Why do we need a real estate agent?

[Anonymous]

Anonymous wrote:Besides, why would you pay for a RE Atty out of your pocket?

Because real estate attorneys actually provide value and protection to a buyer that is roughly proportionate with the cost. Agents do not come close. 3% on 1.3 million is almost $40,000. Having someone search MLS so that you don't need to log into redfin and getting driven around in their SUV is not worth close to that much. The reason people are somewhat accepting of this fee is because they mistakenly think money is relative, not absolute, and that "if I'm spending $1.3 million on a house, what's another $39,000 on an agent?" That makes no sense, because from an economic perspective, overpaying by $39,000 on a house is exactly the same as overpaying for $39,000 on a can of diet coke. Either way, you're out the same amount of money.

Real estate agents might be worth their keep if they significantly reduced the risk you faced in purchasing a property. But they don't. Real estate attorneys do a much better job of that at a fraction of the price (and, as a bonus, are bound by ethical rules that agents are not).

And agents might also earn their keep if having them around decreased your purchase price by 3%, but there's no evidence they do, nor do they even have the same incentive to negotiate as you do, because they actually lose money if they get an additional reduction in the sale price. Their primary concern is making sure the sale happens at some price point, so they will always err on the side of telling you to be safe and accept an offer over pushing for additional concessions and losing the house.

[Anonymous]

Anonymous wrote:I think it totally depends on the agent. My agent didn't provide comps or information that I didn't already had from the internet and her bid recommendation was just pushing us to bid the max every time without even considering the neighborhood (i.e., overbidding in locations with no bidding wars). Ultimately, while she knew lenders, etc. they weren't necessarily the best referrals - just people she worked with. If you have a bad agent, you are just paying a lot of money to fill out a contract and you might as well go with redfin or some other arrangement.

Now, if I had an agent like PP, I would have said that the agent was worth every penny. There were two houses on my block that were sold before the open house so I have to imagine there were agents plugged in and getting their clients an advanced look. Maybe talk to a few agents to see what they can offer and not go exclusive right away.

Same experience here.

[Anonymous]

Redfin does not have experienced agents. It is fine to look at their open register where they list the opens but to purchase your most important investment why would you not have very experienced representation? I see this every day, as a broker with 30 plus years of experienced. Believe me, no different than any other profession with the upper 20%. I am not talking about the 80% who do not know. I am speaking about the 20% who are experienced. I also see contracts which are written by "lawyers" because they think they do not need agents. These contracts have the biggest suits, since the "lawyers" do not know the ins and outs of the profession, and certainly do not know the forms. If every t is not crossed and every I dotted, you have nothing

[Anonymous]

ps. to the poster who spoke of an attorney who "is bound by ethics, etc" Guess what, realtors have code of ethics, and more laws over them than just about any profession. They do not know what they are talking about.

[Anonymous]

Anonymous wrote:Redfin does not have experienced agents. It is fine to look at their open register where they list the opens but to purchase your most important investment why would you not have very experienced representation? I see this every day, as a broker with 30 plus years of experienced. Believe me, no different than any other profession with the upper 20%. I am not talking about the 80% who do not know. I am speaking about the 20% who are experienced. I also see contracts which are written by "lawyers" because they think they do not need agents. These contracts have the biggest suits, since the "lawyers" do not know the ins and outs of the profession, and certainly do not know the forms. If every t is not crossed and every I dotted, you have nothing

Most real estate attorneys practice real estate full time, so they know the profession as well as lawyers. And most realtors print out a bunch of forms that the realty company updates in a central location. Your post just reads like scare tactics.

I also think its a little odd that a lot of the same people who preach the importance of realtors are very concerned about having financial planners that are fee only. A free financial planner affiliated with a financial institution has a much smaller conflict of interest than a for-commission buyer's agent. The entirety of a buyer's agent's fee is contingent on the buyer paying as much as possible! A lawyer would be disbarred for using a similar fee structure.

[Anonymous]

Anonymous wrote:ps. to the poster who spoke of an attorney who "is bound by ethics, etc" Guess what, realtors have code of ethics, and more laws over them than just about any profession. They do not know what they are talking about.

These laws are pushed through by real estate companies and do not protect customers. Let's start with two examples:

1. Buyer's agents make more money the less successful they are at negotiating down the sale price.

2. It is legal for the buyer's agent and seller's agent to work for the same company.

A lawyer would be disbarred for doing either of these things.

[Anonymous]

I think the reason most people, myself included, do not usually trust realtors is that there is too much "back scratching" in the industry.

That is, they use inspectors, finance, legal and other professionals that they work with, sometimes on a rotating basis. I'm not saying it is good or bad, but it can become corrupt. I have bought several houses and watched it in action. Truth be told, if I were to do it again, I would be tempted to use my own attorney, and leave the realtor out of it. 6% is high, especially if you do much of the footwork yourself. Now if they earn it, that is another story altogether.

ITA with what PP said about the FSBO sellers being cheap, consequently not keeping up the property as well. Very accurate.

[Anonymous]

I agree that virtually every FSBO listing I see seems facially overpriced.

[Anonymous]

Anonymous wrote:You don't. We bought 2 houses in very competitive local markets (mulit-bid situations 2004 and 2009) and did not use one. We did our homework.

And yet, you haven't said what you got out of that. Which is presumably nothing.

[Anonymous]

Anonymous wrote:This is a genuine question from a first-time home buyer. We are considering buying a home, and DH is adamant that he doesn't want to use an agent because he begrudges the fee. I have a feeling there are things we don't know about that a realtor would help us with, but I'm also uneasy at the dollar amount (we're looking in the $1.3 million range, so the commission seems like a lot of money to us when we think about it in dollars). We're looking in a very specific neighborhood that we're pretty familiar with, and I've been eyeing the market in this neighborhood for a long time. So I don't need help finding a place or determining what a reasonable offer price would be for any houses that we like. Occasionally we look at houses that are "for sale by owner," so in those instances the seller wouldn't have an agent either. (If that's right, and if we did have an agent, then would the agent get the entire 6% commission to herself, or would she just get 3%?)

What can an agent do for us that, say, a real estate lawyer could not? I'm assuming a lawyer would be cheaper because she'd get paid by the hour, so reviewing/drafting whatever documents are needed and...I'm not sure what else.

Thanks for any input. This is absolutely nothing against real estate agents. I don't want to screw this up, but I also don't want to pay extra if we don't have to, just like I understand when new clients come to me and want to save money if possible. I don't take it personally!

I am a real estate agent and I encourage you to follow your husband's advice. Have a real estate lawyer prepare the documents for you. You can arrange with the listing agent to see any houses and then have the lawyer prepare the documents for you. The listing agent can negotiate the offer directly with you. You can arrange for the inspections, financing and settlement agent if you are not using the lawyer to handle the settlement. It is a fairly simple process to buy a house

[Anonymous]

Anonymous wrote:

Anonymous wrote:This is a genuine question from a first-time home buyer. We are considering buying a home, and DH is adamant that he doesn't want to use an agent because he begrudges the fee. I have a feeling there are things we don't know about that a realtor would help us with, but I'm also uneasy at the dollar amount (we're looking in the $1.3 million range, so the commission seems like a lot of money to us when we think about it in dollars). We're looking in a very specific neighborhood that we're pretty familiar with, and I've been eyeing the market in this neighborhood for a long time. So I don't need help finding a place or determining what a reasonable offer price would be for any houses that we like. Occasionally we look at houses that are "for sale by owner," so in those instances the seller wouldn't have an agent either. (If that's right, and if we did have an agent, then would the agent get the entire 6% commission to herself, or would she just get 3%?)

What can an agent do for us that, say, a real estate lawyer could not? I'm assuming a lawyer would be cheaper because she'd get paid by the hour, so reviewing/drafting whatever documents are needed and...I'm not sure what else.

Thanks for any input. This is absolutely nothing against real estate agents. I don't want to screw this up, but I also don't want to pay extra if we don't have to, just like I understand when new clients come to me and want to save money if possible. I don't take it personally!

I am a real estate agent and I encourage you to follow your husband's advice. Have a real estate lawyer prepare the documents for you. You can arrange with the listing agent to see any houses and then have the lawyer prepare the documents for you. The listing agent can negotiate the offer directly with you. You can arrange for the inspections, financing and settlement agent if you are not using the lawyer to handle the settlement. It is a fairly simple process to buy a house

And you'd be willing to provide the buyers with 50% of your commission if they do this, correct?

[Anonymous]

Anonymous wrote:

Anonymous wrote:Agents are exceptionally useless and poorly regulated, and you can certainly get the selling agent to return some of the fee if the alternative is not making the sale. (If you had an agent, the seller's agent would get only 3%, so it is massively in the selling agent's interest to give you 2% back then to sell to a buyer with an agent).

With that being said, you're a first time homebuyer buying at a high price point. I would consider at least using redrin, or using a normal realtor and squeezing him or her on the commission.

This is idiotic advice. As a buyer you have no say in the seller's commission, although it would be fun to see the seller's agent laugh at the suggestion.

That said, using redfine or asking a buyers agent to rebate some of their commission is fine. But with all things, you get what you pay for, so you may end up paying more for a home in order to "save" $1,000 or less on a commission.

+1. especially in this market. in a buyer's market, when a house can sit a long time with no offers, I can see a seller's agent accept to lower the commission to make a sale happen (but I wonder if this would be convenient for a buyer, maybe the house is sitting on the market because it is overpriced or has other problems, so is the buyer going to benefit? - we got our home for 50K less than the original asking price, after it had been on the market ofr a month an a half in a desirable neighborhood in 2010 - getting 1% or 2% from the seller's agent would not have helped us as much as our agent's advice in getting the price down so much)

in a seller's market like the one in DC today, even in OP's price point, this is laughable. homes sell with multiple offers within days of listing. try call an agent busy reviewing offers with the seller and tell her you are ready to pay $1.3M but need her to get up and open teh door of the home because you do not have an agent, and you will see the answer. there was a thread a while ago by an OP who was an attorney about this exact scenario. he kept saying that he had money and was a serious buyer but that seller's agents would not even return his calls to set up an apt to see homes. some sellers responded to him and told him plainly that the market was in their favor and that would not want their agents to waste time with random buyers. when you have 5 serious offers, some with no contingencies (a friend lost a $900K home to a cash offer with no contingencies last spring), you do not waste time with a random guy who does not even bother getting an agent.

if the market cools down, maybe it will be easier going solo. but at OP's price point, and given her lack of experience, I would not go solo, she is risking to make expensive mistake in exchange of no gains (or minimal gains)

[Anonymous]

Anonymous wrote:

Anonymous wrote:Besides, why would you pay for a RE Atty out of your pocket?

Because real estate attorneys actually provide value and protection to a buyer that is roughly proportionate with the cost. Agents do not come close. 3% on 1.3 million is almost $40,000. Having someone search MLS so that you don't need to log into redfin and getting driven around in their SUV is not worth close to that much. The reason people are somewhat accepting of this fee is because they mistakenly think money is relative, not absolute, and that "if I'm spending $1.3 million on a house, what's another $39,000 on an agent?" That makes no sense, because from an economic perspective, overpaying by $39,000 on a house is exactly the same as overpaying for $39,000 on a can of diet coke. Either way, you're out the same amount of money.

Real estate agents might be worth their keep if they significantly reduced the risk you faced in purchasing a property. But they don't. Real estate attorneys do a much better job of that at a fraction of the price (and, as a bonus, are bound by ethical rules that agents are not).

And agents might also earn their keep if having them around decreased your purchase price by 3%, but there's no evidence they do, nor do they even have the same incentive to negotiate as you do, because they actually lose money if they get an additional reduction in the sale price. Their primary concern is making sure the sale happens at some price point, so they will always err on the side of telling you to be safe and accept an offer over pushing for additional concessions and losing the house.

you are mistakenly assuming that by going without an agent a buyer would save the $39K of commission. but the reality is that by going without an agent, the buyer would still pay $1.3M on the house and the seller's agent would pocket the entire 6% or 5% commission. so the buyer would not save anything, and go unrepresented. what's the advantage?

[Anonymous]

The assertion that the agent would be able to pocket all of the commission makes no economic sense to any party involved. I agree with PPs that you probably need an agent just to (literally) get through the door to the property. By the time you have presented the best offer, you have more room to get money back.

Anyhow, I think its sad that the best arguments advanced in favor of paying a real estate agent a massive commission so far are: (1) You can't conclusively prove you are personally harmed by doing so; and (2) agents will ignore you and prioritize other people who are using agents. What a terrible, entrenched industry. It makes about as much sense as a midevil guild system.

[Anonymous]

We used I-agent, won a bidding war in a competitive environment and received a rebate of over $18k.

The I-agent realtor was younger, more full of energy, really fought for us and did everything with automated tools that allowed us to docusign so that we didn't have to resign any changes we wanted. It was awesome because we got to modify the terms exactly how we wanted it without fearing of the hassle with signing and recscsanning etc...

My last 3 real estate transactions have been with rebate realtors and I have never had an issue. You just need to be the type that knows what they want, can do your own research.