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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

#161
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…

Standard economic theory predicts that the tax incidence falls more on the party that has lower elasticity — that is, fewer alternative options to make a deal. If it is hard to find an apartment, the renter will pay most of the fee. If it is hard to find a renter, it’s the opposite.

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

#162

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…

(Disclaimer: I work for a tech company in the real estate industry. Opinions are my own.) > 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. Negotiating a $100,000 purchase or sale is an order of magnitude less lower stakes than negotiating a $2,000,000 purchase or sale. If you're a real estate agent and you're abl…

The commission shouldn't be based on the full price though. When a car salesman sells a car, their commission is based on the profit, not the total price. Selling a Honda can get you more commission than a BMW if you are good at what you do.

To make the same for a house, the seller should say "this is how much I want" and then the agent gets to keep say 50% of whatever they get over that price. Then the incentives are aligned.

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

#163

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…

Depends on the state. For instance, in PA yes, they cover the legal side of things (at least to the extent that there isn't usually another lawyer involved in the process).

The other piece to this is that this 6% is split between the buyers agent and sellers agent. Typically, as a buyer, the person showing the house to you is _your_ agent (versus the UK where it is the seller's agent). Put another way, there's effectively a whole extra person involved who (at least legally) has a specific fiduciary responsibility to the buyer, and who takes on _some_ of the tasks that otherwise might fall to a selling agent.

It's also worth noting that there _do_ exist "discount agents". For instance, Redfin will charge sellers 1-1.5%, and if you use them as a buyer's agent, they will still charge 3% (since it is effectively baked into all prices) but then rebate you 1.5%. But this is less common.

So yes, overall, realtors here are doing more overall, but honestly it's largely (I think) just that they make more here because they've been effective at establishing norms, and also because small percentage point differences are easy to discount away. For instance, I'm currently buying using a traditional agent, because honestly the 1.5% fee difference is outweighed by the savings you can get with someone who can work better on offer price and post-inspection negotiations, and who is going to be someone the listing agent _wants_ to work with (which they will pitch to their clients as "this person is reliable and will ensure we close, whereas Redfin are useless and the deal might fall apart").

Not saying it's good, just giving more of the landscape.

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

#164
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…

Why wouldn’t they unless you agreed to pay the buyer’s agent commission? It’s how they make their living.

Edit: oops meant buyers agent - corrected.

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

#165
post #77

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-...

worth noting that a) transfer taxes exist in the US too and b) property taxes in the US are typically _much_ higher than council tax in the UK (though this isn't apples to apples, especially as council tax is usually also paid by tenants).

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

#166
post #48

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…

>But was it worth $12k for less than 40 hours of total work?

That's $300/hr. Similar to what lawyers ask.

Although, I suspect that a lot more education is required to become a lawyer than a real estate agent.

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

#167

Earlier quoted context omitted.

(Disclaimer: I work for a tech company in the real estate industry. Opinions are my own.) > 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. Negotiating a $100,000 purchase or sale is an order of magnitude less lower stakes than negotiating a $2,000,000 purchase or sale. If you're a real estate agent and you're abl…

The commission shouldn't be based on the full price though. When a car salesman sells a car, their commission is based on the profit , not the total price. Selling a Honda can get you more commission than a BMW if you are good at what you do. To make the same for a house, the seller should say "this is how much I want" and then the agent gets to keep say 50% of whatever they get over that price. Then the incentives a…

So does the real estate do less work based on how much a house has appreciated since it was bought?

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

#168
post #52

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.

[deleted]

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

#169

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…

The way the market seems to compensate for this is that more agents flood into that job market for a given number of houses, and then they spend proportionally more time trying to find clients. They spend a relatively small fraction of their time actually helping existing clients in very hot markets, since they just don't have many (except the few top agents/brokers, who do very well for themselves).

But spending all your time finding clients isn't actually useful work in helping transactions happen, so it's less and less efficient as the home values go up.

At least that's what I've observed from a distance.

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

#170

Earlier quoted context omitted.

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…

Why wouldn’t they unless you agreed to pay the buyer’s agent commission? It’s how they make their living. Edit: oops meant buyers agent - corrected.

There was no sellers agent, why would that commission be paid? They did pay the buyers agent commission (albeit at a lower rate).
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