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Almost no one pays a 6% real-estate commission except Americans

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Re: Almost no one pays a 6% real-estate commission except Americans

#41

Post by nmcfarl »

hef19898 wrote: post #15
onlyrealcuzzo wrote: post #11

Earlier quoted context omitted.

Why is the notary making 2%?! Is that including all legal fees? Even still that seems like a much bigger rip off than a buyer's agent in the US.

A nortary makes sure the sale ia properly exevuted and titles properly transferred, he is certifying the transaction and takes on some legal riks dor doing so. This provides legal security for seller and buyer, a service woth paying for in transactions most people only do once in their life (we talk about Germany here). For all others, it is just coat of doing business. No idea why it is always everybody else who sho…

This sounds a lot like a ‘title company’ to me.

Re: Almost no one pays a 6% real-estate commission except Americans

#42

Post by joshgachnang »

benjaminwootton wrote: post #22
ianhawes wrote: post #16

Earlier quoted context omitted.

Well typically 6% is split between the buyers agent and the sellers agent. And each agent has to kick up a percent to their broker. Most real estate agents I know working in the average market (I.e. not NYC or the Bay Area) are not clearing $100K.

How did you ever get to the situation where two people want to buy and sell one of life’s fundamental commodities, and 3 people get to insert themselves into the middle to the cost of thousands of dollars? America confuses me sometimes!

It's a hell of a lot more than 3! The list of other agencies and fees I had to pay when buying my house and getting a mortgage were absolutely insane.

Re: Almost no one pays a 6% real-estate commission except Americans

#43

Post by tecleandor »

hef19898 wrote: post #15
onlyrealcuzzo wrote: post #11

Earlier quoted context omitted.

Why is the notary making 2%?! Is that including all legal fees? Even still that seems like a much bigger rip off than a buyer's agent in the US.

A nortary makes sure the sale ia properly exevuted and titles properly transferred, he is certifying the transaction and takes on some legal riks dor doing so. This provides legal security for seller and buyer, a service woth paying for in transactions most people only do once in their life (we talk about Germany here). For all others, it is just coat of doing business. No idea why it is always everybody else who sho…

Sounds more like a lawyer or several competencies at the same time.

In Spain the notary "just" works through the signature of the contract:

  - Checks the identities of the parties and their legal status
  - Makes "sure" both parties understand the contract
  - Verifies that the property can be sold (checks for legal issues in the national registry)
  - Serves as a legal witness to the signature
  - Sends a copy of the contract to the national registry (but AFAIK, doesn't follow up)
The cost here, for that, is around 500-800€. It's regulated by law.

Then you have to contact a registrar to make all the legal papers to make all the legal papers in the national registry. That's araound 300-400 €, I think.

Re: Almost no one pays a 6% real-estate commission except Americans

#44

Post by thiago_fm »

Wrong.

In Germany the Maklerprovision (comission for the Real State agent) is 7%.

Typically, the seller pays half of it, but there are cases where the buyer pays it all.

You also need to pay a notary, government taxes, making the cost of buying a property over 12%+.

Furthermore, you shouldn't sell that property for around 10 years, otherwise, you'll need to pay Capital gains taxes.

The good part is that you don't pay any taxes if you own it for over 10 years and sell it.

Also property taxes are quite low, so once you get through this, it's usually great. Given that health insurance is public, there's quality public transport and the supermarket bill is cheap enough, it makes worth it!

Re: Almost no one pays a 6% real-estate commission except Americans

#45

Post by koolba »

voisin wrote: post #29
ssharp wrote: post #21

I don't know how much value agents added over the past few years, navigating bidding wars, pocket listing access, etc. but I've never understood the justification for spending so much money on these fees. The last time I sold a house was 2011, when the housing market was still down from the 2008/09 crash. I talked with multiple agents and never got a sense of them doing much to push the house other than listing it on…

> The buyer doesn't bear the cost at all This is the issue. If both sides had to pay their own agent, significantly fewer agents would be used. Instead the buyer externalizes the cost, and many sellers aren’t confident enough to deal with the buyer’s agent directly so they arm themselves with an agent.

The buyer is paying the agent in the addition to the sale price.

The buyer is also paying additional taxes for many years afterward on the higher assessed value (as it includes the commission!).

Re: Almost no one pays a 6% real-estate commission except Americans

#46

Post by enlyth »

benjaminwootton wrote: post #5
mcntsh wrote: post #3

Closing costs in Germany are quite high... about 12%. - 3.57% RE commission - 2.00% notary - 6% for the land transfer tax And the seller also pays 3.57% of the RE commission. So over 6% at the end of the day :)

In the UK, the market rate 1.5% paid by the seller on completion. Nothing to the buyer and rarely any fees for a failed transaction. Then approximately £1000 in legal fees when buying or selling. Then the big one which is stamp duty (a government tax) which is between 0 and 12% of the purchase price. Typically the lower end of that scale though. ( https://www.gov.uk/stamp-duty-land-tax/residential-property-... )

In the UK we also have one of the worst systems for buying and selling property which on average takes 3 months or more for a single transaction and everyone can walk away at any point until exchange of contracts for whatever dumb reason. As a buyer you will spend thousands on legal and survey fees before you even know if there is anything wrong with the property.

Legal fees are more like 2k+ these days (source: buying a house)

Re: Almost no one pays a 6% real-estate commission except Americans

#47

Post by epx »

thiago_fm wrote: post #44

Wrong. In Germany the Maklerprovision (comission for the Real State agent) is 7%. Typically, the seller pays half of it, but there are cases where the buyer pays it all. You also need to pay a notary, government taxes, making the cost of buying a property over 12%+. Furthermore, you shouldn't sell that property for around 10 years, otherwise, you'll need to pay Capital gains taxes. The good part is that you don't pay…

In Brazil it is 6%, some agents used to charge even 8% or 10% but the trend is towards 5% (since real estate became expensive here as well in the last 12 years).

Re: Almost no one pays a 6% real-estate commission except Americans

#48

Post by jwestbury »

codedokode wrote: post #12

If you divide 6% commission by hours spend, how much does an agent earns per hour? Probably more than senior Google AI developer?

It's generally 6% split between two agents, so 3% per agent. Experienced agents often have something like a 60/40 split with their brokerage (such as ReMax). So, that's 0.9% -- let's round up to 1% to be generous.

My home state (Washington) is the 4th-most expensive state in the country. In the Seattle area, a senior software engineer makes about $275k on average. Meanwhile, the average house price in 2022 was $650k. Easy math here - an experienced agent will make $6.5k on a sale in WA. (Yes, it would be higher in Seattle - but real estate doesn't necessarily concentrate in the same way as engineering talent, so I don't think that's a fair comparison.) Thus, an agent would need to be the buying or selling agent in 42 sales per year to make as much as a senior engineer.

Selling agents probably sell ~30 houses a year in a really strong market, so even in peak COVID relocation times, less than a senior software engineer in a similar location.

On the other side of things, when my wife and I bought in the competitive market of 2021, we probably toured about 30 houses. We put offers in on eight of them. Our agent coordinated inspections and was present for all of them. I'd guess they put in, conservatively, 60 hours of work for our house. We paid $670k, so our agent got around $6.7k for those 60 hours of work - around $110/hr, or a lot less than I was making as a senior engineer at Dropbox at the same time (almost twice that).

tl;dr, no, they probably don't earn more per hour than a senior software engineer at a high-paying company, unless the real estate agent also happens to live in San Francisco.

Re: Almost no one pays a 6% real-estate commission except Americans

#49

Post by thiago_fm »

onlyrealcuzzo wrote: post #11
mcntsh wrote: post #3

Closing costs in Germany are quite high... about 12%. - 3.57% RE commission - 2.00% notary - 6% for the land transfer tax And the seller also pays 3.57% of the RE commission. So over 6% at the end of the day :)

Why is the notary making 2%?! Is that including all legal fees? Even still that seems like a much bigger rip off than a buyer's agent in the US.

The 2% is worth it.

It's an expensive, but essential step in Germany.

Because there isn't a default real estate purchase contract, so you need to trust that you'll receive the property. It's like paying a lawyer to mediate an expensive purchase, and they carry some legal risks with it.

They also do the bureaucracy with the government to add your name to the Grundbuch (it's a book from the government about who owns what % of a property), and also clean up the previous debts that it had (they are written there).

Re: Almost no one pays a 6% real-estate commission except Americans

#50

Post by mihaic »

hef19898 wrote: post #15
onlyrealcuzzo wrote: post #11

Earlier quoted context omitted.

Why is the notary making 2%?! Is that including all legal fees? Even still that seems like a much bigger rip off than a buyer's agent in the US.

A nortary makes sure the sale ia properly exevuted and titles properly transferred, he is certifying the transaction and takes on some legal riks dor doing so. This provides legal security for seller and buyer, a service woth paying for in transactions most people only do once in their life (we talk about Germany here). For all others, it is just coat of doing business. No idea why it is always everybody else who sho…

Validating property rights is a fixed-time operation that seems to be one of the basic services a state should offer. I read the parent poster naturally asking why 2% instead of some lower, fixed amount.
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