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A new class-action lawsuit takes aim at real estate agents and their 6% fee

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Re: A new class-action lawsuit takes aim at real estate agents and their 6% fee

#71

Post by dragonwriter »

bootlooped wrote: post #60
s_dev wrote: post #52

Earlier quoted context omitted.

It being % based means the incentives of the agent are more aligned with the seller than buyer. If the agent charged a flat fee -- the agent doesn't have incentive to negotiate a higher price.

There was a Freakanomics podcast episode or book section (I don't remember) where they asserted that the data showed realtors left their own homes on the market longer, ultimately yielding a higher sale price, when compared to homes they were selling for their clients. The reasoning they gave was that the difference in the realtor's percentage between a lower total price and a higher total price was not meaningful en…

> There was a Freakanomics podcast episode or book section (I don't remember) where they asserted that the data showed realtors left their own homes on the market longer, ultimately yielding a higher sale price, when compared to homes they were selling for their clients.

Real estate agents are more likely to plan sufficient time to maximize sale value; most people make plans with timelines where sale (or purchase; I bet you’ll find a similar issue on the other side, too) of the house is a blocker for other things before talking to an agent, so the disruption of not completing the transaction timely is significant.

Re: A new class-action lawsuit takes aim at real estate agents and their 6% fee

#72

Post by tathougies »

rplst8 wrote: post #56

I'm generally OK with commission based sales - if there are guarantees. There's very little due diligence on the part of the Realtor or real estate agent. They can't really be held responsible for anything related the to condition of the house if something was hidden or missed by a home inspector. They'll put anything on the market, and typically make suggestions to sellers that while intended to improve "curb appeal…

> Purchasing a home is always "buyer beware."

I mean, as a rule of thumb sure (because who wants to have to depend on the legal system for restitution), but not legally. Legally, the seller can't make any false representations. If you're worried about accidentally doing so, it's best to hire an agent who then takes on the responsibility for it.

Re: A new class-action lawsuit takes aim at real estate agents and their 6% fee

#73

Post by Jocund »

The 6% fee needs to end! I'm a Co-founder of a new firm in NYC who rebates 50%+ of the buyer side commission back to the buyer.

The average buyer doesn't a ton of assistance and giving them 1.5% of the purchase price back at closing just makes sense.

Re: A new class-action lawsuit takes aim at real estate agents and their 6% fee

#74

Post by kevindong »

I'm about to graduate college and move to NYC for a job. The unfortunate norm there is to pay a 15% fee (of the annual rent) to brokers to get a rental apartment. The cheapest the broker's fee gets is one month's rent, so about 8.33% of the annual rent. High end apartments sometimes pay the broker's fee on the renter's behalf [2]. Large apartment complexes sometimes have their own leasing offices, so there's no fee there either. To be clear, this is a one time fee paid when you initially move into the apartment. If you renew the lease, you don't owe another broker's fee.

Meaning if the rent on an apartment is $2,000/month = $24,000/year, the broker's fee on that would be $24,000 * 15% = $3,600. The cheaper apartment are usually owned by small landlords who use brokers to vet applicants. For those apartments, you're required to use brokers. There's no way to opt out by working with the landlord directly as the broker's fee is paid by the renter. The broker provides their services to the landlord for free.

I'm trying my absolute best to find a no fee apartment, but it pretty severely limits my options. For studio or 1 bedroom apartments under $2,500/month, there's currently 1,362 no-fee apartments [0] and 3,395 apartments at large (so, 2,033 for-fee apartments) [1].

[0]: https://streeteasy.com/for-rent/nyc/status:open%7Cprice:-250...

[1]: https://streeteasy.com/for-rent/nyc/status:open%7Cprice:-250...

[2]: https://www.brickunderground.com/blog/2015/12/in_case_you_mi...

Re: A new class-action lawsuit takes aim at real estate agents and their 6% fee

#75

Post by chrisseaton »

noneeeed wrote: post #57
andrewtbham wrote: post #2

currently, it is illegal to pay anyone a commission for selling your house except a licensed real estate agent. If you got rid of that restriction, imagine the opportunities. you could let your friends sell your house by sharing a link on social media and they could get the commission. Also in England, real estate commission fees are about 1% vs. 6% in US. As the article states, in the US a lot of agents won't show F…

Is there a significant difference between what an "estate agent" (UK) and a "realtor" (US) do? Are they more involved in the actual legal side of things (the sort of thing a conveyancing solicitor would do in the UK), or are they still just there to advertise the property and show people round? If they were doing a lot more of the legal side of things I could understand the difference, but a four or five percentage-p…

Realtor is a brand name - it's a registered trademark. The generic version is estate agent.

Re: A new class-action lawsuit takes aim at real estate agents and their 6% fee

#76

Post by chrisseaton »

Latteland wrote: post #47
bkohlmann wrote: post #19

Where you stand really depends on where you sit. My wife recently became an agent, and prior to that I was all about disrupting the industry. But I’ve come to see the 3% on each side as an almost market clearing price. It’s really hard work, with low barriers to entry, and significant upfront costs. In a tight market, being a buyers agent can be a blessing or a curse. She’s been working with one client for nearly a y…

It's not that people don't do something worthwhile. It's more a question that is it worth paying 60,000 when selling your house? It's not. At $100 an hour, do you get 600 hours out of work of them? No. It's not about market prices, because the cartel (real estate industry) prevents lowering percentages - and they fight to the death any upstart who wants to do it. It should not be a percentage, it should be a fixed ra…

> It's more a question that is it worth paying 60,000 when selling your house? It's not.

So why does anyone use them? Other people must think they bring more value than they cost. And if they're too expensive why aren't people undercutting?

Re: A new class-action lawsuit takes aim at real estate agents and their 6% fee

#77

Post by mbesto »

andrewtbham wrote: post #2

currently, it is illegal to pay anyone a commission for selling your house except a licensed real estate agent. If you got rid of that restriction, imagine the opportunities. you could let your friends sell your house by sharing a link on social media and they could get the commission. Also in England, real estate commission fees are about 1% vs. 6% in US. As the article states, in the US a lot of agents won't show F…

> Also in England, real estate commission fees are about 1% vs. 6% in US.

Also in England...stamp duty.[0] Yaaaaa....no thanks.

https://www.gov.uk/stamp-duty-land-tax/residential-property-...

Re: A new class-action lawsuit takes aim at real estate agents and their 6% fee

#78

Post by SilasX »

s_dev wrote: post #52
pseudometa wrote: post #25

It blows my mind that the fees are percentage based. The amount of work required for an agent on a 100K house is very similar to that of a 2 Mill house. Presumably the seller agent wishes to get compensation for increasing the value of the house, but for both the seller and buyer agents, the number of deals done far outweighs slight incremental selling prices. In which case, both would prefer to settle on a lower pri…

It being % based means the incentives of the agent are more aligned with the seller than buyer. If the agent charged a flat fee -- the agent doesn't have incentive to negotiate a higher price.

Maybe, but there are better options. As o nate's comment notes [1], the vast majority of their compensation comes from the house getting sold at all, and the gain from anything beyond that is weak. So they're actually incentivized to just make sure the deal happens and not go for the extra.

Edit: There's a similar issue with recruiters.

[1] https://news.ycombinator.com/item?id=19432743

Re: A new class-action lawsuit takes aim at real estate agents and their 6% fee

#79

Post by seltzered_ »

Fwiw a16z did a video on the realtor setup and ideas around interacting with companies more in the future for real estate: https://m.youtube.com/watch?v=IRPH3K1GXj0

I haven’t looked into the details of the article, but it seems interesting that the RE startups may have some shared interest in changing the 6% rule, although one could speculate their goals may be to replace an “organic monopoly” of many agents with a (scaled techno-geographic?) monopoly.

Edit: the Hahn blogpost (https://www.inman.com/2019/03/08/what-the-bombshell-buyer-si...) linked by the article posits the suit could be expanded to also involve larger RE brokerages and not just franchise orgs:

“The lawyers picked the top four largest real estate brokerages in their Complaint; I assume that they will quickly realize that RE/MAX and Keller Williams are not brokerages, but franchise companies, and will either amend the Complaint to include some other large brokerages (Howard Hanna? Compass? HomeSmart? eXp Realty?) and/or other large franchisors (Realogy brands, Exit, NextHome, etc.).

The basic claim is that the MLS rule of unilateral offer of compensation is a violation of the Sherman Antitrust Act.“

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