Almost No One Pays a 6% Real-Estate Commission - Except Americans (wsj.com) 144
The way we buy and sell homes in the U.S. isn't normal -- at least not compared with the rest of the world. From a report: The commission on a home sale here is typically around 5% to 6%, usually split between the seller's and buyer's agents. In most countries, the commissions are substantially smaller. The U.S. is home to as many as three million agents. By most estimates, no other country is even a close second.
Though it is unclear how much a court decision on commissions last month will upend American real estate, if at all, the ruling opens up the possibility of forever changing how agents are paid for their work. And looking at home sales around the world offers a window into what could be in store. One reason commissions here remain high is the use of buyer agents, said Ryan Tomasello, managing director at investment bank Keefe, Bruyette & Woods. Home sellers pay the commission -- typically between 5% and 6% of a home's selling price -- which is usually split between the seller's and buyer's agent. Buyer agents aren't nearly as common in other parts of the world, said Tomasello.
[...] In the pre-internet days, a buyer agent's main job was to screen and filter listings for hopeful home buyers. Today, much of that early house hunting can be done online. So the role of the buyer agent has shifted more to providing advice and support, as well as recommendations for home inspectors, lenders and lawyers. A good buyer agent will know how to make a strong offer and may push to lower the home price. In most countries, buyer agents are much less of a factor.
Though it is unclear how much a court decision on commissions last month will upend American real estate, if at all, the ruling opens up the possibility of forever changing how agents are paid for their work. And looking at home sales around the world offers a window into what could be in store. One reason commissions here remain high is the use of buyer agents, said Ryan Tomasello, managing director at investment bank Keefe, Bruyette & Woods. Home sellers pay the commission -- typically between 5% and 6% of a home's selling price -- which is usually split between the seller's and buyer's agent. Buyer agents aren't nearly as common in other parts of the world, said Tomasello.
[...] In the pre-internet days, a buyer agent's main job was to screen and filter listings for hopeful home buyers. Today, much of that early house hunting can be done online. So the role of the buyer agent has shifted more to providing advice and support, as well as recommendations for home inspectors, lenders and lawyers. A good buyer agent will know how to make a strong offer and may push to lower the home price. In most countries, buyer agents are much less of a factor.
skip the agent and do by owner! (Score:4, Insightful)
skip the agent and do by owner!
Re:skip the agent and do by owner! (Score:5, Insightful)
That shuts you out of enough buyers and opportunities that you likely will make less than if you just paid the 6% commission.
Re:skip the agent and do by owner! (Score:5, Insightful)
Maybe 10 years ago, and maybe in some markets. But around here, even shitbox fixer-upper starter homes are going for around $1 million, and there's people lined up to buy them with cash for over asking price.
If I was selling in this market, I'd avoid the agent and hire a lawyer to make sure everything is done properly and save that $60,000+.
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even shitbox fixer-upper starter homes
Live in a nice neighborhood and people will drive through, looking for "for sale" signs.
I'd avoid the agent and hire a lawyer
Always, if that's an option. Even in addition to the agent. If the agents fill out the boilerplate contracts, have your own people look it over as well. Back in my younger days, one realtor asked to have me come in, read through and sign the closing documents. Me: "Can I get a copy of those to read through in advance?" "Why?! We've got to hurry! Get in here and sign now!"
I have attorneys in the family. I can get a coupl
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Username checks out. Can't be bothered to grasp that most markets aren't like SoCal, huh?
Here's your personalized message; you live in a bubble that is not representative of the rest of the country.
Before you race to reply, look up the recent victory against the National Association of Realtors and consider that people getting locked out of the market is so pervasive that they awarded 1.7bn+ in damages.
Hopefully now you understand why MBGMorden is completely correct. They have a stranglehold on customers.
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I'd avoid the agent and hire a lawyer to make sure everything is done properly
Lawyer sounds expensive. Where I live, we have these people called "settlement agents", whose one job is to make sure real estate sales "done properly", and they cost about us$500.
Though if you are selling a house (not a condo/strata) and have a mortgage, it is fairly easy here to DIY. Your bank will provide the venue for settlement, and make sure the payment is done right for their own sake.
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If you have legal insurance through your employer (i.e. ARAG), this is a service they cover. I think I pay about $15/mo for that insurance and that one use alone made it worth it for several years.
Not necessarily true (Score:2)
My mom literally sold their last house via "Garage Sale, House attached".
She got 50% more than what the real estate agents were saying.
Then they got some stuff like because dad installed the water heater, it had to be replaced. Dad had spent a lot of the money saved on labor in getting a better, higher quality water heater. Even the installer putting the new one in admitted that the old water heater was much better quality - and that the new one would fail faster than it would have. The buyers ended up i
Re: Not necessarily true (Score:2)
Real estate agents want to maximize their profits.
Even buyer agents want that.
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Re: skip the agent and do by owner! (Score:3)
Welcome to labor unions. In this case, the National Association of Realtors. If there isn't a 6% commission involved either for just them or split with another realtor (a trademarked term, by the way,) you'll basically get boycotted by NAR buyer's agents. Normally this kind of thing is an illegal cartel, but a long time ago the mafia succeeded in getting it government sanctioned, generally by bribing democrats [youtube.com].
And of course, if you talk about it, democrats call you rats, scabs, bootlickers, etc. Basically j
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skip the agent and do by owner!
Don't you mean Skip the agent and DO The Owner ?
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It's still a very complicated process. The stacks of paperwork alone means you really want a professional involved. But that costs money, so...
Re:skip the agent and do by owner! (Score:5, Insightful)
the realtors are also to blame for the process being overly complicated.
job security.
Another middle-man (Score:3)
Bonus media: "And the seller always pays." "Everyone does it this way." "The buyer always pays that." "I'm really busting my ass here." "If you want the loan, you're going to have to." "All first time buyers have to." "This looks nice."
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On the rental market here, they recently passed a law which explicitly states that agents can't charge the tenants fees, presumably meaning that they can't double dip, i.e. charge both the tenants & the owners. They're all carrying on as if nothing has changed & if you ask them about it, they either say that they not agent's fees, they're some other kind of fees because... reasons, or they get aggressive.
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Estate agents always have been & always will be liars. You can trust them as far as you can throw them. They also seem to have not realised that they are competing with multiple websites where owners can rent their properties directly. It's actually quicker, easier, more convenient, & a lot cheaper to contact the owners directly.
Yes, yes, maybe, and not really "but".
RE agents are certainly manufactured jobs that contribute far less than their fees account for. There are advantages to having professionals prep, photograph, document, and list a house but I doubt they equal 6% of a sale or 1/12th of a year's rent.
With that said, most landlords are more than happy to hand off an apartment rental process to a 3rd party. It costs them nothing, saves them time and effort, and why would they care if the agents effectively price-fix the i
Historical Capitalism Artifacts (Score:3)
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I was suprised in early 2000s when I visited friends in Sweden. They owned their own home despite the main income being from the dad who was still in graduate school! To me, owning a home was something you didn't do until you were out of school and had enough in savings to cover 10% of the total cost that most mortgages requires. But they said it was normal to buy a house rather than rent, and the process wasn't that much more complex and without a big upfront payment.
Also when walking through Helsinki, t
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I have quite a few Swedish coworkers and what most people don't realize is their whole mortgage system is vastly different than the US.
Until recently, in Sweden the vast majority of mortgages are perpetual, low down-payment, interest-only mortgages at far lower rates than a typical US mortgage - in the range of 1-2%. They generally never pay anything off, but instead allow houses to appreciate so when they retire/sell/inherit there's significant profit. TL;DR it's FAR cheaper to buy something than rent.
Ship B awaits (Score:4, Funny)
Dear agent, the first departure of Golgafinchan Ark Fleet is ready. Up the gangplank you go! See you later!
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To me, this episode is the counterpoint to all the elitist ideas, which either were displayed as desirable (Ayn Rand) or as dystopia (Aldous Huxley). Humanity might consist mainly of bickering, mediocre, lazy, idiotic people, but in the long run, those will prevail, while neither the elite nor the thralls will be able to survive, because the elite in their lofty ivory tower is ignor
Several decades ago ... (Score:5, Interesting)
So, good luck changing the system.
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I guess so their offices get firebombed and not their homes.
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I'm not sure while a real estate company needs a physical office in the first place.
This was pre-Internet and probably pre cell phone. So people needed a place to sit, make calls, file paperwork, etc.
Why they need an office (Score:2)
Generally speaking, while most work is indeed done in the field, trying to do office work in your car tends to suck.
So you'll see things where they'll have an office in order to do paperwork signings, where they can have a table for everybody to work at, so they can have an office that is nicer than the car for doing things like making customer contacts, reviewing listings for buyers, setting up listings for sellers, storage of records, etc...
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Up for grabs (Score:5, Interesting)
As with everything, 6% is traditional, but not required. We bought our first house without our own real estate agent, we found it on the internet by ourselves. Since there was only a listing agent, we finagled the price down 3% as we were acting as our own agent. The listing agent didn't like it (he wanted the whole 6% to himself) but there wasn't really a counter-argument, and he wanted the house sold.
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We bought our house with no agents on either side. Around that time, one seller's agent refused to show us a house, because we didn't have a buyer's agent.
However, in this area, agents often front the money required to do the necessary improvements that appear to be necessary to get a good price for a house.
Agents also don't seem to have a strong code of conduct. Before we bought our house, a similar house was sold -- and bought the agent apparently representing the sellers. This house went for way under ma
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Unless you argued for a 3% reduction in the price of the house and the seller (and their agent) agreed, I don't see how as the buyer you had any input at all in what the seller paid their own agent.
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The buyer did two ne
Variables (Score:2)
Exactly right. The other variable in our case was that it was a probate sale, so we were only dealing with the listing agent. The court was the seller, and there were a whole ton of people waiting for the proceeds of the sale to be divvyed up. In these cases, in general, the court rubber-stamps whatever the listing agent does.
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When I was house shopping I came across one or two that were ... buyers only (or whatever the technical term) aka they wouldn't pay the buyers agent fee for you.
They we're both weird situations. One I forget exactly but the other was a relative who had built a mostly-complete house and then died, leaving it to split between multiple relatives. Presumably it was feuding family members who wanted to maximize their profit and didn't have the means to finish the house and get the certificate of occupancy.
The
Who is forcing you? (Score:3, Insightful)
Nobody. You don't have to pay it. It's because you want certain services that you're paying it. It's like saying, "how come I have to pay $150 an hour for a plumber"? Well YOU want a plumber to come fix your shit, that's why dumbass. Nobody should be compelled by you to work for the rate YOU specify or think is fair. Maybe the plumber would rather watch Netflix that deal with your pipes if you only offered $149. If plumbers could charge $1000 or even $10,000 and hour they'd do it, you'd do the same if you were a plumber. Just like how you'd pay $1 an hour if you could get away with it. The US real estate market has coalesced around 6% commission.
You know what a monopoly is right? (Score:4, Insightful)
Remember kiddies, for every sufficiently complex problem there is an answer that is simple, elegant and _wrong_.
Re:You know what a monopoly is right? (Score:5, Interesting)
Go look into how vertical the real estate industry is sometimes and why. It is just a smidge more complicated than "nobody is forcing you"
Please enlighten us because frankly, I'm puzzled. There are a zillion agents trying to get listings: I don't understand why they haven't dropped their commissions yet. Searching for houses is also a ton easier with Zillow and other tools. Why haven't buyer's agents dropped prices? For that matter, the multiple listing service, MLS, used to have a virtual monopoly on listings but shouldn't any more.
I'm a firm believer in free markets and competition and yet this market hasn't succumbed to the disruptions which have upended virtually every other part of retail markets. Shoot, even car buying, the poster child for sleezy salespeople taking advantage of asymmetric information, has an entirely different behavior compared to 30 years ago. Home buying hasn't changed. Why is that?
I'm watching a home sale process happen in my family so I've been thinking about this a lot. One thing which is weird is houses are one of the largest financial transaction anyone is going to engage in and yet it's the only one where buyers directly work with sellers. There's no intermediary, although Zillow tried to fill that role. It's kind of an oddball. Going back to the car buying market, it used to be tons of people sold used cars on weekends in a local parking lot. I don't see that any more. Independent used car lots seem to have faded largely away (but maybe that's just a Bay Area thing). The vast majority of used cars seem to go through the regular dealerships now. Why aren't we seeing a rise in home sales brokers?
Re:You know what a monopoly is right? (Score:5, Interesting)
It's because the large agencies (Coldwell Banker, Keller Williams, Re/Max etc) have most of the listings, and they keep commissions artificially high in a variety of ways. Corporate takes billions in profits, they maintain expensive offices all over the place, they force employees to each be a Realtor®, which in itself is mostly bullshit certification, they roll all of that back into massive marketing campaigns, they manipulate access to MLS, etc, etc.
Companies like Redfin and Zillow are the first wave of digitizing the industry and creating actual price competition. If you trust Redfin just as much as Coldwell Banker, you'll save quite a bit of money.
If these lawsuits actually manage to dismantle some of the monopolistic practices in the US real estate industry, the floodgates may open to the point that 1-3% commissions is way more common than 6%, and of course the DIYers will still be able to do it for more or less flat legal fees.
Redfin & Zillow both play ball (Score:2)
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One thing which is weird is houses are one of the largest financial transaction anyone is going to engage in and yet it's the only one where buyers directly work with sellers.
some states (perhaps counties?) do not allow direct buyer-seller communication (e.g., no "please select me" letters from would-be buyer to seller) due to discrimination (e.g., "i dont wont sell to those people").
when i purchased a condo in southern CA years ago, i never even talked to or met the seller once.
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Even in places this isn't illegal, the agents *strongly* discourage it. Some of that reasoning is legitimate - in such a large transaction people tend to take things personally instead of objectively. However, the risk of that is small in comparison to the cost of having a middle-man to relay messages.
TL;DR it's still a price-fixing scam.
Re:You know what a monopoly is right? (Score:4, Interesting)
Easy, because realtors don't want to lose those fat checks.
That commission is part of the selling price and split between buyer and seller.
Many people have tried the "low commission" route - and you know what happens? They find realtors purposefully ignored their listings. Preferring of course, to show prospective buyers houses that pay full commission.
Realtors do that. Buyers come to them asking for a house in a range in a neighborhood or town and with certain details. The realtor then finds some listings and drives them around town to show them - usually arranging things like open houses and all that for the buyer. All you the buyer has to do is get to their office, and get driven around town looking at houses.
At the same time, said realtors are also gatekeeping the houses they see - there may be a nice house you'd be interested in, but if the seller isn't wanting high commissions then it'll be likely skipped.
Now, these days, you can do it all yourself - you can sell your home without a realtor (and in many places you can be listed on MLS), and you can buy a home without a realtor. Of course, this means the amount of work you do goes way up.
As a seller, well, you can specify how much commission you want - from zero to whatever. Put in zero and no realtor will bother you, leaving you to buyers who search various websites on their own. hoping your house stands out among the crowd. You're also responsible for staging and open house showings.
As a buyer, well, you're presented a list of addresses of houses for sale and in general they're presented with no context - you have to look it up analyze if it's close the amenities you want, figure the neighborhood, and other things.
Of course, most people want to short-circuit the whole process - it is a full time job after all to do all the selling work or buying work yourself.
That's not to say there aren't realtors willing to do reduced commissions - many do cut it in half if the buyer and seller are the same company or even the same person. But therein lies the problem - it's in the realtor's self-interest to go for high commissions. As a selling realtor, the commission dictates how much effort you put into selling it - if the seller wants low commissions, you put in low efforts to staging, holding open houses, suggesting how to get the place to sell.
As a buyer, if the seller doesn't want high commissions, you're less inclined to push that place over some other place that will pay you more.
In the end, the realtors are paid by commission. And just like any job, you'll probably take the one that pays more, everything else being equal. If someone is paying you $100K a year, or another job pays you $120K per year, same job, benefits, commute, etc, which would you take? Commissions are the same thing. Would you sell a house where the seller relented to full commissions and you can make $12K ($200K house), or a house where seller wants low commissions and you can only make $6K? Which house would you try to get someone to buy first?
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Many people have tried the "low commission" route - and you know what happens? They find realtors purposefully ignored their listings. Preferring of course, to show prospective buyers houses that pay full commission.
And this is *exactly* the point of the lawsuit(s). Collusion to fix prices far, far above reasonable across an entire industry. Is it any wonder that real estate is one of the hottest careers any time the housing market isn't completely down the drain?
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Except it isn't collusion.
Do you take any jo
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Re:Who is forcing you? (Score:5, Insightful)
It's because you want certain services that you're paying it. (...)
The US real estate market has coalesced around 6% commission.
so what services exactly do those agents provide to us home buyers/sellers that are worth a whopping 6% of the transaction and the rest of the world doesn't enjoy (or gets for free or from somewhere else)?
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Nonsense. Believe it or not, most professions are honest people who aren't trying to screw to their customers. Equally, most people are not scumbags who are out to screw the people they hire to do work for them. In fact, people will often offer to pay more than they were charged if they think the work done was worth more.
People know when they're being treated fairly, and they always find out when they've been treated unfairly.
There are other motivations than money, after all. People are generally willi [hbr.org]
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Nobody. You don't have to pay it. It's because you want certain services that you're paying it. It's like saying, "how come I have to pay $150 an hour for a plumber"? Well YOU want a plumber to come fix your shit, that's why dumbass. Nobody should be compelled by you to work for the rate YOU specify or think is fair. Maybe the plumber would rather watch Netflix that deal with your pipes if you only offered $149. If plumbers could charge $1000 or even $10,000 and hour they'd do it, you'd do the same if you were a plumber. Just like how you'd pay $1 an hour if you could get away with it. The US real estate market has coalesced around 6% commission.
In a free market, this would be true. The argument is that the market is not free, and furthermore, that the 6% is the result of collusion. Imagine if the commission were subject to supply and demand. In such a free market, the commission would move toward the actual agent costs because newer, less established agents would be willing to offer a lower commission. That doesn't happen due to collusion.
This collusion should be illegal because it's anti-competitive, but it turns out that it's largely legal b
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If capitalism had a dick you would have nuts on your chin now.
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But only if one is not in survival mode and America like to keep its citizens busy, takes a bit of will not to engage it all.
My buyer's agent was invaluable to me... (Score:2)
... in 1996.
I remember thinking at the time all we needed was a standard format for real estate listing HTML pages.
Google could index them, and the Multiple Listing Service would go away.
Instead, we eventually got Zillow - real estate listings, gameified.
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We saw what happened with search engines after 1996. You can't trust people to make accurate listings. Or tell the difference between scams and real listings. Search engines would eat all that up and spit out bad data. It's true that Google has gotten pretty good (mostly) at weeding out scam search results, but they're not even good at weeding out scam Adwords advertisers. At least all of it is lower stakes than real estate.
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It's true that Google has gotten pretty good (mostly) at weeding out scam search results
Yeah. But those are the ones it sends to me.
Seriously, the whole on-line search and advertising has been moving toward answering the questions: "Who are you? And how much money do you have?" If we like you, you get the good real estate deals, the cheap airline tickets and a better selection of high value products. If we don't like you, you'll be steered toward the crap.
I think it's funny (Score:5, Insightful)
...that so many news narratives start from the POV of "however we do it in America is DUMB!"
What remarkable self-loathing? Do other countries do that? Are there a lot of articles in the German press about how America does X better, why don't we?
To everyone asking such a question: just because someone else does something differently, doesn't mean it's BETTER.
To answer the OP's question - the US has buyer agents largely because the market is less state-controlled. At the same time, generally, US land and house prices are MUCH cheaper than nearly anywhere else in the developed world.
From quora 2023:
https://www.quora.com/Why-is-r... [quora.com]
You can always trust Amercians (Score:2, Insightful)
It's kinda like the "boomer remover". The phrase made the rounds during COVID and there was a bunch of clutched pearls and what have you... but what I didn't see was anyone asking why so many young folk looked at a deadly disease that was wiping out the elderly and went "oh thank God".
Put another way: What the American people don't know is what makes them the American people. Learn some self reflection. It'll do you some good and save tim
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well, we're also one of the few places that has 30 year FIXED mortgages.
most everywhere else your mortgage is 'reassessed' periodically, like 5 or 7 years.
Though i can't imagine grabblers tolerating the peasants getting one over on them for too much longer. For example my mortgage is a fixed 2.875%, while current rates are north of 7%. from the bankers perspective we're stealing a huge amount of money from them. That's money that they SHOULD be collecting each month in interest and they are not not able t
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Re:I think it's funny (Score:4, Insightful)
...that so many news narratives start from the POV of "however we do it in America is DUMB!"
That would be weird, except the way we do a lot of things here is really stupid. That's probably because, as you've clearly demonstrated, a lot of Americans are really stupid. Hell, a lot of us even vote against our own interests, which sounds noble until you realize that it's for selfish reasons! No matter how you look at it, that's really stupid.
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Translation: "They don't vote the way I think they should."
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You're not a big thinker are you?
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This isn't a matter of perspective. This is a simple matter of objective fact. I'm absolutely right about this and you know it.
This 'both sides' nonsense [newsliteracymatters.com] of yours isn't a reasoned middle ground, it's cowardly and lazy.
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Bad ideas never die... (Score:2)
...once they are established and a large number or people benefit from them
Like tipping, the real estate biz sucks, but it's REALLY hard to change
The odds of an oligopoly (Score:2)
...NOT eventually screwing over customers is approximately 1 in 3,720.
UK comparison (Score:2)
18 months ago we put my mothers flat on the market. Estate agent (who was our next door neighbour growing up) did a flat rate fee of £1800, discounted from £3000, on a £150,000 asking price so effectively 2% dropped to 1.2%. There was a payment to solicitors for the legal work when it sold that I can't fnd, but it was in the region of a few hundred only.
Figure choice is annoying (Score:4, Insightful)
I hate seeing articles that pick a meaningless figure, which often happens, as this kind of article is about inflaming people, not informing them.
When a chart shows "real-estate agent count by country" and shows the US with 1.6 million and Canada with 160 thousand and there's not even a mention that the US has about 340M people and Canada about 39M, this is complete negligence in reporting, IMO. Population isn't perhaps the best measure here, perhaps the number of real estate deals is a better one, but it's a readily available figure. The US has about 4.7 agents per 1000 people and Canada 4.1. The difference isn't this start.
And sure, the UK and Australia do have significantly less (and it would be interesting to compare to the number of real estate deals), but still, that chart is meaningless as is.
Obviously the author wasn't around back then (Score:2)
"In the pre-internet days, a buyer agent's main job was to screen and filter listings for hopeful home buyers."
We bought our house back "in the pre-internet days". In terms of time spent, our agent's main job was taking us around to all these houses he'd located for us and showing them to us. He put in a lot of hours with us over the course of several months. I certainly didn't begrudge him his commission.
BTW we paid $80K for our house in 1990 HAHAHAHAHA
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That was either really good or really bad, depending on where your house was.
Location is everything. I can drive an hour and get 5 acres of lakefront property with infrastructure but no building for a little less than that. I can drive an hour in another direction and get 6 acres and a farm house for just a little more. An hour in yet another direction and 80k wouldn't cover the commission on 5 acres of lakefront property.
Real-estate agents are a ripoff (Score:3)
I sold my first home without using an agent. We paid a company that does fixed-price packages that include photos and a Web page. The amount we paid was about 0.36% of the selling price. We were able to list for slightly less than comparable properties and pocket more.
When I bought my second home, neither party used agents. The process was an absolute pleasure... about 20 minutes of face-to-face negotiation between buyer and seller and we were done.
When I bought my current house, the seller had an agent, but I did not. So I guess the price reflected the agent's fees, but there wasn't much I could do.
In today's world where so much information is freely-available, the only role real-estate agents play is to restrict the flow of information and jack up prices.
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I should add that I live in Canada, not the US, but the rules for realtors are comparable.
Its a nice gig if you can get it (Score:2)
I can't think of any other line of work where you take 6-8% of $largenumber for so little work.
They're like snakes/reptiles .. only need to feed once every month or two to make a comfortable living.
Tip? (Score:2)
Almost No One Pays a 6% Real-Estate Commission - Except Americans
Just praise yourselves lucky that American real estate agents don't get the traditional American 20% tip.
Australia 2% negotiable (Score:2)
Typically 2% but a cluey seller might make it 1% up to a certain figure and 10% of everything over that. I haven't seen buyer's agents except for very high end stuff.
My buyer's agent's been great (Score:2)
Having a buyers agent has been great. In 1998, 2004, and 2016, he's saved me loads and loads of work.
Even in 1998 I was using an online version of the MLS and MapQuest! to navigate, but he did all of the legwork and communications with the various sellers' agents on my behalf. Plus, I didn't really know how to buy a house back then, and he was a great advocate. Yeah, sure, he was chasing his half of the commission, but he still worked his ass off considering I was buying at the very low end of the market, y
I am for buyer's agents (Score:2)
I have bought three homes, sold two, and made offers on six over the years. One offer was in Sweden where they just have a single broker that coordinates both sides of the transaction; I hated it. My realtor that I have used for all the transactions that went through was awesome. He had no idea what kind of home we actually wanted any of the times, but was patient in showing us many options over a long period of time. We found what we bought each time ourselves, but he streamlined the process for us in maki
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It makes sense for the buyer to have a buyer's agent, and for the seller to have a seller's agent. Each represents the best interests of the party they represent. If one agent tries to handle both sides of the deal, there is a built-in conflict of interest that favors the seller, because the agent is going to want a higher commission.
This is understandable (Score:2)
As an American, I haven't paid 6% (Score:2)
I've bought two houses and sold one. In each case, the agent I used provided a rebate of 1-2% of the commission, making the commission. I assumed this was common practice, because I didn't even have to ask for it.
This is what happens when you try to DIY (Score:2)
https://www.youtube.com/watch?... [youtube.com]
"racist real estate ad" (watch to end before complaining please :-)
It's a lot more than looking up what homes are for (Score:2)
Only the most naive think a real estate agents only role is to locate a home.
If you are a buyer, the agent may help you with financing, inspections, hiring legal representation if necessary, spotting potential issues with potential homes and a long long list of other things they are probably a lot better equipped to handle than you.
If you are a seller, the agent shows your home, helps you hire contractors to fix it up prior to selling, verifies buyer's finances, helps find an escrow agent, helps you arrange
Positive realtor experience - sometimes worthwhile (Score:2)
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How much R&D and equipment do you invest in to do real estate?
Re:6% margins are TINY (Score:5, Informative)
Mining is a business. You spend money to extract something from the ground and sell it at the going rate for that commodity. If you can do it super efficiently, that's the profit for you even if it's 1000%.
Software consultancy is a business. You're providing a service, which is often on a time-and-materials basis. Your cost is only what you pay your people, and a markup for the corporation and owners to split above and beyond labor cost. There's a broader correlation to input cost vs. price and fee than in mining or manufacturing, but it's still a service.
Real estate agents are a marketplace. They enable a buyer and a seller to come together and make a trade. They provide no input. They provide some service, but only in that it is hard to find buyers when there is no formal market, so the commission they generate is about providing efficiency in an inherently efficient market; ie filtering down to actual buyers who have actual money to buy your product, and casting a wide net to bring as many offers to the table as possible.
In comparable businesses, 6% is egregious. Insurance products pay 1% commission. Most brokers charge .6%. Many robo-brokers charge .25%. The highest is private equity and venture capital at 2% in finance. So 6% is extremely hefty. It made sense when you're talking about physical goods and having to get actual people to view the physical goods; geography was a barrier for some time. But online sales and viewing and virtual walkthroughs have severely brought down the geographic barriers to buying a house, so the question is valid about the value provided for the fee offered. Robo-brokers are a good example; by automating they undercut more traditional brokers and then create price pressure. But price pressure has not affected realtors despite the advent of technology making their job much easier.
Re:6% margins are TINY (Score:5, Informative)
6% is not the margin.
6% of the sale price is the agent's revenue. That minus his costs are the gain. Gain divided by the sum correspondingto 6% is the margin.
For 500k house, revenue is 30k, ahent costs are maybe 1,000, and so the margin is somewhere around 97%.
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You have to account for the time they spend on showing people the house. Let's say it takes 60 hours to get a house sold, then the hourly pay for their work in your example is $480 / hour. Totally reasonable. /s
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Wut? That seems backwards. In Australia, the only real estate agent is the seller's agent, and they show prospective buyers the property. (The seller and buyer each have a conveyancer, and the buyer may be dealing with a mortgage broker, but there's no need to have a buyer's agent.)
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it's more like a 6% vig if anything.
The actual costs for an agent are negligible as you noted and the 'risk' is largely just in their time spent. i think part of the reason this is tolerated is there's generally zero cost-risk to the seller or buyer. You list a house and all you do is sign things. You want to view houses, you just say so (occasionally signing something). If you change your mind you cancel at your whim and generally zero cost. All this is paid for by fuzzy money that no one ever has to
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You are going to be an executive someday, this so reminds me of the idiotic statements I've heard CTOs and CEOs make in meetings. Good job buddy, excelsior!
Re:Meh (Score:4, Insightful)
I've had wildly varying experiences. The first one I used didn't really do much of anything I couldn't (or didn't) do myself. He looked up things on MLS, sometimes took me to houses that were terrible (a neighborhood where all the houses had bars on the windows, a house with a big hump down the main hallway). He did no negotiating and had no real advice to give on what we should offer. The second was better but made mistakes that could have been huge. I had to argue with him over a contract that he sent that said that the house I was selling was the house I was living in, when I had never lived in it. Obvious error. He couldn't see it. My last one was really good, but I also made it easy. Basically, "I think I want to buy this house. Can you show it to me? Yes, I do want to buy it. Sold." After we bought it, the seller's agent sent a postcard to everyone in the community (that I now lived in) bragging about getting a list price sale, when she had nothing to do with me buying it AND was unreachable when we were trying to look at the house and had trouble getting in. And they'd already cut the price on the house, so it was less "list price" and more "lowered it until it was reasonable". I don't think the seller got 6% of value out of that agent.
Personally, I agree with people saying paying $30,000 commission to sell a $500k house is a little nuts. The real estate market around here was on fire last year and selling a house took basically no effort. Put it on the market and you'd get multiple offers at list or higher. Your land example was the opposite. That agent earned every bit of their 10%. I guess that gets to the core of it: they should be paid based on the value they provide. Sometimes it's a lot. Sometimes it's not.
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When we buy a house, we don;t trust the realtors: we get a house inspector to inspect the house for us. They are third parties, work for a small flat rate, and are unencumbered by financial reasons to screw us over. Always hire a private house inspector, never trust realtors.
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But there are plenty of soccer-moms-turned-realtors out there who aren't worth crap.
Agreed. There are a glut of real estate agents. And there are seminars urging people to become real estate agents with just a few classes. It was the go-to job for stay at home spouses for awhile. Especially good if you're the person who knows the local language plus English and are setting up the one-stop store front in the strip mall for tax/notary/real-estate/shipping/money-order/donuts shop.
When I bought my current house, I had a realtor doing the buying for me.
"Realtor" is at trademark and has been around from before the glut, though it's used frequently enough that the
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You sign a contract to get your house listed and represented by an agent, and if you try and go around them you can be sued.
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This.
When my dad sold the family home, he signed a 6 month listing contract. The listing agent did a shitty job of writing the property description up and argued over some of the details (We can't say "has a huge, park-like back yard". Someone might complain that we are steering the property toward buyers with kids and discriminating against childless people!) It didn't move. At the end of the contract, my dad sat down with a new agent and negotiated the listing before signing (huge back yard, walking dist
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Heck now even we have noctor middlemen, called physicians assistants. Don't want a doctors salary do dig into your profits... well hire a noctor and voila, cost savings. Your clients still pay 200$ + copay, but they don't see a doctor, but an "assistant" who gets 1/5th the pay, and will give you advice probably worse than chatgpt
"Now"? Physician assistants have been around since the 1970s. They are quicker to turn out than doctors, work under guidance from physicians, and at $120K a year make about half of what physicians make (around $250K based on median pay). They have at least a bachelor's degree plus extra courses and training, and most have master's degrees.
As the population ages, they will become even more necessary as the doctor:patient ratio gets ever more skewed and medical school gets ever more expensive (in 2022. The av
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Yup, physician assistants are great. Most of the time the nurse knows exactly what to do but can't legally do it. Primarily it means that they can write up prescriptions. The doctors are fewer and far between or don't want to come to your podunk town. So PAs are a good way to get medical care out to a lot of communites.
We had PAs at our university student clinic which worked well because most students who had health insurance from the parents didn't always have it apply where the school was, or because ha
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PAs are almost doctors... ARNPs or Nurse Practitioners are nurses who went to the Medical School of Real Experience and then got some paper to prove it all.
And yes, they (and similar degrees/certifications) both have quite a role to fill in health care world
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Whether or not you use agents, each side will have a lawyer to facilitate the closing (at least, that's how it works here in Canada.) So the lawyer looks out for your interests, not the agent. And since lawyers typically charge a fixed fee for real-estate transactions, they're not incentivized to monkey with the selling price.