
|
| I've also heard of similar things including negotiating down
| the selling agent's cut as part of it but haven't seen as
| much of that firsthand.
| _aavaa_ wrote:
| > Some selling agents refuse to do this because it's pretty
| shady, but definitely not all.
|
| This is a blatant conflict of interest. My god.
| ska wrote:
| The entire thing is a bit of a racket.
| ethbr1 wrote:
| It's only a conflict of interest if either the seller or
| the buyer expect their agents to negotiate price for
| them.
|
| Generally agents steer well clean of that, for legal and
| time reasons.
|
| A realtor is there to put properties in front of you /
| put your properties in front of others, and then close
| the deal when you tell them which property you're
| interested in.
|
| Volume pays realtors, not price-over/under-replacement.
| _aavaa_ wrote:
| It's a conflict regardless of negotiating price.
|
| Your realtor (as the seller) is now going to give
| preferential treatment to one buyer for their own
| personal gain.
| ethbr1 wrote:
| The realtor doesn't care which side of the party "wins",
| as long as the deal goes through.
|
| So they're only preferring whoever is bitching the
| loudest?
| DavidPeiffer wrote:
| >It's only a conflict of interest if either the seller or
| the buyer expect their agents to negotiate price for
| them.
|
| There are other details that come up through a
| transaction that many people wouldn't even think about.
| Are appliances included? Window treatments? Leftover
| paint? What year the transaction closes could impact
| taxes or incentives for either party. Inspections (what
| types of inspections are permitted, their timeline, what
| will be repaired prior to sale).
|
| If there are disagreements about any of those, or if the
| property was materially misrepresented by the selling
| agent, it's way more messy than if another agent is
| involved and it's clear who represents who.
| conductr wrote:
| It will be presented to both parties. It's not a hidden
| conflict.
| _aavaa_ wrote:
| Hidden or not it still is one.
| jliptzin wrote:
| Yea, it's fucked. As a buyer, I had an agent for a while,
| thinking that since the same commission is coming out from
| the seller's side anyway, it can't hurt. Wrong. I kept having
| my offers turned down without any good reasons, getting slow
| walked on offers that were for the seller's full asking
| price, etc, until I dropped the buyer's agent and just went
| directly to the seller's agent and it was amazing how fast
| the offer was accepted.
| trey-jones wrote:
| It's like this throughout the real estate and real estate
| development industries to be honest. Building my own house I
| expected plenty of savings over buying (and to be fair, I
| still did of course), but even beyond permitting (which is
| also more about who you know than what you know) I
| encountered things like this (roughly from most mind-boggling
| to least):
|
| - You can't build a septic system, you have to use sewer
| because you're in city limits (later rescinded when they
| realized they would have to pump my sewage _up_ to the city
| sewer.
|
| - You need to hire an engineer to make sure your lumber is ok
| (we milled our own lumber)
|
| - You need to hire an architect to make sure your plans are
| ok
|
| - You didn't finish in 6 months? Buy a new permit please.
|
| I know there were a million more things like this, but it's
| been over ten years and some things you don't want to
| remember... Contractors act like I'm taking food out of their
| kids' mouths by wanting to do the work myself, and the
| municipality is on their side.
| mholm wrote:
| The municipality is on their side because many people who
| try to get variances on these things are legitimately
| cutting terrible corners that compromise both the safety of
| the inhabitants (present and future) and the neighbors.
| It's inconvenient, but these regulations save a lot of
| lives/QoL from bad/naive actors.
| ethbr1 wrote:
| The municipality is on their side because they're
| overworked.
|
| In even the smallest town, if any appreciable percentage
| of new builds required custom handling... the system
| would instantly be person-starved and start backing up.
|
| Business-as-usual is the fast/efficient path from a
| paperwork standpoint. Anything odd is (a) discouraged and
| (b) looked at with annoyance because it takes more time.
|
| One reason it's almost always cheaper to tear-down fire
| damaged houses with still viable framing. No one wants to
| take the time to quantify exactly how much the framing
| was damaged.
| salamanderss wrote:
| My town solved the guilty until proven innocent issue
| regarding permits by just giving people carte blanche.
| Imo this is far more rational: if the county can't/won't
| verify paperwork they should default towards freedom and
| let the property owner have at it rather than presuming
| guilt and saying you haven't the money/people to check
| it.
|
| Granted people aren't rich where I live so we'd rather
| them live in potentially a subpar house and maybe have it
| fall in on them than be homeless and die from the
| elements.
|
| Re below: USA / Arizona. Pick the right county and no
| code inspections.
| ethbr1 wrote:
| Which country/state? Inquiring minds want to know!
| duped wrote:
| Those examples sound pretty reasonable, what's the issue?
| pixl97 wrote:
| They want to be the reason why the laws are created, they
| don't want to have to follow them.
| LeafItAlone wrote:
| Your list of "mind-boggling" items all seem extremely
| reasonable to me.
|
| Your city and neighbors don't want to be responsible for or
| have to deal with your house falling down because it was
| improperly constructed. And having lived in neighborhoods
| with septic systems most of my life, a little neglect can
| go a long way.
|
| Unless you're building in the middle of nowhere (far from
| anything labeled a "city"), there are obligations to those
| around you.
|
| Signed, someone whose neighbors properties have dilapidated
| buildings in various states of disrepair.
| Turing_Machine wrote:
| > Your city and neighbors don't want to be responsible
| for or have to deal with your house falling down because
| it was improperly constructed.
|
| Why on earth would the city or the neighbors be
| "responsible" for that?
| salamanderss wrote:
| They usually aren't it's an argument used to scare people
| into making housing stock replenishment more expensive
| and lock in property values.
|
| I'm building a house now. I sent the county... A picture
| of a square on a map. No plans no inspections nothing.
| Fuck all that. I build based on what seems reasonable
| after a cool Busch Light and then I just do it without
| asking permission from anybody.
|
| Half my county did the same. It's not rocket science, and
| the world here hasn't fallen apart or burned down. But
| you will be told the opposite to get locked into
| expensive contractors and corrupt inspectors and the cash
| extracting nightmare licensing and permitting systems
| that surround that.
|
| And before anybody gets too excited... this is all 100%
| legal if you pick the right spot.
| brewdad wrote:
| When my neighbor's house fails and causes damage to my
| property, I'm not legally "responsible" but I still have
| to deal with a whole lot of negatives. Hence the "or deal
| with it" part of OP's statement. Far better to reduce the
| risks by making sure the project isn't being half-assed
| up front.
| kemayo wrote:
| Depends on the specific thing, but generally it's because
| there might be consequences to doing things poorly that
| would spill onto your neighbors, or which might cost the
| local government money to fix after it hurts or kills
| you. It's the same kind of reason that laws requiring
| motorcycle helmets or seatbelts exist.
|
| The sewer one is obvious, since it could be a public
| health issue -- if you screw it up you could wind up
| contaminating local water sources (or just stinking up
| the area). Issues with the lumber you use, or with your
| building plans, could potentially result in your house
| collapsing in such a way that it might damage your
| neighbor's property. And getting a new permit if you take
| too long is probably just a way to force you to check in
| and make sure that you're not deviating from the earlier
| plans you filed.
| autoexec wrote:
| If my neighbor doesn't wire their home to code and it
| burns down and the fire spreads to my house it doesn't
| matter who is "responsible", I'd still lose my stuff (or
| my life).
|
| Hell, if my neighbor's _tree_ falls into my property and
| causes damages I can 't be sure I'd be fully compensated
| for my losses. You can take someone to court, but they
| can't give you what they don't have.
|
| People also just don't want to live in slums filled with
| run down barely standing shacks since it hurts their
| property value too. Part of living in a community means
| giving consideration to other people around you. The
| closer you are to others the more responsibility you have
| to be considerate of your impacts on those others.
| salamanderss wrote:
| How many lives of man hours are lost from overhead for
| these costs and compliance? The issue is people enforcing
| these regulations see the dead bodies from the burned out
| home but not the dead bodies of the homeless or the kids
| with less food or the dude with untreated cancer because
| regulatory costs and materials safety margins sucked away
| money that could've been spent on other life critical
| things.
|
| At this point it seems completely plausible more lives
| would be saved through complete deregulation including
| setting loose uncle joe the methhead electrician.
|
| RE:
|
| >cities to turn into dangerous shanty towns where anyone
| who can lean a piece of corrugated sheet metal against a
| mud pile can call themselves a home builder.
|
| My whole county did this. No inspections or building
| plans. It turned out fine. It's the only way I can even
| afford a house.
|
| re county: believe the options are unincorporated burrows
| of Alaska, greenlee or cochise Arizona, Jackson Wayne and
| several other county in Tennessee, bunch of others.
| autoexec wrote:
| If kids can't get food that's a problem entirely separate
| from the costs of an electrical inspector. No one builds
| a house and then becomes homeless because of how much it
| cost to make sure it was up to code.
|
| I'd agree that those costs shouldn't be excessive, and
| they may even be higher than they should be right now,
| but we've got plenty of examples of what deregulated
| construction leads to and it's never the utopia you'd
| imagine. It's much better to have sane standards than to
| deregulate and allow our cities to turn into dangerous
| shanty towns where anyone who can lean a piece of
| corrugated sheet metal against a mud pile can call
| themselves a home builder.
|
| I'm certain that I can find more evidence that a lack of
| regulation leads to deaths than you could of code
| compliance causing untreated cancer. In fact, some
| regulations prevent building homes using materials that
| we know have caused cancer. Feel free to try to find a
| study or evidence that suggests otherwise though.
| LeafItAlone wrote:
| > My whole county did this. No inspections. It turned out
| fine.
|
| Would you be willing to provide us with the name of the
| county so that we can determine for ourselves how it
| turned out?
| chongli wrote:
| Because it damages their property values. Would you want
| to buy a house next to a dilapidated pile of abandoned
| rubble?
| mywittyname wrote:
| > - You can't build a septic system, you have to use sewer
| because you're in city limits (later rescinded when they
| realized they would have to pump my sewage up to the city
| sewer.
|
| You got lucky. Houses with lift stations are a thing.
| Usually a bunch of houses will go to a common lift station,
| but that's not always the case.
|
| My dad runs a company installing and servicing various
| sewage treatment solutions and I spent a lot of weekends as
| a child going to nice houses on service calls because their
| lift station threw an alarm and it wasn't pumping their
| sewage.
| pixl97 wrote:
| Why is number one the most boggling? Not dealing with
| sewage correctly is a public health hazard. In most places
| if there is a sanitary sewer hookup you must, by law,
| connect to it. Now in your particular case they don't have
| a sewage lift, but if one is ever installed it is likely
| you will have to connect to it if you ever need to do
| septic maintenance again. I certainly hope your
| municipality requires regular inspections of your septic so
| you're not flowing shit water into the local environment.
| aidenn0 wrote:
| Your list seems fairly reasonable.
|
| I looked into building where I was (because land was
| surprisingly cheap compared to houses) and was told to
| allocate 2 years and $250k for permits. A significant chunk
| of that was paying an architect to respond to the city and
| resubmit the plans. This was back when most houses were
| under $1M, and the lots we were looking at were around
| $200k, so the permits were literally more valuable than the
| land, and a pretty large fraction of the value of the
| improvement.
| dminor wrote:
| We used a real estate lawyer instead of an agent and the
| seller worked it out with their agent to keep the 3%. The
| seller's agent told us that's what ended up making our bid
| the most attractive.
| xyzelement wrote:
| It doesn't sound like you negotiated well and is a sign you
| could use an agent :)
|
| But seriously, imagine you and I are both bidding $1,000,000
| on a house. You have an agent, so if your bid is accepted,
| your agent and the sellers agent each get $30,000.
|
| I don't have an agent. In my offer, I write "the sellers
| agent gets the usual 3%, and I am allocating the 3% that the
| buyer's agent would get towards the seller instead." That
| means for the seller's agent there's no difference whether I
| use an agent or not, but to the seller themselves, my offer
| looks $30,000 better than yours because I am sweetening the
| deal using that $ I'd otherwise give my realtor.
|
| All that said, I used a realtor on my house purchase despite
| being financially savvy and a good negotiator because they
| actually helped us find the right house, and they were well
| worth the fee.
| ralph84 wrote:
| The commission is spelled out in the listing contract
| between the seller and their agent. The buyer is not a
| party to that contract and can't dictate changes to it.
| sib wrote:
| Well, sorta.
|
| The contract between the seller and their broker/agent
| definitely reserves (typically) 3% for the buyer side
| broker/agent. What happens to that 3% is definitely under
| the influence of the buyer. We negotiated a 50/50 split
| of the 3% back to us as the buyer in the most recent
| house that we bought. I guess we could have instead
| offered it as an incremental incentive to the selling
| party to sweeten the deal.
| ethbr1 wrote:
| FYI, here's what an example seller's contract from
| northeast FL MLS looks like:
|
| >> _Broker will cooperate with and compensate, as stated
| below, NEFMLS brokers and any broker who reciprocates
| with NEFMLS. For finding a buyer ready, willing and able
| to purchase the Property, SELLER will pay BROKER, no
| later than the date of closing, a broker transaction fee
| of 5% of the Purchase Price, whether a buyer is secured
| by BROKER, SELLER, or any other person. BROKER agrees to
| offer cooperating broker compensation of: 2.5% of the
| Purchase Price to a single agent for a buyer; or 2.5% of
| the Purchase Price to a transaction broker for a buyer;
| or 1% of the Purchase Price to a non-representative
| broker._
|
| >> _If no cooperating broker compensation is offered, the
| Property cannot be placed in NEFMLS. SELLER hereby
| directs closing attorney /settlement agent to disburse at
| closing all compensation to brokers payable hereunder_
|
| So in this case, the seller's broker is entitled to 5%,
| of which 2.5% is required to be shared with a buyer's
| broker, if existent.
|
| In the event that no buyer's broker exists... it would be
| a conversation with the seller's broker as to how to
| dispose of the 2.5% (refund to the deal, etc.).
| xyzelement wrote:
| Yeah agree! Great reference to the contract language.
| Point being is that there's now a 30K that's freed up for
| creative use.
| ethbr1 wrote:
| Happened to have a recent contract handy. ;)
| xyzelement wrote:
| Correct, but I can make the offer with that language and
| the seller can review that w their agent. If the agent is
| "just as well off" or even ahead of the game they can
| direct the ~3% I whatever way makes sense to get the deal
| done.
| nicholasjarnold wrote:
| I used an attorney specializing in real-estate to represent
| our side of the house during my first home purchase. We
| subsequently reduced the bid by 3% with an explicit note
| about why (no buyer's agent commission to pay). The seller's
| agent was a broker and was apparently motivated because they
| accepted our deal along with fixing a list of little items
| uncovered during inspection. We paid our lawyer a $2-3k iirc.
|
| I'll never know if that broker got 6% from the seller or took
| 3% to close the deal, but our strategy worked: I paid 5
| figures less for the home than what was being asked for at a
| time when houses were selling for over asking price in this
| area.
|
| It's worth a shot I guess. 2 warnings: Some seller's agents
| will get very pissed at you (b/c this and other things like
| Redfin's 1% is disrupting their cash cow and they're not
| stoked about it). It might be difficult to find an attorney
| since most RE attorneys focus on commercial deals.
| cgh wrote:
| Same, we used a notary public for most of the paperwork and
| a lawyer for a bit of it. I think I calculated that we
| saved around $20,000.
| francisofascii wrote:
| Yep, I learned that the hard way when we bought our first
| house a long time ago. I naively thought I would be a more
| attractive buyer because they don't have to pay my agent.
| There ended up being two other offers. Anyway, I remember
| seeing in the closing documents the amount allotted to their
| agent, the full 6%. Wtf, indeed.
| conductr wrote:
| Technically, the 6% goes to the Seller agent. They promote on
| the listing how much they're willing to share with the
| Buyer's agent; half is customary but not set in stone.
|
| There are agents for your situation. They'll collect the 3%
| (or whatever it is) and rebate it back to you at or after
| closing; less some fixed fee ($600 in my experience). They
| are not going to do much for you, but if you already found
| the house yourself and are familiar with the buying
| contracts/process. It's an option that can save you a lot.
|
| This may differ by state of course. My experience is limited
| to Texas. But I've bought and sold property using these type
| of agents. When selling, you just do all the work (hire a
| photographer $200-500, write the description $0+, and they
| load it to the MLS for you as the listing agent). I'm of the
| opinion that for most properties, the only value added
| marketing is the MLS. When they talk about their websites and
| portals and ads they run in print media I roll my eyes.
| philips wrote:
| In Oregon it is illegal, by statute, to give a refund to a
| real estate client.
| poulsbohemian wrote:
| Here's the brief response I offered earlier today when asked what
| this actual does:
|
| I don't really expect significant changes. We are in a more
| balanced market today than when these lawsuits were first filed.
| Many sellers will find it advantageous to offer buyer agent
| compensation. If/when we return to a seller-advantaged market,
| some buyers may need to pay their agents directly, which could
| involve rolling those costs into their financing. Lenders are
| more of an expert than myself on any issues in doing that, but it
| appears to happen in other states already. One of the problems of
| these lawsuits is the conflation of agency with payment. States -
| both WA and OR, for example - are working to fix the agency
| problem that wasn't made explicit to buyers post-subagency. But,
| I don't think there's any question that buyer's having to
| directly pay buyer's agent compensation will be a higher cost to
| buyers.
| riku_iki wrote:
| > Many sellers will find it advantageous to offer buyer agent
| compensation
|
| so, now conspired realtors charge seller and not buyer. Still
| looks broken.
| poulsbohemian wrote:
| I guess you aren't familiar with this having been the system
| in most markets for decades?
| riku_iki wrote:
| your guess is incorrect
| manuelabeledo wrote:
| > I guess you aren't familiar with this having been the
| system in most markets for decades?
|
| Definitely not in most markets. This is very unique to the
| US.
|
| Also, what's the advantage of paying someone whose goals
| don't quite align with yours? And isn't it a massive
| conflict of interest?
| jjoonathan wrote:
| Broken systems linger despite themselves all the damn time,
| are you really suggesting otherwise?
| closewith wrote:
| The system as described is nearly unique to North America.
| It takes a particularly distorted and unregulated market to
| allow this kind of anti-competitive structures to arise.
| georgeecollins wrote:
| This seems like a very disingenuous interpretation of the
| verdict by avoiding "what it said" and then telling us what
| will actually happen (as though you can predict) or what's
| wrong with it. If I were a realtor what is wrong with it is it
| could threaten my fat commissions.
|
| What the jury said was that the national association of
| realtors colludes to keep agent fees high in a way that
| violates anti-trust rules.
|
| (edited for grammar)
| poulsbohemian wrote:
| Dude - any realtor paying attention has been watching this
| (and other) cases now for years. You think we haven't been
| monitoring this along with state legislation, Congressional
| action, MLS rule changes, and all the other things that have
| potential legal impact to our business and our clients? NWMLS
| (for those of you in WA) made rule changes over a year ago
| that were good changes regardless of the outcome of this
| case, plus the legislature made clarifying agency changes
| that go into effect in January. We're not the trolls you all
| think we are.
| bogota wrote:
| Honestly just going to do a FSBO if i ever sell. The fact that
| I pay out 5% of my house price for what is essentially a few
| hours of data entry work is beyond stupid.
| sp332 wrote:
| When we bought, the seller's agent apparently spent a good
| chunk of her fee on little scent dispensers. We were finding
| those things tucked behind cabinets for months.
| poulsbohemian wrote:
| So go for it! If you believe you have the ability to market
| your house successfully, then by all means do so. As a
| realtor, if I had a house in a market where I don't do
| business, there is absolutely no bloody way I would try to
| sell my own home.
| flkiwi wrote:
| The concern is perhaps less one's ability to "market" a
| house better than a realtor than it is whether the
| realtor's services, both individually and as a combined
| effort between buyer and seller agents, is worth anything
| remotely like the fees charged. The answer is clearly no to
| the latter.
|
| With prices where they are today and the combination of
| effort and skill demonstrated by the realtors I have worked
| with--each of whom was highly regarded--I would give them
| perhaps a 1% commission split between them. In all but the
| most unusual cases, even that would be an overpayment at a
| reasonable hourly rate for their education and skill level.
| loosescrews wrote:
| You will likely still need to offer a buying agent commission
| if you want buying agents to show the house. Still, that cuts
| the fee roughly in half.
|
| At least some selling agents do a lot more than data entry.
| They generally pay for photos, staging, and landscaping while
| the house is on the market. They also research similar houses
| to position the property in the market and talk to buying
| agents. A lot of the negotiation can happen before the offer.
|
| You can do most if not all of that yourself and you may do a
| better job than the real estate agent you would have hired.
| Doing a good job is a fair amount of work. Most real estate
| agents cost the same amount, so there generally isn't a price
| different between a good and a bad agent (unless you count
| the commission on a higher sale price). If you can find a
| good one, it is likely worth the cost. A bad one might even
| decrease your sale price though.
|
| Do you think you can do a better job selling your own house
| than you can do at hiring a real estate agent?
| closewith wrote:
| I think this is unimaginative. More than likely, eventually the
| US will join most of the world in having no buyer's agents and
| low seller's agent commissions.
| briffle wrote:
| at 6% of the median 500k for a house, they have about 30k
| reasons to fight that tooth and nail..
| alwa wrote:
| I've never been involved with residential real estate in the
| US, so forgive me if I'm missing something obvious.
|
| Why will it be a higher cost to buyers? At the macro level,
| aren't the transaction costs effectively priced in? Is the idea
| that the home has some absolute value that exists independently
| of the cost structure of the market it trades in (so the buyer
| paying commission directly is doing so "on top of" this amount
| as it's valued under the status quo)?
|
| Is it mainly a question of categorizing the commission as "a
| cost" rather than "hidden in the seller's asking price
| therefore part of the value of the home"?
|
| Otherwise, why wouldn't the buyer who now says "I have
| $100,000, so I'll buy a $100,000 house" instead say "I have
| $100,000, and I know my agent is going to charge me around
| $3,000, so I've got to buy a $97,000 house instead"? If that
| becomes the new norm, wouldn't all sellers find that people who
| could buy at $100,000 before can only buy at $97,000 now, and
| have to price their homes accordingly, making it a wash?
|
| If it were me, I feel like I'd want to hire my agent at a flat
| rate if I could, to reward them for finding me a better deal
| rather than incentivize them to make more by selling me more.
| But then again maybe that's part of the higher cost to buyers
| that you mention: maybe there's no question that buyers' agents
| will be able to squeeze the buyers for more commission directly
| than they presently get out of the sellers?
| ajhurliman wrote:
| In the US the seller pays for both the listing agent as well
| as the buyer's agent. When you list your house, you agree to
| a commission for your listing agent and you advertise a
| commission to co-broke on the MLS listing, which entices
| buyers agents to show your house (or steer buyers away from
| it if the commission is low).
|
| I think the biggest impediment to driving down costs to the
| consumer is the momentum of social convention.
|
| Even for agents at fixed-cost brokerages, they know they can
| charge 2-3% so they do, and most people don't know that it's
| negotiable.
| briffle wrote:
| A bit part of the lawsuit, was that the buyers agent
| compensation was ONLY visible on MLS to other registered
| agents.
|
| So, when you were looking online, you had no idea if the houses
| you found where offering 3% or 1.5% buyers agent commission,
| but your agent was, and could steer you to the higher paying
| homes.
| underseacables wrote:
| I know people will knock on realtors, but I've had nothing but
| good experiences with them. There's so much stuff I don't know
| that I don't know, and the ones I've had have been very helpful.
| Worth every penny, in my opinion.
| Calvin02 wrote:
| I think the real problem is the fact that you can't buy or rent
| in some markets without an agent.
|
| As a buyer, I should be able to make an offer and work with the
| lender to schedule all the due diligence required. Some people
| need more help and they should be willing to pay for it.
|
| However, the way it is structured today, I can't make an offer
| without a realtor and have to pay some percentage of the value.
|
| I was lucky in that I had an agent in the family and they
| charged a nominal fee.
|
| I've heard about realtors being blacklisted for offering flat
| fee services.
| asah wrote:
| not sure why you're getting downvoted. If realtors add more
| value than their commission, then great.
|
| Consider normies who don't understand why all this "tech stuff"
| costs so much money.
| kstrauser wrote:
| The average home sale price around here is around $1M.
| Realtors simply do not provide $60K worth of value to the
| sale of one.
| denton-scratch wrote:
| https://archive.ph/Ahzio
| semiquaver wrote:
| Also known as Sitzer/Burnett. Docket at
| https://www.courtlistener.com/docket/15018641/sitzer-v-natio...
| bozhark wrote:
| Realtors are a scam.
|
| Use brokers, fixed 1.5% from both sides to the same person.
| scottwick wrote:
| Not really related to the article but something I've been
| wondering...
|
| In recent years the housing market has been so competitive that
| escalation clauses are often written into offers. They typically
| include a base offer of $X and then an agreement to escalate that
| value by increments (maybe $1-5k at a time) up to some cap. All
| the offers are collected by a certain date and then an auction is
| run behind the scenes by the realtors involved.
|
| What's to stop a seller from having one of their friends enter
| into one of these escalations? Submit a non-serious offer with a
| high escalation and include a minimal deposit which would be
| forfeited if that fake offer happens to win but otherwise hope it
| comes in 2nd to push everyone else's escalation up.
| tehlike wrote:
| sadly the answer is honor code.
|
| There are also a lot of shenanigans realtors could be pulling.
|
| Example: Few years ago, we wanted to buy a house, we made a bid
| for 2.6, the realtor said they would not accept anything less
| than 2.8 as this was their competing offer. We said no, the
| house sold for 2.4. I suspected the realtor might have been
| double dipping, or bluffing, i don't know. But what I do know
| is they did not present the offer to the seller.
|
| (numbers are not exactly precise, but directionally and
| somewhat magnitude wise, it should be similar).
| FireBeyond wrote:
| > But what I do know is they did not present the offer to the
| buyer.
|
| I believe in most states a real estate agent (I despise
| 'Realtor(TM)') is obliged to present an offer (at least by
| the Realtor's Code of Conduct/Membership Agreement).
|
| Edited to add: I'm not sure if this refers to seller agents
| (who cannot hold back an offer from their client), or to
| buyer agents, presenting that to the seller side, or both. I
| think at least the first.
| nordsieck wrote:
| > I believe in most states a real estate agent (I despise
| 'Realtor(TM)') is obliged to present an offer
|
| Sure. But enforcement is the soul of the law.
|
| And it's pretty tough to catch stuff like that. Most people
| who put in offers and don't "win" aren't sitting around
| monitoring how much the winning bid ended up being.
| tehlike wrote:
| Exactly. In my case, I thought of finding the seller
| after sale was final, and ask if their agent presented my
| offer. He'd then maybe sue their agent.
|
| I didn't care enough to pursue that route.
| bravoetch wrote:
| I had a similar issue. A put a full price cash offer on a
| place for 1.9. The seller said they had a competing offer
| that was higher and asked me to submit a new offer at 2.1. I
| declined, and said they are welcome to provide a written
| counter offer at 2.1. The reason they won't counter is that a
| new higher offer from any buyer (me) will trigger escalation
| clauses for other buyers offers. Dirty trick that screws over
| buyers, because sellers can see all offer details.
| weeblewobble wrote:
| Maybe there was something else unattractive about your offer
| and the 2.8 fell through? Happens all the time.
|
| When I sold a house recently I took the second highest offer,
| because the highest offer came from someone out of state who
| had never set foot in the house
| tehlike wrote:
| Realtor definitely didn't mention anything, but mentioned a
| higher offer, which definitely didn't end up happening.
|
| It was a standard bay area offer - 20% down preapproval, no
| contingency, 4 weeks close, and could have been shorter.
| FireBeyond wrote:
| Very little. When I was younger growing up in Australia,
| auctions were very common, and it was very much the
| "traditional" model, everyone stands around in front of the
| property and puts up their hand to bid.
|
| Regularly auctioneers would get caught taking bids from trees
| or vehicles to push prices up. They'd get caught when their
| fake bid was the highest. It became so common it was almost
| expected, and reforms to the process had to be introduced.
| bitbckt wrote:
| This is called "chandelier bidding" in industry parlance.
| taude wrote:
| I think a lot of the escalations involve more than just one
| other person bidding, so you'd really need to be running a good
| game to get three or four people involved to run up a price in
| something like this.
|
| Additionally, in a competitive market, with multiple offers,
| people aren't doing a bare minimum deposit. More like 30 - 50K
| is involved based on my experience, but it varies dependending
| on state.... I'm currently looking in a new market, and we were
| told our offers should have about 10 to 30K on them between Due
| Dilligence and Ernest money....
|
| Besides, it's just easier for the seller/buyer agent to have a
| conversation on which buyer wants it the most.
| hammock wrote:
| You can ask to see the other offer if the escalation clause is
| triggered. It technically has to be "bona fide"
| scottwick wrote:
| Do you see the deposit amount and all the details of the
| escalation from the triggering offer in that case?
|
| Say I saw that the triggering offer had a measly deposit and
| I suspected it of being fake. Would I be on the hook to prove
| it? Technically if I rescind my offer at this point I lose my
| own deposit, right?
| teen wrote:
| Yes but they can drag their feet in giving it to you, since
| they can just sign your offer immediately. However, you can
| just cancel your offer after with a follow up document.
| teen wrote:
| This happened to me in 2019. I went into escrow and they
| didn't give me the offer for about 5 days. When I finally got
| it, it was lower than it should have been. It rubbed me the
| wrong way and I bailed out of the deal.
| scottwick wrote:
| How did you bail without losing your deposit? I would have
| thought if you were the highest bidder you'd either be on
| the hook for the full purchase or lose your deposit.
| userinanother wrote:
| If the escalation was fraudulent then you can bail.
| MikeTheGreat wrote:
| This is just my understanding, but here goes:
|
| 1) If your bid wins then you're on the hook to buy the house.
| Part of the offer your make includes "earnest money" which is
| that deposit you're talking about (which you forfeit if you
| don't actually buy the house). The seller sees all the offers
| so presumably you putting down $500 earnest money on a $300K
| house would look suspicious enough to get you ignored by the
| buyer.
|
| 2) However, you've got a bigger issue: it's a secret auction.
| You put in your bid/offer, and so does everyone else, but
| _nobody_knows_about_anyone_else's_bid_. Heck, you don't even
| know how many other people are bidding. You _may_ be able to
| ask your realtor to nicely ask the seller's realtor for a
| general description of how hot the listing is (which works in
| the realtors' favor - the hotter the listing, the more you'll
| anticipate needing to bid), but beyond that you don't know
| about the other bids. And you for sure don't know about the
| specific, bogus bid that the realtor's friend put in to
| influence all the people that don't know about the bogus bid :)
|
| I might be wrong (realtor's friend puts in a bogus bid so the
| seller's realtor can lie and say the listing is hot, after your
| realtor asks them about it), but I don't think this is a
| strategy that will work in general.
|
| Legal context: United States
| scottwick wrote:
| > putting down $500 earnest money on a $300K house would look
| suspicious enough to get you ignored by the buyer
|
| Assuming you mean the seller here? If I were the seller I too
| would ignore that kind of offer but first I'd let it push all
| the other escalation clauses up ;)
| koolba wrote:
| Good for them. On the list pointless middlemen, they're
| definitely at the top.
|
| One of the dumbest parts of the real estate commission scam is
| purporting the lie that "the seller pays the commission". Anyone
| with half a brain knows that if money is coming out of a
| transaction, it's a transaction cost being eventually passed onto
| the buyer.
| senorrib wrote:
| Anyone with microeconomics knowledge would tell you that it
| depends on the elasticity on each side of the transaction.
| loosescrews wrote:
| I think this assumes that the price of real estate is set by
| the post-fees price that sellers receive. I don't think that is
| true.
|
| I think the strongest factor in real estate pricing is what
| buyers are willing to pay. In some cases that is influenced by
| how much the buyer was able to keep after selling a previous
| property, but I don't think that is the most significant
| factor.
|
| Another factor that influences the sale price is the psychology
| surrounding the pre-fee sale price. Many sellers become fixated
| on a particular sale price. A common strategy for getting a
| lower effective sale price is getting sellers to include more
| in the sale price. One particularly notable example is seller
| financing.
| elyobo wrote:
| US fees seem very high; Australia & New Zealand have a selling
| agent fee in the 2-3% range (+ variable vendor paid advertising
| on top) and buyers agents are uncommon so not a fee most pay at
| all.
| hackerfooze wrote:
| Why not just link your house to an NFT and transfer that? Easy,
| no intermediary needed
| havefunbesafe wrote:
| Sounds great! Let us know when you do that!
| seattle_spring wrote:
| I can't tell if this is a legitimate suggestion, or a satirical
| comment poking fun at crypto-folk.
| johnea wrote:
| A side note: archive.ph didn't overcome the wsj paywall on this
| article...
| jsight wrote:
| The problem isn't just realtors, it is that the whole system is
| designed to maximize transaction costs. Who cares how much the
| attorney and loan paperwork cost when they are only 1-2%, you are
| already paying 5-6% to realtors, ~.5-1% in repair costs, and
| often a part of the buyer's closing costs too?
|
| But if you think about that wholistically, that means sellers are
| paying 8-10% of the cost of a house every time they sell!
|
| Surely that means someone could cut the cost in half and make a
| much more attractive platform, right? Opendoor comes kind of
| close, but they end up shouldering a lot of the risk of the
| transaction and therefore tend to lowball.
| notaustinpowers wrote:
| A huge hurdle with trying to cut costs is because of NAR
| themselves, and local Realtor Associations. Any Realtor is with
| NAR and a local Association, which heavily restricts what they
| can do. Not being in a local Association can remove your access
| to the MLS, reducing your visibility to other agents, and
| remove your access to the state-specific legal forms.
|
| Add in closing attorneys and home inspectors being brought in-
| house to reduce costs, it can be a very expensive start-up cost
| that would require lots of capital to achieve. Zillow/Opendoor
| got REALLY close, but they stopped (Zillow) or, like you said,
| lowball offers because they're fronting all of the backend
| costs that used to be spread across 4 or 5 different services.
| jsight wrote:
| Good points. I totally forgot about the whole home inspection
| process and how ridiculous it tends to be. Even when they
| aren't in house, you know it will be someone that the realtor
| has worked with before. It will certainly catch things
| because it has to demonstrate its value, and those things
| will be worth at least hundreds of $$s. Unfortunately, it
| will also offer no real guarantee that those things were
| worth catching or that other things weren't missed.
|
| You are right, a party trying to fix this will need great
| funding, large scale, and they can't be someone that will
| just sell out (ala zillow). With the NAR's ability to block
| out parties that they don't like, it might not even be
| practically possible.
| tylergetsay wrote:
| Not only everything you mentioned above -- the associations
| control access to the homes themselves
| notaustinpowers wrote:
| Yup! Forgot to mention that. In my area, you have to be a
| member of the local Association & NAR to access the
| lockboxes.
| conductr wrote:
| My problem has always been with the percentages used on certain
| things; like commissions. Just make it a flat fee. Things that
| require agent's time like open houses; bill for that. It's the
| essentially the same effort on a $100K house and a $500K house
| and a $1M house. Maybe once you get to $5M+ houses the fees
| need to increase since this is a different class of RE with
| much smaller pool of buyers. But still should be fixed amount
| and not percentages.
|
| In my area, since I bought my first house 10 years ago house
| prices have 4X'd. I don't think the wages of most professions
| have, the demand for housing makes it easier to sell, so why
| should agents be making 4X more?
| salamanderss wrote:
| Yeah it also causes the problem of making it a real pain in
| the ass to buy cheaper plots of land. Realtor often don't
| give a flying fuck about the sale of stuff under 50k, not
| worth it for them. Can be hard to get representation.
| Willish42 wrote:
| Dumb, uninformed question here, but are there not some sort of
| For Sale By Owner systems that cut into the huge percents in
| closing costs? Or is the issue that you have to pay the buyers'
| realtor fees too and that's unavoidable?
|
| I'm trying to figure out why nobody's figured out "DIY MLS
| listing as a service without having to pay for a realtor".
| Maybe everyone who does this just gets a realtor's license or
| something.
| 404mm wrote:
| I'm not a realtor but I considered selling my home myself
| once. Two issues I hit immediately:
|
| 1. I could not list the home in MLS as That system requires
| annual fees to use and you need to have a realtor license.
|
| 2. You still need to pay the purchasing side's realtor
| otherwise they will simply not consider your home for their
| clients. That's 3% that's hard to get any lower.
|
| I ended up negotiating my realtor's selling fee down to 1.5%
| with the promise of using them for my purchase as well.
| macNchz wrote:
| > 1. I could not list the home in MLS as That system
| requires annual fees to use and you need to have a realtor
| license.
|
| Additionally, if you were to decide to list "For Sale by
| Owner" and market it yourself, you can submit it to the
| major aggregators (Zillow et al), but their contracts with
| the MLS systems often disallow them from mixing MLS and
| FSBO listings in the same search result set, so the FSBO
| listings are hidden behind a toggle or something and go
| unseen by the great majority of people browsing.
| cgh wrote:
| It's true that there's scope for an alternate MLS that's just
| for sale by owner listings. But as someone else mentioned,
| the buyer often uses an agent (I refuse to use the made-up
| word "realtor") and you'll have to pay that fee anyway.
| Unless, that is, your listings site provided handholding to
| do away with the buying agent. To handle the paperwork, a
| notary and/or a lawyer is necessary but the site could either
| provide those services for cheap or detailed instructions on
| how to proceed if you want to use your own notary/lawyer.
| It's simple enough. It turns out that the main function of a
| real estate agent is to simply ferry paperwork back and forth
| between the clients and the lawyers. You can just as easily
| do this yourself (we did and saved a lot).
| OJFord wrote:
| The problem is 'buying agents'. Looks totally bonkers from over
| here (UK, I _think_ it 's foreign to at least most of Europe
| too).
| aeternum wrote:
| Yes, this is where the collusion comes in. Many seller agents
| will simply ignore buyers without a buying agent.
| lloyddobbler wrote:
| In the U.S., at least, I've never known a seller's agent to
| do that (having done a good number of real estate
| transactions). In fact, in my experience I find it to be
| the exact opposite. Seller's agents are incentivized to not
| work with buyer's agents, if the situation arises where
| they're approached directly by a buyer.
|
| If the seller's agent is comfortable acting as the
| intermediary, and recognizing the limits of conflict of
| interest, then it's in their best interest to keep all of
| the 6% commission instead of giving half of it to the
| buyer's agent.
| kelnos wrote:
| Yep. And a lot of it is of dubious value; I think for many
| (most?) properties, title insurance is a scam. Most houses,
| especially those built (or at least having changed hands) in
| the last, oh, 50 years (or more?) should be fine.
|
| It also just seems kinda dumb that realtors get paid a
| percentage rather than a flat fee. On the buyer side, it's
| essentially the same amount of work to help someone find and
| buy a $200k house as it is for a $1M house. For the two
| properties I've purchased, things moved so quickly that I don't
| think the realtors had to do all that much. Conservatively, the
| first one made at least $2k/hr, and the second at least $1k/hr
| (and I'm probably underestimating there). I'm not saying their
| services weren't valuable -- they certainly were -- but I can't
| see most people agreeing to pay that rate if it were presented
| to them that way.
|
| And I'm not convinced there's all that much of a difference on
| the seller side, either. The staging is going to cost more for
| a larger/nicer house, but the sellers are paying separately for
| the staging anyway. I was also reading somewhere recently that
| orgs that control access to the MLS will not even allow you to
| list if there's no buyer's realtor's commission, and there's a
| floor, like it has to be at least 2% or something.
|
| From the buyer's perspective, I really liked Redfin's pre-
| pandemic model, where they'd give you part of the buyer's
| commission as a "refund", because their realtors are salaried.
| I assume they figure out from the traditional commission how
| much they need in order to pay their own operating costs (plus
| whatever profit margin they've decided to take), and then give
| you the rest. Of course, they stopped doing that during the
| pandemic, and now pocket the entire buyer's commission.
|
| Granted, the realtors we've worked with through Redfin were
| hit-or-miss. One we worked with was fantastic and
| knowledgeable, and helped a ton, but another (in a different
| region) let us put an offer on a home that we wouldn't have
| been able to rent out legally in the way we wanted to, which is
| something she absolutely should have known (a non-realtor
| friend alerted us to the issue; fortunately we were able to
| rescind the offer before it was acted upon). I haven't listed
| anything on Redfin as a seller, but they charge 1% of the sale
| price, which is a lot better than the 2.5%-3% traditional
| realtors take. Still, the percentage model seems unnecessary
| there too; the amount of work needed to sell houses of
| different values shouldn't necessarily be directly linked to
| the eventual sale price.
|
| > _But if you think about that wholistically, that means
| sellers are paying 8-10% of the cost of a house every time they
| sell!_
|
| I can only assume this also is part of our housing
| affordability issues. Sellers need to see some minimum amount
| of appreciation (and a fairly large amount at that) in order to
| break even (without even taking inflation into account), so
| homes sell for higher than they would otherwise, especially in
| markets where sellers have the upper hand.
| frumper wrote:
| Title insurance is often required by the lender. If I loan
| you a boatload of money, I want to make sure there isn't any
| funny business about who owns what when you buy that the
| borrowed money. If there is funny business, that why I want
| you to have bought the insurance. Seems as reasonable as home
| owners insurance on a mortgaged property.
| tootie wrote:
| Paying a percentage to realtors is just theft. They add so
| little value in my experience. The fact that a fee can be split
| between two brokers or kept by one just shows they are
| extracting rents for ambiguous value.
| r00fus wrote:
| I'm just as worried about the conspiracy among landlords to
| ratchet up rents and home sale prices.
|
| https://www.propublica.org/article/yieldstar-rent-increase-r...
| WalterBright wrote:
| > by making it difficult for buyers and sellers to negotiate for
| lower rates.
|
| I've negotiated lower commissions with real estate agents. They
| always say it's non-negotiable, and always cave.
| Xeoncross wrote:
| Real Estate in the US is like a bunch of little MLS fiefdoms
| still angry you have access to the internet.
|
| Eventually the Real Estate market will adopt like the music
| industry and others had to. Welcome to the 21st century.
|
| Brokers and agents are mostly sales people that drive around
| showing places. Its the lawyers, inspectors, insurance
| underwriters, loan originators, and title companies that do the
| real and/or legal work.
|
| It's time for broker/agents to take a more fitting role instead
| of charging 6% for posting cell phone pictures of your house on
| their regional MLS.
| harrisonjackson wrote:
| Inspectors maybe since they go on site and climb around etc...
| but every other profession you listed uses the same
| documents/software for every single deal so I don't know what
| you mean by "real" work.
| Root_Denied wrote:
| > Its the lawyers, inspectors, insurance underwriters, loan
| originators, and title companies that do the real/legal work.
|
| And they get paid a flat rate to do that work (hourly or per
| contract). There should be no reason for commission based
| compensation for brokers and RE agents in the residential
| market. I could see an argument in the commercial market for it
| though.
| brentm wrote:
| The music industry didn't have a patch work of local laws
| protecting it's thiefdom, unwinding Real Estate is a much more
| difficult challenge. If it was not I think we would have seen
| some real inroads by now, it's obviously a massive market.
| fsckboy wrote:
| my beef with the commissioned agents is that paying them a
| commission does not actually influence them to work on your
| behalf; they still work on their own behalf. For example, keeping
| your house for sale on the market longer (by rejecting offers)
| tends to eventually bring a higher price. A study or two has
| shown that real estate agents keep their own houses on the market
| for longer than average.
|
| But longer on the market is more work for the agent, while the
| small percentage increase in a higher price doesn't enhance their
| commission by nearly as much as it does the homeowner's,
| especially considering there is frequently a substantial mortgage
| on the house (meaning, the homeowner gets to collect the "bank's
| share" of any additional sale price)
|
| but what will your realtor recommend? "list it at a low price to
| generate interest and start a bidding war", pretty much the
| opposite of what you should do.
|
| In the grand scheme of things, a commission for making a large,
| complex selling process go smoothly is not a ridiculous notion,
| but when your agent is participating in plucking your feathers
| it's pretty annoying.
| ajhurliman wrote:
| You're not forced into taking any deal you don't want to; your
| real estate agent can't accept deals without your consent. I
| agree, agents are usually more focused on deal flow than
| particular outcomes, but it's sort of a fundamental issue with
| agency in general.
|
| A software consultant is more focused on you signing off on the
| work than your bottom line, it's hard to get people to not act
| in their best interest, and for the average person the home
| buying/ selling process is probably too complicated for them to
| navigate without going through some training.
|
| I think the biggest reform that could be passed is to
| disentangle NAR and MLS.
| fsckboy wrote:
| when I am paying somebody handsomely for their domain
| expertise, I don't want to become as educated as they are in
| order to evaluate what they throw in front of me. I want
| advice that I can trust from a fiduciary.
| userinanother wrote:
| The incentive is to close the deal asap the extra 100k for the
| seller isn't much for the realtor
| osigurdson wrote:
| If you think about the problems to solve in a real estate
| transaction are roughly as follows:
|
| Seller problems: 1) Maximize selling price 2) Minimize damage to
| property / theft 3) Minimize cleaning / preparation for showings
|
| Buyer problems: 1) Minimize purchase price 2) Minimize number of
| hidden problems with house
|
| One would think that realtors might help to maximize selling
| price but their incentives are much more aligned with selling a
| property quickly as it is less work that way. For the most part,
| they solve seller problem #2 by acting as a kind of well dressed
| (and likely not very tough) security guard.
|
| The pricing problem could arguably be solved by having something
| along the lines of a Dutch auction. Many of the uncertainties
| (largely not addressed with the current system) could be solved
| via insurance.
| karaterobot wrote:
| > For several years NAR has been fending off accusations by U.S.
| antitrust officials and private litigants that it has conspired
| to keep home-sale costs high in the face of major technological
| upheavals. This verdict is by far the group's biggest setback
| yet.
|
| Buying or selling a home involves paying numerous middlemen
| thousands of dollars without having a clear idea what value they
| are providing in the process, except that if you don't pay them,
| you can't pay the next person in the line. Burn that whole
| industry to the ground as far as I'm concerned.
| 1vuio0pswjnm7 wrote:
| The opinion:
|
| https://ecf.ca8.uscourts.gov/opndir/23/08/222664P.pdf
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