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Zillow CEO: startups trying to disrupt real estate commissions will fail (2012)

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Re: Zillow CEO: startups trying to disrupt real estate commissions will fail (2012)

#251
post #169

As a realtor for the past 6 years I can say a couple of quick things as to why I don't see the real estate industry going anywhere, even though I think that real estate brokers are extremely overpaid. - selling your house, at the end of the day, is quite the undertaking. A lot goes into it, it can get emotional, messy, and sometimes quite complicated. Having someone that does it on a daily basis can be nice and reall…

Expecting 3%/$30,000 k for being "someone that smoothes things out" on a sale of, let's say a $1M home in CA, is theft.

It's not 3% for every price range. For example, $1 M price ranges pay way less.

Re: Zillow CEO: startups trying to disrupt real estate commissions will fail (2012)

#252

Just to add another perspective: I recently bought an apartment in NYC without using a broker. One common argument for buyer's brokers is that they don't cost the buyer anything: the seller pays for their commission. If I were buying a $1M apartment, the seller would pay $30,000 (3%) of that to my broker. Alternatively, I could not use a broker and instead negotiate the price I pay to $970k (basically what I ended up…

Let us know in a few years if everything worked out alright.

Re: Zillow CEO: startups trying to disrupt real estate commissions will fail (2012)

#254
Weird/unrelated anecdote: Nobody in Greece uses realtors.

I can't remember the exact historical reasoning, but it starts with the Ottomans. The Ottomans controlled the Greeks since about 1453, and when they were finally overthrown after the Greek War of Independence, there began about 120 years of political turmoil until the end of the Greek Civil War.

So, post-civil war time. Tons of people are in exile, the country is torn by rival factions, and everything is in an even worse state than when the Germans occupied it. After hundreds of years of being occupied by foreign powers, there isn't really a clear indication of who owns what piece of property. Most of what you went by was "Well, somebody in my family used to own it." Cool.

When it comes time to buying or selling property, there aren't really well defined "properties" per-se, or even a market for them. Somebody might just come up to you and tell you somebody else wants to buy your land, and if you just give them some cash up front, they'll get you a really good deal. So you give them some cash, and either they never return, or they come back with a really horrible deal. If they claim they're going to help you with the legal paperwork, they'll almost definitely sabotage it.

Today, if somebody tries to help buy or sell a home in Greece, the average Greek will think they're a grifter trying to make a quick buck. To make matters more difficult, apparently there's been multiple confusing ways of legally registering and searching properties, and the red tape involved with completing the title transfer is crazy.

So there's very few registered realtors in Greece, and basically nobody uses or trusts them. Meanwhile, the country is fucking stunning and there's abandoned property all over the place that nobody can shift. An ocean front property in the Peloponnese can go for a hundred grand. But good luck finding it or having any help in acquiring it, because they're all FSBOs that pin an advertisement on a telephone pole in the nearest city.

Re: Zillow CEO: startups trying to disrupt real estate commissions will fail (2012)

#255

Earlier quoted context omitted.

While the inspector recommended by your agent might be fine, there is an implied incentive/bias for the inspector to help close the sale; The recommending agent is a marketing arm for the inspector; if the wrong deal falls apart because of the inspection, the inspector knows the agent isn't going to get their commission, whether or not that means they'll recommend them with as much fervor the next time can be largely…

The flaw here is in thinking just because you find an inspector on your own that makes a difference in incentives. Who do you think the inspector has the most incentive to impress? The buyer whom they most likely will never see again or the agent who can potentially provide more and more clients?

This is my point in the last paragraph; you should ideally never let them meet.

Re: Zillow CEO: startups trying to disrupt real estate commissions will fail (2012)

#257

Earlier quoted context omitted.

Sounds like software engineering today.

Where most engineering interns are probably paid more than the median national household income? Where starting salaries are in the 6 digits?

Only in Tech Hubs like NYC or SV...

Re: Zillow CEO: startups trying to disrupt real estate commissions will fail (2012)

#258
We ended up paying a total commission of 1.5% selling our house in Cupertino, CA, but that was a special situation. The listing agent agreed to accept a 1.5% commission, as the house sold itself - more easily than we expected. (We got 21 offers at or above asking, in a week.) The buyer was also an agent, so she offered to buy without a commission (which effectively added 3% to her bid). I did a lot of work on the selling side: taking pictures, writing the description for the MLS, helping to show the house, including two very busy open houses, negotiating. The house was an as-is tear-down, so there was no staging, just a little bit of tidying up. (Some of the interested buyers wanted to live there, though I warned they they would need to budget for repairs.)

Re: Zillow CEO: startups trying to disrupt real estate commissions will fail (2012)

#259
post #60

Earlier quoted context omitted.

Frankly, if you're worried about 3% on the purchase price of the house, you can't afford that house, regardless of the amount of money. Particularly in expensive markets in the Bay Area, the real estate agent is there to tell you when you're being stupid - unrealistic with your demands (under or _over_ paying) and keeping you from stomping away in a huff during the stressful negotiations. This is buying and selling t…

I think this is pretty misguided. 3% of $100,000 is $3,000. Many housing purchases will be more than that, but let's just talk over $3k. Some people will be very comfortable with dealing with negotiations, pricing their house (the quasi-ethical can even talk to a few realtors before hand to get their opinion), and doing the paper legwork. Just because someone chooses to use their time and effort rather than forking o…

In the Bay Area, you're looking at 3% of at least $1 million.

Your annual property taxes (In San Jose) on that USD$1m will be on the order of $14,000. Your mortgage payment with a 10% mortgage will be another $4,255/month. That's $65,000/yr just to hold the house, with insurance adding another $3k (earthquake insurance!). Don't forget a maintenance budget of 1%/yr!

Additionally, you're going to be spending ~$8,500 in tax and fees just to close.

To repeat, if 3% is going to make or break your ability to buy the house, you can not afford that house. Imagine what happens when it drops 10% in value? What happens if it drops 10% in value, you need to move and market rents don't cover your mortgage[1]? The Bay Area has 30% swings from peak to trough, 10% is (slightly exaggerating) the peak to trough swing in a single year.

I never said that people who chose to go without an agent were stupid. I said agents were there to keep you from making stupid mistakes - but that was my experience. I had no concept of what the prices were in the area, or how to deal with selling agents who didn't want to close. The agent talked my partner down off the ledge a couple of times.

However, that doesn't mean that other people shouldn't consider managing their own purchase or sale. My comment was purely around the statement that saving 3% would allow you to buy a home.

[1] SF rent - https://medium.com/@mccannatron/1979-to-2015-average-rent-in...

Re: Zillow CEO: startups trying to disrupt real estate commissions will fail (2012)

#260
post #20

Yeah and startups that tried to disrupt filing taxes failed... Turbotax has kept me from paying an accountant a commission to do my taxes for years. Someone will figure out how to streamline the process online.

Yet, Intuit is one of the largest lobbyists against simplification of the tax code. https://www.propublica.org/article/filing-taxes-could-be-fre...

Which is why I've chosen cheaper alteratives to TurboTax - plus that I'm a cheapskate. Last year I used CreditKarma - free for both federal and state (CA) filing. I will almost certainly do the same this year.

I. pretty sure I can do a better job that some underpaid dude at H&R Block.

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