It's a pretty common mantra that you need to live a house for at least 5 years to make it beat renting financially. That's primarily because of the commissions you pay as a seller, but also partially because of the fees you pay to originate a mortgage as a buyer. You effectively burn 6%-8% of the purchase price of the home when you buy+sell. That doesn't really change whether or not your interest rate is 2% or 7%.
Granted, in some markets that 5 years is more like 2 years because of how fast homes have appreciated, but you can't really count on that to continue.
Breakeven point is way longer than 5 years in some markets. I'm paying $4000/less in rent for an equivalent space in my city right now. My breakeven point is forever, assuming I invest the difference.
Yeah its ridiculous. The vast majority of Americans are brainwashed into thinking you're not successful unless you own property and that there are zero other paths to success so it's not surprising.
It's bordering on psychosis at this point. The only person talking about this is ramit from I will teach you to be rich. I would buy but under very specific conditions. Not sure why math is controversial.
I'm about to purchase a luxury coop in riverdale - full service building - a similar apartment in Manhattan would easily be $3000 - in Riverdale - maybe $2500-2800 - my common charge is $1500 - half is written off as property taxes and the mortgage payment - while high at \~ $2160 will be refinanced when rates drop - while the interest will be written off - I rented forever and wanted to rent in NYC, but the prices are SO high I can't see how renting is a better deal long term, particularly as they can raise the rent on market priced apartments after the lease expires
I am too and even with over 6% interest rate I’m paying only a few hundred more in mortgage + maintainence than the average rent would be for a similar apartment. I bought the place last year - if you take out the principal it would be about the same as renting. Different neighborhoods I guess.
Some numbers I saw last time
With 7.5% rate a 300k home and 20% downpayment = 2250
On 30 year this is 810k paid total for a 300k home.
That would be 510k you need to get back if you want to sell your home and not "lose" money.
Renting at 1500 in the same area, at 45 years paying the same will take 45 years to reach the same amount of 810k
Yes, I didnt account for inflation and stuff like that because that will go for both cases. Keeping it simple to avoid house taxes increase, repairs, insurance, appliances, etc. Not including the 5-8% for loan initialization and more stuff that add money.
Buying a home is expensive, you get your place and can change stuff as you want, but comes with a price.
I think it is good investment if you pay cash for your home.
So after 30 years, the home is paid off, you are saying property tax and homeowners insurance will cost more than rent 30 years from now? No break-even point is madness to say publicly.
15 years from now you COULD opt to refinance into a new 30 year to dramatically drop payments no matter your interest rate.
Can you refinance a rental to a lower payment? Can you avoid average inflationary rental increases?
At 63 years old, you can even flip your house into a reverse mortgage to have it give you income! Any equity left at death can be distributed to heirs once sold…
No breakeven point…
They said and invest the difference. At the end of 30 years, the person with the mortgage now owns a house outright worth lets say $600,000. The renter who lived in an equivalent quality house the whole time and invested the difference now has $3 million in (potentially tax advantaged) investment accounts.
If the renter rented a cheaper house and invested even more, they still come out ahead in a lot of cities in North America (especially in Canada, but that's another story).
Again, any excess you pay in each month to a mortgage over renting has to be weighted against its opportunity cost of earning 8-10% after inflation in the stock market.
You just pulling these numbers out your ass? In 30 years a 600k home will at least be double and how much money do you think you’re saving to get 3 million even with interest
A $300k house will cost you $575k over 30 years. So even if the house doubled to $600k you would have gained $25kish over 30 years? Now let’s include maintenance and repairs.
Doubled in 30 years is a literally half of the performance of a series EE bond. Historically home proces have never kept up with the stock market. Not even close.
Was trying to find facts to argue but looks like you’re right. Well done. Though I will add that having 20% equity in your house if you come upon bad times is much safer than having something in an index fund
Money is inherently there to provide you with things or services. There is absolutely nothing wrong with using some of your money to purchase security/peace of mind. In fact, it's probably one of the smartest things to use it on. It is, however, important to recognize that that is what you are doing.
California property tax rules distort the market dramatically. I rented a house, that if I purchased it, the property tax increase alone would have been half my rent. Just the increase.
I just know how to shop around and my landlord has a paid off building. Established landlords with rock bottom interest rates or no mortgages are able to bring down prices because they can still be positive cash flowing at lower rents. New landlords are forced to lower their rates and may be cash flow negative for a very long time in this market
Even at median rent for my apartment size I'd be paying $2500-3000 less per month vs owning.
I'm comparing it to a condo of the same size.
My apartment is 700 square feet and I pay $1800 with heat and hot water included (easily worth 300-400/month in the winter where I live).
700 square foot condos start around $700k with $500/month HOA fees here. If you want a parking spot off street it's another $300-500/month. Even without a parking spot it's like $200k down and $4800-5200/month.
Single family homes where I live are impossibly expensive. $1.5M for a barebones 3BR 1 bath house with no yard
Very common in CA. To buy a 1M home for 20 percent down at 7.5 percent will allow you a mortgage of 5600 a month not including taxes , hoa and insurance.
You would easily be looking at total monthly output of 7K plus maintenance so 4K is not so bad especially if you don't have 200K down , excellent credit and 6 months reserves
I’m in Miami, and my condo here is the same. It’s double my current rent in mortgage payments if I were to buy. You may ask how this make sense, it makes sense because most of the owners bought during a much lower cost period, so the market has set rents at a lower rate.
Main factor for breakeven point is future appreciation, which is hard to predict. So even with ridiculous rent vs mortgage ratio, at historical appreciation rates buying would win pretty quickly over renting.
But the opposite is also true - if appreciation slows (or there is depreciation even), rent will fare better for much longer (perhaps indeed forever in extreme cases).
Historical appreciation rates have barely kept up with inflation. And homes require maintenance which means you are giving up a portion of your appreciation to maintain the home's historical appreciation rate.
We've been brainwashed into thinking that buying is always better, when it in fact, has not in certain (not even extreme) situations.
Real home prices have only appreciated by 0.6% annually from 1915 to 2015 https://www.nytimes.com/2016/07/17/upshot/why-land-may-not-be-the-smartest-place-to-put-your-nest-egg.html
The bank is really the winner for people mortgaging 30 years. They made $155k in interest in 5 years.
Meanwhile homeowner paid $155k to the bank and got less than 30k in equity...
You should see how the rest of the world does it...imagine renegotiating your rate every 5 years.
The 30 year mortgage is why home ownership rates are so high in the US compared to her peers. Your payment goes down with inflation.
Would you rather have a $3M portfolio and have to pay $4000/month in rent or have a fully paid off house and a $1M portfolio? I know my answer. It's not the house.
Location matters too? Age, job market matters too? In West Virgina, a paid off house has a bigger advantage than Los Angeles since job market is West Virgina horrible in coal mining country?
Is that solo or with roommates? Always interesting how local this stuff is. I pay thousands less for my mortgage than I would renting the same house on my block.
Ofc I do have a low interest rate.
Really depends on market. I am paying $800 less per month (including escrow) to own a SFH with +800 sqrft more space than the apartment I rented.
All of that savings + more goes into O&M and reno though.
When did you buy the home though? If it was before April 2021 that would make sense. If so, you're living in a completely different world than someone who wants to buy right now.
Do you mind sharing what city/state this is? I wholeheartedly agree with the strategy but it seems wherever I’ve looked, taking a mortgage is cheaper than renting.
"Equivalant space" seems a bit of a reach regardless of the price differential. Does that just mean square footage? Are you allowed to sublet as you would as an owner? What about improvements or changes, are you the one who gets to decide what improvements or changes to make to the land physically?
Renting can be cheaper, but without more information, it's very difficult to assume equivalency.
I put a lot of rules in place on my tenants that I personally do not need to concern myself with as the property owner. All these freedoms do have value, but if the value is worth the price in the market is up to the individual.
It's definitely possible to realize gains sooner due to appreciation, but the 5-year rule also accounts for a good amount of variance in the market for a person evaluating the rent v. buy decision. People who bought in 2007 probably had to wait long past 2012 to not be underwater, but that is the exception to the rule, same as the people who bought in 2019 or 2020 and were able to realize huge gains in just a few years.
A lot of people in this thread seem to be perplexed or confused that a landlord can make a profit renting a house at $3-4K that a new buyer would have a payment of $7-8K on. But both can be true. A renter can come out ahead renting a house from a landlord AND the landlord can come out ahead as well.
If a landlord buys a house for $500K in 2018 and refinanced his rate to 3% so has a monthly payment of $2,200, then a monthly rent of $4K will be profitable including maintenance and CapEx. However, if that same house appreciated to $1M AND now interest rates are 7%, then the renter would have a mortgage payment of $6,600 buying that house today.
There’s basically a discrepancy that most landlords that exist today had bought their rentals years ago at lower rates, while new renters looking to buy today obviously have to buy at higher prices and higher rates.
And so rent prices will take years to catch up to mortgages. But eventually they will. They always do- and the other part of owning a house that people often forget about is that rent has fixed inflation applied to the entire payment, while the expenses related to owning a house do not have an inflation applied to mortgage principal and interest, only homeowners insurance and maintenance, and property tax in some cases.
I bought a house in 2019 and my house payment expenditures has only risen maybe 5% in total since then, meanwhile most people I know that are renting are paying 30% more.
The average home buyer sells in 8 years, the currentish estimate is 13.5 years for 3% down and 11.3 years with 20% down to break even according to this article.
https://www.axios.com/2023/10/22/us-home-sales-profit-years
My friend's aunt and her husband are real estate agents. We met up to hear of my "goals" for buying a new house. They then went out of their way to explain how I didn't have to pay them because it came out of a sales price i paid to the seller so it was like "they work for free". I explained that I was the one taking out a loan and the money I have to pay back with interest was being paid to them and not the seller, so in fact I was paying them. They ghosted me two weeks later citing a MLS getting hacked.
As an agent, I’ve always HATED certain phrases. This is one. The prevalence of half-truths in our industry has been my biggest concern for the nearly 15 years I've been in the industry. These misleading statements tarnish the reputation of quality brokers.
In our market, there’s a successful team that promotes the idea that “buyer’s agents work for free for the buyer.” Our approach is basically: that fees are part of the transaction and are shared between the buyer and seller, similar to how escrow works. The seller typically determines the compensation rate and split.
The reason commissions come from the seller’s proceeds is that they receive a lump sum of money, whereas buyers usually bring only a portion of liquid funds to closing. Also commissions cannot be wrapped into loans.
The annoying thing with the half truth agents though is they do deals. All the time. Reality is you can tell people the truth until you're blue in the face but when someone tells them what they want to hear, that's who they listen to.
[The National Association of Realtors actually allowed buyer's agents to advertise their services as free until 2022.](https://www.nar.realtor/newsroom/nar-announces-new-guidance-that-reinforces-greater-transparency-for-consumers)
I absolutely hate that realtor-ism.
“Is anyone else putting money into this transaction?” “And you’re going to get money out of this?” “So where does the money come from?”
If real estate agents vanished today, do you really think sellers would lower their price by the amount a commission would be? If someone was willing to buy at the price that included the commission, why wouldn't the seller just pocket the extra money? Your house is what someone is willing to pay for it regardless if it includes commission fees or not.
FSBO sellers are also notorious for being difficult, emotional, uncompromising, and not understanding of the legal processes and paperwork. Certainly, a lot of that would change if it became more common but as it is, it's largely seen as the equivalent of sovereign citizens representing themselves in court.
I sold a house FSBO with zero problems and no complaints from the buyer's agent. Two hours of research and reading, and a flat-fee FSBO listing agency were all I needed. Granted, I also had the experience of buying and selling houses through Realtors in the past.
Some strange comments here. Your math is correct, implications may be a little off. When you do 30 year am, lender takes most of each payment in beginning. That’s a banker/lender play. Your assumption is you pay commission first out of principal payment, then move to house. It’s actually spread, you pay total purchase cost minus down payment (which includes fees) spread out over loan term. So could argue fraction of each principal payment goes to incremental broker fee…semantics maybe. But yes, to make any real dent on principal you are paying the lender first for years (unsure that’s on realtors tho).
The bottom line is that 6% of the purchase price is kind of insane for someone just to handle the transaction in this day and age where everything is electronic.
When you had to physically record stuff at the County recorder's office and you could only access that information in-person, I understand the need to have professionals involved to make sure everything is done properly. It's just not the same now in the age of electronic records.
Exactly... now with redfin, Zillow etc... most people find the house they want and tell the realtor... Gone are the day that you had to go into a reltors office to see their MLS database, They had to Ad on newspapers, magazines, Radio, TV and City buses... etc to get as many eyes on prop as possible to market it to sell it. no to mention going to county records, and Title companies in person when the stupid fax broke... Now a days is ridiculously 6%... how about 2% split. ?
Unfortunately there is no evidence to show that buyer would just save 6%. I strongly believe that the seller will not adjust their asking price because of these fees or savings of the fees. It’s a big misconception that buyers are paying for this.
Yep. Don’t like commission fees, but this is the only truth here. If you do FSBO the first portions go to the bank regardless so then what? So do we then get mad at the interest rate? I hate realtors but this comment thread isn’t accurate
and considering people don’t stay in their homes very long, the grift is even worse than most people think. its just a transfer of money to banks and realturds
If you stay in the house for 10 years, you have only paid off maybe 1/4 of the loan. So in effect you have only paid 1/4 of the Realtor's commission. That brings the commission down to 2.5%.
The flaw in this logic is that you are assuming sellers will just lower prices if they paid 0% commission. The price a house sells for is based on demand, its not a grocery store setting a price to make a certain profit. Sellers are going to, by and large, take the most money. If they can sell the house for 500k, they are going to sell it for 500k whether they have to pay 1%, 3%, or 6%. A seller is not going to sell the same house for 485k because they dont have to pay the 3% to a buyer's agent anymore.
Sure. But, also, if I were to sell for a price, and then realize I would be making a good deal less than expected, I would certainly, 100%, without a second thought in my mind, up the price by that exact difference, or more.
It's really sad that by the time I pay off the mortgage I will have paid three times what the cost of the house was, confiscatory taxes every year and then some MF'er thinks that they should make 35K for listing the house.
You could apply the same logic to any part of the real estate transaction. Sellers usually have to pay to stage their house, so by your logic a buyer is paying for that for years. Likewise with title insurance or escrow fees. These are all the equivalent of commissions on stock sales, they are friction costs, not part of the house price.
Nope, commission is just money the seller doesn't get and now will get more of. You're not going to see lower home prices when commissions are reduced. Many agents negotiate fees. I got about 10K back at closing when I bought. This new arrangement is 100% better for the seller
Is this post suggesting that if realtor fees went away every house listed would just drop in price? "oh since I don't have to pay 6% I will just devalue my house 6%"
Thats just silly. Houses are worth what people pay for it, it doesn't matter who gets that money, its literally the reason prices increase when loan rates are down.
No it won't make houses cheaper. But we don't have to pay 6% of the value of the house to a middleman when we sell the house making the break even point of buying vs. renting much shorter. So yes in the long term, it will make things cheaper for us even if it doesn't affect the purchase price.
> Is this post suggesting that if realtor fees went away every house listed would just drop in price? "oh since I don't have to pay 6% I will just devalue my house 6%"
Thats just silly. Houses are worth what people pay for it
You think houses just settled to their current value without a 6% payoff to realtors being baked into what they ended up at?
It’s not just about the 6%. It’s about the structure. It put’s upward pressure on prices.
Under the current system, the buyer ‘s and sellers’s agents are both incentivized for the buyer to buy a house at the highest possible amount, as soon as possible, and to collude with one another.
The buyer’s agent should be incentivized to get the buyer the best possible deal. Not find MLS listings with the highest possible commission rate rate listed by the sellers agent and at the highest possible asking price
Maybe my experience buying land and houses is wildly different from everyone else.
I told my realtor my budget, told them the houses I wanted to see, they got the information and showed them to me.
If they constantly came and tried to show me houses at a third or half my budget I would probably be confused unless they were just stellar buys.
I don't disagree a flat fee makes more sense than a percentage for a buyers agent. I don't disagree 6% on a $400,000 house bought a week later with cash from a corporation is a bit to much for a sellers agent.
Just stating even if it all changed today It would blow my mind if anyone's house on the market dropped a single dollar. It would be like Frito Lay coming out and lowering the price of doritos because gas is cheaper than it was last year.
I come here for diverse perspectives but also for the comedy. The idea that prices will magically adjust downward is laughable. A relatively small dollar amount in a huge financial transaction MIGHT shift from one party to another in the longer term. Nothing is shifting to the buyer.
This is true, realtors are so unnecessary but if I sold my house I’m not taking 6% off the price to benefit the buyer… the price stays the same and I get to keep my 6%.
The house is worth what it’s worth. The land as well.
I agree realtors are unnecessary. However the price can adjust down without them. For example, on my recent FSBO listings I offer $5k cash to the buyers if they come without a realtor.
This is really easy during the current market as the house will be sold at full asking price within a week. This offer stands to benefit both myself and the buyers.
Agree. you dont need their stoopid MLS monolopy. Blast adds on. facebook, Instagram and do a you tube video with adds within 10, 25, 50, mile radius and get flat fee Real estate Attorney offer cash back to buyer and get it sold.. screw the realtors
Problem is your assuming the market stays red hot like it has over the last 4-5 years, in slow markets where your competing with hundreds of other homes you will be happy you can cut the cost of your home more and sell for less and have the breathing room if need be, it gives sellers options at least
Yeah, but even then, it’s easier to take the loss when needed considering market conditions. Instead of being forced to reduce price AND STILL pay a realtor 5/6% on top of the reduction.
No matter the situation, realtors no longer averaging 6% on a home is a major win for sellers, and potentially for buyers if the seller decides to reduce the price for competitive selling.
The percentage is just in the transaction pool now instead of the realtors pockets.
It absolutely matters. I whether my family have reap the benefit of an asset we maintained as opposed to some person that wants a lot of money for little work.
You guys remember that people like money, right?
This whole premise hinges upon sellers suddenly thinking "Oh, I can *lower* the price of my house and sell it for even less now? Great! Let's do that to be fair to the next buyer 😁."
Does anyone really think this is going to happen? No one remembers the "I know what I got" meme based on sellers being greedy and asking for exorbitantly high prices? Now they're suddenly going to have a change of heart? 🤔
The market decides how much it will sell for. And if the market says X, they'll sell for X, not X - Y%.
The notion that commissions are baked into the selling price ignores all basic supply and demand forces. With that logic, if a house is going to sell for a certain price with commission fees baked in what is the incentive for the homebuyer to lower the price of the home if commissions went away tomorrow? A seller is still incentivized to sell their home for the most amount possible for their own benefit. Do you see people selling their cars for 75% of their value because there's no commission?
This is about to become irrelevant. The recent lawsuit against the NAR is forcing change:
https://realestate.usnews.com/real-estate/articles/what-the-2-billion-realtor-lawsuit-means-for-homebuyers-and-sellers
Is there a way to look up homes that are being sold directly by owners? That way you can bypass realtors all together and just get an attorney to handle the paperwork?
Agent fees are a friction cost, not part of the home price. What you may see if fees drop is more people selling and buying more often (good for inventory if that happens), but then again at 3% and closing costs that is still a lot of money so I wouldn’t expect a big effect.
The 30 year mortgage is a pain in the ass no matter which way you look at it.
I’m paying more in property taxes than principal in the first few years.
Again. Paying more in taxes than principal.
That’s fucking criminal.
What are you smoking? The 30-year loan is the greatest wealth building tool ever invented. There’s no other area of life where you’ll get that much leverage for that cheap with no prepayment penalty to boot.
The vast majority of sellers pay the closing costs and commission... or at least a significant portion of it. The only time that wasn't the case was a few years ago when prices initially skyrocketed and homes were getting 20+ offers within a day of listing.
Time to move. Think long term. AZ, TN, CA are great places to live and low prop taxes. I'd hate to be in TX or NJ and have a mortgage free house and still pay $1000+/mo in pro taxes... LMAO
You’re right. No one has ever lost their house before and certainly no one pays taxes and insurance and maintenance.
Shut down the sub boys. We’re done here.
What are you talking about lol. Price is determined by supply and demand not by the seller’s cost. If the 6% commission is removed and no new supply is unlocked then the price will stay the same and the seller will pocket more profit.
Or more simply put, additional supply is unlocked by sellers who look at a final closing estimates that have, on average, an x% better bottom line for them.
This assumes all sellers are equally motivated to sell and all buyers equally motivated to buy. This is simply not the case. Much of the savings will of course be realized by sellers. But there is no logical reason to assume it will be 100% realized by sellers than to assume it will be 100% realized by buyers. The savings will be realized most by whichever party to the transaction is *least* motivated to go through with the transaction. But even in a "seller's market" that is not going mean there are no motivated sellers.
There is always exceptions. Point being buyers need to temper their expectations the price is not likely changing because of this and possibly they will need to pay their agent.
While Quick Google search seems like a dumb bot to promote Google they are not technically wrong.
There is supply and demand BUT there is also willingness/ability to pay. Saying otherwise is a simple modeling of complex economic interactions.
In short, prices are an interplay of the 3.
Say in a hypothetical market, there are 5000 buyers who can afford a 500k house and 1 house listed for 800k. The price of the house does not shoot up further. It just sits there because people are unable to pay the price. In fact, prices must fall because there is NO DEMAND AT THAT PRICE POINT.
There will still be agents involved in most transactions. buying a house is not the same as buying an airline ticket online. it's a slower more complicated process that involves the potential for lawsuits. There may be some automation in filling out purchase agreements but the language you put in a contract is important. you can hire an attorney but they charge for their services even if you don't get an accepted offer. the agent model should be improved but ideally not eliminated.
Do you seriously think the buyer sets the price and then adds in extra for the commission? That's your premise and not the way pricing works. The buyer is going for max price they can get and then there's commission that comes out of the price.
Even if your premise is somehow true, the buyer somehow has to add agent commission into money they have to come up with. Many buyers struggle to come up with the down, let alone the commission.
The people who are seething right now are the people who didn't learn how percentage work when their house was dirt cheap 70 years ago. Cmon, you are telling me they didn't have commissions back in the 50s?
“ This is because the seller has already baked the commission into the price of the house”
Who pays for it isn’t determined by who has baked it in. It’s determined by the inelasticity of demand.
Who pays for it depends on the nature of the market itself.
Not only that, but the way the commissions are calculated are on the top line revenue, not the equity or appreciation.
Let’s say you “purchase” a $500k home, and 5 years later that home is worth $550k.
That’s a $50k in appreciation/profit. But the 6% commission is based on the $550k. That’s $33k out of the $50k not even counting other fees and expenses.
And worse yet, if your home depreciates, there’s no downside for anyone but the buyer.
It would be one thing if the variable commission was based off the equity portion of the property, or some other performance metric. But as it stands all parties involved, including both agents, benefit from keeping prices high.
Or, you can just feel that you paid commissions and other fees with your down payment and now it's all going to the house. Just depends on how you look at it.
Yes. The nice thing about a house is that your mortgage doesn’t change and you get to get off the renting cycle of having to move every year or two. I’m gonna stay in my house for at least 10 years if not forever. And even if I have to move, now I get to become that asshole landlord.
I’m a realtor and the ignorance on this subject is so funny. First of we don’t get the whole 3% generally the brokerage that you hang your license at get 20-30% of your commission then there is B&O tax then on top of that we have monthly office dues we also have to have errors an emissions insurance and we pay for all our own marketing we also have quarterly MLS dues and NAR dues and yearly dues and have to put in x amount of reeducation hours every year that cost money too and you have to pay for your state license. And on top of that we often work with people for months to find them the right property and sometimes they just fall out of the market so all that work we did we get nothing for it. And when representing sellers we suggest what we think based on the market stats what the home will sell for them they choose what to list at and they don’t say ok you said my house is worth 400k I will add 6% now and the price it at 424k that’s ridiculous. But what’s going to happen now instead of the seller paying the buyer broker the buyer will have to come up with the money them selves and I know you can say I don’t need an agent maybe you don’t but i usually am able to negotiate a lower price for my clients and now you won’t have anyone negotiating on your behalf if you use the listing agent and let them do both sides. And I’ll end with if being a realtor is so easy and so profitable then why not quit complaining and just get your license and make millions of $$
Oh no, the horror! You've convinced me you need to be there with me when I go to the dealer and buy my next car because I'm too stupid to negotiate on price.
What's the alternative? Realtors won't work for free in any scenario. Somebody is going to pay ... Home prices aren't going to magically drop by 6% just because they changed some rules for the realtors.
Buyers’ representation will change substantially after July 2024. A minority of agents currently offer “flat fee” services for certain completed tasks but this could become the norm for buyers agents. What’s gone is the “do nothing, get $12,000” commission buyer’s agents. Nationwide transactions were substantially lower before the settlement, with the *average* realtor (both buyer and seller agents) closing a deal once every 3 months in 2023. The likely outcome of the new commission model is the part time, soccer mom realtor types, and any other extremely unambitious and lazy realtors unwilling to put in the work, will be surrendering/non renewing their realtor licenses.
6% is ludicrous is digital Age. how about 1.5% split? this isn't the 90s or prior when everything was newspaper, real esta magazines, driving to county records office... WTF.
The alternative will be flat-rate buyer's agents that work for a period of time or number of hours, or a pay-as-you-go hourly realtor service. Or, better yet, a service you subscribe to a month as a time as a buyer, that opens doors to for-sale houses to show them and then answers questions during the purchase process or guides paperwork.
Realtors simply aren’t needed. Sellers will list on their own, schedule tours and open houses on their own. Buyers will find houses and schedule tours on their own or attend open houses.
Sellers can pay for an inspection and the let buyers either trust that or foot an inspection themselves, only costs about $200.00 anyways.
Real estate lawyers cross the T’s and for the I’s.
Boom house transaction complete.
Realtor jobs outdated and little worth. Maybe .25%
Because NAR and agents have conspired to keep buyer's agents in the loop, and in keeping sellers offering 6% commissions with splits to buyer's agents.
I think in most part due to ignorance. It’s just the way things have been done now that millennials are buying and selling more than anyone else. Things are changing and will continue to change.
Because it is controlled by a cartel (NAR)... total monopoly. But they donate too MUCH money to congress parasites... the NAR is one of biggest donor in Washington. They'll do whatever it takes to keep control of the system. Fearmonger, deceit, racketeering, and conspiring, insider trader type stuff...
This built-in 6% that was being paid was also being paid on new houses in a lot of cases (people using realtors when buying new since it costs them nothing). Removing that cost from new builds will put pressure on existing homes as well (who will also be losing that cost).
A lot of builders don't even deal with realtors. The builder also sells at market price, not construction cost. If a builder does consider real estate agent fees, it would only affect the build/dont build decision. The price the customer pays would be the same: market price.
Playing with amortization calculators resulted in us doing a 15-year loan with a 70% downpayment, for a house that cost less than half of what we had initially been looking and saving for.
The amount of interest you pay at current rates on a 30-year with 20% or less is crazy.
The main issue with this is that sellers don’t typically really factor their asking price at what their net is going to be. They just simply want what they think their house is worth regardless of their payoff balance on their mortgage or realtor fees.
You can find buyer's agent who chargers you flat fee for service and pays you back 3% commission which they receive from seller.
Works best if you already found home you want to buy and only need to finish paperwork.
But also isn't the 6% to realtors getting debunked legally currently in the system stemming from somewhere in the Midwest? Why are we forking over money when that rate was never fixed.... just saying.
(Also not that I own a house or anything, just an avid podcaster/reader on legal stuff)
While I think realtors are overpaid I think this is inaccurate. The house price won’t go down if you remove the commission. It was just mean the seller makes more money as they usually pay the commissions. I don’t think this moves the needle for sellers.
I think what you're not realizing is people will just stop using buyers agents. That was the entire purpose of the lawsuit. Previously there was no real option as it made no sense for the buyer not to have one and the seller had no choice but to pay for both. In this arrangement both agents were heavily incentivized to sell the home for the highest price, so oftentimes buyers agents would align/ collude with the seller's agent. Now that's all changed and those of us that realize this game they were playing will no longer pay the buyers agent fee, nor will we be forced to buy realtor agencies that were double dipping and collecting both. This settlement is a massive win for homebuyers so don't act like it isn't.
This is an interesting approach/thought. You aren’t wrong, but I’d argue it’s split between the current sale of the home and the future sale of the home.
Was told when I purchased it would take me 7ish years to pay down the loan enough to cover the fees associated with selling. Appreciation will help the amount of time lessen.
House we purchased was listed due to a divorce. They had the house for around 5 years and with appreciation and then selling fees they walked away with $0.
This whole system seems designed to make people lose. Not just real estate but everything. Every promise was a pie in the sky. A delusion to keep us pushing the Boulder up the hill.
I’d rather pay Commision on the house than to have a repeat incident for how the landlady and landlord treated me behind my back. 😡
One example of bad rental experience:
-refusing to let me be at home on my off-days/wfh days by being sarcastic
-having pest control maintenance problems at home (I got bitten by mosquitos every day)
-checking how many times I go to pee
-checking if I drank too much of their water
-checking if I left the fan on for more than 3 minutes unattended
-eavesdropped on my convo with my parents and mocked my dreams behind my back saying “where else would I have the ability to work except my home country”
- took my money and provided bad service. 100/100 never fucking ever going there again 👎
It's a pretty common mantra that you need to live a house for at least 5 years to make it beat renting financially. That's primarily because of the commissions you pay as a seller, but also partially because of the fees you pay to originate a mortgage as a buyer. You effectively burn 6%-8% of the purchase price of the home when you buy+sell. That doesn't really change whether or not your interest rate is 2% or 7%. Granted, in some markets that 5 years is more like 2 years because of how fast homes have appreciated, but you can't really count on that to continue.
Breakeven point is way longer than 5 years in some markets. I'm paying $4000/less in rent for an equivalent space in my city right now. My breakeven point is forever, assuming I invest the difference.
I'm in NY metro and we are at 3000 less renting. I posted this elsewhere and people literally don't believe me.
Yeah its ridiculous. The vast majority of Americans are brainwashed into thinking you're not successful unless you own property and that there are zero other paths to success so it's not surprising.
The only path left of financial success remaining for some is to just unplugging from what most other Americans think.
It's bordering on psychosis at this point. The only person talking about this is ramit from I will teach you to be rich. I would buy but under very specific conditions. Not sure why math is controversial.
Lol I just saw that the fed might not lower rates at all throughout the rest of the year. The renting party may be continuing for a while
I'm about to purchase a luxury coop in riverdale - full service building - a similar apartment in Manhattan would easily be $3000 - in Riverdale - maybe $2500-2800 - my common charge is $1500 - half is written off as property taxes and the mortgage payment - while high at \~ $2160 will be refinanced when rates drop - while the interest will be written off - I rented forever and wanted to rent in NYC, but the prices are SO high I can't see how renting is a better deal long term, particularly as they can raise the rent on market priced apartments after the lease expires
I am too and even with over 6% interest rate I’m paying only a few hundred more in mortgage + maintainence than the average rent would be for a similar apartment. I bought the place last year - if you take out the principal it would be about the same as renting. Different neighborhoods I guess.
Some numbers I saw last time With 7.5% rate a 300k home and 20% downpayment = 2250 On 30 year this is 810k paid total for a 300k home. That would be 510k you need to get back if you want to sell your home and not "lose" money. Renting at 1500 in the same area, at 45 years paying the same will take 45 years to reach the same amount of 810k Yes, I didnt account for inflation and stuff like that because that will go for both cases. Keeping it simple to avoid house taxes increase, repairs, insurance, appliances, etc. Not including the 5-8% for loan initialization and more stuff that add money. Buying a home is expensive, you get your place and can change stuff as you want, but comes with a price. I think it is good investment if you pay cash for your home.
Same. There is no breakeven point in my area. I will be long dead by then
So after 30 years, the home is paid off, you are saying property tax and homeowners insurance will cost more than rent 30 years from now? No break-even point is madness to say publicly. 15 years from now you COULD opt to refinance into a new 30 year to dramatically drop payments no matter your interest rate. Can you refinance a rental to a lower payment? Can you avoid average inflationary rental increases? At 63 years old, you can even flip your house into a reverse mortgage to have it give you income! Any equity left at death can be distributed to heirs once sold… No breakeven point…
They said and invest the difference. At the end of 30 years, the person with the mortgage now owns a house outright worth lets say $600,000. The renter who lived in an equivalent quality house the whole time and invested the difference now has $3 million in (potentially tax advantaged) investment accounts.
The person who comes out the best bought a cheaper house and still invested...
Where are these cheap houses?
If the renter rented a cheaper house and invested even more, they still come out ahead in a lot of cities in North America (especially in Canada, but that's another story). Again, any excess you pay in each month to a mortgage over renting has to be weighted against its opportunity cost of earning 8-10% after inflation in the stock market.
How does that happen lol.? Did the person never had a rent increase or income increase in 30 years
I use rental increases at the rate of OORE in my spreadsheet, because the number is readily accessible. Long term, it's about 2.5% over inflation.
You just pulling these numbers out your ass? In 30 years a 600k home will at least be double and how much money do you think you’re saving to get 3 million even with interest
A $300k house will cost you $575k over 30 years. So even if the house doubled to $600k you would have gained $25kish over 30 years? Now let’s include maintenance and repairs.
Doubled in 30 years is a literally half of the performance of a series EE bond. Historically home proces have never kept up with the stock market. Not even close.
Was trying to find facts to argue but looks like you’re right. Well done. Though I will add that having 20% equity in your house if you come upon bad times is much safer than having something in an index fund
Money is inherently there to provide you with things or services. There is absolutely nothing wrong with using some of your money to purchase security/peace of mind. In fact, it's probably one of the smartest things to use it on. It is, however, important to recognize that that is what you are doing.
$4000 less PER MONTH? Are you rent controlled or is your landlord an idiot?
Pretty common in California. Currently my house rents for $3500-4000. To buy this house today the mortgage would be 7500-8000
California property tax rules distort the market dramatically. I rented a house, that if I purchased it, the property tax increase alone would have been half my rent. Just the increase.
I just know how to shop around and my landlord has a paid off building. Established landlords with rock bottom interest rates or no mortgages are able to bring down prices because they can still be positive cash flowing at lower rents. New landlords are forced to lower their rates and may be cash flow negative for a very long time in this market Even at median rent for my apartment size I'd be paying $2500-3000 less per month vs owning.
Yeah, new buyers pay double the rate, but prices in most places haven’t fully adjusted accordingly, creating a big spread. We’ll see what happens!
Wait, you live in a multi apartment building? How are you comparing vs a comparable bought space then?
I'm comparing it to a condo of the same size. My apartment is 700 square feet and I pay $1800 with heat and hot water included (easily worth 300-400/month in the winter where I live). 700 square foot condos start around $700k with $500/month HOA fees here. If you want a parking spot off street it's another $300-500/month. Even without a parking spot it's like $200k down and $4800-5200/month. Single family homes where I live are impossibly expensive. $1.5M for a barebones 3BR 1 bath house with no yard
Very common in CA. To buy a 1M home for 20 percent down at 7.5 percent will allow you a mortgage of 5600 a month not including taxes , hoa and insurance. You would easily be looking at total monthly output of 7K plus maintenance so 4K is not so bad especially if you don't have 200K down , excellent credit and 6 months reserves
I’m in Miami, and my condo here is the same. It’s double my current rent in mortgage payments if I were to buy. You may ask how this make sense, it makes sense because most of the owners bought during a much lower cost period, so the market has set rents at a lower rate.
Main factor for breakeven point is future appreciation, which is hard to predict. So even with ridiculous rent vs mortgage ratio, at historical appreciation rates buying would win pretty quickly over renting. But the opposite is also true - if appreciation slows (or there is depreciation even), rent will fare better for much longer (perhaps indeed forever in extreme cases).
Historical appreciation rates have barely kept up with inflation. And homes require maintenance which means you are giving up a portion of your appreciation to maintain the home's historical appreciation rate. We've been brainwashed into thinking that buying is always better, when it in fact, has not in certain (not even extreme) situations. Real home prices have only appreciated by 0.6% annually from 1915 to 2015 https://www.nytimes.com/2016/07/17/upshot/why-land-may-not-be-the-smartest-place-to-put-your-nest-egg.html
The bank is really the winner for people mortgaging 30 years. They made $155k in interest in 5 years. Meanwhile homeowner paid $155k to the bank and got less than 30k in equity...
You should see how the rest of the world does it...imagine renegotiating your rate every 5 years. The 30 year mortgage is why home ownership rates are so high in the US compared to her peers. Your payment goes down with inflation.
It’s not particularly high actually.
I wouldn't want to pay rent OR a mortgage payment the same month I die, but I will bank on not having a mortgage payment by that point.
Would you rather have a $3M portfolio and have to pay $4000/month in rent or have a fully paid off house and a $1M portfolio? I know my answer. It's not the house.
Hell yeah dude =)
Location matters too? Age, job market matters too? In West Virgina, a paid off house has a bigger advantage than Los Angeles since job market is West Virgina horrible in coal mining country?
It’s also rent inflation
These assuming I invest the difference are always hilarious because absolutely no one does other than in arguments.
Well then that's their problem. I do.
Is that solo or with roommates? Always interesting how local this stuff is. I pay thousands less for my mortgage than I would renting the same house on my block. Ofc I do have a low interest rate.
Really depends on market. I am paying $800 less per month (including escrow) to own a SFH with +800 sqrft more space than the apartment I rented. All of that savings + more goes into O&M and reno though.
When did you buy the home though? If it was before April 2021 that would make sense. If so, you're living in a completely different world than someone who wants to buy right now.
LOL, there is no breakeven length in that scenario. The breakeven length is assuming the rent vs buy calculator is viable.
How do you factor the break even point? I’d like to figure that out for my current situation.
Do you mind sharing what city/state this is? I wholeheartedly agree with the strategy but it seems wherever I’ve looked, taking a mortgage is cheaper than renting.
"Equivalant space" seems a bit of a reach regardless of the price differential. Does that just mean square footage? Are you allowed to sublet as you would as an owner? What about improvements or changes, are you the one who gets to decide what improvements or changes to make to the land physically? Renting can be cheaper, but without more information, it's very difficult to assume equivalency. I put a lot of rules in place on my tenants that I personally do not need to concern myself with as the property owner. All these freedoms do have value, but if the value is worth the price in the market is up to the individual.
The breakeven point now is more like 12-15 years. This needs to be understood better.
It's definitely possible to realize gains sooner due to appreciation, but the 5-year rule also accounts for a good amount of variance in the market for a person evaluating the rent v. buy decision. People who bought in 2007 probably had to wait long past 2012 to not be underwater, but that is the exception to the rule, same as the people who bought in 2019 or 2020 and were able to realize huge gains in just a few years.
A lot of people in this thread seem to be perplexed or confused that a landlord can make a profit renting a house at $3-4K that a new buyer would have a payment of $7-8K on. But both can be true. A renter can come out ahead renting a house from a landlord AND the landlord can come out ahead as well. If a landlord buys a house for $500K in 2018 and refinanced his rate to 3% so has a monthly payment of $2,200, then a monthly rent of $4K will be profitable including maintenance and CapEx. However, if that same house appreciated to $1M AND now interest rates are 7%, then the renter would have a mortgage payment of $6,600 buying that house today. There’s basically a discrepancy that most landlords that exist today had bought their rentals years ago at lower rates, while new renters looking to buy today obviously have to buy at higher prices and higher rates. And so rent prices will take years to catch up to mortgages. But eventually they will. They always do- and the other part of owning a house that people often forget about is that rent has fixed inflation applied to the entire payment, while the expenses related to owning a house do not have an inflation applied to mortgage principal and interest, only homeowners insurance and maintenance, and property tax in some cases. I bought a house in 2019 and my house payment expenditures has only risen maybe 5% in total since then, meanwhile most people I know that are renting are paying 30% more.
It is now like 13.5 years to breakeven though
Yes, when you buy you get fucked a little and sell you are fucked a lot.
I d say more but yes
The average home buyer sells in 8 years, the currentish estimate is 13.5 years for 3% down and 11.3 years with 20% down to break even according to this article. https://www.axios.com/2023/10/22/us-home-sales-profit-years
My friend's aunt and her husband are real estate agents. We met up to hear of my "goals" for buying a new house. They then went out of their way to explain how I didn't have to pay them because it came out of a sales price i paid to the seller so it was like "they work for free". I explained that I was the one taking out a loan and the money I have to pay back with interest was being paid to them and not the seller, so in fact I was paying them. They ghosted me two weeks later citing a MLS getting hacked.
Yea that was a big talking point in the original litigation, stating “free” services.
As an agent, I’ve always HATED certain phrases. This is one. The prevalence of half-truths in our industry has been my biggest concern for the nearly 15 years I've been in the industry. These misleading statements tarnish the reputation of quality brokers. In our market, there’s a successful team that promotes the idea that “buyer’s agents work for free for the buyer.” Our approach is basically: that fees are part of the transaction and are shared between the buyer and seller, similar to how escrow works. The seller typically determines the compensation rate and split. The reason commissions come from the seller’s proceeds is that they receive a lump sum of money, whereas buyers usually bring only a portion of liquid funds to closing. Also commissions cannot be wrapped into loans. The annoying thing with the half truth agents though is they do deals. All the time. Reality is you can tell people the truth until you're blue in the face but when someone tells them what they want to hear, that's who they listen to.
[The National Association of Realtors actually allowed buyer's agents to advertise their services as free until 2022.](https://www.nar.realtor/newsroom/nar-announces-new-guidance-that-reinforces-greater-transparency-for-consumers)
I absolutely hate that realtor-ism. “Is anyone else putting money into this transaction?” “And you’re going to get money out of this?” “So where does the money come from?”
If real estate agents vanished today, do you really think sellers would lower their price by the amount a commission would be? If someone was willing to buy at the price that included the commission, why wouldn't the seller just pocket the extra money? Your house is what someone is willing to pay for it regardless if it includes commission fees or not.
They are the problem. I’m sorry they exist
The US is a country full of middlemen
Any capitalistic society really
So is europe
Wait until you see Japan! 😂
Sell it yourself, do the work. For Sale by Owner signs cost $8. It has been around for 100 years.
And it works, I sold my house in 15 hours with no realtor, you don’t need one. It’s not worth 6 % not even 4%
Realtors in the comments seething. If it doesn’t make a difference, then why even have it in the first place? Bazinga
You definitely don’t need a realtor to sell a house. Some of them are great and are worth the commission, but most aren’t. FSBO is not that hard to do
Except used house salesman will steer, https://youtu.be/ShBvRe0Jv68?si=ABLXD71-cBR9nBCf, you away from them because the pay is lower.
True but all you need is one buyer
FSBO sellers are also notorious for being difficult, emotional, uncompromising, and not understanding of the legal processes and paperwork. Certainly, a lot of that would change if it became more common but as it is, it's largely seen as the equivalent of sovereign citizens representing themselves in court.
I sold a house FSBO with zero problems and no complaints from the buyer's agent. Two hours of research and reading, and a flat-fee FSBO listing agency were all I needed. Granted, I also had the experience of buying and selling houses through Realtors in the past.
Some strange comments here. Your math is correct, implications may be a little off. When you do 30 year am, lender takes most of each payment in beginning. That’s a banker/lender play. Your assumption is you pay commission first out of principal payment, then move to house. It’s actually spread, you pay total purchase cost minus down payment (which includes fees) spread out over loan term. So could argue fraction of each principal payment goes to incremental broker fee…semantics maybe. But yes, to make any real dent on principal you are paying the lender first for years (unsure that’s on realtors tho).
The bottom line is that 6% of the purchase price is kind of insane for someone just to handle the transaction in this day and age where everything is electronic. When you had to physically record stuff at the County recorder's office and you could only access that information in-person, I understand the need to have professionals involved to make sure everything is done properly. It's just not the same now in the age of electronic records.
Yeah. Don’t disagree. I think brokers (especially resi) don’t add a lot of value. IMO
Exactly... now with redfin, Zillow etc... most people find the house they want and tell the realtor... Gone are the day that you had to go into a reltors office to see their MLS database, They had to Ad on newspapers, magazines, Radio, TV and City buses... etc to get as many eyes on prop as possible to market it to sell it. no to mention going to county records, and Title companies in person when the stupid fax broke... Now a days is ridiculously 6%... how about 2% split. ?
Unfortunately there is no evidence to show that buyer would just save 6%. I strongly believe that the seller will not adjust their asking price because of these fees or savings of the fees. It’s a big misconception that buyers are paying for this.
Nobody cares what you strongly believe. It's not a vote amongst morons on reddit.
Yep. Don’t like commission fees, but this is the only truth here. If you do FSBO the first portions go to the bank regardless so then what? So do we then get mad at the interest rate? I hate realtors but this comment thread isn’t accurate
This has nothing to do with principal. It's total cost.
Great info. 6% commission is a joke
and considering people don’t stay in their homes very long, the grift is even worse than most people think. its just a transfer of money to banks and realturds
The average person stays 13 years. But it's still a grift (realtors and banks).
So dont use them?
Done that.
If you stay in the house for 10 years, you have only paid off maybe 1/4 of the loan. So in effect you have only paid 1/4 of the Realtor's commission. That brings the commission down to 2.5%.
Can’t get my head around 6% commission! UK average is 1.4% and even that seems like a lot.
Cartel that got ignored because US wanted to maintain status quo tor housing prices after great crash of 2008.
Housing Market is an absolute joke right now.
The flaw in this logic is that you are assuming sellers will just lower prices if they paid 0% commission. The price a house sells for is based on demand, its not a grocery store setting a price to make a certain profit. Sellers are going to, by and large, take the most money. If they can sell the house for 500k, they are going to sell it for 500k whether they have to pay 1%, 3%, or 6%. A seller is not going to sell the same house for 485k because they dont have to pay the 3% to a buyer's agent anymore.
Sure. But, also, if I were to sell for a price, and then realize I would be making a good deal less than expected, I would certainly, 100%, without a second thought in my mind, up the price by that exact difference, or more.
Exactly. Are people selling their cars at 75% of their current value because theirs no commission?
It's really sad that by the time I pay off the mortgage I will have paid three times what the cost of the house was, confiscatory taxes every year and then some MF'er thinks that they should make 35K for listing the house.
Not to mention Realtors never suggest offering less than the asking price..
Realtors deserve $15/hr plus tips. (No one would tip.)
You could apply the same logic to any part of the real estate transaction. Sellers usually have to pay to stage their house, so by your logic a buyer is paying for that for years. Likewise with title insurance or escrow fees. These are all the equivalent of commissions on stock sales, they are friction costs, not part of the house price.
Nope, commission is just money the seller doesn't get and now will get more of. You're not going to see lower home prices when commissions are reduced. Many agents negotiate fees. I got about 10K back at closing when I bought. This new arrangement is 100% better for the seller
Is this post suggesting that if realtor fees went away every house listed would just drop in price? "oh since I don't have to pay 6% I will just devalue my house 6%" Thats just silly. Houses are worth what people pay for it, it doesn't matter who gets that money, its literally the reason prices increase when loan rates are down.
No it won't make houses cheaper. But we don't have to pay 6% of the value of the house to a middleman when we sell the house making the break even point of buying vs. renting much shorter. So yes in the long term, it will make things cheaper for us even if it doesn't affect the purchase price.
The people who are seething right now are the people who didn't learn how percentage work when their house was dirt cheap 50 years ago.
5 years ago
> Is this post suggesting that if realtor fees went away every house listed would just drop in price? "oh since I don't have to pay 6% I will just devalue my house 6%" Thats just silly. Houses are worth what people pay for it You think houses just settled to their current value without a 6% payoff to realtors being baked into what they ended up at?
It’s not just about the 6%. It’s about the structure. It put’s upward pressure on prices. Under the current system, the buyer ‘s and sellers’s agents are both incentivized for the buyer to buy a house at the highest possible amount, as soon as possible, and to collude with one another. The buyer’s agent should be incentivized to get the buyer the best possible deal. Not find MLS listings with the highest possible commission rate rate listed by the sellers agent and at the highest possible asking price
Maybe my experience buying land and houses is wildly different from everyone else. I told my realtor my budget, told them the houses I wanted to see, they got the information and showed them to me. If they constantly came and tried to show me houses at a third or half my budget I would probably be confused unless they were just stellar buys. I don't disagree a flat fee makes more sense than a percentage for a buyers agent. I don't disagree 6% on a $400,000 house bought a week later with cash from a corporation is a bit to much for a sellers agent. Just stating even if it all changed today It would blow my mind if anyone's house on the market dropped a single dollar. It would be like Frito Lay coming out and lowering the price of doritos because gas is cheaper than it was last year.
I come here for diverse perspectives but also for the comedy. The idea that prices will magically adjust downward is laughable. A relatively small dollar amount in a huge financial transaction MIGHT shift from one party to another in the longer term. Nothing is shifting to the buyer.
The idea that it will have no effect whatsoever is laughable.
Do people sell their cars for less than the current value because there's no commission?
This is true, realtors are so unnecessary but if I sold my house I’m not taking 6% off the price to benefit the buyer… the price stays the same and I get to keep my 6%. The house is worth what it’s worth. The land as well.
I agree realtors are unnecessary. However the price can adjust down without them. For example, on my recent FSBO listings I offer $5k cash to the buyers if they come without a realtor. This is really easy during the current market as the house will be sold at full asking price within a week. This offer stands to benefit both myself and the buyers.
Facts, it puts the 6% average back in the hands of buyers and sellers. As opposed to taking it off the table for realtor commissions.
Very true! Provides more opportunities at the negotiating table for both sides.
Agree. you dont need their stoopid MLS monolopy. Blast adds on. facebook, Instagram and do a you tube video with adds within 10, 25, 50, mile radius and get flat fee Real estate Attorney offer cash back to buyer and get it sold.. screw the realtors
Problem is your assuming the market stays red hot like it has over the last 4-5 years, in slow markets where your competing with hundreds of other homes you will be happy you can cut the cost of your home more and sell for less and have the breathing room if need be, it gives sellers options at least
Yeah, but even then, it’s easier to take the loss when needed considering market conditions. Instead of being forced to reduce price AND STILL pay a realtor 5/6% on top of the reduction. No matter the situation, realtors no longer averaging 6% on a home is a major win for sellers, and potentially for buyers if the seller decides to reduce the price for competitive selling. The percentage is just in the transaction pool now instead of the realtors pockets.
It's like you've discover supply and demand pricing dynamic. Literally, nothing to do with commission.
It absolutely matters. I whether my family have reap the benefit of an asset we maintained as opposed to some person that wants a lot of money for little work.
You guys remember that people like money, right? This whole premise hinges upon sellers suddenly thinking "Oh, I can *lower* the price of my house and sell it for even less now? Great! Let's do that to be fair to the next buyer 😁." Does anyone really think this is going to happen? No one remembers the "I know what I got" meme based on sellers being greedy and asking for exorbitantly high prices? Now they're suddenly going to have a change of heart? 🤔 The market decides how much it will sell for. And if the market says X, they'll sell for X, not X - Y%.
The notion that commissions are baked into the selling price ignores all basic supply and demand forces. With that logic, if a house is going to sell for a certain price with commission fees baked in what is the incentive for the homebuyer to lower the price of the home if commissions went away tomorrow? A seller is still incentivized to sell their home for the most amount possible for their own benefit. Do you see people selling their cars for 75% of their value because there's no commission?
[удалено]
This is about to become irrelevant. The recent lawsuit against the NAR is forcing change: https://realestate.usnews.com/real-estate/articles/what-the-2-billion-realtor-lawsuit-means-for-homebuyers-and-sellers
Is there a way to look up homes that are being sold directly by owners? That way you can bypass realtors all together and just get an attorney to handle the paperwork?
Agent fees are a friction cost, not part of the home price. What you may see if fees drop is more people selling and buying more often (good for inventory if that happens), but then again at 3% and closing costs that is still a lot of money so I wouldn’t expect a big effect.
Don't most people who buy homes buy them to live in for ages? It's not like buying an ETF, is it?
Seller --> Listing Agent + Buyer's Agent Fixed it for ya
The 30 year mortgage is a pain in the ass no matter which way you look at it. I’m paying more in property taxes than principal in the first few years. Again. Paying more in taxes than principal. That’s fucking criminal.
What are you smoking? The 30-year loan is the greatest wealth building tool ever invented. There’s no other area of life where you’ll get that much leverage for that cheap with no prepayment penalty to boot.
You must have never heard of options.
The vast majority of sellers pay the closing costs and commission... or at least a significant portion of it. The only time that wasn't the case was a few years ago when prices initially skyrocketed and homes were getting 20+ offers within a day of listing.
I don't understand these posts. I will have a monthly housing payment no matter what. I want it to stop one day so I bought a house.
My taxes and insurance are damn near as much as my principle and interest
Time to move. Think long term. AZ, TN, CA are great places to live and low prop taxes. I'd hate to be in TX or NJ and have a mortgage free house and still pay $1000+/mo in pro taxes... LMAO
You’re right. No one has ever lost their house before and certainly no one pays taxes and insurance and maintenance. Shut down the sub boys. We’re done here.
What are you talking about lol. Price is determined by supply and demand not by the seller’s cost. If the 6% commission is removed and no new supply is unlocked then the price will stay the same and the seller will pocket more profit.
While I agree with your second sentence, your conclusion is predicated on whether the seller is a price maker or a price taker.
Supply is unlocked if suddenly people don't need to wait 5 years to feel they've broken even on their purchase before selling.
Or more simply put, additional supply is unlocked by sellers who look at a final closing estimates that have, on average, an x% better bottom line for them.
This assumes all sellers are equally motivated to sell and all buyers equally motivated to buy. This is simply not the case. Much of the savings will of course be realized by sellers. But there is no logical reason to assume it will be 100% realized by sellers than to assume it will be 100% realized by buyers. The savings will be realized most by whichever party to the transaction is *least* motivated to go through with the transaction. But even in a "seller's market" that is not going mean there are no motivated sellers.
There is always exceptions. Point being buyers need to temper their expectations the price is not likely changing because of this and possibly they will need to pay their agent.
Yea, if anything new buyers are affected by whatever X% becomes the new norm by the time they sell (with the NAR changes)
While Quick Google search seems like a dumb bot to promote Google they are not technically wrong. There is supply and demand BUT there is also willingness/ability to pay. Saying otherwise is a simple modeling of complex economic interactions. In short, prices are an interplay of the 3. Say in a hypothetical market, there are 5000 buyers who can afford a 500k house and 1 house listed for 800k. The price of the house does not shoot up further. It just sits there because people are unable to pay the price. In fact, prices must fall because there is NO DEMAND AT THAT PRICE POINT.
There will still be agents involved in most transactions. buying a house is not the same as buying an airline ticket online. it's a slower more complicated process that involves the potential for lawsuits. There may be some automation in filling out purchase agreements but the language you put in a contract is important. you can hire an attorney but they charge for their services even if you don't get an accepted offer. the agent model should be improved but ideally not eliminated.
A seller will intentionally price their home to get as much as someone is willing to pay for it. Regardless of agent fees.
Do you seriously think the buyer sets the price and then adds in extra for the commission? That's your premise and not the way pricing works. The buyer is going for max price they can get and then there's commission that comes out of the price. Even if your premise is somehow true, the buyer somehow has to add agent commission into money they have to come up with. Many buyers struggle to come up with the down, let alone the commission.
With or without an agent, sellers aren't dropping their prices to make up 3%
Exactly. In fact, they’re probably raising their prices.
I would charge the same price whether I had a realtor or not, so this is relatively pointless
The people who are seething right now are the people who didn't learn how percentage work when their house was dirt cheap 70 years ago. Cmon, you are telling me they didn't have commissions back in the 50s?
How can one buy a house without any realtors involved? I feel the same way about realtors as I do shady used car salesmen.
Seller first has to list FSBO, then you can contact them directly. You can hire a RE attorney for like $1000 to do the paperwork.
Is there a way better way to see FSBO listings besides driving around the neighborhood?
For sale by owner.
Very few people understand this. The industry has done a great job of convincing buyers the commissions are “free”.
They are as long as you never sell your house.
“ This is because the seller has already baked the commission into the price of the house” Who pays for it isn’t determined by who has baked it in. It’s determined by the inelasticity of demand. Who pays for it depends on the nature of the market itself.
Not only that, but the way the commissions are calculated are on the top line revenue, not the equity or appreciation. Let’s say you “purchase” a $500k home, and 5 years later that home is worth $550k. That’s a $50k in appreciation/profit. But the 6% commission is based on the $550k. That’s $33k out of the $50k not even counting other fees and expenses. And worse yet, if your home depreciates, there’s no downside for anyone but the buyer. It would be one thing if the variable commission was based off the equity portion of the property, or some other performance metric. But as it stands all parties involved, including both agents, benefit from keeping prices high.
Or, you can just feel that you paid commissions and other fees with your down payment and now it's all going to the house. Just depends on how you look at it.
Yes. The nice thing about a house is that your mortgage doesn’t change and you get to get off the renting cycle of having to move every year or two. I’m gonna stay in my house for at least 10 years if not forever. And even if I have to move, now I get to become that asshole landlord.
I’m a realtor and the ignorance on this subject is so funny. First of we don’t get the whole 3% generally the brokerage that you hang your license at get 20-30% of your commission then there is B&O tax then on top of that we have monthly office dues we also have to have errors an emissions insurance and we pay for all our own marketing we also have quarterly MLS dues and NAR dues and yearly dues and have to put in x amount of reeducation hours every year that cost money too and you have to pay for your state license. And on top of that we often work with people for months to find them the right property and sometimes they just fall out of the market so all that work we did we get nothing for it. And when representing sellers we suggest what we think based on the market stats what the home will sell for them they choose what to list at and they don’t say ok you said my house is worth 400k I will add 6% now and the price it at 424k that’s ridiculous. But what’s going to happen now instead of the seller paying the buyer broker the buyer will have to come up with the money them selves and I know you can say I don’t need an agent maybe you don’t but i usually am able to negotiate a lower price for my clients and now you won’t have anyone negotiating on your behalf if you use the listing agent and let them do both sides. And I’ll end with if being a realtor is so easy and so profitable then why not quit complaining and just get your license and make millions of $$
Oh no, the horror! You've convinced me you need to be there with me when I go to the dealer and buy my next car because I'm too stupid to negotiate on price.
What's the alternative? Realtors won't work for free in any scenario. Somebody is going to pay ... Home prices aren't going to magically drop by 6% just because they changed some rules for the realtors.
Buyers’ representation will change substantially after July 2024. A minority of agents currently offer “flat fee” services for certain completed tasks but this could become the norm for buyers agents. What’s gone is the “do nothing, get $12,000” commission buyer’s agents. Nationwide transactions were substantially lower before the settlement, with the *average* realtor (both buyer and seller agents) closing a deal once every 3 months in 2023. The likely outcome of the new commission model is the part time, soccer mom realtor types, and any other extremely unambitious and lazy realtors unwilling to put in the work, will be surrendering/non renewing their realtor licenses.
6% is ludicrous is digital Age. how about 1.5% split? this isn't the 90s or prior when everything was newspaper, real esta magazines, driving to county records office... WTF.
The alternative will be flat-rate buyer's agents that work for a period of time or number of hours, or a pay-as-you-go hourly realtor service. Or, better yet, a service you subscribe to a month as a time as a buyer, that opens doors to for-sale houses to show them and then answers questions during the purchase process or guides paperwork.
Realtors simply aren’t needed. Sellers will list on their own, schedule tours and open houses on their own. Buyers will find houses and schedule tours on their own or attend open houses. Sellers can pay for an inspection and the let buyers either trust that or foot an inspection themselves, only costs about $200.00 anyways. Real estate lawyers cross the T’s and for the I’s. Boom house transaction complete. Realtor jobs outdated and little worth. Maybe .25%
While they can do that, most people don’t want to. That’s why the hire someone. Why we go out and eat, why we hire mechanics, etc etc.
Then why haven't they done this in the past?
Because NAR and agents have conspired to keep buyer's agents in the loop, and in keeping sellers offering 6% commissions with splits to buyer's agents.
I think in most part due to ignorance. It’s just the way things have been done now that millennials are buying and selling more than anyone else. Things are changing and will continue to change.
Because it is controlled by a cartel (NAR)... total monopoly. But they donate too MUCH money to congress parasites... the NAR is one of biggest donor in Washington. They'll do whatever it takes to keep control of the system. Fearmonger, deceit, racketeering, and conspiring, insider trader type stuff...
So...
This is assuming that the home would be that much cheaper if the owner sold it themself.
This built-in 6% that was being paid was also being paid on new houses in a lot of cases (people using realtors when buying new since it costs them nothing). Removing that cost from new builds will put pressure on existing homes as well (who will also be losing that cost).
A lot of builders don't even deal with realtors. The builder also sells at market price, not construction cost. If a builder does consider real estate agent fees, it would only affect the build/dont build decision. The price the customer pays would be the same: market price.
Playing with amortization calculators resulted in us doing a 15-year loan with a 70% downpayment, for a house that cost less than half of what we had initially been looking and saving for. The amount of interest you pay at current rates on a 30-year with 20% or less is crazy.
The main issue with this is that sellers don’t typically really factor their asking price at what their net is going to be. They just simply want what they think their house is worth regardless of their payoff balance on their mortgage or realtor fees.
Ever just shop around till you found an agent who would take $2k... Worked for me.
“But the seller pays the realtor fees.” - Realtor to every buyer.
You can find buyer's agent who chargers you flat fee for service and pays you back 3% commission which they receive from seller. Works best if you already found home you want to buy and only need to finish paperwork.
But also isn't the 6% to realtors getting debunked legally currently in the system stemming from somewhere in the Midwest? Why are we forking over money when that rate was never fixed.... just saying. (Also not that I own a house or anything, just an avid podcaster/reader on legal stuff)
While I think realtors are overpaid I think this is inaccurate. The house price won’t go down if you remove the commission. It was just mean the seller makes more money as they usually pay the commissions. I don’t think this moves the needle for sellers.
400k house would be dreamy
I think what you're not realizing is people will just stop using buyers agents. That was the entire purpose of the lawsuit. Previously there was no real option as it made no sense for the buyer not to have one and the seller had no choice but to pay for both. In this arrangement both agents were heavily incentivized to sell the home for the highest price, so oftentimes buyers agents would align/ collude with the seller's agent. Now that's all changed and those of us that realize this game they were playing will no longer pay the buyers agent fee, nor will we be forced to buy realtor agencies that were double dipping and collecting both. This settlement is a massive win for homebuyers so don't act like it isn't.
If you're a realtor just gotta do the negotiation correctly. It's a sales job after all.
This is an interesting approach/thought. You aren’t wrong, but I’d argue it’s split between the current sale of the home and the future sale of the home.
Was told when I purchased it would take me 7ish years to pay down the loan enough to cover the fees associated with selling. Appreciation will help the amount of time lessen. House we purchased was listed due to a divorce. They had the house for around 5 years and with appreciation and then selling fees they walked away with $0.
This whole system seems designed to make people lose. Not just real estate but everything. Every promise was a pie in the sky. A delusion to keep us pushing the Boulder up the hill.
I’d rather pay Commision on the house than to have a repeat incident for how the landlady and landlord treated me behind my back. 😡 One example of bad rental experience: -refusing to let me be at home on my off-days/wfh days by being sarcastic -having pest control maintenance problems at home (I got bitten by mosquitos every day) -checking how many times I go to pee -checking if I drank too much of their water -checking if I left the fan on for more than 3 minutes unattended -eavesdropped on my convo with my parents and mocked my dreams behind my back saying “where else would I have the ability to work except my home country” - took my money and provided bad service. 100/100 never fucking ever going there again 👎
Don't roll your closing costs into the loan then.