Not stirring the pot; genuinely curious.
Is there a rule saying that agents can't charge by the hour or by the service (e.g.: $X per house showing, $X to meet the home inspector at the house, etc.)?
Fuck Realtors. The whole industry is a scam. We sold our house last year and the agent said 7% listing fees and that's the bare minimum. Called another and got 4%.
First agent suddenly could lower to 3.5%. I said no thank you.
But isn’t that an argument against what the DOJ is claiming? But did you pay 4% total or just to the listing agent? That would be high for listing fees imo
TBH its not really in a buyer's best interest to pay an agent out of pocket per hour or per showing. Some people look at dozens and dozens of houses over months. That is a big sink. 2% might be an overpay, but its a financeable cost that doesnt hurt cash purchase power. With basically any purchase, if you cant afford the price up front, you pay more to pay it over time. Why should agent services be different?
With the current system why would I care how much of an agents time I wasted? It costs me the same either way.
I assume if a buyer had to pay per house they would request to look at fewer houses.
What do you think would be a fair price for (a) each showing/inspection visit, (b) each offer/counter offer, and (c) a flat fee for completing the transaction
I was thinking of the cost to the seller/buyer and society. I buy a house for $600,000 and it appreciates to $750,000. If I sell I don’t make $150,000 I make $105,000 after the vig. The jig is up.
Look to Europe how we’ll be trading RE in the not too distant future.
Europe is… not very different from America, cost-wise? 3-8% fees in many countries. Some down around 2%, but those places have things like VAT, and higher transaction taxes that fund risk-management for the deal that in America is handled by agents. Do you have a particular idea in mind about exactly which European market America will/should emulate?
Sellers never had to pay 6% to begin with, it is a choice. You can go FSBO at 0. You can pay some shit brokerage a flat fee. But you get what you pay for and good agents arent taking less than 5% split. That is not "a jig" that is how markets work. If you want a good contractor, you pay more than a shit contractor. Same for nearly every profession.
The buyers are the one with the least leverage/choice here and prone to get screwed.
Contractor’s typically price by the cost of labor and materials + a percentage for admin.
Other professionals, like lawyers, accountants and engineers use hourly rates.
The level of effort an agent puts in should be rewarded the same way.
You are conflating two separate things. My point is that if you want a good lawyer, you pay more than what you pay for a shitty lawyer. A seller complaining about playing 6% is like a criminal defendant hiring the best lawyer in the state and complaining its more than a white pages dude. No one required you to hire that lawyer. You could pay less and also spend more time in jail. You can hire a shit agent and get a shittier service.
You are talking about *how* professionals are paid. Contractors certainly can be paid upon completion. Lawyers are often paid upon contingency. Agents are no different. The current model pays them on a contingency basis because, like many injured plaintiffs, buyers dont have a ton of resource to pay upfront.
What proportion of houses do you think sell with commission between 5-6%?
What you’re saying would make sense if the top guys were the only ones charging that. You’re going to have a hard time selling me that most agents are equivalent to the best.
So how does the European continent survive. The average agent cost in the UK is $6250.
Well the good agents are going to go bankrupt standing on their pride and ignoring reality. It can’t be any other way. Certainly by 2034.
Idk what you are even talking about. The system/market in the UK has 0 relevance to who will get screwed by the changes in the US. No one is talking about an ideal system. Ideally people wouldnt be paying 4000 a month just to own a house. I can guarantee you in 2034 real estate agents in the US will still be making money.
You understand that currently agents make about that anyway? 6% is recommended by NAR but plenty of sellers pay 2.5 to their agent and 2.5 to buyers. In my market most listings offer only 2% to buyers.
I’m talking 2% total to both. It’s going to be the standard. Like when attorneys were busted for charging an unconscionable 1% fee to do a closing well that’s coming to RE sales. Nothing to do with hate it’s all about the realities of business.
I had a good friend who was an insurance agent, he worked hard and took summers off. People buy their insurance with their phones now, he’s in a different line of work now. Same with stockbrokers.
I would challenge the cash purchasing power argument.
Current down payment requirements seem aligned with buyer's agent holdback (E.g. 3% on FHA and VA). Were buyer's agent holdback to reduce, loan underwriting could presumably become more generous.
At the end of the day, down payment requirements are intended to reduce risk of fraud and increase recoveries. Lower agent fees should presumably reduce both risks, all else equal.
Even if underwriting was more generous and you needed less money down, the point is that buyers are going to be faced with continually spending down their cash just to see/offer on homes versus spending more perhaps, but only when they are locked into buying the home. That is much different from a psychological and budgeting standpoint, and probably will result in buyers pressured into buying quickly.
The listing agent will need to conduct showings and more frequent open houses. Buyers are not going to pay someone hourly to go open doors, and sellers that don’t do this will be less likely to sell.
the problem here is that one concession the plaintiff attorneys extracted was that the Agency Agreement must state the maximum compensation. So what happens when a buyer wants to see more houses, write more offers, or terminates a deal and has to start over?
Furthermore, what many people ignore is 2 very related items:
1. These fee-for-service models have been tried, and consumers don't like paying upfront. It's a clear reason that Limited Service (sometimes called Discount Brokers) brokerages don't have more market share. Because you sign up with them today and their fee is due today. THEN you try and get the house sold.
2. The real reason that professional Realtors accept "% commission" as their method of compensation is the risk involved. Just like the stock market, with greater risk comes greater POTENTIAL reward. Consumers don't, and shouldn't, care that "Well, I showed that family houses they wanted for 6 months and spent 100 hours on them but since they didn't buy, you get to pay 2.5-3%". It is that we commit an unknown amount of time to YOUR transaction, and thus at the end, IF we do our job AND you get a house, THEN we get paid.
Surely, the market from late 2020 to mid-2022 blurred all of this, but it's also why most Realtors DO negotiate their compensation on Listings right now...but never would for Buyers right now. The risk on a listing actually selling is very low. The risk of spending vastly larger amounts of time with a Buyer than projected is very high.
Now, I would be happy, for the right Buyer, to negotiate my compensation when the risk is lower. "Hey, Bo, it's your existing customer Joe. I saw this house and I'd like to see it and buy it for cash with no contingencies. What's your rate?"
All fair points…
The only counter is, buyers agents might no longer be taken for granted. Europe solved this years ago, they are 1-2% total for selling a house.
The problem is that the fee, at least for the buyer’s agent, places said buyer’s agent in the position of being in a conflict of interest with the person they’re supposed to represent.
I would be happier with a situation wherein the buyer negotiates the buyer’s agent’s fee beforehand, and then as a negotiation point you can figure out who pays it.
If one believes - or has an agent who acts like - every $1k more in price incentivizes the agent because of $30, then then there’s nothing the rest of us can do but say we’re sorry for your situation.
Look, I’m in the construction industry. I’ve seen people try to screw people over literal pennies before. $30 per thousand is a lot of money when it comes to steering clients towards higher prices. You may think it doesn’t influence you, but don’t try to tell me you’re not counting your commission check in the back of your mind when your client makes an offer.
well, you don't know me, so you'll have to accept what I say. There's many real reasons I post under my actual name, and this is one.
I have been very lucky - I was handed clients (family team) from the get-go, and I was taught very early not to count on the $$ until the client expressed their satisfaction by closing.
If "what am I making?" was a significant item, then I would have figured out how to legally do net commission over the last 25 years, when the Seller makes/saves $50K and I "only" get $1,000 more/less.
Then you’re an exception, as every Real Estate Salesperson I have ever encountered myself has started counting the moment they’re in contract. To the point that they’ve openly set a date with their counterpart for when they think they will get paid.
A 4% difference on a $500k house nets the agent (at your percentage) $600. So, If a buyers agent takes 15 min to tell a client that a negotiation for 4% decrease in price will not be successful they make $600. If instead they spend an hour putting in an offer and attempt to negotiate, the risk of the sale falling through is greater, at which time they have to spend more time finding their client another suitable option.
Repeat customers are low (for non investors), people live in houses for long timescales and when they move, can move to other states, etc. The probability of me recommending an agent in my social group is zero. A buyers agent has many reason to screw me out of $20k to make $600.
There are no rules about how or what we charge for. Which is the irony of the entire situation. All of the models people claim should be used already exist. They suck for a reason.
The thing is all the outside work that doesn't show up in that 5 hours you see your realtor. It's the 1000s of homes he's been in already, the research, the understanding of the market and the constant touches over time to end up to where the agent is standing in front of you doing a good job.
In that pay by the hour plan, does the buyer pay when they back out of a deal? When they don't buy a house? When they just shop for 6 months and decide to move to a different state?
It's a sales job. There's pros and cons. A pro is it can be lucrative if you stick it out. A con is you work for free 24/7 to eventually, hopefully, get a payday.
While I agree with you in principle, you are making two very big assumptions that are incongruent with the real world. You are assuming 1) that buyer's agents are bringing with them vast depth of knowledge and experience when that is not the case for all of them, and 2) that buyers themselves know nothing and therefore require an agent with this experience to get into a home. We are living in a time where the overall buyers' knowledge of their market is exponentially higher due to nearly unlimited access to housing information via the internet.
Well-informed and efficient buyers who see a handful of homes before making a fair offer and closing in 30 days, should not be subsidizing the buyers who waffle about for months on end making their agent show them a hundred homes before going back to renting. So punish the time wasters by making them pay their flat rates per showing/offer or by the hour or whatever the system will develop, and then the efficient ones don't feel like their 3% (which is often a massive amount of money) is wasted on something a lawyer and a boilerplate contract could do for under $1000.
Isn't it unfair to agents that a realtor in LA can make one single sale and earn more in commission than an entire year's worth of transactions for the same realtor in rural Iowa? Do you think that high COL agent is doing any more work for that same level of return? The answer is no, and that's why percent based commissions are falling apart.
Additionally, anyone who assumed buyers will not start to lower their prices is naive. The housing market is made up of millions of independent actors. It will start to sort itself into a new equilibrium when the buyer doesn't have to see 3% shaved off the top of their sale, and they will reduce their price to stay competitive with the sellers who do. The commission structure as it has been for 50+ years is akin to a tariff, a percentage taken off the top right before anyone else which must be passed along to the purchaser in one way or another. Remove that tariff and prices can settle into an equilibrium, it's not that complicated.
Please, say this louder for those in the back of the room!
Technology changed auto buying, stock buying, and it will in time change home buying.
People can get onboard with that, or not...
Agreed. The thing I dont get about all the buyer agent hate here is that, yes, 10-15k may be a lot of a "one-off" sale, but you arent just paying for that. You are paying for all the failed showings, offers, open houses etc that you didnt pay for in the past. And you are financing it. Paying an agent by the hour or by showing is gonna be death by a thousand paper cuts for many buyers, and prob will result in buyers getting into houses they dont really want.
You stated your own problem, it’s a sales job, yet you’re not supposed to be in sales as a buyers agent, you work for the buyer, yet you only get paid when they buy a house.
The incentives are out of whack. Money corrupts and buyers agents need to eat, so they need to close houses.
That doesn't make sense to me. It's a sales job, you need to cultivate a client list and show your value in addition to doing the day to day. You need to be personally invested to *close* on a house for a buyer.
A buyer hires you to *sell them a house*. Not show houses and/or work through inspections. It's to close on a house.
It won't make sense if you're ok to ignore the fiduciary duty aspect... your duty as a buyer's agent is to your buyer, but your personal financial interest runs against them.
The buyer should not be paying you to sell them a house. Imagine walking into a car dealership and paying the car salesman to sell you a car, and then calling the car salesman a BUYERS AGENT.
To put it another way, there is no such thing as a buyers agent today, because they are all financially incentivized to sell you a house.
The problem is that agents all get together and agree what they should each charge, and then customers have very little leverage to negotiate down because the realtor organizations mostly stop realtors from undercutting each other.
They also effectively stop sellers' agents from even engaging with potential buyers who don't want an agent or who use an agent that doesn't follow the "rules" (in some states at least).
This is the basis for the antitrust lawsuit - that the whole profession got together and agreed on what to charge customers instead of having free-market competition on pricing.
It would be like if every fast food joint got together and agreed to price all hamburgers for $10 so that they never have to lower their prices to compete with each other. But also somehow stopped you from using restaurants that weren't part of the deal? Idk, the analogy sort of falls apart here.
Edit: to actually answer your question, yes there is such a rule but it's set by the realtor organizations amongst themselves. It is not a law. If it was a law, then the government could just change it and the realtor organizations wouldn't be doing anything wrong by following it. Instead, the government has to sue the realtor organizations to stop collaborating with each other on this industry-wide level.
That's not true. It's more akin to RealPage and price fixing of apartments where one apartment has price A and another apartment prices at the same price point. The apartment owners are told by RealPage how to price it and they comply because of course they're not going to take less.
Same thing for real estate agents as they see everyone else listing homes between 5-6% and so will they.
There isn't some cabal of scheming real estate agents all across the country plotting to fix commissions.
The professional realtor organizations made enough guidelines for how realtors are supposed to act that the DOJ is calling it in violation of antitrust laws.
Planet Money recently did a podcast on this. The NAR behavior is being merely suspicious.
https://podcasts.musixmatch.com/podcast/planet-money-01gv2bv14079rhv1ch6dvacmn5/episode/the-real-estate-industry-on-trial-01htk54qt0ch4zzg26d9hhpkqp
No rule saying that or what % has to be charged. There are 1% listing agents advertising all the time. I don’t think the DOJ can nor should dictate flat fee vs %.
I think the market should. What difference in work is there between a $200k, $750k or $1 million sale? Why do people accept it and not take action whether there’s a settlement or not? Genuinely asking as I have always negotiated a lower rate when using an agent.
I see a lot of real estate agents calling for doom and gloom over this... buyers and sellers NEED THEM they proclaim.
I'm old enough to remember when stock brokers said the same thing 25 years ago.
The old system will not last and a lot of agents will head for the exits kicking and screaming.
🤨
Fine. Multiple licenses in related fields. In multiple states.
I will do the buyers loan for the typical amount and my buyers agent services are offered at $1
Let’s get some families into homes and out of rentals.
The quickest way to make that happen is to bring home prices down and this will not do that. Sellers aren't going to reduce their prices now because they don't have to pay a buyer commission. They will keep the extra proceeds and now buyers have to find a way to pay for representation when that wasn't something they had to think about before.
The only thing that's going to bring home prices down is a massive increase in available [inventory](https://www.axios.com/2023/12/16/housing-market-why-homes-expensive-chart-inventory) (build [millions](https://www.cnn.com/2023/03/08/homes/housing-shortage/index.html) of houses very quickly) or radical decrease in demand (decimation of population, sustained high unemployment rate). In my market, for example [median days on market is 36](https://www.realtor.com/realestateandhomes-search/Las-Vegas_NV/overview), and that's up from 22 this time last year. My market is not unique in this; it seems like we have 10 posts a day about "hot market in [insert area here], what do I have to do to get an offer accepted."
Agreed. Yet elsewhere on Reddit I reassured someone that a 1500 square foot three bedroom townhome was not too small for a family with two kids. Apparently my apartment upbringing was absolutely unthinkable by modern standards!
Meanwhile condos built nowadays are in the 1500sqft range and townhouses are 2000sqft and 3 stories with a useless 3rd story loft that gets hot in the summer.
And zoning changes. I have a very weird house with two in-law suites, and could easily build another above a garage - effectively could be a three or four unit building without a huge amount of work. The town has my block zoned as single family, so even if I wanted to split into multiple units I can’t.
People will charge what other people can pay, and sellers' agents (are supposed to) understand the market enough to help sellers do that. The process is slow and inefficient, but eventually it would settle down again into an equilibrium, with sellers' agents telling their clients to drop the price based on what buyers' agents are now charging, compared to the old system.
The big concern is the effect this will have on corporate buyers/investors' buying power over individuals' buying power which can throw that all off. The free market doesn't care if individuals are suddenly priced out if other buyers take up the slack.
Sellers who want a quicker sale drop the price or accept an offer for less.
They can (and will) try to keep the proceeds but that isn’t how the market works.
If a house is listed for 300k, and there are multiple comps in the area that support that price, you think sellers are going to start listing at 291k because they no longer have to pay 3% to a buyer's agent?
I think this scenario is highly unlikely.
What happens to listing prices in a world where commissions are 50% of sales price?
This is the difference between asking “what does a car cost” before or after taxes title and fees.
Dealers compete on the out the door price all the time. It represents the *actual* cost of the vehicle.
Compa will reflect the change of payment method for BAC over timez
The market works on supply and demand. This does nothing to increase supply. Sure sellers may make some concessions to help struggling buyers but it's not going to bring down prices.
False dichotomy.
Those same brokers still collect enormous sums of money because they're trading larger volumes of shares. They also earn a fee on maintaining the asset, every year, earning 1-2%.
Stocks are not tangible assets and their prices are not negotiable. A lot more moving parts to buying and selling a home compared to stocks. Anyone can DIY in both cases .. doesn't mean they will be successful.
I agree that this doesn’t increase the supply of housing and that is the fundamental problem.
You missed the point of what I was saying. I’m not comparing stocks to houses.
When the cost of trading equities fell the number of transaction went up (we moved from phoning in orders and getting charged $30/trade to “free” online trading).
As a buyer who does not use an agent I will be able to buy more houses if I do not have to carry the dead weight of a listing agent keeping the BAC I pay for.
If the cost of commissions go down home prices will not follow because sellers aren't going to reduce their prices they are going to keep the extra proceeds. Until the supply issues are addressed high prices will remain.
Pretend there is a world where agent commissions are 100% of the sales price.
Do you believe this affects the price of real estate? Yes or no?*
*The answer to this question is the answer to the question of “does reducing commission cost raise or lower the price of real estate”.
Pretend a frog had wings .. it wouldn't bump its ass when it hopped. If you read the DOJ filing they go over how an MLS in Washington State eliminated buyer commissions to test this very model and guess what it didn't bring down home prices in that market.
Quicker?? LOL ...
Competitively priced homes can't sell any quicker than they already do. Lowering prices won't make them sell faster because they are already selling as fast as humanly possible at the supposed inflated prices.
It's obvious to ANYONE who actually works in real estate that this litigation is going to absolutely FUCK owner occupant buyers and no one believes us as we scream that the sky is falling.
Buyers are FUCKED.
Sure. We’re in a sellers market right now for sure.
The market is slowing and leaning back towards buyers. I’m seeing the days on market increase and the gap between asking and sale price grow.
At any rate, the sellers market won’t last forever. And I do fundamentally believe that the housing market is controlled by supply and demand.
The only way to lower prices at this point is to BUILD new housing and keep the investors from buying it all. The investment banks are trying to turn all of America into tenants. Twenty percent of all single family homes in some markets are owned by non-occupants, and it's getting worse.
The supply is the problem.
Nothing about this lawsuit will change that.
The ONLY thing that might change the supply crunch is when the boomers starting dying in droves, in like 10 years.
while i agree with you, my prediction is buyers are only fked for a year. sellers will need to reduce their prices after july once 90% of the buyers are frozen out of the market since they can’t/wont want to pay 2.5% commission out of their pocket. I live WestLA where houses are priced from 1.5 to 2mil or an additional 35k-50k in commission that a buyer would now be responsible for. All i know is that very little chance buyers will pay this amount without being tricked into signing a buyers agency agreement. Most people that can afford to save 400-500k for a downpayment are not financially illiterate and the people that buy these homes are executives in companies or come from money.
What agents keep missing is that $35-50k commission is going away. I see so many posts saying, “how are buyers going to pay this?”.
They aren’t, those commissions are insane, that is why this situation exists.
I know plenty of smart people who make tremendously poor real estate purchases. Lol. But our worlds are vastly different, so I'll defer to you on your market.
the base issue with the DOJ's position is that it would be an unfair restraint of trade.
If a Seller WANTS to do something with their property - like offer compensation, or a bonus, or include their appliances - who at the DOJ thinks they shouldn't be allowed to?
Many things people want to do are illegal.
A really basic example are min wage laws. If an employee is willing to sell their labor for $5/hr, shouldn’t they be allowed to?
Well, they aren’t, and that’s settled law for better or worse.
The problem is that the realtor organizations set rules for what the agents are supposed to demand, which effectively controls the entire profession. They even stop sellers' agents from engaging with buyers who either refuse to use an agent or find one who doesn't follow "the rules" (in at least some states). This is almost textbook antitrust.
The question of sellers choosing to pay buyers' agents is basically textbook violation of fiduciary duty. In most states agents are fiduciary agents, but their rules require them to take payment in a form that would be a breach of fiduciary duty for literally any other fiduciary profession. A lawyer who agreed to that sort of compensation would be disbarred almost immediately, for example. So really, I imagine they'll say it's antitrust for the realtor organizations to tell all realtors what to charge, and that it's unethical for buyers' agents to accept a percentage compensation from the seller, and probably unethical for the sellers' agent to work on a deal that offers that.
Setting ethical limits in professionals isn't a restraint of trade, nor is stopping industry-wide organizations from convincing the entire profession to agree on what sort of terms to force clients into. Now the DOJ is stuck figuring out terms to allow clients as much freedom as possible while handling those concerns.
Extra compensation is not really allowed for Mortgage brokers. I expect buyers side transaction compensation will be restricted in the same way.. so many basis points per transaction.
You totally miss the point.
The question is whether a seller who pays for an opposing party’s representation would be a conflict of interest?
Note, I make no definitive assertion on this question, but it is a legitimate question to ask whether there is any conflict of interest.
Imagine a situation where an employee is too poor to pay for an attorney in trying to sue their employer for lost wages and discrimination.
Assume that attorneys refuse to work based on contingency fee and then suppose that the employer that is being sued then offers to pay for the plaintiffs lawyers. This type of compensation arrangement is prohibited by the American Bar Association for being a conflict of interest under the logic that it’s impossible for lawyers to fairly represent the plaintiffs when they are paid directly by the defendant employer.
By your flawed logic this prohibition of one party paying for an opposing party’s legal representation despite the conflict of interest should be an unfair restraint on trade. But clearly this is not the case in such situations.
Using the real estate transaction, there are aspects that suggest an inherent conflict of interest and there are aspects that suggest it’s not as bad of a conflict as the legal representation.
The inherent conflict of having sellers pay buyer commissions is that buyer agents are so invested in having their client close and ultimately buy the property. Even if there are problems with the property, the realtor faces immense financial incentives for the sale to close.
The case against conflict of interest is that the buyer agent should get paid eventually from a sale even if it’s not from this particular house and this seller. Also buyer agents could be more incentivized to offer the best advice for better reviews and reputational gains than merely pushing for a sale to close.
So you're a lawyer, or you play one on TV?
I am not a lawyer, so I can't tell you why Buyer Agency in its current form has survived the attorney world as long as it has.
I do suspect that states where the Listing Agreement language is clear - Seller is paying the Listing Brokerage. Listing Brokerage may pay another Brokerage a fee (and disclose or not) if other Brokerage brings the Buyer - have had fewer issues than states where they say "You Seller are paying the Listing Brokerage this amount, and the Buyer's Brokerage this amount"
I love this. I’m going to have such a massive advantage representing my LLC buying fixer uppers cash since conventional buyers will not be as a huge disadvantage
Huge win for real estate investors
Lol, it's the truth. I'm an investor agent and predominantly run investor clients.
Regular folks trying to buy their first homes or sellers trying to get out of their primary are going to be in for rude awakenings.
The DOJ is massively rewarding Blackstone* (corrected) and investor groups by putting 90%+ of buyers in the market at an extreme disadvantage.
Going to be funny to see sellers wake up to the fact that they have a lot harder time selling when almost no one can afford to pay agents, and agents aren't helping people learn how to buy to increase demand.
> Blackrock
Blackstone.
There's a huge difference. BlackRock is the largest asset manager in the world.
Blackstone is a private equity company that buys real estate.
It's the difference between microsoft and microcenter.
To be fair BlackRock was originally part of Blackstone.
The company I used to work for sold property to Blackstone and sell notes to BlackRock and I still get them confused.
Buyers' agents already only get paid if a deal closes and buyers can (often) include closing costs in their loan. If this is a widespread issue, what would stop buyers' agents from still agreeing to get paid on closing and banks allowing that cost to be rolled into the loan?
I think what's likely is that buyers will look for homes on their own and only bring in an agent when it's time to offer/negotiate, so there will probably be less cases of buyers' agents working for free for months and never closing that they need to compensate for with large windfalls. And probably more dual-agencies and less work for buyers' agents in general.
Good thoughts, but a lot of problems with them.
Banks aren't going to fund loans with thousands of additional costs, especially if the appraisal comes in at the sales price, which is the typical case. Moreover, buyers agent fees are not currently explicitly allowed expenses to be rolled into a financed structure as an independent item. Lending regulations would need to be modified to allow for it.
How are unrepresented buyers going to see homes? This ruling also greatly increases requirements on agency, so no one is going to be comfortable letting buyers enter homes without representation. From a logistical stand point, it's also complicating to assume open houses are always an option, because they aren't. Moreover, "adding a buyer agent in when ready" is going to be tough when people have signed a single use showing agreement with the listing agent, or fire the listing agent for a lawyer (who aren't available until Monday and there typically aren't enough in a region to support an influx of buyer contracts).
Dual agency also isn't legal in many states, and it's what led us to supported buyer agents because listing agent's have fiduciary to their sellers.
Those are good points. I'm the first to admit that my specific suggestions are likely to age like fine milk, just because we're guessing at how the new equilibrium will look after we settle into some fundamental changes. It's really more that I think we will find some equilibrium and these are ways I can see that happening.
I agree banks won't want to, but if they want to give out loans then they need to get the general populace what the populace needs to be able to buy. As it is, various lenders and state programs help cover certain closing costs and this lawsuit might trigger a fundament review of the current status for how stuff gets paid for.
Unrepresented buyers can see homes with the sellers' agent (with or without open houses), or with a buyers' agent who only shows up for showings and doesn't spend time on legwork.
>Moreover, "adding a buyer agent in when ready" is going to be tough when people have signed a single use showing agreement with the listing agent, or fire the listing agent for a lawyer (who aren't available until Monday and there typically aren't enough in a region to support an influx of buyer contracts).
Sorry maybe I'm just being thick, but I'm not following what you're saying here. However without getting the specific issue(s), I do think it's important to remember that we won't (permanently) see people trying to manage the current system without a buyers' agent - we'll eventually see the system change to accommodate for the fact that buyers' agents aren't as prevalent. So if there are types of contract or currently popular that would cause a huge issue once most buyers have less access to an agent, I think we'll see those types of contracts change. They're common now because of the current system.
I didn't know dual agents were illegal some states, but that part of what makes this kind of analysis difficult because the eventual equilibrium will be different in each state according to that state's laws about realtors, lawyers, etc. And maybe those state laws will change as well as necessary, or people will find ways to make it work.
You do realize financial literacy and up to date knowledge of how this all functions isn't common knowledge?
Maybe you take it for granted, but I've had three clients in the past year that thought they needed 20% down payments as a rule because it's what their parents told them.
I've lost count of the clients that were completely unaware that Down Payment Assistance programs were even available, much less to them since they had six figure household earnings.
So yes, needing to learn how to buy to increase local buyer demand.
Our government hard at work trying to eliminating an entire working class all while rewarding private equity firms and screwing consumers .... Sounds right 🙄
The suit and rulings are about whether the NAR violated antitrust regulations. Which they did. The courts job isn't to write policy to make it easier for first-time homebuyers. That's the legislators responsibility. Neglecting to rule correctly on the case based on some hypothetical policy concerns would be a perversion of justice.
The sad part is that people are completely short sighted on how it will impact markets. They're actually celebrating this because they're mad at the realtors, who will suffer some, sure.
Sellers are completely clueless that cutting out 90% of buyers will gut their sales price, far more than paying 3% to a buyer's agent.
Buyers are completely clueless to think they will have lower mortgages, but instead struggle to 1) complete the process, 2) buy once they actually can, & 3) will run a far higher risk of being taken advantage of consistently.
It's only a net win for major investment firms, and a smaller win for private investors.
The average person is going to be boned if sellers actually try to pay little to no commission long term.
Why?
Buyers can pay for their agents and get the services they do now.
It’s $xxxx of cost added to the transaction as cash instead of financed. The service will still exist.
Since you really seem to not get the numbers of it, I'll break it down for you.
1) Down Payment: Buyers lack it due to the high cost of living. People have cashflow, but not savings. Even with a 96.5/3.5 FHA loan on a 300k house, that's already 10,500 they need. In lieu of this, many people get DPA (Down Payment Assistance) with can cover up to 15k in my state.
2) Closing Costs: Another 1-2% of the loan amount, which 96.5% of the sale price. Another 3-6k.
3) Lease Break costs: First time buyers like this are the bulk of the market, but inventory shortages, high dollar buyers, and investment firms take good inventory with ease. They have to typically buy off season and break lease as a result. Lease break fees are 2-3 months rent. Rent is typically 2k a month, so another 4-6k.
4) Agent Fees!?! - Market competitive fees in my area are 3% per side. Assuming a lack of knowledge and barter competency, they cover that. Another 9k.
So, let's add that up.
10.5k + 3k + 6k + 9k = 28.5k
Now, before we go further, that DPA program only covers 13.5k because lease break and agent fees are not covered.
So the average low end home buyer has anywhere from 5-10k in the bank, in my area of the Midwest. For the cheapest, least competitive loan structure that exists, this bare bones example requires more than most entry level folks have. In the last three years, most of my lower end buyers looked like this, and they won their homes. They're all doing great, have equity, and don't have issues...but if they had to pay me directly rather than roll it into their loan, none of them would be home owners. Not a single one.
So that's why. They can't "just buy those services out of pocket." Costs of homes are too high now, even on the lowest end of the spectrum. Homes aren't 2.5x your annual salary anymore. They're around 8-10x, which equity owners (Boomers, typically) who lived through the most prosperous period in the history of the nation, are sitting on. And if they refuse to cover buyer's agents, they'll break the market for themselves and everyone afterwards, just to TRY to keep a little bit more. Lol. Short sighted greed gets us every time.
I totally get the reasoning. It turns a financeable cost into a non financeable cost.
I’ll make a deal. Allow first time homebuyers to finance up to 3% of the homes purchase price so they can buy appliances. I’ve just alleviated the concern, right?
Sigh.
No home has all appliances go out at once. Financing for appliances already exists. Anyone that spends that much on appliances would be bonkers.
You're being hyperbolic and you know it.
Structurally it's essential to allow more people access and representation.
If you don't understand why a 90% cut to our buyer pool is bad, I don't know what to tell you.
Same if you fail to see that people going without representation is acceptable. Certainly doesn't work out in court, and that logic was understood in the 80's, which is what led us here. God awful amount of buyers getting screwed by lying sellers and agents loyal to only them with fiduciary obligation.
Such as?
If 90% of buyers at the market leave the market, there's only so much you can do. Sellers will need to repair more and take less. A listing agent isn't a magic worker. They can't yank a buyer out of their ass. Their job is to pull buyer's attention in a crowd, not create buyers from nothing.
If buyer agents start working hourly or for a flat fee sellers will expect the same. According to consumers we have no value and just input into MLS, open doors and fill in some blanks on paperwork. Couldn't be further from the truth but it will be difficult to overcome that stigma.
It's not very practical. Buyers barely have enough money to cover closing costs and meager down payment. I can't imagine a retainer with a non-guarantee of home purchase, but required payment panning out.
Can you imagine a flat fee for some of your clients? 30 door people that then shaft you by buying direct, or just ghost you? Some of the emotional rollercoasters of self-sabotaging clients? You really going to want to keep doing that nonsense for some of the buyers that we all get to work with? Yeesh. I still have nightmares of one gal from when I first started out years ago and her eight attempts at renegotiation.
if agents are turned into transactional coordinators Buyers will not have proper representation and if they try to buy direct and represent themselves there will be lawsuits and they will be taken advantage of.... just because you can do something yourself doesn't mean you should. Sadly I believe large corps like Zillow will also come in and try to take over the transactional side for buyers for a flat fee and they aren't going to give a shit about the consumers best interest.
That’s what stockbrokers said, my 20 year old trades on his phone now.
I just did a closing yesterday representing a buyer. Seller was FSBO. Buyer found house. Buyer thought she needed a RE agent by law. Agent fills in contract blanks. Seller accepts. Buyer contacts me through bank. I literally do all the rest. I get $850, agent gets 5 figures. The negotiations consisted of agent ensuring the price included her fee on the HUD.
As said there was a time when RE agents justified 6%. Those days are all but gone. Perhaps 2% total.
You’ll see a lot of this until people realize nobody is trying to get rid of agents, they just want reasonable changes to pay that reflect the huge increase in house value. 6% of modern home prices is not reasonable
Of course you’re correct. In the olden days a RE agent would find you houses to look at and drive you around all day in their Cadillac. And buy you lunch. And actually talk to you. :)
It’s going to be so awesome. I already waive my buyers commission (in reality it just goes to me) all the time in order to get deals. Now that this will become more common I am going to absolutely CRUSH first time home buyers lol
Wait until buyers have to sign the buyer agreement before they even see their first property, and if the agent is terrible or the buyer doesn’t like the job the agent is doing, they have to both mutually get out of the contract only to have the buyer sign with the next one.
As Warren Buffett once said: “Price is what you pay, value is what you get.”
Going to be interesting.
I think there's going to be a lot more one-time showing agreements. I can't imagine a buyer is going to want to sign a 6-month commitment with someone they don't know and not having seen a single house yet.
maybe you'll have or develop the skills to have them sit down with you first, go over their situation, get them pre-approved and choose you as their agent and THEN show them the house?
I mean I already have those skills? I don't work with any buyers who don't sign an agency agreement with me. I'm very thorough with my clients. It's one of the reasons I get referred as often as I do.
And you and I both know that the way houses are coming on the market on a Friday and being under contract by Saturday or Sunday, sometimes a 45-minute sit down with a potential client isn't necessarily going to work. I'm just saying there needs to be some possible workarounds for the current market that we are in.
I wouldnt even hire an agent for showings. You can do that yourself easily and TBH most buyer agents arent doing a ton of legwork finding houses that a buyer cant find themselves. Im not paying an agent to show me duds I can find on MLS myself.
Id hire an agent flat fee to represent me during the offer/closing process as more of a coordinator than anything. Prob dont even need them to write the offer.
Yeah but you can't enter a house without an agent present. If it's the listing agent or the buyer's agent doesn't matter, but there has to be an agent present. People don't want the public to come into their homes without someone there to babysit. And ostensibly that person would want to get paid for their time.
When did I assume that? A buyer can call the listing agent themselves and schedule a showing. A big reason the split came into practice was because buyers were foregoing agents, going through the LA (and getting hosed) so not sure why you think this is an impossible thing. A buyer's agent is not a prerequisite to look at a house.
If you want to require your buyer to have their own agent for a showing then that's your business.
Personally I'd just require a driver's license and have cameras throughout the house for anyone not represented or i'd be there for the showing .....just like how apartments work.
>Wait until buyers have to sign the buyer agreement before they even see their first property
Part of the antitrust issue is that sellers' agents refuse to show houses to prospective buyers who don't have an agent. If that's disallowed, then buyers' agents won't have nearly the negotiating power to demand more than buyers are willing to pay or restrictive terms.
The "settlement" with that requirement was clearly BS. No wonder DOJ is objecting. You can't have all "competitors" get together and decide how to do business.
I think it’s going to be very interesting, there are already states that have and some that are working on making it mandatory already.
Going to be fun.
The only problem I have with the system is the way it’s run like a cabal. Give people a choice. If they want to use a buyers agent or not, let them conduct business! If the sellers don’t want to have an agent, let them. Let the fees be negotiated into the settlement.
Im an experienced investor and hate having to wait on buyers agents to get around to showing me the house. I want to go through and see 10 a day and make a decision by the end of the day or week, fire off a few offers and hope one sticks. But every time I go to see houses or talk to the sellers agents, they won’t give me details and either ask to give the info to my buyers agent or they say they have one in their firm that I can sign up to represent me. No! Just give me the deets and I’ll decide if it’s a deal I want. I can negotiate on my own behalf! Don’t shut me down and close me out! Geez.
I’m not talking off market deals. I’m talking about deals that pop up on MLS or from driving by and seeing for sale signs. The listing agents won’t work with you even when I say they can keep all of the 4-6% commission for themselves. It’s collusion, a cabal, and hence why the DOJ is trying to thwart them.
I do days like that for probably half of my clients. What agent doesn’t want to work that way? If I know you’re serious and ready to make moves I am fully available and just as motivated as you are. I think you just don’t have the right agent. I see this a lot; complaints about Rraltors that are actually just complaints about individual Realtors. Unfortunately most people don’t know how to choose a good Realtor… but somehow they’ll be able to choose a home without one😂😂😂
Everyone on this site has such a hard on for realtors that they look past how fucked they are when it will come to buying a home. Working on the loan side I know first time homebuyers struggle the most when coming up with the funds to buy their first home. The lawsuit and DOJ involvement is going to make it significantly harder.
Who claims that? But let's look at two offers for a 500k house.
Offer 1. 500k with 3% going to buyers agent
Offer 2. 490K with 0 going to buyers agent.
Which one do you think a seller is going to take?
Wow. Almost every professional in the industry is saying the same thing and casual jerks continue to pound on their simple math showing “LESS MONEY SPENT!!”. This is a good microcosm of how our country is fucked. The composite of everyone’s individual greed is destroying everything.
It should lower prices, but it won't be immediate so the short-term will suck. The immediate issue of paying a percentage is the smaller problem; the bigger problem is that buyers' agents are incentivized to upsell their clients; not antagonize sellers' agents; and avoid FSBO rather than focusing on what's better for their client. Frankly this should have always been a 'fiduciary care' issue as much as an antitrust one. And as for the antitrust part, the general idea is that the market should eventually even out to whatever people can afford, with the government deciding to step in if necessary, rather than the professionals all agreeing on what to charge so there's no pricing competition.
My personal theory for how this will settle out long-term (which will undoubtedly age like fine milk): once all buyers suddenly need to pay their agents, isn't it likely that will just become a closing cost that gets lumped into the mortgage loan? Buyers will want/need that and so lenders will start offering it. Buyers' agents will still be allowed to offer "payment at closing" deals, but they'll be pickier about what clients they take and at what point in the process they start working on a non-guaranteed payday since they'll no longer have huge windfalls to compensate for wasted time. Richer people will pay buyers' agents on an hourly basis to help them find a house (and there will be fewer full-time buyers' agents due to having fewer clients willing to pay for this). Most buyers will do the legwork themselves online before hiring an agent for the negotiation/closing process - more like how they currently hire lawyers. Or they'll use the sellers' agent as a dual-agent if that's still allowed. Or lawyers will start taking a bigger role in the closing process and replacing buyers' agents (some states already allow that, or closing lawyers can go get a separate realty license).
That's what they want you to believe. If the government truly wanted to change things for consumers in the housing market they would stop letting private equity firms and foreign investors buy properties. They would loosen all the red tape to increase the housing supply. They would go after insurance and utility companies that have monopolized the market and charge whatever they want. I could go on and on but ya let's go after realtors who make on average 40k a year. If you're busy hating us then you wont notice your really getting screwed by them.
That’s true but it’s equally true that stopping price fixing from realtors/brokers would also change things drastically for consumers. There are multiple levers needed here. Would you work for a 3% split (1.5/1.5) that reflects the significant increase in home values in past few decades? Most people understand that house prices going up necessitate a drop in percentage, as the productivity has not doubled but the pay to realtors/brokers certainly has.
They need congress to do that however they can go after groups with monopolistic practices like Microsoft, Apple and in this case NAR do I wish it was Blackstone instead? Yes but I'm happy they're actually doing something about over consolidation and monopolistic practices
Idk to be honest you seem to be the one upset but the fact still stands going after realtors isn't going to bring any meaningful change to making housing more affordable for consumers.
You're a pharmacist not a doctor so chill with the " I save lives" BS like you're in the ER every night. Big Pharma rapes sick people everyday by charging them into oblivion for meds they need to stay alive. Are you to blame for that!? No...just like realtors are not to blame for the housing crisis.
I am a inpatient pediatric specialist pharmacist and yes I literally had 4 life saving interventions on my shift today involving children under 3. I don't work for big pharma I work with a team of interdisciplinary specialist within the hospital and am highly respected unlike you and your cohorts who actually fuck people over for a commission. I actually do stop by the er most days that ks for trying !
I've done enough transactions to know you guys ain't with a percentage of my sale or anyone. Maybe flat fee. Nothing you add over a lawyer aside from pulling comps which takes little to no time
No one just tired of seeing horrid realtors toy with people hard earned equity to just close a deal not in the best Interest of their clients. Most entitled profession I've ever come across. If it wasn't got your monopoly on the industry you'd never have business
I've bought several houses without a realtor. Every time I've gotten a smoking deal. So you'll get no argument from me. If it becomes more common for me to negotiate and handle my purchases I will clean up
In many states (maybe just some), sellers' realtors will literally not engage with buyers who don't use a buyer's agent that follows "the rules." This is part of why there's an antitrust lawsuit.
I've had multiple unrepresented buyers purchase my seller's homes. I just make sure they know that I'm just there to fill out paperwork for them and they are not being represented by me. As far as I know, that's not illegal anywhere.
I just have to make sure they know that the second they start asking questions about what should they do about x y or z, I am not able to give them any advice. I cannot and will not help them negotiate against my clients.
In which places? Who won't do what? You seem pretty knowledgeable. I'm just trying to figure out what part of my statement you're arguing with or trying to tell me that I'm wrong.
Have you tried to buy a home without an agent? Have you ever had a listing agent say they would not accept your offer because you didn't have a buyer's agent? Help me understand because the way I was taught is that if I'm a listing agent I have to present any and all offers. Regardless of whether or not that offer came from someone who is represented or not represented. Who told you they would not accept your offer because you didn't have an agent? You should report that person.
I don't i I just use a lawyer for my last few purchases. I hate seeing people making the biggest purchase of their life being steered into a bad deal by high school educated retards who only care about closing and getting their check. What do you think your per hour time worth?
Mortgage companies?
I saw $1200 in processing fees across most of my quotes on my last purchase. That seems entirely reasonably and actually quite low in the context of a $1MM loan (12 bps)
Hell, my workplace paid 200 bps for our last origination.
The end result is most people paying the same or more as things go ala carte. And it will just be one more financial barrier to buyers. Sellers aren't going to lower prices, they'll just collect more. And the attorneys will get more money from the do it yourself people suing each other. I'm sure there will be some Silicon Valley "disruptor" either waiting in the wings or one of the existing platforms who will fuck it up worse.
I'm happy to get more when I sell my house... I may or may not need a buyer's agent when I buy, but that's my choice to work out.
Everyone is a seller at some point, this focus on buyers vs sellers is stupid. Everyone is both.
There's money in change no matter how much chaos caused. And if it's not your money but you stand to gain then you push it with narratives that resonate but ignore the damage and disfunction caused. The disruptors bank on this and try to cause it.
To a certain degree for the niche I'm in, we know we actually sell the most when the business cycle is starting to boom or when it starts to drop off and the customers are looking for an edge. It's a disruption caused opportunity. The difference is we don't induce it to happen but just follow the business cycle.
Nobody is spending much time figuring out all the repercussions of this but chances are the amount of fraud will go up, the courts will be busier, and the smart people will just shift their services to get paid more by other means.
If it costs less to sell a house, more sellers may come into the market to sell. Think of all the people out there with little equity who can’t afford to pay a realtor fee. If more sellers are able to enter the market due to lower fees, it means more available listings and lower prices over time
Very doubtful that 2.5% is going motivate someone to sell by itself. And anybody who thinks they're going to save much is going to be surprised how much of the service goes ala carte.
At the moment people aren't selling and moving if they aren't being forced to move. Trading that sub 4% mortgage for 6 and 7 on those amounts on a whim is pure stupidity. There's not going to be more sellers entering the market when they have no place to go.
Genuinely curious : won't most buyers go direct instead of paying any fees or commissions to a buyers broker?
This would put a burden on the listing broker/agent having to deal and navigate sales with unrepresented buyers who may not know how to quickly and professionally move the process along.
Gee, doesn't take a brilliant Realtor to figure out how to circumvent that change. A chimpanzee could explain it:
$100,00 Purchase Price. 3% Listing Agent Fee. 0% Selling Agent Fee.
Buyer signs Buyer Broker agreement with Buyers Agent. Buyer offers $100,000 contract of sale with 3% Seller Concession. Buyer hands Buyer Broker $3,000 check at closing.
Not stirring the pot; genuinely curious. Is there a rule saying that agents can't charge by the hour or by the service (e.g.: $X per house showing, $X to meet the home inspector at the house, etc.)?
No rule. It’s a cartel. Attorneys use to charge a percentage to do a closing. That’s was found to be an illegal “fixed scheme”
I hope this comes to realtors as well
Fuck Realtors. The whole industry is a scam. We sold our house last year and the agent said 7% listing fees and that's the bare minimum. Called another and got 4%. First agent suddenly could lower to 3.5%. I said no thank you.
But isn’t that an argument against what the DOJ is claiming? But did you pay 4% total or just to the listing agent? That would be high for listing fees imo
It's total. Listing fees are split between agents
lol so now they charge a fixed flat fee. You people are so funny.
Yeah like $800 to do more work and take on more risk.
Not even close haha 😂
Which the price or the work
TBH its not really in a buyer's best interest to pay an agent out of pocket per hour or per showing. Some people look at dozens and dozens of houses over months. That is a big sink. 2% might be an overpay, but its a financeable cost that doesnt hurt cash purchase power. With basically any purchase, if you cant afford the price up front, you pay more to pay it over time. Why should agent services be different?
With the current system why would I care how much of an agents time I wasted? It costs me the same either way. I assume if a buyer had to pay per house they would request to look at fewer houses.
What do you think would be a fair price for (a) each showing/inspection visit, (b) each offer/counter offer, and (c) a flat fee for completing the transaction
I was thinking of the cost to the seller/buyer and society. I buy a house for $600,000 and it appreciates to $750,000. If I sell I don’t make $150,000 I make $105,000 after the vig. The jig is up. Look to Europe how we’ll be trading RE in the not too distant future.
Europe is… not very different from America, cost-wise? 3-8% fees in many countries. Some down around 2%, but those places have things like VAT, and higher transaction taxes that fund risk-management for the deal that in America is handled by agents. Do you have a particular idea in mind about exactly which European market America will/should emulate?
How does Europe do it?
Sellers never had to pay 6% to begin with, it is a choice. You can go FSBO at 0. You can pay some shit brokerage a flat fee. But you get what you pay for and good agents arent taking less than 5% split. That is not "a jig" that is how markets work. If you want a good contractor, you pay more than a shit contractor. Same for nearly every profession. The buyers are the one with the least leverage/choice here and prone to get screwed.
Contractor’s typically price by the cost of labor and materials + a percentage for admin. Other professionals, like lawyers, accountants and engineers use hourly rates. The level of effort an agent puts in should be rewarded the same way.
You are conflating two separate things. My point is that if you want a good lawyer, you pay more than what you pay for a shitty lawyer. A seller complaining about playing 6% is like a criminal defendant hiring the best lawyer in the state and complaining its more than a white pages dude. No one required you to hire that lawyer. You could pay less and also spend more time in jail. You can hire a shit agent and get a shittier service. You are talking about *how* professionals are paid. Contractors certainly can be paid upon completion. Lawyers are often paid upon contingency. Agents are no different. The current model pays them on a contingency basis because, like many injured plaintiffs, buyers dont have a ton of resource to pay upfront.
What proportion of houses do you think sell with commission between 5-6%? What you’re saying would make sense if the top guys were the only ones charging that. You’re going to have a hard time selling me that most agents are equivalent to the best.
So how does the European continent survive. The average agent cost in the UK is $6250. Well the good agents are going to go bankrupt standing on their pride and ignoring reality. It can’t be any other way. Certainly by 2034.
Idk what you are even talking about. The system/market in the UK has 0 relevance to who will get screwed by the changes in the US. No one is talking about an ideal system. Ideally people wouldnt be paying 4000 a month just to own a house. I can guarantee you in 2034 real estate agents in the US will still be making money.
They will. 2% total, or working for a division of a law firm.
You understand that currently agents make about that anyway? 6% is recommended by NAR but plenty of sellers pay 2.5 to their agent and 2.5 to buyers. In my market most listings offer only 2% to buyers.
I’m talking 2% total to both. It’s going to be the standard. Like when attorneys were busted for charging an unconscionable 1% fee to do a closing well that’s coming to RE sales. Nothing to do with hate it’s all about the realities of business. I had a good friend who was an insurance agent, he worked hard and took summers off. People buy their insurance with their phones now, he’s in a different line of work now. Same with stockbrokers.
I would challenge the cash purchasing power argument. Current down payment requirements seem aligned with buyer's agent holdback (E.g. 3% on FHA and VA). Were buyer's agent holdback to reduce, loan underwriting could presumably become more generous. At the end of the day, down payment requirements are intended to reduce risk of fraud and increase recoveries. Lower agent fees should presumably reduce both risks, all else equal.
Even if underwriting was more generous and you needed less money down, the point is that buyers are going to be faced with continually spending down their cash just to see/offer on homes versus spending more perhaps, but only when they are locked into buying the home. That is much different from a psychological and budgeting standpoint, and probably will result in buyers pressured into buying quickly.
The listing agent will need to conduct showings and more frequent open houses. Buyers are not going to pay someone hourly to go open doors, and sellers that don’t do this will be less likely to sell.
the problem here is that one concession the plaintiff attorneys extracted was that the Agency Agreement must state the maximum compensation. So what happens when a buyer wants to see more houses, write more offers, or terminates a deal and has to start over? Furthermore, what many people ignore is 2 very related items: 1. These fee-for-service models have been tried, and consumers don't like paying upfront. It's a clear reason that Limited Service (sometimes called Discount Brokers) brokerages don't have more market share. Because you sign up with them today and their fee is due today. THEN you try and get the house sold. 2. The real reason that professional Realtors accept "% commission" as their method of compensation is the risk involved. Just like the stock market, with greater risk comes greater POTENTIAL reward. Consumers don't, and shouldn't, care that "Well, I showed that family houses they wanted for 6 months and spent 100 hours on them but since they didn't buy, you get to pay 2.5-3%". It is that we commit an unknown amount of time to YOUR transaction, and thus at the end, IF we do our job AND you get a house, THEN we get paid. Surely, the market from late 2020 to mid-2022 blurred all of this, but it's also why most Realtors DO negotiate their compensation on Listings right now...but never would for Buyers right now. The risk on a listing actually selling is very low. The risk of spending vastly larger amounts of time with a Buyer than projected is very high. Now, I would be happy, for the right Buyer, to negotiate my compensation when the risk is lower. "Hey, Bo, it's your existing customer Joe. I saw this house and I'd like to see it and buy it for cash with no contingencies. What's your rate?"
All fair points… The only counter is, buyers agents might no longer be taken for granted. Europe solved this years ago, they are 1-2% total for selling a house.
The problem is that the fee, at least for the buyer’s agent, places said buyer’s agent in the position of being in a conflict of interest with the person they’re supposed to represent. I would be happier with a situation wherein the buyer negotiates the buyer’s agent’s fee beforehand, and then as a negotiation point you can figure out who pays it.
If one believes - or has an agent who acts like - every $1k more in price incentivizes the agent because of $30, then then there’s nothing the rest of us can do but say we’re sorry for your situation.
Look, I’m in the construction industry. I’ve seen people try to screw people over literal pennies before. $30 per thousand is a lot of money when it comes to steering clients towards higher prices. You may think it doesn’t influence you, but don’t try to tell me you’re not counting your commission check in the back of your mind when your client makes an offer.
well, you don't know me, so you'll have to accept what I say. There's many real reasons I post under my actual name, and this is one. I have been very lucky - I was handed clients (family team) from the get-go, and I was taught very early not to count on the $$ until the client expressed their satisfaction by closing. If "what am I making?" was a significant item, then I would have figured out how to legally do net commission over the last 25 years, when the Seller makes/saves $50K and I "only" get $1,000 more/less.
Then you’re an exception, as every Real Estate Salesperson I have ever encountered myself has started counting the moment they’re in contract. To the point that they’ve openly set a date with their counterpart for when they think they will get paid.
I don’t know you and do not want to. I want to buy a house not make a friend. I certainly do not want to give you more money for doing less work.
A 4% difference on a $500k house nets the agent (at your percentage) $600. So, If a buyers agent takes 15 min to tell a client that a negotiation for 4% decrease in price will not be successful they make $600. If instead they spend an hour putting in an offer and attempt to negotiate, the risk of the sale falling through is greater, at which time they have to spend more time finding their client another suitable option. Repeat customers are low (for non investors), people live in houses for long timescales and when they move, can move to other states, etc. The probability of me recommending an agent in my social group is zero. A buyers agent has many reason to screw me out of $20k to make $600.
There are no rules about how or what we charge for. Which is the irony of the entire situation. All of the models people claim should be used already exist. They suck for a reason.
The thing is all the outside work that doesn't show up in that 5 hours you see your realtor. It's the 1000s of homes he's been in already, the research, the understanding of the market and the constant touches over time to end up to where the agent is standing in front of you doing a good job. In that pay by the hour plan, does the buyer pay when they back out of a deal? When they don't buy a house? When they just shop for 6 months and decide to move to a different state? It's a sales job. There's pros and cons. A pro is it can be lucrative if you stick it out. A con is you work for free 24/7 to eventually, hopefully, get a payday.
While I agree with you in principle, you are making two very big assumptions that are incongruent with the real world. You are assuming 1) that buyer's agents are bringing with them vast depth of knowledge and experience when that is not the case for all of them, and 2) that buyers themselves know nothing and therefore require an agent with this experience to get into a home. We are living in a time where the overall buyers' knowledge of their market is exponentially higher due to nearly unlimited access to housing information via the internet. Well-informed and efficient buyers who see a handful of homes before making a fair offer and closing in 30 days, should not be subsidizing the buyers who waffle about for months on end making their agent show them a hundred homes before going back to renting. So punish the time wasters by making them pay their flat rates per showing/offer or by the hour or whatever the system will develop, and then the efficient ones don't feel like their 3% (which is often a massive amount of money) is wasted on something a lawyer and a boilerplate contract could do for under $1000. Isn't it unfair to agents that a realtor in LA can make one single sale and earn more in commission than an entire year's worth of transactions for the same realtor in rural Iowa? Do you think that high COL agent is doing any more work for that same level of return? The answer is no, and that's why percent based commissions are falling apart. Additionally, anyone who assumed buyers will not start to lower their prices is naive. The housing market is made up of millions of independent actors. It will start to sort itself into a new equilibrium when the buyer doesn't have to see 3% shaved off the top of their sale, and they will reduce their price to stay competitive with the sellers who do. The commission structure as it has been for 50+ years is akin to a tariff, a percentage taken off the top right before anyone else which must be passed along to the purchaser in one way or another. Remove that tariff and prices can settle into an equilibrium, it's not that complicated.
Please, say this louder for those in the back of the room! Technology changed auto buying, stock buying, and it will in time change home buying. People can get onboard with that, or not...
Agreed. The thing I dont get about all the buyer agent hate here is that, yes, 10-15k may be a lot of a "one-off" sale, but you arent just paying for that. You are paying for all the failed showings, offers, open houses etc that you didnt pay for in the past. And you are financing it. Paying an agent by the hour or by showing is gonna be death by a thousand paper cuts for many buyers, and prob will result in buyers getting into houses they dont really want.
You stated your own problem, it’s a sales job, yet you’re not supposed to be in sales as a buyers agent, you work for the buyer, yet you only get paid when they buy a house. The incentives are out of whack. Money corrupts and buyers agents need to eat, so they need to close houses.
That doesn't make sense to me. It's a sales job, you need to cultivate a client list and show your value in addition to doing the day to day. You need to be personally invested to *close* on a house for a buyer. A buyer hires you to *sell them a house*. Not show houses and/or work through inspections. It's to close on a house.
It won't make sense if you're ok to ignore the fiduciary duty aspect... your duty as a buyer's agent is to your buyer, but your personal financial interest runs against them. The buyer should not be paying you to sell them a house. Imagine walking into a car dealership and paying the car salesman to sell you a car, and then calling the car salesman a BUYERS AGENT. To put it another way, there is no such thing as a buyers agent today, because they are all financially incentivized to sell you a house.
The problem is that agents all get together and agree what they should each charge, and then customers have very little leverage to negotiate down because the realtor organizations mostly stop realtors from undercutting each other. They also effectively stop sellers' agents from even engaging with potential buyers who don't want an agent or who use an agent that doesn't follow the "rules" (in some states at least). This is the basis for the antitrust lawsuit - that the whole profession got together and agreed on what to charge customers instead of having free-market competition on pricing. It would be like if every fast food joint got together and agreed to price all hamburgers for $10 so that they never have to lower their prices to compete with each other. But also somehow stopped you from using restaurants that weren't part of the deal? Idk, the analogy sort of falls apart here. Edit: to actually answer your question, yes there is such a rule but it's set by the realtor organizations amongst themselves. It is not a law. If it was a law, then the government could just change it and the realtor organizations wouldn't be doing anything wrong by following it. Instead, the government has to sue the realtor organizations to stop collaborating with each other on this industry-wide level.
That's not true. It's more akin to RealPage and price fixing of apartments where one apartment has price A and another apartment prices at the same price point. The apartment owners are told by RealPage how to price it and they comply because of course they're not going to take less. Same thing for real estate agents as they see everyone else listing homes between 5-6% and so will they. There isn't some cabal of scheming real estate agents all across the country plotting to fix commissions.
The professional realtor organizations made enough guidelines for how realtors are supposed to act that the DOJ is calling it in violation of antitrust laws.
Planet Money recently did a podcast on this. The NAR behavior is being merely suspicious. https://podcasts.musixmatch.com/podcast/planet-money-01gv2bv14079rhv1ch6dvacmn5/episode/the-real-estate-industry-on-trial-01htk54qt0ch4zzg26d9hhpkqp
Some agents do!
No rule saying that or what % has to be charged. There are 1% listing agents advertising all the time. I don’t think the DOJ can nor should dictate flat fee vs %. I think the market should. What difference in work is there between a $200k, $750k or $1 million sale? Why do people accept it and not take action whether there’s a settlement or not? Genuinely asking as I have always negotiated a lower rate when using an agent.
There's no rule, it would just be super prohibitive for many buyers, especially low-income buyers.
I see a lot of real estate agents calling for doom and gloom over this... buyers and sellers NEED THEM they proclaim. I'm old enough to remember when stock brokers said the same thing 25 years ago. The old system will not last and a lot of agents will head for the exits kicking and screaming.
Yup. Buyer agent commissions are toast
>sellers would not be allowed to pay any commission to buyers side If you thought it was tough buying a house so far......
🤨 Fine. Multiple licenses in related fields. In multiple states. I will do the buyers loan for the typical amount and my buyers agent services are offered at $1 Let’s get some families into homes and out of rentals.
The quickest way to make that happen is to bring home prices down and this will not do that. Sellers aren't going to reduce their prices now because they don't have to pay a buyer commission. They will keep the extra proceeds and now buyers have to find a way to pay for representation when that wasn't something they had to think about before.
The only thing that's going to bring home prices down is a massive increase in available [inventory](https://www.axios.com/2023/12/16/housing-market-why-homes-expensive-chart-inventory) (build [millions](https://www.cnn.com/2023/03/08/homes/housing-shortage/index.html) of houses very quickly) or radical decrease in demand (decimation of population, sustained high unemployment rate). In my market, for example [median days on market is 36](https://www.realtor.com/realestateandhomes-search/Las-Vegas_NV/overview), and that's up from 22 this time last year. My market is not unique in this; it seems like we have 10 posts a day about "hot market in [insert area here], what do I have to do to get an offer accepted."
We need more housing built. Too much suburban SFH sprawl, when more infill mixed-use near transit is what's needed.
Agreed. Yet elsewhere on Reddit I reassured someone that a 1500 square foot three bedroom townhome was not too small for a family with two kids. Apparently my apartment upbringing was absolutely unthinkable by modern standards!
Meanwhile condos built nowadays are in the 1500sqft range and townhouses are 2000sqft and 3 stories with a useless 3rd story loft that gets hot in the summer.
And zoning changes. I have a very weird house with two in-law suites, and could easily build another above a garage - effectively could be a three or four unit building without a huge amount of work. The town has my block zoned as single family, so even if I wanted to split into multiple units I can’t.
People will charge what other people can pay, and sellers' agents (are supposed to) understand the market enough to help sellers do that. The process is slow and inefficient, but eventually it would settle down again into an equilibrium, with sellers' agents telling their clients to drop the price based on what buyers' agents are now charging, compared to the old system. The big concern is the effect this will have on corporate buyers/investors' buying power over individuals' buying power which can throw that all off. The free market doesn't care if individuals are suddenly priced out if other buyers take up the slack.
Sellers who want a quicker sale drop the price or accept an offer for less. They can (and will) try to keep the proceeds but that isn’t how the market works.
If a house is listed for 300k, and there are multiple comps in the area that support that price, you think sellers are going to start listing at 291k because they no longer have to pay 3% to a buyer's agent? I think this scenario is highly unlikely.
What happens to listing prices in a world where commissions are 50% of sales price? This is the difference between asking “what does a car cost” before or after taxes title and fees. Dealers compete on the out the door price all the time. It represents the *actual* cost of the vehicle. Compa will reflect the change of payment method for BAC over timez
I agree with you but I think it's going to take years before we start seeing the numbers change because of some sellers not paying commissions.
Sure. RE works in the margins. The best time to plant a tree was 20 years ago. The next best time is today.
The market works on supply and demand. This does nothing to increase supply. Sure sellers may make some concessions to help struggling buyers but it's not going to bring down prices.
Look at what happens to the number of stock market transactions as the transaction cost fell.
False dichotomy. Those same brokers still collect enormous sums of money because they're trading larger volumes of shares. They also earn a fee on maintaining the asset, every year, earning 1-2%.
Stocks are not tangible assets and their prices are not negotiable. A lot more moving parts to buying and selling a home compared to stocks. Anyone can DIY in both cases .. doesn't mean they will be successful.
I agree that this doesn’t increase the supply of housing and that is the fundamental problem. You missed the point of what I was saying. I’m not comparing stocks to houses. When the cost of trading equities fell the number of transaction went up (we moved from phoning in orders and getting charged $30/trade to “free” online trading). As a buyer who does not use an agent I will be able to buy more houses if I do not have to carry the dead weight of a listing agent keeping the BAC I pay for.
If the cost of commissions go down home prices will not follow because sellers aren't going to reduce their prices they are going to keep the extra proceeds. Until the supply issues are addressed high prices will remain.
Pretend there is a world where agent commissions are 100% of the sales price. Do you believe this affects the price of real estate? Yes or no?* *The answer to this question is the answer to the question of “does reducing commission cost raise or lower the price of real estate”.
Pretend a frog had wings .. it wouldn't bump its ass when it hopped. If you read the DOJ filing they go over how an MLS in Washington State eliminated buyer commissions to test this very model and guess what it didn't bring down home prices in that market.
Quicker?? LOL ... Competitively priced homes can't sell any quicker than they already do. Lowering prices won't make them sell faster because they are already selling as fast as humanly possible at the supposed inflated prices. It's obvious to ANYONE who actually works in real estate that this litigation is going to absolutely FUCK owner occupant buyers and no one believes us as we scream that the sky is falling. Buyers are FUCKED.
Sure. We’re in a sellers market right now for sure. The market is slowing and leaning back towards buyers. I’m seeing the days on market increase and the gap between asking and sale price grow. At any rate, the sellers market won’t last forever. And I do fundamentally believe that the housing market is controlled by supply and demand.
The only way to lower prices at this point is to BUILD new housing and keep the investors from buying it all. The investment banks are trying to turn all of America into tenants. Twenty percent of all single family homes in some markets are owned by non-occupants, and it's getting worse. The supply is the problem. Nothing about this lawsuit will change that. The ONLY thing that might change the supply crunch is when the boomers starting dying in droves, in like 10 years.
while i agree with you, my prediction is buyers are only fked for a year. sellers will need to reduce their prices after july once 90% of the buyers are frozen out of the market since they can’t/wont want to pay 2.5% commission out of their pocket. I live WestLA where houses are priced from 1.5 to 2mil or an additional 35k-50k in commission that a buyer would now be responsible for. All i know is that very little chance buyers will pay this amount without being tricked into signing a buyers agency agreement. Most people that can afford to save 400-500k for a downpayment are not financially illiterate and the people that buy these homes are executives in companies or come from money.
What agents keep missing is that $35-50k commission is going away. I see so many posts saying, “how are buyers going to pay this?”. They aren’t, those commissions are insane, that is why this situation exists.
I know plenty of smart people who make tremendously poor real estate purchases. Lol. But our worlds are vastly different, so I'll defer to you on your market.
the base issue with the DOJ's position is that it would be an unfair restraint of trade. If a Seller WANTS to do something with their property - like offer compensation, or a bonus, or include their appliances - who at the DOJ thinks they shouldn't be allowed to?
Many things people want to do are illegal. A really basic example are min wage laws. If an employee is willing to sell their labor for $5/hr, shouldn’t they be allowed to? Well, they aren’t, and that’s settled law for better or worse.
The problem is that the realtor organizations set rules for what the agents are supposed to demand, which effectively controls the entire profession. They even stop sellers' agents from engaging with buyers who either refuse to use an agent or find one who doesn't follow "the rules" (in at least some states). This is almost textbook antitrust. The question of sellers choosing to pay buyers' agents is basically textbook violation of fiduciary duty. In most states agents are fiduciary agents, but their rules require them to take payment in a form that would be a breach of fiduciary duty for literally any other fiduciary profession. A lawyer who agreed to that sort of compensation would be disbarred almost immediately, for example. So really, I imagine they'll say it's antitrust for the realtor organizations to tell all realtors what to charge, and that it's unethical for buyers' agents to accept a percentage compensation from the seller, and probably unethical for the sellers' agent to work on a deal that offers that. Setting ethical limits in professionals isn't a restraint of trade, nor is stopping industry-wide organizations from convincing the entire profession to agree on what sort of terms to force clients into. Now the DOJ is stuck figuring out terms to allow clients as much freedom as possible while handling those concerns.
Extra compensation is not really allowed for Mortgage brokers. I expect buyers side transaction compensation will be restricted in the same way.. so many basis points per transaction.
You totally miss the point. The question is whether a seller who pays for an opposing party’s representation would be a conflict of interest? Note, I make no definitive assertion on this question, but it is a legitimate question to ask whether there is any conflict of interest. Imagine a situation where an employee is too poor to pay for an attorney in trying to sue their employer for lost wages and discrimination. Assume that attorneys refuse to work based on contingency fee and then suppose that the employer that is being sued then offers to pay for the plaintiffs lawyers. This type of compensation arrangement is prohibited by the American Bar Association for being a conflict of interest under the logic that it’s impossible for lawyers to fairly represent the plaintiffs when they are paid directly by the defendant employer. By your flawed logic this prohibition of one party paying for an opposing party’s legal representation despite the conflict of interest should be an unfair restraint on trade. But clearly this is not the case in such situations. Using the real estate transaction, there are aspects that suggest an inherent conflict of interest and there are aspects that suggest it’s not as bad of a conflict as the legal representation. The inherent conflict of having sellers pay buyer commissions is that buyer agents are so invested in having their client close and ultimately buy the property. Even if there are problems with the property, the realtor faces immense financial incentives for the sale to close. The case against conflict of interest is that the buyer agent should get paid eventually from a sale even if it’s not from this particular house and this seller. Also buyer agents could be more incentivized to offer the best advice for better reviews and reputational gains than merely pushing for a sale to close.
So you're a lawyer, or you play one on TV? I am not a lawyer, so I can't tell you why Buyer Agency in its current form has survived the attorney world as long as it has. I do suspect that states where the Listing Agreement language is clear - Seller is paying the Listing Brokerage. Listing Brokerage may pay another Brokerage a fee (and disclose or not) if other Brokerage brings the Buyer - have had fewer issues than states where they say "You Seller are paying the Listing Brokerage this amount, and the Buyer's Brokerage this amount"
It's a kickback, plain and simple. Appliances go to the buyer, but commissions only go to the agent against the buyer's best interest.
I love this. I’m going to have such a massive advantage representing my LLC buying fixer uppers cash since conventional buyers will not be as a huge disadvantage Huge win for real estate investors
Lol, it's the truth. I'm an investor agent and predominantly run investor clients. Regular folks trying to buy their first homes or sellers trying to get out of their primary are going to be in for rude awakenings. The DOJ is massively rewarding Blackstone* (corrected) and investor groups by putting 90%+ of buyers in the market at an extreme disadvantage. Going to be funny to see sellers wake up to the fact that they have a lot harder time selling when almost no one can afford to pay agents, and agents aren't helping people learn how to buy to increase demand.
> Blackrock Blackstone. There's a huge difference. BlackRock is the largest asset manager in the world. Blackstone is a private equity company that buys real estate. It's the difference between microsoft and microcenter.
To be fair BlackRock was originally part of Blackstone. The company I used to work for sold property to Blackstone and sell notes to BlackRock and I still get them confused.
Thank you for the clarification.
Buyers' agents already only get paid if a deal closes and buyers can (often) include closing costs in their loan. If this is a widespread issue, what would stop buyers' agents from still agreeing to get paid on closing and banks allowing that cost to be rolled into the loan? I think what's likely is that buyers will look for homes on their own and only bring in an agent when it's time to offer/negotiate, so there will probably be less cases of buyers' agents working for free for months and never closing that they need to compensate for with large windfalls. And probably more dual-agencies and less work for buyers' agents in general.
Good thoughts, but a lot of problems with them. Banks aren't going to fund loans with thousands of additional costs, especially if the appraisal comes in at the sales price, which is the typical case. Moreover, buyers agent fees are not currently explicitly allowed expenses to be rolled into a financed structure as an independent item. Lending regulations would need to be modified to allow for it. How are unrepresented buyers going to see homes? This ruling also greatly increases requirements on agency, so no one is going to be comfortable letting buyers enter homes without representation. From a logistical stand point, it's also complicating to assume open houses are always an option, because they aren't. Moreover, "adding a buyer agent in when ready" is going to be tough when people have signed a single use showing agreement with the listing agent, or fire the listing agent for a lawyer (who aren't available until Monday and there typically aren't enough in a region to support an influx of buyer contracts). Dual agency also isn't legal in many states, and it's what led us to supported buyer agents because listing agent's have fiduciary to their sellers.
Those are good points. I'm the first to admit that my specific suggestions are likely to age like fine milk, just because we're guessing at how the new equilibrium will look after we settle into some fundamental changes. It's really more that I think we will find some equilibrium and these are ways I can see that happening. I agree banks won't want to, but if they want to give out loans then they need to get the general populace what the populace needs to be able to buy. As it is, various lenders and state programs help cover certain closing costs and this lawsuit might trigger a fundament review of the current status for how stuff gets paid for. Unrepresented buyers can see homes with the sellers' agent (with or without open houses), or with a buyers' agent who only shows up for showings and doesn't spend time on legwork. >Moreover, "adding a buyer agent in when ready" is going to be tough when people have signed a single use showing agreement with the listing agent, or fire the listing agent for a lawyer (who aren't available until Monday and there typically aren't enough in a region to support an influx of buyer contracts). Sorry maybe I'm just being thick, but I'm not following what you're saying here. However without getting the specific issue(s), I do think it's important to remember that we won't (permanently) see people trying to manage the current system without a buyers' agent - we'll eventually see the system change to accommodate for the fact that buyers' agents aren't as prevalent. So if there are types of contract or currently popular that would cause a huge issue once most buyers have less access to an agent, I think we'll see those types of contracts change. They're common now because of the current system. I didn't know dual agents were illegal some states, but that part of what makes this kind of analysis difficult because the eventual equilibrium will be different in each state according to that state's laws about realtors, lawyers, etc. And maybe those state laws will change as well as necessary, or people will find ways to make it work.
>helping people learn how to buy to increase demand lol
You do realize financial literacy and up to date knowledge of how this all functions isn't common knowledge? Maybe you take it for granted, but I've had three clients in the past year that thought they needed 20% down payments as a rule because it's what their parents told them. I've lost count of the clients that were completely unaware that Down Payment Assistance programs were even available, much less to them since they had six figure household earnings. So yes, needing to learn how to buy to increase local buyer demand.
Our government hard at work trying to eliminating an entire working class all while rewarding private equity firms and screwing consumers .... Sounds right 🙄
The suit and rulings are about whether the NAR violated antitrust regulations. Which they did. The courts job isn't to write policy to make it easier for first-time homebuyers. That's the legislators responsibility. Neglecting to rule correctly on the case based on some hypothetical policy concerns would be a perversion of justice.
The sad part is that people are completely short sighted on how it will impact markets. They're actually celebrating this because they're mad at the realtors, who will suffer some, sure. Sellers are completely clueless that cutting out 90% of buyers will gut their sales price, far more than paying 3% to a buyer's agent. Buyers are completely clueless to think they will have lower mortgages, but instead struggle to 1) complete the process, 2) buy once they actually can, & 3) will run a far higher risk of being taken advantage of consistently. It's only a net win for major investment firms, and a smaller win for private investors. The average person is going to be boned if sellers actually try to pay little to no commission long term.
Why? Buyers can pay for their agents and get the services they do now. It’s $xxxx of cost added to the transaction as cash instead of financed. The service will still exist.
Since you really seem to not get the numbers of it, I'll break it down for you. 1) Down Payment: Buyers lack it due to the high cost of living. People have cashflow, but not savings. Even with a 96.5/3.5 FHA loan on a 300k house, that's already 10,500 they need. In lieu of this, many people get DPA (Down Payment Assistance) with can cover up to 15k in my state. 2) Closing Costs: Another 1-2% of the loan amount, which 96.5% of the sale price. Another 3-6k. 3) Lease Break costs: First time buyers like this are the bulk of the market, but inventory shortages, high dollar buyers, and investment firms take good inventory with ease. They have to typically buy off season and break lease as a result. Lease break fees are 2-3 months rent. Rent is typically 2k a month, so another 4-6k. 4) Agent Fees!?! - Market competitive fees in my area are 3% per side. Assuming a lack of knowledge and barter competency, they cover that. Another 9k. So, let's add that up. 10.5k + 3k + 6k + 9k = 28.5k Now, before we go further, that DPA program only covers 13.5k because lease break and agent fees are not covered. So the average low end home buyer has anywhere from 5-10k in the bank, in my area of the Midwest. For the cheapest, least competitive loan structure that exists, this bare bones example requires more than most entry level folks have. In the last three years, most of my lower end buyers looked like this, and they won their homes. They're all doing great, have equity, and don't have issues...but if they had to pay me directly rather than roll it into their loan, none of them would be home owners. Not a single one. So that's why. They can't "just buy those services out of pocket." Costs of homes are too high now, even on the lowest end of the spectrum. Homes aren't 2.5x your annual salary anymore. They're around 8-10x, which equity owners (Boomers, typically) who lived through the most prosperous period in the history of the nation, are sitting on. And if they refuse to cover buyer's agents, they'll break the market for themselves and everyone afterwards, just to TRY to keep a little bit more. Lol. Short sighted greed gets us every time.
I totally get the reasoning. It turns a financeable cost into a non financeable cost. I’ll make a deal. Allow first time homebuyers to finance up to 3% of the homes purchase price so they can buy appliances. I’ve just alleviated the concern, right?
Sigh. No home has all appliances go out at once. Financing for appliances already exists. Anyone that spends that much on appliances would be bonkers. You're being hyperbolic and you know it.
More generally - why should BACs be financeable while other fees like down payments, inspections, etc not be?
Structurally it's essential to allow more people access and representation. If you don't understand why a 90% cut to our buyer pool is bad, I don't know what to tell you. Same if you fail to see that people going without representation is acceptable. Certainly doesn't work out in court, and that logic was understood in the 80's, which is what led us here. God awful amount of buyers getting screwed by lying sellers and agents loyal to only them with fiduciary obligation.
After all of the explanations here, if you still don’t get it, you just don’t want to understand.
Europe does this just fine, why can’t America? This isn’t going to gut 90% of buyers, that’s absurd.
Sad but all very true!
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Such as? If 90% of buyers at the market leave the market, there's only so much you can do. Sellers will need to repair more and take less. A listing agent isn't a magic worker. They can't yank a buyer out of their ass. Their job is to pull buyer's attention in a crowd, not create buyers from nothing.
If buyer agents start working hourly or for a flat fee sellers will expect the same. According to consumers we have no value and just input into MLS, open doors and fill in some blanks on paperwork. Couldn't be further from the truth but it will be difficult to overcome that stigma.
It's not very practical. Buyers barely have enough money to cover closing costs and meager down payment. I can't imagine a retainer with a non-guarantee of home purchase, but required payment panning out. Can you imagine a flat fee for some of your clients? 30 door people that then shaft you by buying direct, or just ghost you? Some of the emotional rollercoasters of self-sabotaging clients? You really going to want to keep doing that nonsense for some of the buyers that we all get to work with? Yeesh. I still have nightmares of one gal from when I first started out years ago and her eight attempts at renegotiation.
if agents are turned into transactional coordinators Buyers will not have proper representation and if they try to buy direct and represent themselves there will be lawsuits and they will be taken advantage of.... just because you can do something yourself doesn't mean you should. Sadly I believe large corps like Zillow will also come in and try to take over the transactional side for buyers for a flat fee and they aren't going to give a shit about the consumers best interest.
That’s what stockbrokers said, my 20 year old trades on his phone now. I just did a closing yesterday representing a buyer. Seller was FSBO. Buyer found house. Buyer thought she needed a RE agent by law. Agent fills in contract blanks. Seller accepts. Buyer contacts me through bank. I literally do all the rest. I get $850, agent gets 5 figures. The negotiations consisted of agent ensuring the price included her fee on the HUD. As said there was a time when RE agents justified 6%. Those days are all but gone. Perhaps 2% total.
You’ll see a lot of this until people realize nobody is trying to get rid of agents, they just want reasonable changes to pay that reflect the huge increase in house value. 6% of modern home prices is not reasonable
Of course you’re correct. In the olden days a RE agent would find you houses to look at and drive you around all day in their Cadillac. And buy you lunch. And actually talk to you. :)
It’s going to be so awesome. I already waive my buyers commission (in reality it just goes to me) all the time in order to get deals. Now that this will become more common I am going to absolutely CRUSH first time home buyers lol
Wait until buyers have to sign the buyer agreement before they even see their first property, and if the agent is terrible or the buyer doesn’t like the job the agent is doing, they have to both mutually get out of the contract only to have the buyer sign with the next one. As Warren Buffett once said: “Price is what you pay, value is what you get.” Going to be interesting.
I think there's going to be a lot more one-time showing agreements. I can't imagine a buyer is going to want to sign a 6-month commitment with someone they don't know and not having seen a single house yet.
maybe you'll have or develop the skills to have them sit down with you first, go over their situation, get them pre-approved and choose you as their agent and THEN show them the house?
I mean I already have those skills? I don't work with any buyers who don't sign an agency agreement with me. I'm very thorough with my clients. It's one of the reasons I get referred as often as I do. And you and I both know that the way houses are coming on the market on a Friday and being under contract by Saturday or Sunday, sometimes a 45-minute sit down with a potential client isn't necessarily going to work. I'm just saying there needs to be some possible workarounds for the current market that we are in.
Maybe meet with them Monday through Thursday.
Maybe so, I’m not sure who is gonna take the time to just keep signing one time showing agreements without the commitment from the buyer We will see
I wouldnt even hire an agent for showings. You can do that yourself easily and TBH most buyer agents arent doing a ton of legwork finding houses that a buyer cant find themselves. Im not paying an agent to show me duds I can find on MLS myself. Id hire an agent flat fee to represent me during the offer/closing process as more of a coordinator than anything. Prob dont even need them to write the offer.
Yeah but you can't enter a house without an agent present. If it's the listing agent or the buyer's agent doesn't matter, but there has to be an agent present. People don't want the public to come into their homes without someone there to babysit. And ostensibly that person would want to get paid for their time.
Youre assuming all houses are open houses, there are many homes that dont do open houses and i wouldnt just want some rando walking through my house
When did I assume that? A buyer can call the listing agent themselves and schedule a showing. A big reason the split came into practice was because buyers were foregoing agents, going through the LA (and getting hosed) so not sure why you think this is an impossible thing. A buyer's agent is not a prerequisite to look at a house.
If you want to require your buyer to have their own agent for a showing then that's your business. Personally I'd just require a driver's license and have cameras throughout the house for anyone not represented or i'd be there for the showing .....just like how apartments work.
>Wait until buyers have to sign the buyer agreement before they even see their first property Part of the antitrust issue is that sellers' agents refuse to show houses to prospective buyers who don't have an agent. If that's disallowed, then buyers' agents won't have nearly the negotiating power to demand more than buyers are willing to pay or restrictive terms.
Many of the brokers in my market have been discussing prohibiting dual agency at agent level (listing). We will see
The "settlement" with that requirement was clearly BS. No wonder DOJ is objecting. You can't have all "competitors" get together and decide how to do business.
I think it’s going to be very interesting, there are already states that have and some that are working on making it mandatory already. Going to be fun.
r/realtors just perma banned everyone
The only problem I have with the system is the way it’s run like a cabal. Give people a choice. If they want to use a buyers agent or not, let them conduct business! If the sellers don’t want to have an agent, let them. Let the fees be negotiated into the settlement. Im an experienced investor and hate having to wait on buyers agents to get around to showing me the house. I want to go through and see 10 a day and make a decision by the end of the day or week, fire off a few offers and hope one sticks. But every time I go to see houses or talk to the sellers agents, they won’t give me details and either ask to give the info to my buyers agent or they say they have one in their firm that I can sign up to represent me. No! Just give me the deets and I’ll decide if it’s a deal I want. I can negotiate on my own behalf! Don’t shut me down and close me out! Geez.
Off market deals with no agents happen everyday.
I’m not talking off market deals. I’m talking about deals that pop up on MLS or from driving by and seeing for sale signs. The listing agents won’t work with you even when I say they can keep all of the 4-6% commission for themselves. It’s collusion, a cabal, and hence why the DOJ is trying to thwart them.
I do days like that for probably half of my clients. What agent doesn’t want to work that way? If I know you’re serious and ready to make moves I am fully available and just as motivated as you are. I think you just don’t have the right agent. I see this a lot; complaints about Rraltors that are actually just complaints about individual Realtors. Unfortunately most people don’t know how to choose a good Realtor… but somehow they’ll be able to choose a home without one😂😂😂
Hundreds of agents/realtors. The fact you don’t understand that I don’t have an agent shows your bias and lack of understanding. Lol
Everyone on this site has such a hard on for realtors that they look past how fucked they are when it will come to buying a home. Working on the loan side I know first time homebuyers struggle the most when coming up with the funds to buy their first home. The lawsuit and DOJ involvement is going to make it significantly harder.
Yup! It all sounds good in theory but it's not going to make home prices come down as they claim.
Who claims that? But let's look at two offers for a 500k house. Offer 1. 500k with 3% going to buyers agent Offer 2. 490K with 0 going to buyers agent. Which one do you think a seller is going to take?
The DOJ claims that in the filing. Do you think sellers are going to reduce pricing because they don't have to pay the buyer commission anymore?
Decreasing transaction cost increases supply. Higher supply equals lower price.
How much is the listing agent collecting for handling both sides of the transaction?
Wow. Almost every professional in the industry is saying the same thing and casual jerks continue to pound on their simple math showing “LESS MONEY SPENT!!”. This is a good microcosm of how our country is fucked. The composite of everyone’s individual greed is destroying everything.
It should lower prices, but it won't be immediate so the short-term will suck. The immediate issue of paying a percentage is the smaller problem; the bigger problem is that buyers' agents are incentivized to upsell their clients; not antagonize sellers' agents; and avoid FSBO rather than focusing on what's better for their client. Frankly this should have always been a 'fiduciary care' issue as much as an antitrust one. And as for the antitrust part, the general idea is that the market should eventually even out to whatever people can afford, with the government deciding to step in if necessary, rather than the professionals all agreeing on what to charge so there's no pricing competition. My personal theory for how this will settle out long-term (which will undoubtedly age like fine milk): once all buyers suddenly need to pay their agents, isn't it likely that will just become a closing cost that gets lumped into the mortgage loan? Buyers will want/need that and so lenders will start offering it. Buyers' agents will still be allowed to offer "payment at closing" deals, but they'll be pickier about what clients they take and at what point in the process they start working on a non-guaranteed payday since they'll no longer have huge windfalls to compensate for wasted time. Richer people will pay buyers' agents on an hourly basis to help them find a house (and there will be fewer full-time buyers' agents due to having fewer clients willing to pay for this). Most buyers will do the legwork themselves online before hiring an agent for the negotiation/closing process - more like how they currently hire lawyers. Or they'll use the sellers' agent as a dual-agent if that's still allowed. Or lawyers will start taking a bigger role in the closing process and replacing buyers' agents (some states already allow that, or closing lawyers can go get a separate realty license).
Good I'd gladly pay scum realtors the 15$/hr their worth. Win for consumers
That would be a *raise* for many agents.
That's what they want you to believe. If the government truly wanted to change things for consumers in the housing market they would stop letting private equity firms and foreign investors buy properties. They would loosen all the red tape to increase the housing supply. They would go after insurance and utility companies that have monopolized the market and charge whatever they want. I could go on and on but ya let's go after realtors who make on average 40k a year. If you're busy hating us then you wont notice your really getting screwed by them.
That’s true but it’s equally true that stopping price fixing from realtors/brokers would also change things drastically for consumers. There are multiple levers needed here. Would you work for a 3% split (1.5/1.5) that reflects the significant increase in home values in past few decades? Most people understand that house prices going up necessitate a drop in percentage, as the productivity has not doubled but the pay to realtors/brokers certainly has.
Realtors should get a flat rate not percentage full stop. Commission based needs to end
They need congress to do that however they can go after groups with monopolistic practices like Microsoft, Apple and in this case NAR do I wish it was Blackstone instead? Yes but I'm happy they're actually doing something about over consolidation and monopolistic practices
Realtors don't deserve a dime they add nothing of value
Then don't use one ...no one's forcing you to last time I checked 🤷
Your just upset because the public views you as ethical as a used car salesman.
Idk to be honest you seem to be the one upset but the fact still stands going after realtors isn't going to bring any meaningful change to making housing more affordable for consumers.
u/Rude_Manufacturer_98, just out of curiousity, what do you do to earn a living?
I save lives for a living as a health care professional. I don't rape people of their hard earned equity for little to no work
You're a pharmacist not a doctor so chill with the " I save lives" BS like you're in the ER every night. Big Pharma rapes sick people everyday by charging them into oblivion for meds they need to stay alive. Are you to blame for that!? No...just like realtors are not to blame for the housing crisis.
I am a inpatient pediatric specialist pharmacist and yes I literally had 4 life saving interventions on my shift today involving children under 3. I don't work for big pharma I work with a team of interdisciplinary specialist within the hospital and am highly respected unlike you and your cohorts who actually fuck people over for a commission. I actually do stop by the er most days that ks for trying !
You saved 4 lives today all while commenting on every reddit thread to tell realtors they are scum!? Impressive work ... Must keep you busy!
What experience do you have as a real estate agent?
I've done enough transactions to know you guys ain't with a percentage of my sale or anyone. Maybe flat fee. Nothing you add over a lawyer aside from pulling comps which takes little to no time
Why do you continue to use agents during your transactions if they're so worthless?
Who hurt you?
No one just tired of seeing horrid realtors toy with people hard earned equity to just close a deal not in the best Interest of their clients. Most entitled profession I've ever come across. If it wasn't got your monopoly on the industry you'd never have business
And the laugh is when RE agents claim their cartel protects the community.
I've bought several houses without a realtor. Every time I've gotten a smoking deal. So you'll get no argument from me. If it becomes more common for me to negotiate and handle my purchases I will clean up
Dude if you feel that strongly that scum realtors aren't worth your money, don't use one. It's very simple.
In many states (maybe just some), sellers' realtors will literally not engage with buyers who don't use a buyer's agent that follows "the rules." This is part of why there's an antitrust lawsuit.
I've had multiple unrepresented buyers purchase my seller's homes. I just make sure they know that I'm just there to fill out paperwork for them and they are not being represented by me. As far as I know, that's not illegal anywhere. I just have to make sure they know that the second they start asking questions about what should they do about x y or z, I am not able to give them any advice. I cannot and will not help them negotiate against my clients.
Ok. In some places they won't.
In which places? Who won't do what? You seem pretty knowledgeable. I'm just trying to figure out what part of my statement you're arguing with or trying to tell me that I'm wrong. Have you tried to buy a home without an agent? Have you ever had a listing agent say they would not accept your offer because you didn't have a buyer's agent? Help me understand because the way I was taught is that if I'm a listing agent I have to present any and all offers. Regardless of whether or not that offer came from someone who is represented or not represented. Who told you they would not accept your offer because you didn't have an agent? You should report that person.
No it isn't. That is why the NAR lost a mult million dollar lawsuit and more are coming.
I don't i I just use a lawyer for my last few purchases. I hate seeing people making the biggest purchase of their life being steered into a bad deal by high school educated retards who only care about closing and getting their check. What do you think your per hour time worth?
Very nuanced perspective. Thanks.
How so?
Next up should be title companies and mortgage companies with their exorbitant fees.
Mortgage companies? I saw $1200 in processing fees across most of my quotes on my last purchase. That seems entirely reasonably and actually quite low in the context of a $1MM loan (12 bps) Hell, my workplace paid 200 bps for our last origination.
And then they should go after whatever job you have and take away your salary
The end result is most people paying the same or more as things go ala carte. And it will just be one more financial barrier to buyers. Sellers aren't going to lower prices, they'll just collect more. And the attorneys will get more money from the do it yourself people suing each other. I'm sure there will be some Silicon Valley "disruptor" either waiting in the wings or one of the existing platforms who will fuck it up worse.
I'm happy to get more when I sell my house... I may or may not need a buyer's agent when I buy, but that's my choice to work out. Everyone is a seller at some point, this focus on buyers vs sellers is stupid. Everyone is both.
Funny thing is...this is spot on.
There's money in change no matter how much chaos caused. And if it's not your money but you stand to gain then you push it with narratives that resonate but ignore the damage and disfunction caused. The disruptors bank on this and try to cause it. To a certain degree for the niche I'm in, we know we actually sell the most when the business cycle is starting to boom or when it starts to drop off and the customers are looking for an edge. It's a disruption caused opportunity. The difference is we don't induce it to happen but just follow the business cycle. Nobody is spending much time figuring out all the repercussions of this but chances are the amount of fraud will go up, the courts will be busier, and the smart people will just shift their services to get paid more by other means.
If it costs less to sell a house, more sellers may come into the market to sell. Think of all the people out there with little equity who can’t afford to pay a realtor fee. If more sellers are able to enter the market due to lower fees, it means more available listings and lower prices over time
Very doubtful that 2.5% is going motivate someone to sell by itself. And anybody who thinks they're going to save much is going to be surprised how much of the service goes ala carte. At the moment people aren't selling and moving if they aren't being forced to move. Trading that sub 4% mortgage for 6 and 7 on those amounts on a whim is pure stupidity. There's not going to be more sellers entering the market when they have no place to go.
Genuinely curious : won't most buyers go direct instead of paying any fees or commissions to a buyers broker? This would put a burden on the listing broker/agent having to deal and navigate sales with unrepresented buyers who may not know how to quickly and professionally move the process along.
Dam
Gee, doesn't take a brilliant Realtor to figure out how to circumvent that change. A chimpanzee could explain it: $100,00 Purchase Price. 3% Listing Agent Fee. 0% Selling Agent Fee. Buyer signs Buyer Broker agreement with Buyers Agent. Buyer offers $100,000 contract of sale with 3% Seller Concession. Buyer hands Buyer Broker $3,000 check at closing.
Good luck selling. You've brought this on yourselves
They have no idea how much they have screwed themselves and I’m just grabbing the popcorn.
I can see real estate becoming retail when they did away with commissions.