Almost no one pays a 6% real-estate commission except Americans • Hacker News Board

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

#231

Post by ProllyInfamous » Fri, Nov 17, 2023, 4:46 PM UTC

plagiarist wrote: post #177

ProllyInfamous wrote: post #106

Earlier quoted context omitted.

After turning-out IBEW, I spent the remainder of my electrician career specialized in residential pre-sale renovations ("make ready"). Despite peak earning years just pre-CoVid, essentially just updating circuit panel violations and replacing GFCIs [read: well-paid work without much mental strife], I hung up the towel. Realtors are nice simple people, the masters of soft skills (which I lack) — but ultimately I reali…

It truly is a racket. You get several hours to vet a 7-figure purchase in a zero-sum game against a seller with information arbitrage. Nobody is liable for anything short of actual deliberate fraud. For everything you didn't guess to ask, you're doing the repairs after you buy. Of course they won't spend money on craftsmanship. I doubt they would even fix dangerous shit like bad circuit panels if it weren't for gover…

>I doubt they would even fix dangerous shit like bad circuit panels

A retired NFL player was purchasing this house and multiple inspectors indicated that the entire main panel would require replacement [note: NOT in contract to update any branch circuits; panel only]. Any pre-existing branch circuits unable to be update "to code" were to be de-activated.

Previous homeowner had made all sorts of "specials" [i.e. crappy work] within this home, and many of the branch circuits were just hots with neutrals tapped off other shared circuits [not multibranch; it was hack-work]. One such disabled circuit —per our contract— was for a TV above the kitchen sink, which had its own 15A hot — but jaked off another neutral [melt/burn/fire hazard; not "to code"].

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What does one do on a multiple thousand $$$ contract for a multimillion dollar property, when your lifeblood brokerage is telling YOU [the EXPERT] that "no permits are required, just make that TV work!!!" ?

Or other such new-homeowner surprises as: "please disable the garage door safety sensors even though I have over ten young children that could be crushed by one of the most dangerous items in a typical home [garage door]" —okay, I added that latter half.

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Firms don't often care if your house fetches slightly less, because to them it isn't really reflected much differently in their [already bloated] commissions. Any future land purchases I make will be lawyer only, up-front flat-fee [where possible].

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

#232

Post by yesimahuman » Fri, Nov 17, 2023, 4:47 PM UTC

Navarr wrote: post #128

yesimahuman wrote: post #116

Earlier quoted context omitted.

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.

The buyer's agent fee is basically subsidizing the hard work of buyer's agents (which is taking their clients to multiple properties, discussions about what they want, using time browsing MLS to find houses that meet criteria and arranging tours of them) When I was looking to buy a house, my agent received no financial compensation from me at any point. Their work was entirely subsidized by the buyer's agent fee - an…

Yes but from the perspective of the seller, the buyer's agent fee feels like you're subsidizing the realtor market to make it viable. Now, don't get me wrong, when I _bought_, I was very happy my agent made money, because she deserved it. I can just understand the attitude to sellers over agent commission (not saying I agree with it)

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

#233

Post by runako » Fri, Nov 17, 2023, 4:47 PM UTC

yesimahuman wrote: post #116

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 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.

The thing about proportional pricing is that it doesn't scale up or down. Assuming your sale was near the median US home price, the seller's agent would net around $12k for their work. You believe that was worthwhile, let's assume that was money well spent.

Suppose the market was hotter when you sold and your property was worth 2x the median. Is the same work worth $24k? What if you sold in a hot market in a hot neighborhood, which should make it somewhat easier to move the property? Does it make sense that this would increase the amount the agent gets paid?

For similar reasons, proportional pricing doesn't work well at the lower end of the market, where listings are often under $100k.

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

#234

Post by nordsieck » Fri, Nov 17, 2023, 4:50 PM UTC

Navarr wrote: post #128

yesimahuman wrote: post #116

Earlier quoted context omitted.

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.

The buyer's agent fee is basically subsidizing the hard work of buyer's agents (which is taking their clients to multiple properties, discussions about what they want, using time browsing MLS to find houses that meet criteria and arranging tours of them) When I was looking to buy a house, my agent received no financial compensation from me at any point. Their work was entirely subsidized by the buyer's agent fee - an…

> The buyer's agent fee is basically subsidizing the hard work of buyer's agents (which is taking their clients to multiple properties, discussions about what they want, using time browsing MLS to find houses that meet criteria and arranging tours of them)

Since Zillow and Redfin have existed for quite some time how, that service seems a lot less valuable. I'm sure it can be worth it in the right circumstances, though.

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

#235

Post by HWR_14 » Fri, Nov 17, 2023, 4:50 PM UTC

matwood wrote: post #197

AnimalMuppet wrote: post #104

Earlier quoted context omitted.

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,…

> Negotiations could easily be worth $40K. I'm a better negotiator than any agent I've ever dealt with. Add in the white hot market the last decade and the only 'negotiation' happening was figuring out how much to overbid.

That could be true in your case, but for many people that might not be the case.

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

#236

Post by LeifCarrotson » Fri, Nov 17, 2023, 4:51 PM UTC

jperras wrote: post #210

stephencanon wrote: post #59

Earlier quoted context omitted.

We’ve bought two houses, sold one, bought a lot to built a house for my parents. We’ve never hired a real estate agent. The seller had an agent for the first transaction, none of the other counterparties had an agent. Paying a lawyer by the hour to handle things is simpler, cheaper, and a random lawyer is dramatically more competent than a random agent (the most complex transaction ended up costing us maybe $4k in la…

Canadian here. Sadly, it's common practice around these parts for buyer agents to completely ignore listings that don't have a selling agent attached; it's their form of industry protectionism. As a result you end up losing out on a large surface area of buyers who rely on their buying agent to find properties, which puts you at a disadvantage.

Are the buyers not getting a feed of every MLS listing in their target area?

That entirely solved our purchasing problem - we got automated daily or sometimes hourly emails parametrically filtered by school district, build date, price, square footage, and lot size whenever a new listing went up. It would have been stupid to have our agent filter them based on the deals that were better for him or his industry.

We had a uniquely good agent who spent hundreds of hours with us filtering hundreds of listings, visiting probably 60 different houses at all times of day over the course of a year before we finally bought, submitting a dozen offers, and helping us through the closing process, and then using his builder's license to help us ready the home we bought for move-in. He was extremely knowledgeable about all kinds of building inspection issues and the procedural minutiae. We happily paid him the 6%, it would have been far more costly to bring along an inspector/attorney/general contractor at an hourly rate.

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

#237

Post by MarkusWandel » Fri, Nov 17, 2023, 4:51 PM UTC

stephencanon wrote: post #59

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…

We’ve bought two houses, sold one, bought a lot to built a house for my parents. We’ve never hired a real estate agent. The seller had an agent for the first transaction, none of the other counterparties had an agent. Paying a lawyer by the hour to handle things is simpler, cheaper, and a random lawyer is dramatically more competent than a random agent (the most complex transaction ended up costing us maybe $4k in la…

Canadian here too. I only ever bought one house, in 2005, and I'm still living in it. But I seem to recall that the agent - a good one, referred by friends, and referred onward - had a boilerplate contract in which I was responsible for his commission even if I independently bought a FSBO (pronounced "fizzbo" in realtor lingo, i.e. completely off-system For Sale By Owner house) during the contract period. I had that scratched out before signing.

For realtors it's very simple. Why spend time on something they won't get paid for? Why bother arranging a tour of a FSBO house, unless that one says "agents welcome" in its listing which means they will pay the buyer agent fee. But if that contract is standard, what's the disincentive? Just the unpleasantness of actually enforcing it when necessary?

Common here seem to be "flat rate MLS listing" services, where you pay a few hundred dollars and they list it, and you're your own selling agent. You still pay the 2.5% to the buying agent and say so in the listing.

And yeah, the dream customer of every selling agent is a clueless first-time buyer who just calls up the agent on the for-sale sign. Double commission!

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

#238

Post by closeparen » Fri, Nov 17, 2023, 4:51 PM UTC

mcoliver wrote: post #216

This comment is focused on USA. Some people need or want an agent, some people don't. For the majority the checklist for buying a home is fairly straight forward and could be automated with checklists, yelp, Plaid/UWM, and DocuSign. But not all. The bigger issue that I think almost everyone can agree on is the standardized percentage thing. Being an agent should be a flat negotiated fee or billed like the trades per…

The title company is the one who sends and receives wires and executes the nuts-and-bolts transfer of ownership. You could imagine fintechs getting into that space even with traditional agents, and you could imagine title companies catering to for-sale-by-owner.

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

#239

Post by aftbit » Fri, Nov 17, 2023, 4:52 PM UTC

komadori wrote: post #224

ineptech wrote: post #217

Earlier quoted context omitted.

For the buyer, the value is clear: someone to go out with you to house after house, let you in, walk around with you, talk about whether you could fit a king-sized bed in that room, etc. It's a lot of work and the buyer gets a lot of value from it. But for the seller, who pays the tab, the only value is that some buyers' agents will steer their clients away from you unless you offer a large commission. The individual…

That system seems very convoluted to me. In the UK, only the seller pays a commission on the sale price (typically ~1.5%) and the seller's estate agent is responsible for showing buyers around the property. The buyer doesn't need their own estate agent unless they're also selling a previous property at the same time.

That seems backwards. Only the buyer should need an agent, as they are the one who is searching. The seller is just sitting around waiting for offers.

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

#240

Post by runako » Fri, Nov 17, 2023, 4:53 PM UTC

criley2 wrote: post #18

geff82 wrote: post #7

Earlier quoted context omitted.

Germany has high fees when buying a house, but compared to the US it is dirt cheap to actually own the house. „Ground tax“, similar ro „property taxes“ in the US is usually just a few hundred Euro a year. Which, compared to the US, is change money. A German house, when the mortgage is paid, feels like real property.

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!

> That's a dramatic difference in taxation!

To be fair, we (US) outsource much of our taxation to the private sector, so that basics like healthcare fees/taxes are routed through private companies. If it comes out of your check before you get it, and it's not going into your 401(k), it might as well be a tax.