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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

#231

Post by [deleted] »

opportune wrote: post #228
kbutler wrote: post #202

Earlier quoted context omitted.

$2M house. Seller's realtor says, "Drop the price $200,000 to get a sale". Costs seller $200,000. Gains realtor $54,000 (costs $6,000 from .03*$2M). Or hold out for the sale at $2M. Nets seller $200,000 and increases the realtor's commission only $6K additional with all concerns of delay, potential withdrawal of sale, etc. This is an immediate and unpreventable conflict of interest that impacts the realtor's fiduciar…

I'm having trouble following your math here, how can the seller's realtor gain money from selling the house at a lower price? How did you arrive at the figure of $54k?? It's true that a realtor might favor a slightly lower price for a faster sale but I don't get your numbers.

[deleted]

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

#233

Post by Latteland »

mdorazio wrote: post #184
olyjohn wrote: post #106

Earlier quoted context omitted.

Who is paying $60,000 to sell their house? Most houses and agents aren't selling million dollar houses. There are some, but that's not the majority. Also houses that are priced like that don't have as many buyers, they take longer to sell. They have to market them to the right people, and have connections to sell those kinds of places quicker. People gotta remember, the commission is split 4 ways unless one of the ag…

> Who is paying $60,000 to sell their house? Allow me to introduce you to a place called California. In Santa Monica, where I live, median home price is over $1.5M. Yes, median. La Jolla is about the same. Irvine is just shy of $1M. In San Francisco it's over $1.2M median. San Jose is right around $1M. Mountain View is north of $1.7M. Etc. These places represent thousands of homes and average time on market is genera…

I am in the Seattle area, where the average home price is slightly above $800k. I'm fortunate to have a house that was a little above that average.

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

#234

Post by kbutler »

opportune wrote: post #228
kbutler wrote: post #202

Earlier quoted context omitted.

$2M house. Seller's realtor says, "Drop the price $200,000 to get a sale". Costs seller $200,000. Gains realtor $54,000 (costs $6,000 from .03*$2M). Or hold out for the sale at $2M. Nets seller $200,000 and increases the realtor's commission only $6K additional with all concerns of delay, potential withdrawal of sale, etc. This is an immediate and unpreventable conflict of interest that impacts the realtor's fiduciar…

I'm having trouble following your math here, how can the seller's realtor gain money from selling the house at a lower price? How did you arrive at the figure of $54k?? It's true that a realtor might favor a slightly lower price for a faster sale but I don't get your numbers.

$2M house. 6% commission split 3% to seller's realtor and buyer's realtor. Seller's realtor gets $60K if it sells in 1 month or 1 year, same commission. No sale = $0.

First week gets a 10% low offer of $1,800,000. If sale completes, that's $54,000 income for the realtor (.03*1800000). Or, could hold out for a better offer after for some months of additional work to hopefully get an offer for the full $2M, and the realtor just gets $6,000 more - or $0 if no sale. Seller holding out would get $200,000 more, or if no sale, still has the house.

Realtor's personal interest is to maximize return on invested work - take an early offer and go on to the next sale, even if it is low. Seller's best interest is probably to hold out for a bit better deal.

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

#235

Post by Nelson69 »

gamblor956 wrote: post #195
koolba wrote: post #32

Earlier quoted context omitted.

> 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...

When I last bought a house, I had an agent to show me houses. Then when it came offer time, I actually had my lawyer do the final review and he essentially did the bulk of the negotiation, the agent was simply a mouth piece with access to the databases and someone the other agents would talk to. It was during the 2008 time and I placed a bid on a short sell, my lawyer gave me distinctly different advice than the agent did (a personal friend, no less) the seller made some demands that he wanted in the contract and the agent simply wasn't capable of giving sound advice about it. Probably saved me about $50,000.

The big problem is agents are incentivized to have sales in the market. If you sell your house for $100,000 vs $110,000 is could make a difference of months and they're paid nearly the same even though it's a pretty large difference to the seller. To many of the people "helping" you sell, it's better for you to take less money now than 10% more in 3 months. Nevermind the roles they helped play in the big 2008 crisis... And this is a profession that has a claimed "code of ethics"

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

#236

Post by snovv_crash »

nugget wrote: post #179
jliptzin wrote: post #155

Earlier quoted context omitted.

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…

In your model you’d simply shift (even more) corruption onto the appraisal process.

Then you need independent appraisals where you pay for the service, but they pay a penalty based on how inaccurate their appraisal is.

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

#237

Post by Latteland »

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?

The reason you must pay the commission comes back to the cartel nature. If you won't pay the 3% to each side as the buyer, then many agents refuse to show the sellers the house. I don't think they ask the buyers, they just don't tell them about it. Then when redfin in Seattle started selling houses for lower commissions, it again was difficult because of buyer agents not wanting to bring their customers to the lower commission redfin houses. Redfin I think experimented with only reducing the commission on the seller side, not the buyer side, to try to break the 6%.

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

#238

Post by abduhl »

teachrdan wrote: post #100
0x0000000 wrote: post #96

Earlier quoted context omitted.

The Freakonomics guys found that "when real estate agents sell their own homes, they tend to keep them on the market longer (about 10 days) and get a higher sale price (by about 3%) than when they sell homes for their clients." https://www.investopedia.com/financial-edge/0311/how-real-es...

I know the obvious takeaway is (to exaggerate) that all realtors are crooks who are selling your house for too little because they don't care about you. But are we to expect that every realtor should spend as much time and effort selling every home as they do on their own? They presumably only sell their own home every few years, if that, and sell other people's homes every week. I'm actually surprised the numbers ar…

Yes, we should actually expect them to spend more time and effort. It’s their job!

Would you be happy with the local plumber spending more time and effort fixing their own water valve or yours? Do you expect construction crews to spend more time or less time and effort when building a concrete bridge as compared to when they pour their own driveway?

These are even examples where we should expect the person to care less about their job than their own personal stuff. Realtors have a fiduciary duty to their client.

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

#239

Post by gamblor956 »

Nelson69 wrote: post #235
gamblor956 wrote: post #195

Earlier quoted context omitted.

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...

When I last bought a house, I had an agent to show me houses. Then when it came offer time, I actually had my lawyer do the final review and he essentially did the bulk of the negotiation, the agent was simply a mouth piece with access to the databases and someone the other agents would talk to. It was during the 2008 time and I placed a bid on a short sell, my lawyer gave me distinctly different advice than the agen…

Most people can't afford to have a lawyer go over their home purchase/sales contract. They have to rely on their agent. So some training and insurance is absolutely better than nothing, which is what the comment I was replying to suggested.

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

#240

Post by analog31 »

wnissen wrote: post #11
maerF0x0 wrote: post #3

This is a big deal for "average" americans. Jack bogle took on the fees eating up retirement plans. Now the next biggest asset has an opportunity to be revamped. While real wages have stagnated, we can lower the costs so those wages go further.

There are 1.3 million Realtors(tm) in the U.S. Imagine what a productivity boon it would be if even half of them switched to gainful employment versus rent extraction via their cartel!

Better watch what you ask for. When they switched to no-fault car insurance in my home state, many years ago, the number of non-car-related lawsuits skyrocketed.
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