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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

#81

Post by windexh8er »

tathougies wrote: post #64
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…

I mean, the risk a realtor takes on 2million/100k times the risk in selling a $2mil house versus a 100k house. If the realtor makes false statements on accident, etc, they can be sued up to the total amount in consideration -- which is the price of the house. Moreover, it is likely more work to sell a $2mil home, because there are proportionately fewer buyers, which means more work in sourcing buyers, more work in re…

The reality is realtors are well protected in the sale of the home for many reasons that are defined in the legal documentation required and not in the closing process.

Given the point I'm curious now of how many individual realtors take the blame in a sale after the fact? It is generally the seller who's on the hook and is directly sued from what I've seen. Maybe this is incorrect but it's rarely the middle man stepping in to take the bullet.

In fact I have a personal example where an agency did not do due diligence on behalf of me and shifted the blame to me leaving me holding the bag of potentially being out 5 figures in a botched purchase. Not until I threatened to take legal action against both agencies (never sign arbitration BTW) did both of then come to the plate to decide on how to avoid that as both agencies had points of blame.

Regardless, even though the realtors were to blame neither of them seemed concerned and ultimately the claim was handled by the agencies at a higher level than the individuals to blame.

There is an argument of diminishing return on the value of realtors however I wouldn't paint it with such a broad stroke. That being said I do believe it's s scam that realtors in a legacy mindset are offended when negotiating their rate comes up - regardless of their work put into the sale of the home. Many flat out will not even hear the argument and seem entitled to it while being unable to defend the rationalization of.

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

#82

Post by ericmcer »

tathougies wrote: post #64
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…

I mean, the risk a realtor takes on 2million/100k times the risk in selling a $2mil house versus a 100k house. If the realtor makes false statements on accident, etc, they can be sued up to the total amount in consideration -- which is the price of the house. Moreover, it is likely more work to sell a $2mil home, because there are proportionately fewer buyers, which means more work in sourcing buyers, more work in re…

I have never had someone who has not done programming before, watch me typing into a terminal and say it looks easy. I don't think its hard or requires a huge amount of intelligence, but I think it is crazy to compare the barrier of entry for real estate to that of software engineer.

The average person would take minimum a year to go from no-skills to an actually useful independent engineer. I could literally take a crack at selling a house after a week of training and probably do alright.

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

#83

Post by pmoriarty »

nrclark wrote: post #48
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…

Agreed 100%. Realtors do legitimate work, and deserve to be compensated for sure. But I think the pay is grossly disproportionate to the amount of value provided, and it's propped up by Realtor-sponsored laws and kickbacks. A lot of Realtors won't even deal with non-Realtor(tm) real-estate agents, which promotes their monopoly stranglehold on the real-estate market. I'm not sure where I fall on what a real-estate age…

"When I bought my house, my Realtor found some good listings, arranged viewings, did the paperwork, and set everything up for me. All useful services, and worth paying for. But was it worth $12k for less than 40 hours of total work? I don't think so."

A lot depends on the realtor.

One realtor I know not only does everything you mention, but also gives their clients lots of advice (based on many decades of experience in the industry) -- for instance, telling them if the prices they're setting on their home or bidding for are likely too high or too low, or what to do with a house in order to make it more likely to be sold. How much is such advice worth -- advice that could get them the house they're dreaming of or sell the house they desperately need to sell?

They also explain everything related to real-estate in great detail, tell them about the neighborhoods they're considering, drive them around all over the place (paying for their own gas, car, maintenance and insurance), sit in with them during the closing to go over the entire contract with them and explain everything and make sure they're not getting screwed. For sellers, the agent provides free advertising, spends a ton of time sitting at open houses waiting for people to show up and then showing them around, and trying to sell them the home, etc, etc. They negotiate deals and are the buyer's or seller's representative to the other party.

All this work is done for free unless the house is sold.

Again and again, I've heard how clients take months and months of this work done for free and then switch to go to another agent, paying the agent not a single dime for all the time they spent working for them. Or they'll just change their mind and no longer want to buy or sell.

I've heard so many horror stories from them: clients are often incredibly inconsiderate, calling at all hours of the night and on weekends (this is not a 9-5 job), expecting them to work when sick, or just being super abrasive assholes or liars. Personally, I would never put up with any of that, but agents have to make ends meet, so are often forced to work with those kinds of people or starve.

Watch the movie Glengarry Glen Ross sometime. The life of a typical real estate agent really is that bad, or worse.

Real estate agents also risk their own lives doing their jobs: they routinely go alone in to empty houses with complete strangers. It's not common, but real estate agents have been assaulted, raped, or killed while showing homes. How many people think of that: that being a real estate agent is actually a dangerous profession? I didn't until I got to know an agent well and they started telling me the horror stories of what they have to go through and put up with.

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

#84

Post by sevensor »

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…

Having done several real estate transactions by now, realtors sometimes take their 3% without having to do a lot of work. But sometimes, that 3% is an absolute bargain. The way I see it, it's worth the 3% to make sure things go smoothly.

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

#85

Post by sl1ck731 »

koolba wrote: post #40
T_D_K wrote: post #23

Earlier quoted context omitted.

Having a real estate agent as a buyer can be extremely useful. Time savings: they'll actively search out properties that fit your needs, handle negotiations, schedule inspections and work with the city or county, etc. They're also experienced with all of the legal aspects, and work with mortgage and insurance companies. "Tech Bros" have a stereotype of thinking they can do everything themselves. Sometimes they should…

> Having a real estate agent as a buyer can be extremely useful. ... handle negotiations ... I'll never understand how anyone can think someone who get's paid only if you agree to a deal could have their best interests in mind. Even the seller's agent generally have perverse incentives as pushing to close a deal for $N,000 more only get's them $N,000 x %C vs. losing 100% of it if the deal does not close.

If you are working with some random real estate agent then sure. They are just going to push crap on you and hope you sign.

You should build a rapport with one you trust. Then they don't get paid until you are happy, since you aren't going to buy something you aren't happy with and they know that. It took 2 or 3 to find one that I felt was working for me. Dragged him to all 20 properties I wanted to see in a day and told him no on everything and that was that, until the one I wanted popped up. Then I let him argue with the seller about things that I wouldn't have any idea how to approach.

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

#86

Post by ak217 »

chrisseaton wrote: post #76
Latteland wrote: post #47

Earlier quoted context omitted.

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?

They are undercutting. Online brokerages like Redfin and Opendoor are challenging the 6% fee. Their success has led to the "standard" fee now being 5% in many markets, but if you use these platforms on both the seller and buyer side, you may now be able to get down to 2.5%. I expect the fees will continue to drop.

As the article points out, the realtor cartel works to de-platform individual realtors who undercut the fee by shutting them out of associations (broker networks) and in some cases removing local MLS access. By law, you have to be a licensed realtor to broker real estate sales.

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

#87

Post by pmiller2 »

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.

Then what’s wrong with buyers’ agents taking a flat fee, and sellers’ agents taking a percentage? That right there could almost cut these types of fees in half.

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

#88

Post by sevensor »

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…

> the cartel (real estate industry) prevents lowering percentages - and they fight to the death any upstart who wants to do it.

Do they? I had a realtor once who worked for 2%. Anecdotally, it didn't seem like she was being run out of town. In retrospect, I'd rather have paid 3% for a realtor who did a better job. That extra percent was not worth the months the property sat unsold.

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

#89

Post by rch »

dragonwriter wrote: post #71
bootlooped wrote: post #60

Earlier quoted context omitted.

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…

My impression is that realtors who have their own investments in a market in which they operate sometimes err on the side of overpricing even when they know listings will remain on the market longer than the seller might want. In smaller, growing markets like Colorado it even looks like cartel behavior to me, since multiple brokers follow the same strategy.

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

#90

Post by benj111 »

gnopgnip wrote: post #61
benj111 wrote: post #10

I'm from the UK where it works differently. If you're a buyer, what does the realtor do? Do they sort the legal stuff? Or are you (/seller) paying 3% to find you a house? How does the legal mechanics of this work, do realtors have an obligation to work in the interests of the person that engaged them, or the person that's paying them? Presumably its who engaged them, as they won't know who's paying them. Why then are…

In contrast to other systems used, The US system ensures the buyers are able to make a competitive offer without forgoing representation(because the buyers agent is paid for even if the buyers are unrepresented), and that almost all transactions have both the buyer and seller represented by separate agents. If the buyer is unrepresented, the listing agent is in practice representing them, and the seller still pays 5-…

You seem positive about the situation?

As a point of reference in the UK it's around 1% commission to sell your house, they do the marketing, including on a variety of websites.

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