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
#112I 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…
> 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 question that this raises is even more puzzling: why hasn't there arisen agents that undercut the status quo? Are there guild or cartel effects at play?
I've been using a flat fee agent since 2012. $500 to list, $500 to close, but still have to pay the conventional 2.5-3% to the buyer's agent. Still a huge improvement.
Re: Almost no one pays a 6% real-estate commission except Americans
#113Wrong. 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…
Japan is also ~6% typically, with the buyer paying 3% and the seller paying 3%.
Re: Almost no one pays a 6% real-estate commission except Americans
#114If 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.…
Thank you for a detailed analysis.
Why do you need two agents though? Isn't one enough to do all the paperwork and inspections? As for advertisement, I guess today it can be totally automated.
Re: Almost no one pays a 6% real-estate commission except Americans
#115Earlier quoted context omitted.
The extra value is not there. Anyone can do this job, it's literally filling out boilerplate documents, you can ask gpt 4 vision to do it for you.
I agree and disagree with this. Contracts (which is what I assume you're talking about) are only "boilerplate" in fair-weather deals. But if literally anything goes wrong during the escrow period, then the wording of that contract suddenly becomes critical. When tens of thousands of dollars are at stake, I'd never rely on AI-generated output. That being said, I also agree with you as for the value of agents, because…
There's a saying in M&A: if you're reading the contract you've already lost. For anything that is not open-and-shut (sure, sue the seller if they literally ran away with the earnest money), your specific wording is not going to be worth litigating.
Most offers in the US are truly boilerplate, the text being provided by an association of real estate agents, and the wording is not customizable. This of course does depend on your state.
Contracts aren't worth much more than the paper they're on if you're not willing to litigate, and there's precious few cases where you'd want to. Most of the time you should just resolve your dispute by blowing up the transaction. Speaking from experience and having hired the lawyers to originally draft things, you really have no other remedy if the other party really wants to breach.
Re: Almost no one pays a 6% real-estate commission except Americans
#116I 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…
I just sold a house in the US and the thought of listing it ourselves did cross my mind, but in the end we used an agent and they did _everything_ for us while I was out of the country, and got us a great price. In the end the amount of commission we paid to our agent (3%) didn't feel excessive at all since I barely had to lift a finger (besides moving). Now, 3% for the buyer's agent? _that_ felt excessive.
Re: Almost no one pays a 6% real-estate commission except Americans
#117Earlier quoted context omitted.
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: buyi…
In England you mean. I'm not sure about Wales or NI but the system in Scotland is much better and still has similarly low fee's.
In Scotland sellers are legally required to provide a survey to potential buyer, known as the Home Report, which covers all the basics. While it doesn't go indepth on specific issues it does normally highlight them in the first place so you're far less likely to uncover surprise issues after buying. And if it does find potentially major issues the seller will often pay for a more indepth survey or to just get it fixed themselves as otherwise no one will consider the property. For example the home report for the first property I bought found damp which put most people off so the seller paid for a damp survey and quote to fix which they added to the HR. Even then it put a lot of people off and I got it £3k under valuation despite the quote to fix the damp being only £1.8k.
Also I'm not sure if it's the same down in England but "estate agents" in Scotland are all solicitors and thus regulated. Plus when you sell it's one fee to one company for everything and there's no faff about info going between agents and solicitors.
Re: Almost no one pays a 6% real-estate commission except Americans
#118Earlier quoted context omitted.
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-... )
It's important to note that (in general) sellers pay the estate agents fee and buyers pay stamp duty. If you are both buying and selling then you'd pay both, but on different properties. However if you're moving to/from rentals, dead or moving abroad then you'd pay only one. Also it's possible to cut out the estate agent if you really want to save money. There are a bunch of websites that for a minimal flat fee will…
Well the estate agent is the agent (i.e. employee) of the seller: They work for the seller. It's quite normal that they are paid by the party who employs them!
Re: Almost no one pays a 6% real-estate commission except Americans
#119I 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…
I just sold a house in the US and the thought of listing it ourselves did cross my mind, but in the end we used an agent and they did _everything_ for us while I was out of the country, and got us a great price. In the end the amount of commission we paid to our agent (3%) didn't feel excessive at all since I barely had to lift a finger (besides moving). Now, 3% for the buyer's agent? _that_ felt excessive.
It’s almost like an out of the country agent deserves 3% and an in agent selling agent deserves $2000. Vs a single fixed price they all get.
I had an agent get halfway through listing my house for sale and tell me his fee was 7%. Noped out of that one.
Re: Almost no one pays a 6% real-estate commission except Americans
#120Earlier quoted context omitted.
The chain system is absolutely ludicrous, I wouldn't call it "simple and cheap". IMO the whole system needs reform, I would wager it would go some way in fixing the housing crisis in the country.
Well, it is simple and cheap. "Chains" are not 'the system' they are a fact of life. Many people sell one property to buy their next one and need the money from the sale to finance the purchase (and also don't want to end up on the street) so they want contracts on both sides to be entered into at the same time. It adds a level of complication but no additional costs. This is an issue that exists everywhere though so…
> This is an issue that exists everywhere though solutions perhaps vary a bit. Usually it is a combination of relay loans (not free) and conditional contracts (tricky and pretty much the same result).
We use both in the US. I’m assuming a “relay loan” is akin to what I’ve seen as a “bridge loan” here—a temporary loan to cover a down payment while waiting for your current house to sell.
More often, we use conditional contracts. This would be classified as a “contingency”—we’ll buy this house on date X for price Y if the money from the sale of our house is in the bank by date X, that kind of thing. Needing one of these tends to make an offer less attractive, though.