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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

#141

Post by dkjaudyeqooe »

UncleMeat wrote: post #93
jasode wrote: post #75

Earlier quoted context omitted.

>I said "good riddance" to the agents and did an MLS self-list for like $400. [...] So back to my original point -- where is that seller value coming from? It's a puzzle to you because you had the personality & motivation to do the work of marketing+showing+negotiating the house yourself. You have inadvertently projected your DIY savvy onto other homeowners to do the same thing. But, a lot of home sellers don't want…

Agents provide value. They do things that many homeowners can't or don't want to do. My electrician also does that. Do agents provide tens of thousands of dollars of value?

They can do. If they market your house well you can maybe get another $100,000 (5-10%). At around 1-2% they're generally profitable to the seller.

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

#142

Post by jaywalk »

Ajay-p wrote: post #76
voisin wrote: post #29

Earlier quoted context omitted.

> 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.

Is there not U.S. states where both the buyer and seller pay commission fees? A quick search provided this: The seller’s agent collects a listing fee for marketing and selling the home. The buyer’s agent collects the buyer’s agent fee for bringing a qualified buyer to purchase the home. In my understanding there is costs borne by both the buyer and seller for the services of a real estate agent.

No, the seller pays the 6% commission to their agent and then their agent gives the buyer's agent half of it. That's how it works everywhere in the US.

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

#143

Post by PopAlongKid »

tempsy wrote: post #34
criley2 wrote: post #18

Earlier quoted context omitted.

The tax man gets his one way or another. Imagine the shock of an American living without sales tax when they go to Germany and everything has a 20% government markup... In Germany, the net average tax rate on a worker is 37.4%, in America it is 24.8%. That's a dramatic difference in taxation!

Anyone living in California or NYC and making mid six figures and up is easily paying more than German tax rates then. You’re paying almost 50% around high six figure range. I’ve never quite understood why people think the US is a low tax country.

>You’re paying almost 50% around high six figure range.

That's a gross oversimplification and thus very misleading. While your marginal tax rate on taxable income (not gross income) might be close to 50%, if you are married filing joint, a homeowner, and have children, you are not paying anywhere near 50% effective tax rate[0] on your total income, due to deductions and exemptions, credits, tax-deferred retirement contributions, tax-free health insurance, and progressive tax brackets.

[0] "effective tax rate" does not have a universally agreed single definition, but the statement holds for most reasonable definitions.

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

#144

Post by gpderetta »

mytailorisrich wrote: post #95

Here (England) people like to complain about the system, mostly because either party can walk away for free until the actual contracts are exchanged, but overall it is simple and cheap. Technically, estate agents are not required, lawyers are not required, etc. Seller and/or buyer could do everything themselves if they wished (unwise but they could) as long as no mortgage is involved (the lenders are the ones requiri…

Well, there is plenty of insanity still:

- buyer can't walk away after exchange, but your mortgage provider can with impunity, screwing you up

- There is no CGT if you sell your first home, but tax duty (paid by the buyer) can be significant

- buyer (well, buyer solicitor) is responsible for fetching all the documents. This can be a significant time cost.

- let's not talk about the headaches from selling or buying a leasehold.

But yes I agree that solicitor and agent costs are relatively cheap.

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

#145

Post by ssharp »

jasode wrote: post #75
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…

>I said "good riddance" to the agents and did an MLS self-list for like $400. [...] So back to my original point -- where is that seller value coming from? It's a puzzle to you because you had the personality & motivation to do the work of marketing+showing+negotiating the house yourself. You have inadvertently projected your DIY savvy onto other homeowners to do the same thing. But, a lot of home sellers don't want…

> It's a puzzle to you because you had the personality & motivation to do the work of marketing+showing+negotiating the house yourself. You have inadvertently projected your DIY savvy onto other homeowners to do the same thing. But, a lot of home sellers don't want to DIY a home listing.

I might have implied I did much of this work. I didn't, outside of negotiating. The marketing is simply getting the house on real estate sites and in-front of buyer agents, which is what MLS self-listing services do for you for a flat rate. The showings were still handled by the buyer agents. The only thing I had to do was represent myself in negotiations, which was not that difficult.

Understood that some may want to do that, but the price difference is insane. If you save 4.5% (assuming buyer agent gets the 1.5% difference from 6%) on a $400k house, that's $18,000.

Regarding FSBO, this is where MLS self-listing plays a huge role. I tried selling my house for a few months by listing on Zillow (assuming Zillow is way more popular a decade later, but still) and sticking a sign in my front-yard. MLS gets you on every real estate site and at the fingertips of buying agents.

Lastly, as you say in your replies, the issue is justification of the 6%. There are lots of issues here -- super expensive, there is already a very serious principle-agent issue incentive misalignment, and the value is questionable. When housing prices skyrocketed, did their value skyrocket in tandem?

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

#146

Post by ta1243 »

mytailorisrich wrote: post #109
scrlk wrote: post #100

Earlier 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…

Any new home for the last decade, including "freehold" ones, comes with financial obligations to pay for public areas. Older homes have that as council tax, but new homes have a privatised council tax in addition.

It's known as "fleecehold" due to its similarity to leasehold.

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

#147

Post by [deleted] »

AnimalMuppet wrote: post #104
danielvaughn wrote: post #87

Earlier quoted context omitted.

^ this is good advice. There are really two things you need to rely on in real estate deals. The first is the legal aspect, which 100% absolutely should be handled by a lawyer. The second is negotiations, assuming you yourself aren't a skilled negotiator. Neither of these things require an agent, and neither are worth $40K.

Negotiations could easily be worth $40K. It could easily be worth 6%. Or it may not. Worse: If I use the agent, I don't know whether the agent gained me 6% of the price in the negotiations. If I don't use the agent, I don't know if I cost myself 6% of the price (or more!) in the negotiations. Someone could do a study, looking at sale prices of "for sale by owner" versus sale prices of comparable sales through agents,…

[deleted]

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

#148

Post by jasode »

dkjaudyeqooe wrote: post #135
jasode wrote: post #75

Earlier quoted context omitted.

>I said "good riddance" to the agents and did an MLS self-list for like $400. [...] So back to my original point -- where is that seller value coming from? It's a puzzle to you because you had the personality & motivation to do the work of marketing+showing+negotiating the house yourself. You have inadvertently projected your DIY savvy onto other homeowners to do the same thing. But, a lot of home sellers don't want…

No one is arguing against agents, they're arguing against a fixed, non-negotiable 6% fee. The reason people are talking about DIY sales is because that is the only option left to them.

>, they're arguing against a fixed, non-negotiable 6% fee.

The 6% exists in a marketplace of various fees (some charging less) based on other arrangements (discount brokers, For-Sale-Buy-Owner). E.g. Redfin charges 1%: https://www.redfin.com/why-redfin-how-you-save

Apparently, Redfin has never made a profit.

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

#149

Post by [deleted] »

tempsy wrote: post #34
criley2 wrote: post #18

Earlier quoted context omitted.

The tax man gets his one way or another. Imagine the shock of an American living without sales tax when they go to Germany and everything has a 20% government markup... In Germany, the net average tax rate on a worker is 37.4%, in America it is 24.8%. That's a dramatic difference in taxation!

Anyone living in California or NYC and making mid six figures and up is easily paying more than German tax rates then. You’re paying almost 50% around high six figure range. I’ve never quite understood why people think the US is a low tax country.

[deleted]

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

#150

Post by choxi »

jwestbury wrote: post #48
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.…

40% of 3% is 1.2%, where’d you get 0.9% from?
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