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

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

#191

Post by raiyu » Tue, Mar 19, 2019, 8:49 PM UTC

philwelch wrote: post #119

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…

(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…

Perhaps true but if you are buying and don't have a broker you can already reduce the price 3% by not having the seller pay any buyer broker fees.

That's a garaunteed 60% discount off of you hypothetical 5% that the agent would have negotiated.

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

#192

Post by ska » Tue, Mar 19, 2019, 8:53 PM UTC

pmoriarty wrote: post #187

ska wrote: post #173

Earlier quoted context omitted.

I think one of the main issues is it being a purely commission sale. I suspect that makes it easy for the principals to ignore the cost in their thinking but it makes the time investment riskier for the agent, which they have to balance against fee size etc. Perhaps a better system would be a base fee + (lower) commission, and commission based on concrete sales target rather than market value...

In my own view the fairest structure would be an hourly wage plus commission based on the sale price. That way even if the client backs out, at least the agent hasn't completely wasted their time, effort, and money for absolutely nothing. I don't see why a commission should be limited, however. If you're great at your job and have a track record of selling homes home for more or buying homes for less than other agent…

Commission is always limited in some absolute sense, but that's not what I was suggesting. I was suggesting structuring differently than on % of sale price ... after all that is affected by a lot of things out of the agents control and does not lead to incentives necessarily matched with the principal.

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

#193

Post by Gibbon1 » Tue, Mar 19, 2019, 8:56 PM UTC

windexh8er wrote: post #81

tathougies wrote: post #64

Earlier quoted context omitted.

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 step…

My impression buying a house was the entity holding the bag is the title company. Everyone else involved is just holding out their hand.

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

#194

Post by intrasight » Tue, Mar 19, 2019, 8:58 PM UTC

We tried selling our first house ourselves. Ran ads in paper. Put up fliers. Etc. This was before the internet mind you. Tried this for 3 months and literally had no serious interest. We gave the listing to an agent and a week later had two full price offers. Sure, the internet has changed things a bit, but since then I always use a realtor. 6% is fair for the good ones. More challenging in some markets near me is where 6% isn't enough. Lots of $50K houses still. That's only $1500 for each agent.

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

#195

Post by gamblor956 » Tue, Mar 19, 2019, 9:10 PM UTC

koolba wrote: post #32

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…

> Where you stand really depends on where you sit. There's really only two seating sections. The one's paying the outrageous commissions or the one's receiving them. > 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. The vast majority of the upfront costs are a moat dug by the established players. Everything…

Everything from mandatory trainings, registration to insurance requirements.

People pay hundreds of thousands of dollars on their homes. It's the single largest transaction of most people's lives. I certainly hope the individuals hired to negotiate and manage these transactions are trained and insured...

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

#196

Post by manny_hasyrs » Tue, Mar 19, 2019, 9:14 PM UTC

ska wrote: post #173

pmoriarty wrote: post #83

Earlier quoted context omitted.

"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…

I think one of the main issues is it being a purely commission sale. I suspect that makes it easy for the principals to ignore the cost in their thinking but it makes the time investment riskier for the agent, which they have to balance against fee size etc. Perhaps a better system would be a base fee + (lower) commission, and commission based on concrete sales target rather than market value...

They already have options. You have 1% brokerages in every state now. There is even a guy in my town that will list your house on the mls for $500 until its sold. You bring him the pictures and an address. You do everything else yourself. He has an a la' carte real estate brokerage.

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

#197

Post by sl1ck731 » Tue, Mar 19, 2019, 9:15 PM UTC

tacomonstrous wrote: post #159

sl1ck731 wrote: post #70

Earlier quoted context omitted.

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 y…

I think it could work in certain scenarios. I just would not want to be alone for a major purpose were something to come up. Some years my taxes are super simple, some they are more difficult. When it's difficult I hire an accountant to do them. Same with a house, but there are a million little things that people might not realize they don't know about a house.

For example my house had a situation with taxes where I had to pay investor rated taxes for a year since it was held by an investor previously. That's the tax rate I see when I look at the MLS. I would have said no to the house if my realtor had not told me the way it worked, and that they would fall off the next year. I don't know that a generic list can capture that since its specific to my locale (or not, I don't know how it works in other places and that's great since I don't have to be an expert on it).

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

#198

Post by ska » Tue, Mar 19, 2019, 9:17 PM UTC

manny_hasyrs wrote: post #196

ska wrote: post #173

Earlier quoted context omitted.

I think one of the main issues is it being a purely commission sale. I suspect that makes it easy for the principals to ignore the cost in their thinking but it makes the time investment riskier for the agent, which they have to balance against fee size etc. Perhaps a better system would be a base fee + (lower) commission, and commission based on concrete sales target rather than market value...

They already have options. You have 1% brokerages in every state now. There is even a guy in my town that will list your house on the mls for $500 until its sold. You bring him the pictures and an address. You do everything else yourself. He has an a la' carte real estate brokerage.

Getting lots more agents playing around with the options is a good way to find out what works, so that's good.

I'm not sure how either of those address what I was responding too, though. If you are (as an agent) doing all the legwork in the hopes of getting paid on close, it's risky. Some form of industry standard way for agents to get paid a bit for this work I thing would improve it for everyone, but ymmv.

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

#199

Post by Waterluvian » Tue, Mar 19, 2019, 9:17 PM UTC

Im buying a house right now. The work my agent is doing surely deserves the 2.5% she gets.

Not that this doesn't mean it's still broken somewhere.

Don't be afraid to be pushy though if you think you're not getting your money's worth. Or just do it yourself.

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

#200

Post by chrisco255 » Tue, Mar 19, 2019, 9:18 PM UTC

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…

Former real estate agent, now software engineer. Doing a FSBO (for sale by owner) is as old as time. There's nothing wrong with this approach, but you are limiting your market (and you might therefore be selling at a lower price anyways) and it's highly dependent on your: patience, financial situation, free time, marketing skills, general sales skills, local housing market, tricky property situations, ability to assist buyers with locating financing, handling any objections or mortgage exceptions that come up (including zoning and inspections requirements), etc.

Buyer's agents deserve their 3% perhaps even more than listing agents and it's unfortunate you screwed this agent out of that. It's sort of like stiffing a server on a tip. Buyers are fickle, time consuming, and sometimes demanding. It can take many showings and offers to find a good fit for someone. Sometimes I would work with a client for weeks or months. Many clients would fall through and you'd get $0 for those clients. So you have to average out your earnings with the successes.

There's other things you have to do, too sometimes. Like once I had an FHA financed client and there were certain restrictions about the distance a well could be from the septic tank at the Federal level but they didn't match the requirements at the county level (which were looser). So I had to coordinate with local zoning and the FHA to get an exception for this loan. That was a bigger ordeal than I can explain here.

These online MLS listing services have been around since 2004-2005. They're nothing new. Are there crappy agents? Yeah. Just like any profession. But the profession itself is not going anywhere.