Biden admin going after realtors!

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

I think a good test case is the new construction industry. Because it is an industry where many buyers are already unrepresented. And speaking firsthand, you should see some of the horrible stuff builders get away with with unrepresented buyers or buyers represented by agents who are not knowledgeable about new construction.

In a new construction transaction in the DC area, if a buyer brings an agent to the transaction, the builder pays the commission for the Agent. Many times the agent is even able to offer a rebate to the buyer. Meanwhile, the builders around here, do not generally offer concessions to this buyers were not represented by agents.

I’m sure builders would absolutely love to do away with the model where the seller pays the buyers agent. So basically, the only buyers, who will bring real estate agents to the table are those buyers who can afford to bring real estate agents to the table. And unfortunately, those are the people who probably least need a real estate agent.

Do you really think that a builder is going to cut their sale price by two or 3%? They will not. They will price at the absolute highest at the market can bear. So, same sales price for them, higher profit because they are not paying agents. And buyer sees no benefit and has no representation unless they are willing to pay for it as they go.

I think the problem is the overall analysis assumes that it is due to agent fees that home sales prices are inflated. But really, all the commission does is take money out of the sellers net profits. There is not a one for one correlation between agent fees and Home prices. You can see it in the industry today. For sale by owners always insist on the comparable price. Are you really going to list your home as a for sale by owner and price at 3% less because you don’t have an agent? No, you’re obviously not. You’re going to list it at the highest comparable price and probably still insist that you are not going to pay the buyers agent.

This whole thing would be great for sellers, not good for homebuyers though

What is meant by “overall analysis”, “this whole thing”? The pending NAR lawsuits and anti-trust action by the DOJ/FTC, I assume. Your post does not specify exactly.

[E]specially homebuyers who are first timers, and do not know much about the process and don’t have cash on hand to hire an agent.

Your overall concern seems to be the outcome that anti-trust litigation – prohibiting realtor fee “tying”, “steering” regulation, etc.. - will have on builders of homes and some buyers of new construction, buyers who require agents but cannot afford their services.

But if the current real estate practices violate anti-trust law, is the remedy to ignore regulations designed to promote competition and drive down consumer prices because the prosperity of the building industry depends on them being ignored? ( No if you are pro-consumer and pro-rule-of-law; Yes if you are pro-building industry )

The subset of buyers who require buying agents but cannot afford them will choose more affordable living alternatives. That mat not be ideal for the building industry, but that is a them problem; I’m confident the US construction industry would adjust to equilibrium and substitution effects.


Many countries do not have the real estate arrangements presently under scrutiny in the United States. As I understand, they build homes. They buy and sell homes, often at roughly half the commission cost. Those who cannot afford to purchase a home have the option to lease.

I don't think the outcome of the litigation is necessarily that buyer's agents will no longer be paid from seller's agents.

It's not inevitable, but it is clearly the relief sought. An(other) out of course settlement could keep it in place.

It could be that the structure of the arrangement stays the same but the percentages are lower.

The lawsuit alleges high commissions are a product of the arrangement. Doubtful that will be the outcome of this particular action is decided.

My guess is that realtors will come up with more ways to compete if they aren't allowed to prevent competition as they've been doing.

The hope is that impediments to competition will be removed subjecting realtors to price compete in a downward price pressure context like every other industry.


[10] If NAR’s Adversary Commission Rule were not in place, then the cost of buyer broker commissions would be paid by their clients (home buyers). Buyer brokers would thus have to compete with one another by offering a lower commission rate. The Adversary Commission Rule thereby restrains price competition among buyer brokers because the person who actually retains the buyer broker — the home buyer — does not negotiate or pay the commission for his or her broker.

[22] Moreover, in the absence of the Adversary Commission Rule, seller brokers would likely face additional competitive pressures. That is, instead of following long-time practice of setting total commissions at or near 6% and assigning roughly half of that amount to themselves and roughly the other half to the buyer broker commission (and selecting that amount at a level to remain in the good graces of buyer brokers), seller brokers would set a commission to pay themselves alone and would likely begin to engage in more vigorous competition with one another to lower their rates and/or provide additional services to justify their newly transparent rates

- Burnett et al. v. National Association of Realtors®, et al., Third Amended Class Action Complaint

Not to quibble, but I think the difference is important: the relief sought (aside from damages) is an end to the anticompetitive conduct, which is the agreement to a rule that raises commission rates. Whether getting rid of that illegal agreement ultimately means the end of commission splitting between sellers and buyers and is a separate matter altogether. The complaint sets forth what they allege would happen in the "but for" world--the world that would exist but for the anticompetitive conduct--but that is different than the relief being sought.

No that's fair.

I can see a world, an outcome, in which the buyer broker commission arrangement is among the options available to a consumer. If you want a buyer broker commission rule arrangement, it could be an option. If the consumer prefers à la carte fee-for-service alternatives, they should be available too, without industry interference.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The only thing that will happen if you untie the two fees is that buyers will lose free representation, and sellers will keep 2-3 percent more profit.

Sellers could take a lower price because their net would be higher. A lot of deals fall apart because the buyer and seller can't agree to price. Changing the realtor fees to 2% would get them 2-3% closer than the current 4-5% commissions.

I don't know why this is not discussed more. What is more likely to sell a home quickly? A top notch realtor or a price that is 5% under the market of the realtor-represented ones?

Also that for some reason realtors commission is on the gross and not the net. That makes no sense, nothing else I can think of is comped that way.

This. The lower price is much more likely to sell the home quickly. No seller's realtor can squeeze more money from a buyer. The most they can do is avoid hampering the deal, which unfortunately seems to happen a lot.

It is because the seller and buyer agent make more when the price is higher, and of course, the industry as a whole (where commissions are based on percentage of sales price) benefits more with higher overall prices.

It has been shown statistically that the opposite is true, and realtors overall make MUCH more with faster sales:

When she sells her own house, an agent holds out for the best offer; when she sells yours, she encourages you to take the first decent offer that comes along. Like a stockbroker churning commissions, she wants to make deals and make them fast. Why not? Her share of a better offer—$150—is too puny an incentive to encourage her to do otherwise.

https://forum.nachi.org/t/exerpt-from-freakonomics-book-regarding-real-estate-agents/56492

https://freakonomics.com/2008/02/real-estate-agents-revisited/

Indeed.

The commission scheme incentivizes frequent sales.

In addition to Levitt & Syverson, an example :

For example, if an agent expected that spending 30 extra hours would increase the selling price of a home by about $10,000, the 3 percent listing agent’s commission on that increase ($300), translating to $300/30 = $10/hour, or more likely $7/hour,[13] would hardly seem likely to motivate the agent to invest the time .

[13] Actually, both buyer and seller agents usually share their commissions with their brokers, with the agents typically retaining 70% of the commission. So here, the agent would receive 70% of the $300 = $210 for 30 hours

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3571088

There is zero real monetary incentive ($7/hour) for a seller agent to maximize returns for the seller, nor any incentive for the buyer agent to minimize price for the buyer.

Here, we are talking about a buyer's agent, who gets paid nothing if the buyer doesn't buy. The OP is talking about buying with an agent. While seller's agents might also not have the seller's interests at heart, the incentive for the buyer's agent is to get the deal done, whether it is a good deal, fair price, etc. And the higher the price, the more commission the buyer's agent gets, on that sale and any other sales made using that as a comparable. The simple truth is that RE agents aren't faithfully representing the interests of buyers or sellers, despite holding themselves out as "agents."

The above is plainly true. This is why RE agents are essentially useless, especially on the buyer side, and the quicker people realize that, the better off everyone (other than RE agents) will be.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The only thing that will happen if you untie the two fees is that buyers will lose free representation, and sellers will keep 2-3 percent more profit.

Sellers could take a lower price because their net would be higher. A lot of deals fall apart because the buyer and seller can't agree to price. Changing the realtor fees to 2% would get them 2-3% closer than the current 4-5% commissions.

I don't know why this is not discussed more. What is more likely to sell a home quickly? A top notch realtor or a price that is 5% under the market of the realtor-represented ones?

Also that for some reason realtors commission is on the gross and not the net. That makes no sense, nothing else I can think of is comped that way.

This. The lower price is much more likely to sell the home quickly. No seller's realtor can squeeze more money from a buyer. The most they can do is avoid hampering the deal, which unfortunately seems to happen a lot.

It is because the seller and buyer agent make more when the price is higher, and of course, the industry as a whole (where commissions are based on percentage of sales price) benefits more with higher overall prices.

It has been shown statistically that the opposite is true, and realtors overall make MUCH more with faster sales:

When she sells her own house, an agent holds out for the best offer; when she sells yours, she encourages you to take the first decent offer that comes along. Like a stockbroker churning commissions, she wants to make deals and make them fast. Why not? Her share of a better offer—$150—is too puny an incentive to encourage her to do otherwise.

https://forum.nachi.org/t/exerpt-from-freakonomics-book-regarding-real-estate-agents/56492

https://freakonomics.com/2008/02/real-estate-agents-revisited/

Indeed.

The commission scheme incentivizes frequent sales.

In addition to Levitt & Syverson, an example :

For example, if an agent expected that spending 30 extra hours would increase the selling price of a home by about $10,000, the 3 percent listing agent’s commission on that increase ($300), translating to $300/30 = $10/hour, or more likely $7/hour,[13] would hardly seem likely to motivate the agent to invest the time .

[13] Actually, both buyer and seller agents usually share their commissions with their brokers, with the agents typically retaining 70% of the commission. So here, the agent would receive 70% of the $300 = $210 for 30 hours

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3571088

There is zero real monetary incentive ($7/hour) for a seller agent to maximize returns for the seller, nor any incentive for the buyer agent to minimize price for the buyer.

Here, we are talking about a buyer's agent, who gets paid nothing if the buyer doesn't buy. The OP is talking about buying with an agent. While seller's agents might also not have the seller's interests at heart, the incentive for the buyer's agent is to get the deal done, whether it is a good deal, fair price, etc. And the higher the price, the more commission the buyer's agent gets, on that sale and any other sales made using that as a comparable. The simple truth is that RE agents aren't faithfully representing the interests of buyers or sellers, despite holding themselves out as "agents."

The above is plainly true. This is why RE agents are essentially useless, especially on the buyer side, and the quicker people realize that, the better off everyone (other than RE agents) will be.

Nothing to add to that.

The buyer should retain legal, as a purchase agreement is a legal contract. So with a commission structure providing ~ $25,000 for purchasing fees (1,000,000 x .025 commission). We assume $500-$4000 for legal. The buyer is still +20,000. One agent reported a hourly fee of $100 (is that normal?). That means ( -legal ) the buyer is left with 200 hours of billable buyer agent time ($20,000 / $100 = 200 hours).

What does the buyers agent do for 200 hours?

Assume you find a home on Zillow, price out comparables, and assume you use legal professionals for legal contracts. What does the buyers agent do to justify 200 hours? In the normal course of things, what problems does a buyer need solved that amounts to 200 hours worth of work?

[Anonymous]

I’m in an area where there are about 10 realtors who get all the listings and they’re essentially a cartel, which they could get away with in the Covid boom years but is so painfully obvious how they’re controlling prices now. The free market can’t fully operate with realtors, time to go!!

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The only thing that will happen if you untie the two fees is that buyers will lose free representation, and sellers will keep 2-3 percent more profit.

Sellers could take a lower price because their net would be higher. A lot of deals fall apart because the buyer and seller can't agree to price. Changing the realtor fees to 2% would get them 2-3% closer than the current 4-5% commissions.

I don't know why this is not discussed more. What is more likely to sell a home quickly? A top notch realtor or a price that is 5% under the market of the realtor-represented ones?

Also that for some reason realtors commission is on the gross and not the net. That makes no sense, nothing else I can think of is comped that way.

This. The lower price is much more likely to sell the home quickly. No seller's realtor can squeeze more money from a buyer. The most they can do is avoid hampering the deal, which unfortunately seems to happen a lot.

It is because the seller and buyer agent make more when the price is higher, and of course, the industry as a whole (where commissions are based on percentage of sales price) benefits more with higher overall prices.

It has been shown statistically that the opposite is true, and realtors overall make MUCH more with faster sales:

When she sells her own house, an agent holds out for the best offer; when she sells yours, she encourages you to take the first decent offer that comes along. Like a stockbroker churning commissions, she wants to make deals and make them fast. Why not? Her share of a better offer—$150—is too puny an incentive to encourage her to do otherwise.

https://forum.nachi.org/t/exerpt-from-freakonomics-book-regarding-real-estate-agents/56492

https://freakonomics.com/2008/02/real-estate-agents-revisited/

Indeed.

The commission scheme incentivizes frequent sales.

In addition to Levitt & Syverson, an example :

For example, if an agent expected that spending 30 extra hours would increase the selling price of a home by about $10,000, the 3 percent listing agent’s commission on that increase ($300), translating to $300/30 = $10/hour, or more likely $7/hour,[13] would hardly seem likely to motivate the agent to invest the time .

[13] Actually, both buyer and seller agents usually share their commissions with their brokers, with the agents typically retaining 70% of the commission. So here, the agent would receive 70% of the $300 = $210 for 30 hours

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3571088

There is zero real monetary incentive ($7/hour) for a seller agent to maximize returns for the seller, nor any incentive for the buyer agent to minimize price for the buyer.

Not sure where you are listing houses, but I do most of my work in Arlington and there is a large monetary incentive for me to maximize returns to the seller. The sellers happily trumpet around the neighborhood that I got more money for them and that gets more listings and more money for me. What am I missing about marketing 101?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The only thing that will happen if you untie the two fees is that buyers will lose free representation, and sellers will keep 2-3 percent more profit.

Sellers could take a lower price because their net would be higher. A lot of deals fall apart because the buyer and seller can't agree to price. Changing the realtor fees to 2% would get them 2-3% closer than the current 4-5% commissions.

I don't know why this is not discussed more. What is more likely to sell a home quickly? A top notch realtor or a price that is 5% under the market of the realtor-represented ones?

Also that for some reason realtors commission is on the gross and not the net. That makes no sense, nothing else I can think of is comped that way.

This. The lower price is much more likely to sell the home quickly. No seller's realtor can squeeze more money from a buyer. The most they can do is avoid hampering the deal, which unfortunately seems to happen a lot.

It is because the seller and buyer agent make more when the price is higher, and of course, the industry as a whole (where commissions are based on percentage of sales price) benefits more with higher overall prices.

It has been shown statistically that the opposite is true, and realtors overall make MUCH more with faster sales:

When she sells her own house, an agent holds out for the best offer; when she sells yours, she encourages you to take the first decent offer that comes along. Like a stockbroker churning commissions, she wants to make deals and make them fast. Why not? Her share of a better offer—$150—is too puny an incentive to encourage her to do otherwise.

https://forum.nachi.org/t/exerpt-from-freakonomics-book-regarding-real-estate-agents/56492

https://freakonomics.com/2008/02/real-estate-agents-revisited/

Indeed.

The commission scheme incentivizes frequent sales.

In addition to Levitt & Syverson, an example :

For example, if an agent expected that spending 30 extra hours would increase the selling price of a home by about $10,000, the 3 percent listing agent’s commission on that increase ($300), translating to $300/30 = $10/hour, or more likely $7/hour,[13] would hardly seem likely to motivate the agent to invest the time .

[13] Actually, both buyer and seller agents usually share their commissions with their brokers, with the agents typically retaining 70% of the commission. So here, the agent would receive 70% of the $300 = $210 for 30 hours

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3571088

There is zero real monetary incentive ($7/hour) for a seller agent to maximize returns for the seller, nor any incentive for the buyer agent to minimize price for the buyer.

Not sure where you are listing houses, but I do most of my work in Arlington and there is a large monetary incentive for me to maximize returns to the seller. The sellers happily trumpet around the neighborhood that I got more money for them and that gets more listings and more money for me. What am I missing about marketing 101?

Economics 101 says there is a higher monetary incentive to sell volume.

250K extra on 1M will earn you ~6K. Selling fast and pursuing another similar listing earns you 25K. 25K > 6K. Incentive is clearly volume, according to economists.

But economists examine evidence and incentives from a macroeconomic level. The Arlington "trumpet" effect is a localized and specific to particular market conditions.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The only thing that will happen if you untie the two fees is that buyers will lose free representation, and sellers will keep 2-3 percent more profit.

Sellers could take a lower price because their net would be higher. A lot of deals fall apart because the buyer and seller can't agree to price. Changing the realtor fees to 2% would get them 2-3% closer than the current 4-5% commissions.

I don't know why this is not discussed more. What is more likely to sell a home quickly? A top notch realtor or a price that is 5% under the market of the realtor-represented ones?

Also that for some reason realtors commission is on the gross and not the net. That makes no sense, nothing else I can think of is comped that way.

This. The lower price is much more likely to sell the home quickly. No seller's realtor can squeeze more money from a buyer. The most they can do is avoid hampering the deal, which unfortunately seems to happen a lot.

It is because the seller and buyer agent make more when the price is higher, and of course, the industry as a whole (where commissions are based on percentage of sales price) benefits more with higher overall prices.

It has been shown statistically that the opposite is true, and realtors overall make MUCH more with faster sales:

When she sells her own house, an agent holds out for the best offer; when she sells yours, she encourages you to take the first decent offer that comes along. Like a stockbroker churning commissions, she wants to make deals and make them fast. Why not? Her share of a better offer—$150—is too puny an incentive to encourage her to do otherwise.

https://forum.nachi.org/t/exerpt-from-freakonomics-book-regarding-real-estate-agents/56492

https://freakonomics.com/2008/02/real-estate-agents-revisited/

Indeed.

The commission scheme incentivizes frequent sales.

In addition to Levitt & Syverson, an example :

For example, if an agent expected that spending 30 extra hours would increase the selling price of a home by about $10,000, the 3 percent listing agent’s commission on that increase ($300), translating to $300/30 = $10/hour, or more likely $7/hour,[13] would hardly seem likely to motivate the agent to invest the time .

[13] Actually, both buyer and seller agents usually share their commissions with their brokers, with the agents typically retaining 70% of the commission. So here, the agent would receive 70% of the $300 = $210 for 30 hours

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3571088

There is zero real monetary incentive ($7/hour) for a seller agent to maximize returns for the seller, nor any incentive for the buyer agent to minimize price for the buyer.

Here, we are talking about a buyer's agent, who gets paid nothing if the buyer doesn't buy. The OP is talking about buying with an agent. While seller's agents might also not have the seller's interests at heart, the incentive for the buyer's agent is to get the deal done, whether it is a good deal, fair price, etc. And the higher the price, the more commission the buyer's agent gets, on that sale and any other sales made using that as a comparable. The simple truth is that RE agents aren't faithfully representing the interests of buyers or sellers, despite holding themselves out as "agents."

The above is plainly true. This is why RE agents are essentially useless, especially on the buyer side, and the quicker people realize that, the better off everyone (other than RE agents) will be.

+1

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The only thing that will happen if you untie the two fees is that buyers will lose free representation, and sellers will keep 2-3 percent more profit.

Sellers could take a lower price because their net would be higher. A lot of deals fall apart because the buyer and seller can't agree to price. Changing the realtor fees to 2% would get them 2-3% closer than the current 4-5% commissions.

I don't know why this is not discussed more. What is more likely to sell a home quickly? A top notch realtor or a price that is 5% under the market of the realtor-represented ones?

Also that for some reason realtors commission is on the gross and not the net. That makes no sense, nothing else I can think of is comped that way.

This. The lower price is much more likely to sell the home quickly. No seller's realtor can squeeze more money from a buyer. The most they can do is avoid hampering the deal, which unfortunately seems to happen a lot.

It is because the seller and buyer agent make more when the price is higher, and of course, the industry as a whole (where commissions are based on percentage of sales price) benefits more with higher overall prices.

It has been shown statistically that the opposite is true, and realtors overall make MUCH more with faster sales:

When she sells her own house, an agent holds out for the best offer; when she sells yours, she encourages you to take the first decent offer that comes along. Like a stockbroker churning commissions, she wants to make deals and make them fast. Why not? Her share of a better offer—$150—is too puny an incentive to encourage her to do otherwise.

https://forum.nachi.org/t/exerpt-from-freakonomics-book-regarding-real-estate-agents/56492

https://freakonomics.com/2008/02/real-estate-agents-revisited/

Indeed.

The commission scheme incentivizes frequent sales.

In addition to Levitt & Syverson, an example :

For example, if an agent expected that spending 30 extra hours would increase the selling price of a home by about $10,000, the 3 percent listing agent’s commission on that increase ($300), translating to $300/30 = $10/hour, or more likely $7/hour,[13] would hardly seem likely to motivate the agent to invest the time .

[13] Actually, both buyer and seller agents usually share their commissions with their brokers, with the agents typically retaining 70% of the commission. So here, the agent would receive 70% of the $300 = $210 for 30 hours

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3571088

There is zero real monetary incentive ($7/hour) for a seller agent to maximize returns for the seller, nor any incentive for the buyer agent to minimize price for the buyer.

Here, we are talking about a buyer's agent, who gets paid nothing if the buyer doesn't buy. The OP is talking about buying with an agent. While seller's agents might also not have the seller's interests at heart, the incentive for the buyer's agent is to get the deal done, whether it is a good deal, fair price, etc. And the higher the price, the more commission the buyer's agent gets, on that sale and any other sales made using that as a comparable. The simple truth is that RE agents aren't faithfully representing the interests of buyers or sellers, despite holding themselves out as "agents."

The above is plainly true. This is why RE agents are essentially useless, especially on the buyer side, and the quicker people realize that, the better off everyone (other than RE agents) will be.

Nothing to add to that.

The buyer should retain legal, as a purchase agreement is a legal contract. So with a commission structure providing ~ $25,000 for purchasing fees (1,000,000 x .025 commission). We assume $500-$4000 for legal. The buyer is still +20,000. One agent reported a hourly fee of $100 (is that normal?). That means ( -legal ) the buyer is left with 200 hours of billable buyer agent time ($20,000 / $100 = 200 hours).

What does the buyers agent do for 200 hours?

Assume you find a home on Zillow, price out comparables, and assume you use legal professionals for legal contracts. What does the buyers agent do to justify 200 hours? In the normal course of things, what problems does a buyer need solved that amounts to 200 hours worth of work?

There's no need to hire buyer's realtors at all. They become extinct. The seller's realtor can show the home to prospective buyers. I stopped using buyer agents. I just call the seller's agent and they show me the house. That's how we bought our current house.

[Anonymous]

Many of not most legal practices in this area do not charge commissions to do the paperwork for a home sale/purchase. Many charge flat rates of $600 to $1000, regardless of the home’s sale price.

There is no need to pay $4000 (and certainly not $20,000 or more) to a buyer‘s agent to purchase a home. This can be an incentive to a seller particularly if it allows them to keep more of the sale proceeds.

[Anonymous]

Realtors came in as the top lobbying spenders (again) as 3rd quarter numbers released. A cool $20 million for 3 months (one of which Congress wasn’t even around)! Impressive work, cartel dogs!

[Anonymous]

Anonymous wrote:Many of not most legal practices in this area do not charge commissions to do the paperwork for a home sale/purchase. Many charge flat rates of $600 to $1000, regardless of the home’s sale price.

There is no need to pay $4000 (and certainly not $20,000 or more) to a buyer‘s agent to purchase a home. This can be an incentive to a seller particularly if it allows them to keep more of the sale proceeds.

Yea. The 4K number I was being generous.

I've always put down a 3500 retainer and always get a refund. This includes a time where the title was dirty and needed representation for that too.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The only thing that will happen if you untie the two fees is that buyers will lose free representation, and sellers will keep 2-3 percent more profit.

Sellers could take a lower price because their net would be higher. A lot of deals fall apart because the buyer and seller can't agree to price. Changing the realtor fees to 2% would get them 2-3% closer than the current 4-5% commissions.

I don't know why this is not discussed more. What is more likely to sell a home quickly? A top notch realtor or a price that is 5% under the market of the realtor-represented ones?

Also that for some reason realtors commission is on the gross and not the net. That makes no sense, nothing else I can think of is comped that way.

This. The lower price is much more likely to sell the home quickly. No seller's realtor can squeeze more money from a buyer. The most they can do is avoid hampering the deal, which unfortunately seems to happen a lot.

It is because the seller and buyer agent make more when the price is higher, and of course, the industry as a whole (where commissions are based on percentage of sales price) benefits more with higher overall prices.

It has been shown statistically that the opposite is true, and realtors overall make MUCH more with faster sales:

When she sells her own house, an agent holds out for the best offer; when she sells yours, she encourages you to take the first decent offer that comes along. Like a stockbroker churning commissions, she wants to make deals and make them fast. Why not? Her share of a better offer—$150—is too puny an incentive to encourage her to do otherwise.

https://forum.nachi.org/t/exerpt-from-freakonomics-book-regarding-real-estate-agents/56492

https://freakonomics.com/2008/02/real-estate-agents-revisited/

Indeed.

The commission scheme incentivizes frequent sales.

In addition to Levitt & Syverson, an example :

For example, if an agent expected that spending 30 extra hours would increase the selling price of a home by about $10,000, the 3 percent listing agent’s commission on that increase ($300), translating to $300/30 = $10/hour, or more likely $7/hour,[13] would hardly seem likely to motivate the agent to invest the time .

[13] Actually, both buyer and seller agents usually share their commissions with their brokers, with the agents typically retaining 70% of the commission. So here, the agent would receive 70% of the $300 = $210 for 30 hours

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3571088

There is zero real monetary incentive ($7/hour) for a seller agent to maximize returns for the seller, nor any incentive for the buyer agent to minimize price for the buyer.

Here, we are talking about a buyer's agent, who gets paid nothing if the buyer doesn't buy. The OP is talking about buying with an agent. While seller's agents might also not have the seller's interests at heart, the incentive for the buyer's agent is to get the deal done, whether it is a good deal, fair price, etc. And the higher the price, the more commission the buyer's agent gets, on that sale and any other sales made using that as a comparable. The simple truth is that RE agents aren't faithfully representing the interests of buyers or sellers, despite holding themselves out as "agents."

The above is plainly true. This is why RE agents are essentially useless, especially on the buyer side, and the quicker people realize that, the better off everyone (other than RE agents) will be.

Nothing to add to that.

The buyer should retain legal, as a purchase agreement is a legal contract. So with a commission structure providing ~ $25,000 for purchasing fees (1,000,000 x .025 commission). We assume $500-$4000 for legal. The buyer is still +20,000. One agent reported a hourly fee of $100 (is that normal?). That means ( -legal ) the buyer is left with 200 hours of billable buyer agent time ($20,000 / $100 = 200 hours).

What does the buyers agent do for 200 hours?

Assume you find a home on Zillow, price out comparables, and assume you use legal professionals for legal contracts. What does the buyers agent do to justify 200 hours? In the normal course of things, what problems does a buyer need solved that amounts to 200 hours worth of work?

There's no need to hire buyer's realtors at all. They become extinct. The seller's realtor can show the home to prospective buyers. I stopped using buyer agents. I just call the seller's agent and they show me the house. That's how we bought our current house.

Well to be fair, as some have noted, some buyers prefer an agent to walk them through the process.

There’s nothing wrong with that, of course. The Seller by default being required to offer a buyer commission for a service that may or may not be necessary or requested is the problem.

If the buyer wants to hire an uber to provide transportation to closing, fine. Hire yourself a driver.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The only thing that will happen if you untie the two fees is that buyers will lose free representation, and sellers will keep 2-3 percent more profit.

Sellers could take a lower price because their net would be higher. A lot of deals fall apart because the buyer and seller can't agree to price. Changing the realtor fees to 2% would get them 2-3% closer than the current 4-5% commissions.

I don't know why this is not discussed more. What is more likely to sell a home quickly? A top notch realtor or a price that is 5% under the market of the realtor-represented ones?

Also that for some reason realtors commission is on the gross and not the net. That makes no sense, nothing else I can think of is comped that way.

This. The lower price is much more likely to sell the home quickly. No seller's realtor can squeeze more money from a buyer. The most they can do is avoid hampering the deal, which unfortunately seems to happen a lot.

It is because the seller and buyer agent make more when the price is higher, and of course, the industry as a whole (where commissions are based on percentage of sales price) benefits more with higher overall prices.

It has been shown statistically that the opposite is true, and realtors overall make MUCH more with faster sales:

When she sells her own house, an agent holds out for the best offer; when she sells yours, she encourages you to take the first decent offer that comes along. Like a stockbroker churning commissions, she wants to make deals and make them fast. Why not? Her share of a better offer—$150—is too puny an incentive to encourage her to do otherwise.

https://forum.nachi.org/t/exerpt-from-freakonomics-book-regarding-real-estate-agents/56492

https://freakonomics.com/2008/02/real-estate-agents-revisited/

Indeed.

The commission scheme incentivizes frequent sales.

In addition to Levitt & Syverson, an example :

For example, if an agent expected that spending 30 extra hours would increase the selling price of a home by about $10,000, the 3 percent listing agent’s commission on that increase ($300), translating to $300/30 = $10/hour, or more likely $7/hour,[13] would hardly seem likely to motivate the agent to invest the time .

[13] Actually, both buyer and seller agents usually share their commissions with their brokers, with the agents typically retaining 70% of the commission. So here, the agent would receive 70% of the $300 = $210 for 30 hours

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3571088

There is zero real monetary incentive ($7/hour) for a seller agent to maximize returns for the seller, nor any incentive for the buyer agent to minimize price for the buyer.

Here, we are talking about a buyer's agent, who gets paid nothing if the buyer doesn't buy. The OP is talking about buying with an agent. While seller's agents might also not have the seller's interests at heart, the incentive for the buyer's agent is to get the deal done, whether it is a good deal, fair price, etc. And the higher the price, the more commission the buyer's agent gets, on that sale and any other sales made using that as a comparable. The simple truth is that RE agents aren't faithfully representing the interests of buyers or sellers, despite holding themselves out as "agents."

The above is plainly true. This is why RE agents are essentially useless, especially on the buyer side, and the quicker people realize that, the better off everyone (other than RE agents) will be.

Nothing to add to that.

The buyer should retain legal, as a purchase agreement is a legal contract. So with a commission structure providing ~ $25,000 for purchasing fees (1,000,000 x .025 commission). We assume $500-$4000 for legal. The buyer is still +20,000. One agent reported a hourly fee of $100 (is that normal?). That means ( -legal ) the buyer is left with 200 hours of billable buyer agent time ($20,000 / $100 = 200 hours).

What does the buyers agent do for 200 hours?

Assume you find a home on Zillow, price out comparables, and assume you use legal professionals for legal contracts. What does the buyers agent do to justify 200 hours? In the normal course of things, what problems does a buyer need solved that amounts to 200 hours worth of work?

There's no need to hire buyer's realtors at all. They become extinct. The seller's realtor can show the home to prospective buyers. I stopped using buyer agents. I just call the seller's agent and they show me the house. That's how we bought our current house.

Well to be fair, as some have noted, some buyers prefer an agent to walk them through the process.

There’s nothing wrong with that, of course. The Seller by default being required to offer a buyer commission for a service that may or may not be necessary or requested is the problem.

If the buyer wants to hire an uber to provide transportation to closing, fine. Hire yourself a driver.

I bought a house recently without a buyer's agent. The seller's agent, while making clear he could not "represent" us, helped keep the paperwork and closing moving along. He had all the incentive in the world to make sure the deal closed. I honestly am not at all clear what the buyer's agent might have done, other than slow things down. I really think that no buyer should have an agent. If you have questions that cannot be answered by the internet, pay a lawyer for a few hours of work.

The advantage to us was that the seller was willing to come down a little in price. The seller's agent made more (because he didn't have to split the commission); the seller made more because the commission percentage went down; and we paid less for the house. I will never buy another house with an agent ever again, unless it is some niche market with a lot of complexities.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The only thing that will happen if you untie the two fees is that buyers will lose free representation, and sellers will keep 2-3 percent more profit.

Sellers could take a lower price because their net would be higher. A lot of deals fall apart because the buyer and seller can't agree to price. Changing the realtor fees to 2% would get them 2-3% closer than the current 4-5% commissions.

I don't know why this is not discussed more. What is more likely to sell a home quickly? A top notch realtor or a price that is 5% under the market of the realtor-represented ones?

Also that for some reason realtors commission is on the gross and not the net. That makes no sense, nothing else I can think of is comped that way.

This. The lower price is much more likely to sell the home quickly. No seller's realtor can squeeze more money from a buyer. The most they can do is avoid hampering the deal, which unfortunately seems to happen a lot.

It is because the seller and buyer agent make more when the price is higher, and of course, the industry as a whole (where commissions are based on percentage of sales price) benefits more with higher overall prices.

It has been shown statistically that the opposite is true, and realtors overall make MUCH more with faster sales:

When she sells her own house, an agent holds out for the best offer; when she sells yours, she encourages you to take the first decent offer that comes along. Like a stockbroker churning commissions, she wants to make deals and make them fast. Why not? Her share of a better offer—$150—is too puny an incentive to encourage her to do otherwise.

https://forum.nachi.org/t/exerpt-from-freakonomics-book-regarding-real-estate-agents/56492

https://freakonomics.com/2008/02/real-estate-agents-revisited/

Indeed.

The commission scheme incentivizes frequent sales.

In addition to Levitt & Syverson, an example :

For example, if an agent expected that spending 30 extra hours would increase the selling price of a home by about $10,000, the 3 percent listing agent’s commission on that increase ($300), translating to $300/30 = $10/hour, or more likely $7/hour,[13] would hardly seem likely to motivate the agent to invest the time .

[13] Actually, both buyer and seller agents usually share their commissions with their brokers, with the agents typically retaining 70% of the commission. So here, the agent would receive 70% of the $300 = $210 for 30 hours

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3571088

There is zero real monetary incentive ($7/hour) for a seller agent to maximize returns for the seller, nor any incentive for the buyer agent to minimize price for the buyer.

Here, we are talking about a buyer's agent, who gets paid nothing if the buyer doesn't buy. The OP is talking about buying with an agent. While seller's agents might also not have the seller's interests at heart, the incentive for the buyer's agent is to get the deal done, whether it is a good deal, fair price, etc. And the higher the price, the more commission the buyer's agent gets, on that sale and any other sales made using that as a comparable. The simple truth is that RE agents aren't faithfully representing the interests of buyers or sellers, despite holding themselves out as "agents."

The above is plainly true. This is why RE agents are essentially useless, especially on the buyer side, and the quicker people realize that, the better off everyone (other than RE agents) will be.

Nothing to add to that.

The buyer should retain legal, as a purchase agreement is a legal contract. So with a commission structure providing ~ $25,000 for purchasing fees (1,000,000 x .025 commission). We assume $500-$4000 for legal. The buyer is still +20,000. One agent reported a hourly fee of $100 (is that normal?). That means ( -legal ) the buyer is left with 200 hours of billable buyer agent time ($20,000 / $100 = 200 hours).

What does the buyers agent do for 200 hours?

Assume you find a home on Zillow, price out comparables, and assume you use legal professionals for legal contracts. What does the buyers agent do to justify 200 hours? In the normal course of things, what problems does a buyer need solved that amounts to 200 hours worth of work?

There's no need to hire buyer's realtors at all. They become extinct. The seller's realtor can show the home to prospective buyers. I stopped using buyer agents. I just call the seller's agent and they show me the house. That's how we bought our current house.

Well to be fair, as some have noted, some buyers prefer an agent to walk them through the process.

There’s nothing wrong with that, of course. The Seller by default being required to offer a buyer commission for a service that may or may not be necessary or requested is the problem.

If the buyer wants to hire an uber to provide transportation to closing, fine. Hire yourself a driver.

I bought a house recently without a buyer's agent. The seller's agent, while making clear he could not "represent" us, helped keep the paperwork and closing moving along. He had all the incentive in the world to make sure the deal closed. I honestly am not at all clear what the buyer's agent might have done, other than slow things down. I really think that no buyer should have an agent. If you have questions that cannot be answered by the internet, pay a lawyer for a few hours of work.

The advantage to us was that the seller was willing to come down a little in price. The seller's agent made more (because he didn't have to split the commission); the seller made more because the commission percentage went down; and we paid less for the house. I will never buy another house with an agent ever again, unless it is some niche market with a lot of complexities.

That is certainly true, but he didn't have your interests in mind and, in fact, was legally obligated to do everything possible to ensure things were in the seller's favor. So while you were able to represent yourself, the seller had someone with experience in real estate transactions on their side. Maybe it didn't negatively affect you, but maybe it did. As for the price, it may be that the seller was willing to "rebate" some of the cost savings achieved by not having a buyer's agent on to you, but that certainly won't be true in every case. In a tight, seller-oriented market like we've had in the DMV for many years now, sellers are generally going to keep that money for themselves. In other words, the market price is the market price. Sellers will benefit financially, but I doubt that buyers will, in general.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The only thing that will happen if you untie the two fees is that buyers will lose free representation, and sellers will keep 2-3 percent more profit.

Sellers could take a lower price because their net would be higher. A lot of deals fall apart because the buyer and seller can't agree to price. Changing the realtor fees to 2% would get them 2-3% closer than the current 4-5% commissions.

I don't know why this is not discussed more. What is more likely to sell a home quickly? A top notch realtor or a price that is 5% under the market of the realtor-represented ones?

Also that for some reason realtors commission is on the gross and not the net. That makes no sense, nothing else I can think of is comped that way.

This. The lower price is much more likely to sell the home quickly. No seller's realtor can squeeze more money from a buyer. The most they can do is avoid hampering the deal, which unfortunately seems to happen a lot.

It is because the seller and buyer agent make more when the price is higher, and of course, the industry as a whole (where commissions are based on percentage of sales price) benefits more with higher overall prices.

It has been shown statistically that the opposite is true, and realtors overall make MUCH more with faster sales:

When she sells her own house, an agent holds out for the best offer; when she sells yours, she encourages you to take the first decent offer that comes along. Like a stockbroker churning commissions, she wants to make deals and make them fast. Why not? Her share of a better offer—$150—is too puny an incentive to encourage her to do otherwise.

https://forum.nachi.org/t/exerpt-from-freakonomics-book-regarding-real-estate-agents/56492

https://freakonomics.com/2008/02/real-estate-agents-revisited/

Indeed.

The commission scheme incentivizes frequent sales.

In addition to Levitt & Syverson, an example :

For example, if an agent expected that spending 30 extra hours would increase the selling price of a home by about $10,000, the 3 percent listing agent’s commission on that increase ($300), translating to $300/30 = $10/hour, or more likely $7/hour,[13] would hardly seem likely to motivate the agent to invest the time .

[13] Actually, both buyer and seller agents usually share their commissions with their brokers, with the agents typically retaining 70% of the commission. So here, the agent would receive 70% of the $300 = $210 for 30 hours

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3571088

There is zero real monetary incentive ($7/hour) for a seller agent to maximize returns for the seller, nor any incentive for the buyer agent to minimize price for the buyer.

Here, we are talking about a buyer's agent, who gets paid nothing if the buyer doesn't buy. The OP is talking about buying with an agent. While seller's agents might also not have the seller's interests at heart, the incentive for the buyer's agent is to get the deal done, whether it is a good deal, fair price, etc. And the higher the price, the more commission the buyer's agent gets, on that sale and any other sales made using that as a comparable. The simple truth is that RE agents aren't faithfully representing the interests of buyers or sellers, despite holding themselves out as "agents."

The above is plainly true. This is why RE agents are essentially useless, especially on the buyer side, and the quicker people realize that, the better off everyone (other than RE agents) will be.

Nothing to add to that.

The buyer should retain legal, as a purchase agreement is a legal contract. So with a commission structure providing ~ $25,000 for purchasing fees (1,000,000 x .025 commission). We assume $500-$4000 for legal. The buyer is still +20,000. One agent reported a hourly fee of $100 (is that normal?). That means ( -legal ) the buyer is left with 200 hours of billable buyer agent time ($20,000 / $100 = 200 hours).

What does the buyers agent do for 200 hours?

Assume you find a home on Zillow, price out comparables, and assume you use legal professionals for legal contracts. What does the buyers agent do to justify 200 hours? In the normal course of things, what problems does a buyer need solved that amounts to 200 hours worth of work?

There's no need to hire buyer's realtors at all. They become extinct. The seller's realtor can show the home to prospective buyers. I stopped using buyer agents. I just call the seller's agent and they show me the house. That's how we bought our current house.

Well to be fair, as some have noted, some buyers prefer an agent to walk them through the process.

There’s nothing wrong with that, of course. The Seller by default being required to offer a buyer commission for a service that may or may not be necessary or requested is the problem.

If the buyer wants to hire an uber to provide transportation to closing, fine. Hire yourself a driver.

I bought a house recently without a buyer's agent. The seller's agent, while making clear he could not "represent" us, helped keep the paperwork and closing moving along. He had all the incentive in the world to make sure the deal closed. I honestly am not at all clear what the buyer's agent might have done, other than slow things down. I really think that no buyer should have an agent. If you have questions that cannot be answered by the internet, pay a lawyer for a few hours of work.

The advantage to us was that the seller was willing to come down a little in price. The seller's agent made more (because he didn't have to split the commission); the seller made more because the commission percentage went down; and we paid less for the house. I will never buy another house with an agent ever again, unless it is some niche market with a lot of complexities.

We did this too. There's no real role for a buyer's agent anymore.