Biden admin going after realtors!

[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:

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.

Buyer's agents look out for themselves. Why are you grasping at straws to justify keeping buyer's agents?

Not that respondent, but to be fair some buyers want a walk through the process.

~12K on a 500K purchase is an expensive walk but, you do you with your money.

The seller's agent can walk them through the process. NAR has overcomplicated this. There are just a few options for the buyer to select from: price, inspection contingency, financing contingency, closing date, and down payment. I don't understand why anyone would pay for a realtor or even a separate real estate attorney (not settlement attorney) to walk you through this on a standard contract to buy a home.

This point has been made upthread a few times, but its worth reiterating. The seller's agent represents the seller, not the buyer. Why would you want this person to "walk you through the process?" The do not (and are not permitted to) look out for the buyer's interests. All of those choices the buyer makes in putting together the offer have (potential) consequential effects down the road. Many people don't want them explained by someone who is representing someone whose interests are not aligned with (and sometimes completely opposed to) their own.

The buyer's options are not that complicated in most transactions. There is the price, time to close, basically three contingencies, and possibly some sort of rent back. It is all easy to figure out. The only somewhat complicated part of the transaction is lining up all the closing documents/people so that it closes on time. The seller's agent will absolutely help make sure that happens.

Aside from all of that, as has been said many times, the buyer's agent isn't really representing the interests of the buyer. In theory, he/she should be. But the financial and other professional incentives make it so that the buyer wants to close the deal, maintain a good relationship with the seller's agent, and keep prices as high as possible. Buyer's agents are at best neutral, and at worst harmful. I would rather have a discount on the price and do it myself.

[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:

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.

Buyer's agents look out for themselves. Why are you grasping at straws to justify keeping buyer's agents?

Not that respondent, but to be fair some buyers want a walk through the process.

~12K on a 500K purchase is an expensive walk but, you do you with your money.

The seller's agent can walk them through the process. NAR has overcomplicated this. There are just a few options for the buyer to select from: price, inspection contingency, financing contingency, closing date, and down payment. I don't understand why anyone would pay for a realtor or even a separate real estate attorney (not settlement attorney) to walk you through this on a standard contract to buy a home.

This point has been made upthread a few times, but its worth reiterating. The seller's agent represents the seller, not the buyer. Why would you want this person to "walk you through the process?" The do not (and are not permitted to) look out for the buyer's interests. All of those choices the buyer makes in putting together the offer have (potential) consequential effects down the road. Many people don't want them explained by someone who is representing someone whose interests are not aligned with (and sometimes completely opposed to) their own.

The buyer's options are not that complicated in most transactions. There is the price, time to close, basically three contingencies, and possibly some sort of rent back. It is all easy to figure out. The only somewhat complicated part of the transaction is lining up all the closing documents/people so that it closes on time. The seller's agent will absolutely help make sure that happens.

Aside from all of that, as has been said many times, the buyer's agent isn't really representing the interests of the buyer. In theory, he/she should be. But the financial and other professional incentives make it so that the buyer wants to close the deal, maintain a good relationship with the seller's agent, and keep prices as high as possible. Buyer's agents are at best neutral, and at worst harmful. I would rather have a discount on the price and do it myself.

If you want to do it yourself, have at it. But not everyone wants to or is comfortable doing so. Moreover, at a fundamental level, the buyer's goal (buying a house) and the agents financial incentive are completely aligned.

[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:

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.

Buyer's agents look out for themselves. Why are you grasping at straws to justify keeping buyer's agents?

Not that respondent, but to be fair some buyers want a walk through the process.

~12K on a 500K purchase is an expensive walk but, you do you with your money.

The seller's agent can walk them through the process. NAR has overcomplicated this. There are just a few options for the buyer to select from: price, inspection contingency, financing contingency, closing date, and down payment. I don't understand why anyone would pay for a realtor or even a separate real estate attorney (not settlement attorney) to walk you through this on a standard contract to buy a home.

This point has been made upthread a few times, but its worth reiterating. The seller's agent represents the seller, not the buyer. Why would you want this person to "walk you through the process?" The do not (and are not permitted to) look out for the buyer's interests. All of those choices the buyer makes in putting together the offer have (potential) consequential effects down the road. Many people don't want them explained by someone who is representing someone whose interests are not aligned with (and sometimes completely opposed to) their own.

The buyer's options are not that complicated in most transactions. There is the price, time to close, basically three contingencies, and possibly some sort of rent back. It is all easy to figure out. The only somewhat complicated part of the transaction is lining up all the closing documents/people so that it closes on time. The seller's agent will absolutely help make sure that happens.

Aside from all of that, as has been said many times, the buyer's agent isn't really representing the interests of the buyer. In theory, he/she should be. But the financial and other professional incentives make it so that the buyer wants to close the deal, maintain a good relationship with the seller's agent, and keep prices as high as possible. Buyer's agents are at best neutral, and at worst harmful. I would rather have a discount on the price and do it myself.

If you want to do it yourself, have at it. But not everyone wants to or is comfortable doing so. Moreover, at a fundamental level, the buyer's goal (buying a house) and the agents financial incentive are completely aligned.

If you define the goal as simply buying a house, then sure. But that’s either ignorant or dishonest. Buyers want to pay as little as possible for as good a house in as desirable a location as they can find, while avoiding potentially ruinous issues with the house or finances, such as buying a house with big problems or overpaying. If you look at the goals honestly, you can see why the buyers’ agents’ goals are not aligned.

[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:

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.

Buyer's agents look out for themselves. Why are you grasping at straws to justify keeping buyer's agents?

Not that respondent, but to be fair some buyers want a walk through the process.

~12K on a 500K purchase is an expensive walk but, you do you with your money.

The seller's agent can walk them through the process. NAR has overcomplicated this. There are just a few options for the buyer to select from: price, inspection contingency, financing contingency, closing date, and down payment. I don't understand why anyone would pay for a realtor or even a separate real estate attorney (not settlement attorney) to walk you through this on a standard contract to buy a home.

This point has been made upthread a few times, but its worth reiterating. The seller's agent represents the seller, not the buyer. Why would you want this person to "walk you through the process?" The do not (and are not permitted to) look out for the buyer's interests. All of those choices the buyer makes in putting together the offer have (potential) consequential effects down the road. Many people don't want them explained by someone who is representing someone whose interests are not aligned with (and sometimes completely opposed to) their own.

The buyer's options are not that complicated in most transactions. There is the price, time to close, basically three contingencies, and possibly some sort of rent back. It is all easy to figure out. The only somewhat complicated part of the transaction is lining up all the closing documents/people so that it closes on time. The seller's agent will absolutely help make sure that happens.

Aside from all of that, as has been said many times, the buyer's agent isn't really representing the interests of the buyer. In theory, he/she should be. But the financial and other professional incentives make it so that the buyer wants to close the deal, maintain a good relationship with the seller's agent, and keep prices as high as possible. Buyer's agents are at best neutral, and at worst harmful. I would rather have a discount on the price and do it myself.

If you want to do it yourself, have at it. But not everyone wants to or is comfortable doing so. Moreover, at a fundamental level, the buyer's goal (buying a house) and the agents financial incentive are completely aligned.

If you define the goal as simply buying a house, then sure. But that’s either ignorant or dishonest. Buyers want to pay as little as possible for as good a house in as desirable a location as they can find, while avoiding potentially ruinous issues with the house or finances, such as buying a house with big problems or overpaying. If you look at the goals honestly, you can see why the buyers’ agents’ goals are not aligned.

Like any other profession, a real estate agent's long term prosperity is tied to their professional reputation. Therefore, doing a good job for their clients is an important part of what the agent needs to do. Therefore, an agent will want to take the factors you outlined above into account on their client's behalf. Are there bad agents/bad apples out there? Of course. But that is true for any profession. A electrician just wants to sell their services. Does he or she care that they do a good job for a fair price? The good ones/non-crooks do.

[Anonymous]

Moreover, at a fundamental level, the buyer's goal (buying a house) and the agents financial incentive are completely aligned.

Nonsense.

Incentives are "completely aligned" when the buyer agent's financial gain and negotiated price are inversely related. The opposite is true.

[Anonymous]

Like any other profession, a real estate agent's long term prosperity is tied to their professional reputation.

And unlike any other profession, the buyer side incentive to drive down price is not directly related to negotiator compensation.

Therefore, doing a good job for their clients is an important part of what the agent needs to do. Therefore, an agent will want to take the factors you outlined above into account on their client's behalf. Are there bad agents/bad apples out there? Of course. But that is true for any profession. A electrician just wants to sell their services. Does he or she care that they do a good job for a fair price? The good ones/non-crooks do.

We’re talking about an incentive structure where the buyer negotiator is compensated for a higher sales price: that benefits the seller, not the buyer.

The existence of agents who want to “do a good job” does not change the underlying incentive structure that does not align with the buyer’s interests.

[Anonymous]

One reason it's obvious that buyers' agents do not transparently work on behalf of buyer's interests is the existence of "credits" to entice buyers, as opposed to simply lowering the price. Why would a seller offer a 5k credit to a buyer instead of simply lowering the price of the home 5k? Because the buyer's agent is disadvantaged by a reduced sale price. So in order to keep the buyer's agent (the real "client" in most home sale transactions) happy, the seller will simply give money to the buyer rather than adjust the price. And this has a follow on effect because when home sale prices are disclosed publicly, they don't include credits, which then impacts the perceived value of other homes on the market. It all accrues to the benefit of both sellers and real estate agents (both sides) but never to the buyer.

[Anonymous]

Anonymous wrote:One reason it's obvious that buyers' agents do not transparently work on behalf of buyer's interests is the existence of "credits" to entice buyers, as opposed to simply lowering the price. Why would a seller offer a 5k credit to a buyer instead of simply lowering the price of the home 5k? Because the buyer's agent is disadvantaged by a reduced sale price. So in order to keep the buyer's agent (the real "client" in most home sale transactions) happy, the seller will simply give money to the buyer rather than adjust the price. And this has a follow on effect because when home sale prices are disclosed publicly, they don't include credits, which then impacts the perceived value of other homes on the market. It all accrues to the benefit of both sellers and real estate agents (both sides) but never to the buyer.

First, the existence of "credits" or "buyer subsidies" is available. Second, the reason for their use is often that the buyer needs a certain amount of cash, and so lowering the price doesn't really help them, since all of their money is borrowed. The "credit" can be used for closing costs, etc. In effect, it allows the buyer to finance some of the costs associated with a home purchase.

[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.

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.

Meh, I had an argument with Stephen Dubner at the Cosmos Club that his economist co-author of "Freakonomics" was wrong about his assertion that real estate agents got more money for their own houses because they kept them on the market longer. This was based on economist Steven Levitt's experience in selling his own home. The reality is that agents get more money for their home because -- unlike Levitt -- they know how to prepare their homes for the market and price them correctly. I also shot down to great applause Dubner and Levitt's argument that real estate agents are like the Klu Klux Klan.

Diddle around with your economics. I know what I am doing and know how to make money.

[Anonymous]

Anonymous wrote:Meh, I had an argument with Stephen Dubner at the Cosmos Club that his economist co-author of "Freakonomics" was wrong about his assertion that real estate agents got more money for their own houses because they kept them on the market longer. This was based on economist Steven Levitt's experience in selling his own home. The reality is that agents get more money for their home because -- unlike Levitt -- they know how to prepare their homes for the market and price them correctly. I also shot down to great applause Dubner and Levitt's argument that real estate agents are like the Klu Klux Klan.

Diddle around with your economics. I know what I am doing and know how to make money.

[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.

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.

Meh, I had an argument with Stephen Dubner at the Cosmos Club that his economist co-author of "Freakonomics" was wrong about his assertion that real estate agents got more money for their own houses because they kept them on the market longer. This was based on economist Steven Levitt's experience in selling his own home. The reality is that agents get more money for their home because -- unlike Levitt -- they know how to prepare their homes for the market and price them correctly. I also shot down to great applause Dubner and Levitt's argument that real estate agents are like the Klu Klux Klan.

Diddle around with your economics. I know what I am doing and know how to make money.

Wasn't the theory not that agents got more money, but that they kept them on the market longer as well? The conclusion being that an agent would rather hold out for more money when they were not only going on commission?

I am dying laughing at you saying there was "great applause."

[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.

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.

Meh, I had an argument with Stephen Dubner at the Cosmos Club that his economist co-author of "Freakonomics" was wrong about his assertion that real estate agents got more money for their own houses because they kept them on the market longer. This was based on economist Steven Levitt's experience in selling his own home. The reality is that agents get more money for their home because -- unlike Levitt -- they know how to prepare their homes for the market and price them correctly. I also shot down to great applause Dubner and Levitt's argument that real estate agents are like the Klu Klux Klan.

Diddle around with your economics. I know what I am doing and know how to make money.

Wasn't the theory not that agents got more money, but that they kept them on the market longer as well? The conclusion being that an agent would rather hold out for more money when they were not only going on commission?

I am dying laughing at you saying there was "great applause."

LOL. Who knew the Cosmos Club consisted mostly of realtors who overheard pp?

[Anonymous]

Anonymous wrote:

Anonymous wrote:Meh, I had an argument with Stephen Dubner at the Cosmos Club that his economist co-author of "Freakonomics" was wrong about his assertion that real estate agents got more money for their own houses because they kept them on the market longer. This was based on economist Steven Levitt's experience in selling his own home. The reality is that agents get more money for their home because -- unlike Levitt -- they know how to prepare their homes for the market and price them correctly. I also shot down to great applause Dubner and Levitt's argument that real estate agents are like the Klu Klux Klan.

Diddle around with your economics. I know what I am doing and know how to make money.

I don't believe alleged adults who use gifs instead of their words.

[Anonymous]

I don't believe alleged adults who use gifs instead of their words.

That is adorable.

[Anonymous]

this Is long time coming and commission need to be cut down to 1-2% like any other developed country. I don't see what agents do to get such a high commission.