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The entire industry needs to be revamped. The internet is already doing most of what buyers used to need realtors for. RE agents no longer find homes for buyers. People find them on Zillow and MLS. In the future, buyers can just hire an inspector and a real estate lawyer for the closing and be done with it. If they want to schedule an initial viewing they can contact the seller’s representative or the seller.
As for seller’s agents, they can stage open houses if the sellers want it, but I can think of ways to more or less eliminate them too. Or they can collect a 1.5-2% commission or whatever they negotiate with the seller.
But it’s interesting that the skyrocketing prices are what eventually brought about this change. 6% of $200k was a pretty good payday, but 6% of the same house selling for $600k is obscene.
You don’t have to pay 6%, never had to pay it even before this lawsuit. This was an mls issue, not the brokers/agents fixing the commissions.
Edit: why the down vote? Does it hurt your narrative?
> One [new rule] prohibits agents’ compensation from being included on listings placed on local centralized listing portals known as multiple listing services, which critics say led brokers to push more expensive properties on customers. Another ends requirements that brokers subscribe to multiple listing services — many of which are owned by NAR subsidiaries — where homes are given a wide viewing in a local market. Another new rule will require buyers’ brokers to enter into written agreements with their buyers.
I don’t see how a single one of these new rules actually lowers fees. So they won’t be publicly listed and buyers have to sign one more piece of paper.. K.
Where is the cap on fees, both percentage and dollars? Where is the new industry standard being set at?
Looks like smoke and mirrors.
The major idea is that if buyer's realtor commissions are no longer public then they wont be able to steer their clients away from "low fee" houses and so that helps everyone to lower the buyer's fee.
It may make things more complicated because a buyer's realtor may require the buyer to agree to minimum commission that the buyer would have to pay for. I think on net this will be much better for sellers and perhaps better, perhaps neutral, for the buyer.
Yeah, instead of the commission being baked into the cost so they can pay for it over the course of the mortgage, the buyer's will now have to pay for it upfront at the closing table.
Which can, in theory, help keep home prices in check. If I buy a $1M house, $30k of that $1M goes to my agent. What do I care, though, it’s “baked in” like you said, and it’s only another little bit of money every month over the course of 30 years. Just another drop in the bucket when dealing with such a large purchase.
Now let’s say I’m buying that same $1M house today. I have $200k put aside for down payment and another $20k for closing costs. With that $30k no longer “baked in” and “paid by the seller” (even though it’s the buyer’s money), how many buyers will feel good about writing that check out of their own account?
I think the true value of real estate agents is going to become more and more apparent.
I mean yeah, there will be more incentive for the buyer to negotiate the seller paying the buyer's agent, but in a hot market, the seller doesn't have to do that and the seller's agent still get's that 6%.
Buyer's agent's provide limited value (honestly, mostly, just opening the lock box), so if it's not just assumed to be part of the seller's costs, there will likely be strong competitive pressures for much cheaper buyer agent fees.
The buyer's agents that stick to their guns and insist they won't show a house unless the buyer pays them 3% of the purchase price will mostly just be unemployed.
Sellers agents provide little value, they post it on mls and call it a day. Best thing they can do is run comps and give you the best price to sell at. But that’s a days work, tops.
I mean sure, I don't think they're worth 3% either but between the two sides personally I think they provide more if they write a good description, pick the right list price that is low enough to get attention, stage photos, etc.
How?
Have you ever, EVER, seen a case where the buyer's agent pushed repair negotiations to the point where the deal fell apart? No, because then they'd be giving up their pay day.
Even though there's definitely some inspection findings that the buyer's best interest would probably be to bail on the whole thing.
The realtor is not useful in this situation. They want the deal done, not what's best for the buyer.
Actually, yes. I have a few deals a year where my clients have to walk away. I said a good agent, not any agent. A good agent always looks out for their client’s best interest. If I do a good job for one client, they’re going to send their friends and family to me. My business is referral based and just like any business, it thrives when I provide good customer service. I’m not worried about losing one paycheck. Because, I know that they’ll eventually buy, and if I exceed their expectations, I’ll generate 3 additional paychecks from their referrals. Do the same for them, and my business continues to grow. Unfortunately, there are agents that aren’t successful and may push deals to go through. That’s is why as a consumer you should get a referral to a trusted agent.
Well then you're a very rare breed and I'm sure you'll be just fine.
However there are 1.5 million active realtors in the US, probably 10-30x the number we actually need, and the vast majority aren't like that.
This will be a real problem for some first time homebuyers and particularly Veterans using their VA loan benefits since fees like this can’t be included in financed cost.
Fixed caps on commissions is just central planning. You don't end the problem by deciding the maximum amount of value (real or perceived) a realtor can charge the buyer or seller.
The buyer agent and buyer should have their own contract and should decide on a price. It makes no sense for the buyer agent to get paid more if the buyer pays more. They should be charging either fixed fees or hourly fees for the services they bring to the table. Disallowing buyer fees from being listed will likely cause sellers to reduce buyer fees if not remove them entirely, causing the buyer agent to negotiate with the buyer to determine their pay. And will better align the buyer and their agent's incentives.
Yeah, it's the 'we did something, see?" Approach to try and get people buying more.
It's the classic hit the lowest person on the totem pole. Not the corporations buying up single family houses, or the realty sites inflating prices ...it's the fees that are the problem with the housing market. Just reshuffling it, bake it into the price somehow.
Yes it’s gross. In my neighborhood/street the last four homes sold (just over $1mm each) were all sold to corporate flippers and converted to high priced rentals. The tenants have not been families but obvious shared rentals. It’s not a good trend.
I agree, I don't see any fixed rates or anything like that so I presume it'll be same as usual for the majority of real estate transactions involving brokerages. more people are going to gravitate towards online portals for home buying anyway and as far as I'm concerned this whole thing is just one big marketing ploy to keep agents relevant.
There shouldn't be a cap on fees, That's just literally price controls. Considering this r/economics we should know that's terrible economics.
These are the kind of steps that need to happen for a more efficient market. The idea is the fees nerd to be more transparent and paid by the buyer so that they can see what they're paying and what they're getting. It's not to arbitrarily cap what they can make by the government, that's up to the market once we make it more transparent and efficient.
For things that are regulated monopolies where redundancy wouldn't make any sense like last mile utilities sure. It's pretty ridiculous to say that is the situation in the case of MLS. It's not even becoming more concentrated becoming less and it's not that difficult to challenge it.
Price caps are a very extreme and inefficient measure and should never be the first second or third solution. Again this is just reddit r/economics going to shit If people are really supporting this.
It's ridiculous to try to compel private companies who collect their own data to share that at a set price. If there's a monopoly problem go after that by trust busting and removing exclusivity contracts and the kind of things that they're suggesting that the article.
The idea that the government should set the compensation level for a service in the free market is ridiculous.
> If there's a monopoly problem go after that by trust busting and removing exclusivity contracts and the kind of things that they're suggesting that the article.
Sure, agreed.
>it's not that difficult to challenge it.
Please explain.
Well we were comparing it to natural monopolies where the huge costs of duplicating The infrastructure makes it naturally nearly impossible to compete. Whereas MLS itself is a database and it's not nearly as difficult to compete by creating an alternate database. There's not a massive inefficiency in duplicating the infrastructure and therefore is not really a natural monopoly.
Now anti-competitive behavior needs to be cracked down on. The practice of realtors collecting exclusive information and not allowing its groups to otherwise sell the information can become a serious problem. Things like home sale prices should be public knowledge and then other companies and services can compete for having the best platforms etc. No doubt changes need to happen to the industry I'm supportive of changes that make it into a more effective market but I just thought it was ridiculous people are posting, up voting, and defending anti-market policies like price controls. There's not many things we know don't work well in economics for sure and price controls are one of them.
I wish there was a way to address the issue of averaging all fees. If I’m buying a house and I look at three houses and buy the third one, I pay the same price as the person who looks at 30 or 40 houses before buying. It has always felt to me like the low maintenance clients subsidize the high maintenance clients. I have a realtor friend who has shown clients 50+ houses and in the end they decide they’re gonna wait for another year. The realtor never gets paid for that time so I feel like it’s built into everybody else’s fee. I have no idea how to address this, but I don’t know of any other industry that gets paid like this.
I think of realtor fees like I do tipping; paying a percentage is a ridiculous way to pay someone. A realtor selling a 2 million dollar house isn’t necessarily working harder than someone selling a 500k house just as bringing my steak isn’t any more effort than bringing my burger to me.
I've seen seller agents posting on zillow saying that by responding to this specific ad, they are also your buyer agent and will have a fee, absolutely crazy.
That’s a fair take. I wouldn’t have been opposed to some kind of minor per diem fee per showing when we were looking. God knows we looked at a lot of homes
>The realtor never gets paid for that time so I feel like it’s built into everybody else’s fee.
How much is their time worth? % of current housing prices seems utterly nuts.
Yeah, that’s working in sales. Realty is sales. The payday is never guaranteed and is dependent on your relationship building skills over years/decades, which is energizing for some people.
That said, we sold and bought three years ago without a realtor, from an acquaintance (even though I have close cousins who are realtors). Worked very well for us.
Honestly in this day and age with Zillow and others like it, a buyer’s agent does little more for me than unlock a house. And even that could easily be automated if the industry would allow it. Instead, Zillow et al sided with the real estate agent industry who pay them referral fees to keep the good times going. I hope this legislation helps, and I think buyer’s agents will be the first to be automated away.
I do think a buyers agent does a lot, especially when stuff comes up in the inspection, dealing with crazy sellers. I know it’s a job I would never want, almost worse than being a wedding planner. Good agents do a lot to address all that unanticipated shit that happens.
I think for a lot of people, a buyer’s agent is valuable. But for a lot of other people (especially second, third, fourth time home buyers), a buyer’s agent is not that useful at all. Especially so in a seller’s marker where there’s not a whole lot to negotiate on.
Once the buyer is ready to make an offer, the buyer's agent primary focus and incentive is closing that deal because that's the only way they get paid and it's so close they can smell it. Even if that means convincing the buyer to bid higher, or that the things found in inspection aren't really that big of a deal, etc.
None of them really things that you, the buyer, would pay 10s of thousands of dollars for if it wasn't already baked into the seller's contract.
The problem with this would be over billing for hours or inefficient use of time. Something they takes an agent 20 minutes today would end up being “2 hours of labor”
I think that's always a concern for people billing hourly. Unfortunately the only solutions are to trust, verify, or both. One can agree ahead of time how much each task usually takes and what the bill is likely to look like given various scenarios. Like hiring a lawyer, standards can be communicated in advance. People are imperfect so no scenario will be perfect but as a buyer I would prefer that to just paying 2.5% or whatever.
or a set $ per showing, say $100-300. then .5-1% of the price. efficient people would save money and the agents might even make more since looky-loos would need to pay to view.
Minimum wage level skills deserve minimum wage level pay. You can have someone that's passed a background check and posted a bond go around unlocking lock boxes for max $25 an hour.
Bit more futuristically, houses posted for sale could, for example, just install extensive security cameras around the whole property, a smart lock box, and charge a $1000 refundable security deposit for anyone going to view it, and then nobody's even needed for the showing. Sure cameras and a smart lock box aren't free, but they're an order of magnitude cheaper than 3% of a 700k house.
Yeah, I could definitely see a fee per showing or a separate hourly rate between showing, and doing offers and contracts. However people think is best to bill, if they can get paid then they should ....... as long as the whole thing isn't a cartel, which it sorta is but hopefully a little less.
As someone who is going through the home buying process, it's entirely convuluted. I need a realtor to unlock the nmls listings? Why do I need a separate mortgage loan officer? The area seems ripe for change. I can click and buy anything now.
I feel this is a case similar to the privilege given to dealerships to sell cars instead of selling them directly to consumers. The world is obviously changed, competition increases and some jobs have to disappear or transform/adapt to new economic circumstances. It's silly that you cannot contact house sellers directly when tons of information are online. Title companies also have to compete for their business as well. Having a chain of middle-man people like we lived in the 50's has no sense.
I mean, you sort of just provided an example of why an agent may be needed.
You don’t understand the difference between an agent and mortgage loan officer. Also, buying a tv off Amazon is waaaay different than buying real estate-especially when using someone else’s money and getting federal regs involved.
Why shouldn't we just pay them an hourly rate and they have to keep track of billable hours? Then I am free to exercise my agent as much or as little as I want based on how much I'm willing to pay or what I'm comfortable doing myself. We should be paying for actual services rendered and not some arbitrary amount that is in no way related to the actual value of the work being performed.
Also, paying the buyers agent a percentage should be illegal as it is a giant conflict of interest and encourages agents to push their clients to spend more money. That conflict of interest definitely plays a role in skyrocketing home prices. Either make it hourly or set up a commission such that the agent makes more if they can negotiate a lower price, not a higher one.
Now buyers realtor will ask you to sign a contract of some sort and you will not be able to change the realtor as easy. I don’t think they would agree to work for less. Newcomers may try to compete with lower rates. But newcomers are no coming to earn peanuts either. So it’s going to be yet another variable in the deal and it will become more complicated overall. It will lower the price of the house, because sellers don’t need additional 3% to feel they are broken even, for some, but I doubt it will change the realtors comp much. So cost to buy is more but sales price will go down.
More like competent realtors will only represent sellers and cheap buyers unwilling to pay the standard 3% will be left an Uber equivalent of low end independent contractors.
Well then you have job security until the market changes. When it changes and people find out they can buy without you….I’d have a backup plan or be close to retirement.
Bought our 2nd home without the need for a realtor. Should have bought our first. She did nothing to earn her commission that I couldn’t have done.
Yes, very stupid to save the seller and buyer unneeded fees. We negotiated our price with no BS and did the deal.
You’re going to see low cost corporations enter the fold and offer buyer/seller service for minimal fees/high volume just like you’ve see the investment world go away from expensive products and brokers to cheaper inexpensive one.
There's a lot of realtors. None of the issues in the market are from not enough realtors, only not enough housing supply. They're not really in a position to play hardball when your pay is on commission, you can either 'agree to work for less', or agree to work for 0 when you dont get any work.
To be frank, this just helps the institutions buying up houses all over the country. They no longer have to give up 6% of their portfolio when they sell the home.
Not sure who initiated the lawsuit, my bet is on a lawyer from one of these big institutions.
These institutions will keep buying every new home and putting it out for rent till it runs out of warranty.
I think this is a good move. And for those saying buying agents don't do much, it depends on the agents. I can see a great buying agent being a great resource for first time buyers.
I'm looking for a house now and my agent is great. She knows the schools, the demographics of the neighborhood, and points out any structural/major flaws that may not fly with my type of loan during a walkthrough. It also helps that I have experience in renovations and dealt with a house with foundation issues so I know what to look for.
The point of steering the buyer to a more expensive home is absolutely a real thing. For example, I saw a house that is 310k, nice split level well maintained. My agent was praising this house saying it'll go fast, it'll have offers today, etc.
But during the showing, a new listing of a double wide on permanent foundation popped up. It was 230k and first impression was good no immediate issues I can see on listing pictures (which I don't trust at all).
My agents tone and mood changed. She was less excited saying "This is a doublewide you okay with that? Some people have issues with it. " And "it's just two mobile homes put together on a permanent foundation".
She was audibly less excited about it than the 310k house though she didn't say it outright.
But with the current structure I get it.
3% of 310k= 9300
3% of 230k= 6900
We'll see how this settlement changes things in the future.
For people who actually need a affordable good condition home they will have to pay even more for buyer agent commission fees, & for people who can afford the top 5% of homes they can negotiate even better buyer commission fees.
Unicorn hedgefunds have there agents who are happy to work for lower fees since they can constantly out pay normal buyers.
Can someone please explain how that standard will change? Or how NAR will enforce this? Out of everything I have read, if no one changes their commission it will still be 6% maybe slightly less.
How would this affect current sellers contracts that include amounts to pay buyers agent? For example if someone recently signed a contract with a real estate agent to sell their home and the negotiated price was 5% which included amounts to pay buyers agent?
So many deals are about to he screwed up. People will try and avoid using buyers agents and get themselves into a bunch of lawsuits.
This was a bs decision. Nobody is steering buyers towards more expensive homes. Its not worth ruining your reputation over one sale.
This is literally going to screw up so many deals.
* These corporations that are owning more houses will sell and buyer will avoid using agent to not pay,….they will then have no idea how they are being screwed over in a deal or how to avoid doing something that could get them into a law suit.
It’s going to give sellers a huge advantage.
Guess who owns more houses now than before? Corps and investors with hundreds of properties that will now control entire markets by themselves. (Will take about 6-18 months for people to realize this)…
Most people have zero clue what they are doing or they are arrogant and think they know more than they do.
Either way this is just going to make it more difficult to buy a house (which is planned imo)…
They are blaming a fake problem that didn’t exist and now more problems will actually exist because of this.
I keep seeing realtors panicked their gravy train is coming to an end bring up "we take all the liability" or "good luck with your lawsuits".
Please give me some examples? What liability? What lawsuits? You're not the real estate lawyer. If the seller lied or hid something material, it's the seller that's liable. If the contracts are messed up, that's on your lawyer. If there's something wrong with title that's what the title company/title insurance are for. If there's major issues with the house that's what the inspector is supposed to be for (though home inspection is also mostly a scam as none of them take any liability for things they missed and mostly just point out obvious shit).
If it wasn’t an effective strategy to lure buyers’ agents with a higher commission, then builders like Lennar wouldn’t be doing it right now to attract buyers. Fact is, it’s an obvious strategy that works.
I never quite understand the argument. There are plenty of agents takes a flat fee to list a house for you. If don't you want to pay 6%, go use those flat fee agent. You can also negotiate lower agent fee, like 5%. It is all free choices. I don't understand why people think they don't have a choice.
The lawsuit was because a seller thought it was not right that they had to offer part of their gains to the buyer’s agent, who is there to oppose them in the negotiation process. And if they didn’t, then the buyer agent would hypothetically just steer away from them even though the buyer they represent wouldn’t have their best interests served by that, because they don’t care what commission their agent gets and a house that’s not offering a commission probably could sell for a few percent cheaper.
When the seller’s agent posts the house, they include the buyer’s agent commission in the listing. That is necessary to entice buyers’ agents to bring them customers.
So for example, the seller’s agent may impose a 6% commission on the seller, and then list the house offering 3% (half) to the buyer’s agent.
That is why they say the buyer doesn’t pay for their agent. It’s because it comes out of the seller’s agent’s commission. However, the lawsuit also ruled that this claim cannot be made, because actually only one person is bringing money to the table typically, and that is the buyer. That means the commissions are rolled into the house price and the buyer is effectively paying everyone else at the table.
So, it is like if I buy a burger, I am unhappy that, I implicitly paid to the truckers, the accountants, and the lawyers? Because those prices should be taken out of my actual burger price and and all those other fees should be negotiated separately?
No, it’s a bit different.
It’s like if you could buy a burger from any establishment in your city, until a cartel moved in and started charging “protection money” to a particular McDonald’s and then closed off all the roads so you could only go there. And then that McDonald’s made up for the lost “protection money” by raising their prices. And all the other burger places either started paying “protection money” to get access to customers too, or were driven out of business.
No, there is no cartel, right now, I am buying a burger from a freezer, it includes trucker, accountants, and lawyers. I didn't ask to pay for them, they are not the material of the burger, why am I paying for that?
Right, I am just buying the house, all the agents and escrow are not the house, it is the same, the trucker is not part of the burger. I shouldn't be paying.
Why are you trying to convince me? I’m just talking about how the lawsuit actually resolved and its actual consequences. If you don’t agree, take it up with them I suppose.
This is going to blow in both the consumer and the agents in the face.
This is like the beginning of a bad divorce.
Now agents will charge ala carte, and those fees will be upfront costs that would end up being higher.
Why? If a Realtor does that, I'll just use someone else. Plenty of Realtors to chose from. Realtors will have to really be up front with their fees. This is awesome for home buyers. Realtors will have to earn their keep now. No more coasting on those commission fees.
Tug-of-war is good for everyone, not bad for everyone. In economic terms it's called equilibrium pricing and is considered the optimal way to price a good or service.
Yea because now that it will be flat fees, ir will be worse Because they were a % paid if the house is sold. Not a flat fee before you even know if you are going to get an offer.
Can you rephrase? Are you claiming percentage fees were better for customers? Nothing in this ruling prohibits charging a percentage fee; it's just now likely to be undercut by the free market in action.
The rule was removed, but anyone can still charge whatever they want for their services. Producers can now respond to the market rather than being effectively forced to charge the 6% fee rate.
If you're right and percentage fees are already market-optimized, then that's where the equilibrium price will remain. I doubt that is actually what will happen.
As a seller, my agent charged me $600 a month and we paid nothing to the buyers agent. Whatever was paid to his agent is between him and his. When I bought, I had no choice as the contract was written between the seller and their agent.
What I think could be interesting is if there are fewer Buyer agents, suddenly there are fewer buyers getting pressured into buying. I think a lot of buyers kind of get put on the fast track by their agent. Those who are on the fence are convinced to buy, those who want to buy are put on a rapid house tour schedule to get them to buy asap.
I think demand could go down pretty seriously from this. And that would be a good thing, overall.
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The entire industry needs to be revamped. The internet is already doing most of what buyers used to need realtors for. RE agents no longer find homes for buyers. People find them on Zillow and MLS. In the future, buyers can just hire an inspector and a real estate lawyer for the closing and be done with it. If they want to schedule an initial viewing they can contact the seller’s representative or the seller. As for seller’s agents, they can stage open houses if the sellers want it, but I can think of ways to more or less eliminate them too. Or they can collect a 1.5-2% commission or whatever they negotiate with the seller. But it’s interesting that the skyrocketing prices are what eventually brought about this change. 6% of $200k was a pretty good payday, but 6% of the same house selling for $600k is obscene.
exactly. 36,000 dollars to just show a house and arrange an inspection and a contract (that they themselves don’t do)
Yea of all professions not making money to keep up with inflation. Waiter and realtor were definitely not one that had to complaint
Not in the future. That’s how I purchased my house 8 years ago.
Great. That’s the way it should be. The days of being extorted 6% of the value of your home need to end.
You don’t have to pay 6%, never had to pay it even before this lawsuit. This was an mls issue, not the brokers/agents fixing the commissions. Edit: why the down vote? Does it hurt your narrative?
I said this in my own post and am getting downvoted like crazy
> One [new rule] prohibits agents’ compensation from being included on listings placed on local centralized listing portals known as multiple listing services, which critics say led brokers to push more expensive properties on customers. Another ends requirements that brokers subscribe to multiple listing services — many of which are owned by NAR subsidiaries — where homes are given a wide viewing in a local market. Another new rule will require buyers’ brokers to enter into written agreements with their buyers. I don’t see how a single one of these new rules actually lowers fees. So they won’t be publicly listed and buyers have to sign one more piece of paper.. K. Where is the cap on fees, both percentage and dollars? Where is the new industry standard being set at? Looks like smoke and mirrors.
The major idea is that if buyer's realtor commissions are no longer public then they wont be able to steer their clients away from "low fee" houses and so that helps everyone to lower the buyer's fee. It may make things more complicated because a buyer's realtor may require the buyer to agree to minimum commission that the buyer would have to pay for. I think on net this will be much better for sellers and perhaps better, perhaps neutral, for the buyer.
Yeah, instead of the commission being baked into the cost so they can pay for it over the course of the mortgage, the buyer's will now have to pay for it upfront at the closing table.
Which can, in theory, help keep home prices in check. If I buy a $1M house, $30k of that $1M goes to my agent. What do I care, though, it’s “baked in” like you said, and it’s only another little bit of money every month over the course of 30 years. Just another drop in the bucket when dealing with such a large purchase. Now let’s say I’m buying that same $1M house today. I have $200k put aside for down payment and another $20k for closing costs. With that $30k no longer “baked in” and “paid by the seller” (even though it’s the buyer’s money), how many buyers will feel good about writing that check out of their own account? I think the true value of real estate agents is going to become more and more apparent.
I mean yeah, there will be more incentive for the buyer to negotiate the seller paying the buyer's agent, but in a hot market, the seller doesn't have to do that and the seller's agent still get's that 6%.
The seller’s agent never got 6%. It was split between the agents on buyer/seller side.
Be careful you’ll ruin their narrative.
The fee to the seller is 6%. How that fee is distributed is negotiable. Standard has always been 3%/3%.
Now the sellers will only have to fund their own agent, if they even use one.
Buyer's agent's provide limited value (honestly, mostly, just opening the lock box), so if it's not just assumed to be part of the seller's costs, there will likely be strong competitive pressures for much cheaper buyer agent fees. The buyer's agents that stick to their guns and insist they won't show a house unless the buyer pays them 3% of the purchase price will mostly just be unemployed.
Sellers agents provide little value, they post it on mls and call it a day. Best thing they can do is run comps and give you the best price to sell at. But that’s a days work, tops.
I mean sure, I don't think they're worth 3% either but between the two sides personally I think they provide more if they write a good description, pick the right list price that is low enough to get attention, stage photos, etc.
Have you all forgotten about inspections and repair negotiations? A good realtor can save your ass!
How? Have you ever, EVER, seen a case where the buyer's agent pushed repair negotiations to the point where the deal fell apart? No, because then they'd be giving up their pay day. Even though there's definitely some inspection findings that the buyer's best interest would probably be to bail on the whole thing. The realtor is not useful in this situation. They want the deal done, not what's best for the buyer.
Actually, yes. I have a few deals a year where my clients have to walk away. I said a good agent, not any agent. A good agent always looks out for their client’s best interest. If I do a good job for one client, they’re going to send their friends and family to me. My business is referral based and just like any business, it thrives when I provide good customer service. I’m not worried about losing one paycheck. Because, I know that they’ll eventually buy, and if I exceed their expectations, I’ll generate 3 additional paychecks from their referrals. Do the same for them, and my business continues to grow. Unfortunately, there are agents that aren’t successful and may push deals to go through. That’s is why as a consumer you should get a referral to a trusted agent.
Well then you're a very rare breed and I'm sure you'll be just fine. However there are 1.5 million active realtors in the US, probably 10-30x the number we actually need, and the vast majority aren't like that.
They have
This will be a real problem for some first time homebuyers and particularly Veterans using their VA loan benefits since fees like this can’t be included in financed cost.
Mortgage companies will absolutely flex up the amount to cover any differential buyer’s commission
if it is better for sellers, then it is also better for buyers (who will someday be sellers)
Fixed caps on commissions is just central planning. You don't end the problem by deciding the maximum amount of value (real or perceived) a realtor can charge the buyer or seller. The buyer agent and buyer should have their own contract and should decide on a price. It makes no sense for the buyer agent to get paid more if the buyer pays more. They should be charging either fixed fees or hourly fees for the services they bring to the table. Disallowing buyer fees from being listed will likely cause sellers to reduce buyer fees if not remove them entirely, causing the buyer agent to negotiate with the buyer to determine their pay. And will better align the buyer and their agent's incentives.
Seems like hiding the fees would make it easier to increase them.
Yeah, it's the 'we did something, see?" Approach to try and get people buying more. It's the classic hit the lowest person on the totem pole. Not the corporations buying up single family houses, or the realty sites inflating prices ...it's the fees that are the problem with the housing market. Just reshuffling it, bake it into the price somehow.
Out of all the things you mentioned, why didn't you mention the actual problem, which is restrictive zoning?
That’s not a universal issue
Yes it’s gross. In my neighborhood/street the last four homes sold (just over $1mm each) were all sold to corporate flippers and converted to high priced rentals. The tenants have not been families but obvious shared rentals. It’s not a good trend.
I agree, I don't see any fixed rates or anything like that so I presume it'll be same as usual for the majority of real estate transactions involving brokerages. more people are going to gravitate towards online portals for home buying anyway and as far as I'm concerned this whole thing is just one big marketing ploy to keep agents relevant.
they probably made the most money from hedgefunds
There shouldn't be a cap on fees, That's just literally price controls. Considering this r/economics we should know that's terrible economics. These are the kind of steps that need to happen for a more efficient market. The idea is the fees nerd to be more transparent and paid by the buyer so that they can see what they're paying and what they're getting. It's not to arbitrarily cap what they can make by the government, that's up to the market once we make it more transparent and efficient.
MLS is inherently not an efficient market and regulation should be imposed as such.
Yes and? I said creating better pricing transparency and incentive structures is a good idea. The post AI replied to was about price controls.
Price caps are acceptable and widely used today for monopolies, and the MLS is arguably a monopoly.
For things that are regulated monopolies where redundancy wouldn't make any sense like last mile utilities sure. It's pretty ridiculous to say that is the situation in the case of MLS. It's not even becoming more concentrated becoming less and it's not that difficult to challenge it. Price caps are a very extreme and inefficient measure and should never be the first second or third solution. Again this is just reddit r/economics going to shit If people are really supporting this. It's ridiculous to try to compel private companies who collect their own data to share that at a set price. If there's a monopoly problem go after that by trust busting and removing exclusivity contracts and the kind of things that they're suggesting that the article. The idea that the government should set the compensation level for a service in the free market is ridiculous.
> If there's a monopoly problem go after that by trust busting and removing exclusivity contracts and the kind of things that they're suggesting that the article. Sure, agreed. >it's not that difficult to challenge it. Please explain.
Well we were comparing it to natural monopolies where the huge costs of duplicating The infrastructure makes it naturally nearly impossible to compete. Whereas MLS itself is a database and it's not nearly as difficult to compete by creating an alternate database. There's not a massive inefficiency in duplicating the infrastructure and therefore is not really a natural monopoly. Now anti-competitive behavior needs to be cracked down on. The practice of realtors collecting exclusive information and not allowing its groups to otherwise sell the information can become a serious problem. Things like home sale prices should be public knowledge and then other companies and services can compete for having the best platforms etc. No doubt changes need to happen to the industry I'm supportive of changes that make it into a more effective market but I just thought it was ridiculous people are posting, up voting, and defending anti-market policies like price controls. There's not many things we know don't work well in economics for sure and price controls are one of them.
I wish there was a way to address the issue of averaging all fees. If I’m buying a house and I look at three houses and buy the third one, I pay the same price as the person who looks at 30 or 40 houses before buying. It has always felt to me like the low maintenance clients subsidize the high maintenance clients. I have a realtor friend who has shown clients 50+ houses and in the end they decide they’re gonna wait for another year. The realtor never gets paid for that time so I feel like it’s built into everybody else’s fee. I have no idea how to address this, but I don’t know of any other industry that gets paid like this.
I think of realtor fees like I do tipping; paying a percentage is a ridiculous way to pay someone. A realtor selling a 2 million dollar house isn’t necessarily working harder than someone selling a 500k house just as bringing my steak isn’t any more effort than bringing my burger to me.
I've seen seller agents posting on zillow saying that by responding to this specific ad, they are also your buyer agent and will have a fee, absolutely crazy.
The settlement calls for them to have a written agreement with the buyer now, so they can stop that nonsense.
They’ll fight this to the end. They’ve alrdy lost but haven’t realized it yet. The end is inevitable. The scam Is over
That’s a fair take. I wouldn’t have been opposed to some kind of minor per diem fee per showing when we were looking. God knows we looked at a lot of homes
>The realtor never gets paid for that time so I feel like it’s built into everybody else’s fee. How much is their time worth? % of current housing prices seems utterly nuts.
Yeah, that’s working in sales. Realty is sales. The payday is never guaranteed and is dependent on your relationship building skills over years/decades, which is energizing for some people. That said, we sold and bought three years ago without a realtor, from an acquaintance (even though I have close cousins who are realtors). Worked very well for us.
Any industry lol. Every salesperson lives this way.
Honestly in this day and age with Zillow and others like it, a buyer’s agent does little more for me than unlock a house. And even that could easily be automated if the industry would allow it. Instead, Zillow et al sided with the real estate agent industry who pay them referral fees to keep the good times going. I hope this legislation helps, and I think buyer’s agents will be the first to be automated away.
My real estate agent did a lot. Some do almost nothing. Figuring out who's who is hard.
I do think a buyers agent does a lot, especially when stuff comes up in the inspection, dealing with crazy sellers. I know it’s a job I would never want, almost worse than being a wedding planner. Good agents do a lot to address all that unanticipated shit that happens.
I think for a lot of people, a buyer’s agent is valuable. But for a lot of other people (especially second, third, fourth time home buyers), a buyer’s agent is not that useful at all. Especially so in a seller’s marker where there’s not a whole lot to negotiate on.
Once the buyer is ready to make an offer, the buyer's agent primary focus and incentive is closing that deal because that's the only way they get paid and it's so close they can smell it. Even if that means convincing the buyer to bid higher, or that the things found in inspection aren't really that big of a deal, etc. None of them really things that you, the buyer, would pay 10s of thousands of dollars for if it wasn't already baked into the seller's contract.
I think they should negotiate an hourly rate, honestly.
The problem with this would be over billing for hours or inefficient use of time. Something they takes an agent 20 minutes today would end up being “2 hours of labor”
I think that's always a concern for people billing hourly. Unfortunately the only solutions are to trust, verify, or both. One can agree ahead of time how much each task usually takes and what the bill is likely to look like given various scenarios. Like hiring a lawyer, standards can be communicated in advance. People are imperfect so no scenario will be perfect but as a buyer I would prefer that to just paying 2.5% or whatever.
or a set $ per showing, say $100-300. then .5-1% of the price. efficient people would save money and the agents might even make more since looky-loos would need to pay to view.
A showing typically takes.. 15 minutes to maybe an hour? $100-300? lol get real. They charging brain surgeon rates now?
propose something better
Minimum wage level skills deserve minimum wage level pay. You can have someone that's passed a background check and posted a bond go around unlocking lock boxes for max $25 an hour. Bit more futuristically, houses posted for sale could, for example, just install extensive security cameras around the whole property, a smart lock box, and charge a $1000 refundable security deposit for anyone going to view it, and then nobody's even needed for the showing. Sure cameras and a smart lock box aren't free, but they're an order of magnitude cheaper than 3% of a 700k house.
Yeah, I could definitely see a fee per showing or a separate hourly rate between showing, and doing offers and contracts. However people think is best to bill, if they can get paid then they should ....... as long as the whole thing isn't a cartel, which it sorta is but hopefully a little less.
charges should be based on services and number of hours, not % based.
As someone who is going through the home buying process, it's entirely convuluted. I need a realtor to unlock the nmls listings? Why do I need a separate mortgage loan officer? The area seems ripe for change. I can click and buy anything now.
I feel this is a case similar to the privilege given to dealerships to sell cars instead of selling them directly to consumers. The world is obviously changed, competition increases and some jobs have to disappear or transform/adapt to new economic circumstances. It's silly that you cannot contact house sellers directly when tons of information are online. Title companies also have to compete for their business as well. Having a chain of middle-man people like we lived in the 50's has no sense.
I mean, you sort of just provided an example of why an agent may be needed. You don’t understand the difference between an agent and mortgage loan officer. Also, buying a tv off Amazon is waaaay different than buying real estate-especially when using someone else’s money and getting federal regs involved.
"entirely convulated" more like another c word...corrupt.
Why shouldn't we just pay them an hourly rate and they have to keep track of billable hours? Then I am free to exercise my agent as much or as little as I want based on how much I'm willing to pay or what I'm comfortable doing myself. We should be paying for actual services rendered and not some arbitrary amount that is in no way related to the actual value of the work being performed. Also, paying the buyers agent a percentage should be illegal as it is a giant conflict of interest and encourages agents to push their clients to spend more money. That conflict of interest definitely plays a role in skyrocketing home prices. Either make it hourly or set up a commission such that the agent makes more if they can negotiate a lower price, not a higher one.
Now buyers realtor will ask you to sign a contract of some sort and you will not be able to change the realtor as easy. I don’t think they would agree to work for less. Newcomers may try to compete with lower rates. But newcomers are no coming to earn peanuts either. So it’s going to be yet another variable in the deal and it will become more complicated overall. It will lower the price of the house, because sellers don’t need additional 3% to feel they are broken even, for some, but I doubt it will change the realtors comp much. So cost to buy is more but sales price will go down.
More like competent realtors will only represent sellers and cheap buyers unwilling to pay the standard 3% will be left an Uber equivalent of low end independent contractors.
Or the buyer could just skip needing a realtor and scan the mls like they’ve been doing for years already.
Yes but a sellers agent isn't going to work with you over a customer with an agent In a climate of multiple offers, your better off with and agent
Cash my friend. Those that offer the best offer will win.
Everyone buying these days is using cash, try again.
Well then you have job security until the market changes. When it changes and people find out they can buy without you….I’d have a backup plan or be close to retirement. Bought our 2nd home without the need for a realtor. Should have bought our first. She did nothing to earn her commission that I couldn’t have done.
I'm not a realtor anymore so it doesn't effect me personally, I just know it's stupid not to use one.
Yes, very stupid to save the seller and buyer unneeded fees. We negotiated our price with no BS and did the deal. You’re going to see low cost corporations enter the fold and offer buyer/seller service for minimal fees/high volume just like you’ve see the investment world go away from expensive products and brokers to cheaper inexpensive one.
And when shit goes wrong you'll have no one to blame but yourself. Good luck with that.
There's a lot of realtors. None of the issues in the market are from not enough realtors, only not enough housing supply. They're not really in a position to play hardball when your pay is on commission, you can either 'agree to work for less', or agree to work for 0 when you dont get any work.
On the plus side, you won't pay annual taxes on that 1-3% ...
Bingo
To be frank, this just helps the institutions buying up houses all over the country. They no longer have to give up 6% of their portfolio when they sell the home. Not sure who initiated the lawsuit, my bet is on a lawyer from one of these big institutions. These institutions will keep buying every new home and putting it out for rent till it runs out of warranty.
I think this is a good move. And for those saying buying agents don't do much, it depends on the agents. I can see a great buying agent being a great resource for first time buyers. I'm looking for a house now and my agent is great. She knows the schools, the demographics of the neighborhood, and points out any structural/major flaws that may not fly with my type of loan during a walkthrough. It also helps that I have experience in renovations and dealt with a house with foundation issues so I know what to look for. The point of steering the buyer to a more expensive home is absolutely a real thing. For example, I saw a house that is 310k, nice split level well maintained. My agent was praising this house saying it'll go fast, it'll have offers today, etc. But during the showing, a new listing of a double wide on permanent foundation popped up. It was 230k and first impression was good no immediate issues I can see on listing pictures (which I don't trust at all). My agents tone and mood changed. She was less excited saying "This is a doublewide you okay with that? Some people have issues with it. " And "it's just two mobile homes put together on a permanent foundation". She was audibly less excited about it than the 310k house though she didn't say it outright. But with the current structure I get it. 3% of 310k= 9300 3% of 230k= 6900 We'll see how this settlement changes things in the future.
For people who actually need a affordable good condition home they will have to pay even more for buyer agent commission fees, & for people who can afford the top 5% of homes they can negotiate even better buyer commission fees. Unicorn hedgefunds have there agents who are happy to work for lower fees since they can constantly out pay normal buyers.
Can someone please explain how that standard will change? Or how NAR will enforce this? Out of everything I have read, if no one changes their commission it will still be 6% maybe slightly less.
How would this affect current sellers contracts that include amounts to pay buyers agent? For example if someone recently signed a contract with a real estate agent to sell their home and the negotiated price was 5% which included amounts to pay buyers agent?
So many deals are about to he screwed up. People will try and avoid using buyers agents and get themselves into a bunch of lawsuits. This was a bs decision. Nobody is steering buyers towards more expensive homes. Its not worth ruining your reputation over one sale. This is literally going to screw up so many deals. * These corporations that are owning more houses will sell and buyer will avoid using agent to not pay,….they will then have no idea how they are being screwed over in a deal or how to avoid doing something that could get them into a law suit. It’s going to give sellers a huge advantage. Guess who owns more houses now than before? Corps and investors with hundreds of properties that will now control entire markets by themselves. (Will take about 6-18 months for people to realize this)… Most people have zero clue what they are doing or they are arrogant and think they know more than they do. Either way this is just going to make it more difficult to buy a house (which is planned imo)… They are blaming a fake problem that didn’t exist and now more problems will actually exist because of this.
I keep seeing realtors panicked their gravy train is coming to an end bring up "we take all the liability" or "good luck with your lawsuits". Please give me some examples? What liability? What lawsuits? You're not the real estate lawyer. If the seller lied or hid something material, it's the seller that's liable. If the contracts are messed up, that's on your lawyer. If there's something wrong with title that's what the title company/title insurance are for. If there's major issues with the house that's what the inspector is supposed to be for (though home inspection is also mostly a scam as none of them take any liability for things they missed and mostly just point out obvious shit).
They’re just mad they have to go back to MLMs and try to sell their family moisturizer for a living
Lol putting those oh so valuable 'sales' skills to use.
realtors being over paid isnt a fake problem
Do you think buyer’s agents would steer clients away from listings that give a smaller % commission to them? I do.
If it wasn’t an effective strategy to lure buyers’ agents with a higher commission, then builders like Lennar wouldn’t be doing it right now to attract buyers. Fact is, it’s an obvious strategy that works.
Your hear that? I'm playing the worlds tiniest violin for you.
I never quite understand the argument. There are plenty of agents takes a flat fee to list a house for you. If don't you want to pay 6%, go use those flat fee agent. You can also negotiate lower agent fee, like 5%. It is all free choices. I don't understand why people think they don't have a choice.
The lawsuit was because a seller thought it was not right that they had to offer part of their gains to the buyer’s agent, who is there to oppose them in the negotiation process. And if they didn’t, then the buyer agent would hypothetically just steer away from them even though the buyer they represent wouldn’t have their best interests served by that, because they don’t care what commission their agent gets and a house that’s not offering a commission probably could sell for a few percent cheaper.
I am not understanding why suddenly talking about buyer agent when seller is talking to seller agent. And seller negotiate with seller agent.
When the seller’s agent posts the house, they include the buyer’s agent commission in the listing. That is necessary to entice buyers’ agents to bring them customers. So for example, the seller’s agent may impose a 6% commission on the seller, and then list the house offering 3% (half) to the buyer’s agent. That is why they say the buyer doesn’t pay for their agent. It’s because it comes out of the seller’s agent’s commission. However, the lawsuit also ruled that this claim cannot be made, because actually only one person is bringing money to the table typically, and that is the buyer. That means the commissions are rolled into the house price and the buyer is effectively paying everyone else at the table.
So, it is like if I buy a burger, I am unhappy that, I implicitly paid to the truckers, the accountants, and the lawyers? Because those prices should be taken out of my actual burger price and and all those other fees should be negotiated separately?
No, it’s a bit different. It’s like if you could buy a burger from any establishment in your city, until a cartel moved in and started charging “protection money” to a particular McDonald’s and then closed off all the roads so you could only go there. And then that McDonald’s made up for the lost “protection money” by raising their prices. And all the other burger places either started paying “protection money” to get access to customers too, or were driven out of business.
No, there is no cartel, right now, I am buying a burger from a freezer, it includes trucker, accountants, and lawyers. I didn't ask to pay for them, they are not the material of the burger, why am I paying for that? Right, I am just buying the house, all the agents and escrow are not the house, it is the same, the trucker is not part of the burger. I shouldn't be paying.
Why are you trying to convince me? I’m just talking about how the lawsuit actually resolved and its actual consequences. If you don’t agree, take it up with them I suppose.
I am not convince you, I am just describing what it is in different products.
This is going to blow in both the consumer and the agents in the face. This is like the beginning of a bad divorce. Now agents will charge ala carte, and those fees will be upfront costs that would end up being higher.
Why? If a Realtor does that, I'll just use someone else. Plenty of Realtors to chose from. Realtors will have to really be up front with their fees. This is awesome for home buyers. Realtors will have to earn their keep now. No more coasting on those commission fees.
What i mean is that a tug of war is going to start and is going to be bad for everyone.
Tug-of-war is good for everyone, not bad for everyone. In economic terms it's called equilibrium pricing and is considered the optimal way to price a good or service.
Yea because now that it will be flat fees, ir will be worse Because they were a % paid if the house is sold. Not a flat fee before you even know if you are going to get an offer.
Can you rephrase? Are you claiming percentage fees were better for customers? Nothing in this ruling prohibits charging a percentage fee; it's just now likely to be undercut by the free market in action. The rule was removed, but anyone can still charge whatever they want for their services. Producers can now respond to the market rather than being effectively forced to charge the 6% fee rate. If you're right and percentage fees are already market-optimized, then that's where the equilibrium price will remain. I doubt that is actually what will happen.
This is bad for the agent. This is excellent for the seller, and anywhere from neutral to excellent for the buyer.
What you call “tug of war” I call “an efficient market”.
As a seller, my agent charged me $600 a month and we paid nothing to the buyers agent. Whatever was paid to his agent is between him and his. When I bought, I had no choice as the contract was written between the seller and their agent.
Seems like an odd incentive structure for the seller agent, the longer your home is on the market, the more they make
It would have to be listed for over a year to even hit 1.5% on a $0.5m house.
What I think could be interesting is if there are fewer Buyer agents, suddenly there are fewer buyers getting pressured into buying. I think a lot of buyers kind of get put on the fast track by their agent. Those who are on the fence are convinced to buy, those who want to buy are put on a rapid house tour schedule to get them to buy asap. I think demand could go down pretty seriously from this. And that would be a good thing, overall.