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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

#151

Post by Justin_K »

om3n wrote: post #146

I'm a software engineer, and I started my career at a well known mortgage company in Detroit. Views are my own, BTW. I bought a house a couple years after I started working there, and I wanted the full home-purchaser experience. I used my company's services for everything, and as an employee they hooked me up with a real estate agent (among other things). I was honestly appalled at what little my real estate agent di…

She was hostile because a real estate agent's approach is to black ball any for sale by owner listing, or any for sale by Redfin / Zillow, etc. Agents around my area always blackball these listings and will NOT tell buyers about these listings unless buyers specifically ask. This is nonsense and not in favor of buyers and is an attempt to bring failure to reform. Fortunately, more and more buyers are realizing they can do the research themselves online.

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

#152

Post by lallysingh »

siggen wrote: post #37
jayess wrote: post #4

Earlier quoted context omitted.

This is a state-level law. And real estate agent lobbying is extremely powerful. I don't see it changing any time soon.

The issue is more complex and nuanced than simply paying agents 6% commission and feeling you did not get your money's worth. One could argue that a lot of buyers agents and sellers agents are horrible at their jobs. However, having met an exceptional agent, I would gladly pay this fee than deal with long term non-obvious issues that come with a property and then being upset with everyone involved in the purchase of…

Yes, this. Good agents are the ones you come back to when you want another house. Good agents know this, and live off of referrals from happy customers.

The fees are fixed w.r.t. the price of the home, but the agent is exposed to the risk of how much work is involved in getting a buyer/seller pair matched up. Both agents can be on the hook for some time -- houses may not sell for a while, or either buyer/seller decide to stop trying to transact. That's sunk cost by the agents.

So if you're not asking very much of the agent, or giving much risk to them, it's not worth 6%. But that risk has to be accounted for somewhere, and spread across clients like any other risk.

Also, if you're doing a sale + purchase, you can usually negotiate that 6% down with your agent.

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

#153

Post by ska »

jdpedrie wrote: post #104
nrclark wrote: post #48

Earlier quoted context omitted.

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…

> But was it worth $12k for less than 40 hours of total work? I don't think so. First, I agree that the fees charged are exorbitant. However, for many smaller realtors, they may not have much inventory at any given time. So, just like a freelance programmer, the buyer is paying for their work and for their downtime between jobs.

Isn't this a bit circular though? If the fees are high enough, it allows for an oversupply of realtors ... which only gets worse in a rising market because fees are % based and entry-to-market (for a realtor) is fairly easy. NB: easy to enter doesn't mean easy to succeed, which is borne out by the longevity statistics, I believe.

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

#154

Post by mrtweetyhack »

Justin_K wrote: post #151
om3n wrote: post #146

I'm a software engineer, and I started my career at a well known mortgage company in Detroit. Views are my own, BTW. I bought a house a couple years after I started working there, and I wanted the full home-purchaser experience. I used my company's services for everything, and as an employee they hooked me up with a real estate agent (among other things). I was honestly appalled at what little my real estate agent di…

She was hostile because a real estate agent's approach is to black ball any for sale by owner listing, or any for sale by Redfin / Zillow, etc. Agents around my area always blackball these listings and will NOT tell buyers about these listings unless buyers specifically ask. This is nonsense and not in favor of buyers and is an attempt to bring failure to reform. Fortunately, more and more buyers are realizing they c…

Then they've failed their principal/agent fudicary duty and should be sued.

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

#155

Post by jliptzin »

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.

Pretty simple to fix actually. Charge a flat fee up front, like $1,000, to do the initial listing. Get the house independently appraised, maybe subtract 10%. Give incentive commission equal to the difference in the sale price and the discounted assessed home value * 20%. So if the agent manages to sell a $500,000 home for $700,000, they get a $41,000 commission. If the home sells for 10% below its market value, they only get the $1,000 compensation for the listing.

Of course this will never actually happen due to the racket currently going on as described in the lawsuit. Why would they agree to this structure when they can already skim 6% off the home price just buy submitting some photos to MLS and opening up doors and closets for people for a few weeks.

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

#156

Post by tacomonstrous »

tathougies wrote: post #67
tacomonstrous wrote: post #6

The model's pretty broken now, when anyone can look up listings on realtor.com or Redfin, and get customized alerts based on preferences. I mean what special skills do agents even bring on the buy side? I can mediate things with the seller myself, thank you very much. On the sell side, an experienced agent can be much more of a help. Even there, we used Redfin the last time we sold, and the difference in commission w…

> I can mediate things with the seller myself, thank you very much. Yeah, but if you use an agent, you can sue them when things go bad. You have to eat your own losses. People often pay others to take on risk.

I'm not sure this is true. Short of actually colluding with the other agent, I don't think there's anything the buyer's agent can do that would be worthwhile to bring a lawsuit over.

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

#157

Post by matthewowen »

tathougies wrote: post #91
ericmcer wrote: post #82

Earlier quoted context omitted.

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…

> I could literally take a crack at selling a house after a week of training and probably do alright. My father was an agent, so I'm obviously biased. However, thinking that 'selling a home' is all there is to being an agent is incredibly naive. It is a professional certification, where you have to be knowledgeable about the laws of the state you operate in, because they control your business. Compared to the regulat…

It's two weeks of classes and a test.

85% of realtors drop out of the industry within 18 months. My impression is that this is because "becoming a realtor" is very easy.

A counterpoint might be that it's because being a _good_ realtor is hard, and I believe that that is true to some extent. But that means you aren't _really_ paying someone "for having passed a test saying that he/she is capable of representing you in accordance with the law", because the licensing burden is really small. For instance, it's much smaller than the licensing burden you need to start cutting peoples hair.

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

#158

Post by alehul »

Adding onto the complaints of economic inefficiency here: one of the worst things I found living in Boston (not sure how many other major cities this applies to) is that it's completely standard for the renter of a property to pay a broker's fee, generally equivalent to one month's rent, to the landlord's agent.

In most (healthy, cheaper) rental markets, the landlord will pay a real estate agent a fee (one month's rent, again) to find a renter. This intuitively makes sense, as the landlord requires some number of hours of effort from the agent to list the home, show the apartment to a ton of people, and find one willing to rent it.

It seems economically so incorrect that the renter should bear the cost of the fee the rental agent charges for showing the home to like 10 potential renters— they spend maybe 10 minutes of their time showing the individual renter, and they're late more often than not!

Edit: below commenter rightly pointed out that this is economically perfectly correct— unjust from a value perspective would be better phrasing

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

#159

Post by tacomonstrous »

sl1ck731 wrote: post #70
tacomonstrous wrote: post #59

Earlier quoted context omitted.

These seem like useful services, but the seller paid at least 3% of the home value towards them. Wouldn't you have rather just had that as cash instead?

I don't really follow the proposal. Are you saying that there should have been just their realtor and I keep the 3% I would have paid to have my own representative? I don't expect their realtor to act in my best interest if so. Our goals aren't aligned. I almost fell into a situation where the realtor I was choosing was the buyers representative as well, which a family member who is a realtor as well as my bank advis…

No, what I mean is more straighforward. Let's say your signed offer is for $600k. Literally $18k is being set aside for your agent to point out these (IMO rather minor) things, and do some other pretty minor stuff, very akin to what a tax accountant might do during filing season.

What if you could just buy the house for $282k and never had to have an agent? Perhaps you would have missed these issues. Or more likely you would have Googled for a robust checklist of things to look for in an inspection, and discovered them yourself.

This is a structural reimagining of things could be.

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

#160

Post by cde-v »

alehul wrote: post #158

Adding onto the complaints of economic inefficiency here: one of the worst things I found living in Boston (not sure how many other major cities this applies to) is that it's completely standard for the renter of a property to pay a broker's fee, generally equivalent to one month's rent, to the landlord's agent. In most (healthy, cheaper) rental markets, the landlord will pay a real estate agent a fee (one month's re…

New York is the same way, except the fee can be up to 20% of yearly rent. You hope you only have to pay one month broker's fee.
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