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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

#171

Post by PaulDavisThe1st »

jaywalk wrote: post #142
Ajay-p wrote: post #76

Earlier quoted context omitted.

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.

Except in a for-sale-by-owner scenario, where the seller is not using an agent. In those scenarios, it may be necessary to agree to a fee paid directly by the seller to a buyer's agent. 2-3% is typical. This is not always necessary - some buyers will not be using an agent either, but it is not rare.

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

#172

Post by Multiplayer »

In coastal California the commission situation becomes ludicrously lucrative to the top agents. This week a home in my community sold for $25,0000,000. One of my friends had the buy side, another had the sell side. The buy side agent will be involved in ~200,000,000 in transactions this year, a down year. In this community there are plenty of transactions north of $20,000,000. He just did another and had both sides of the deal for $50,000,000. At this level the commissions are usually 2.5%/2.5%. 5% of 25,000,000 is $1,250,000. The irony? High end home sales require much less work/effort than low end. Far fewer showings. No open houses, ever.

I used to work at a major real estate company and I know very well how intent they are on holding the listing service monopoly together. Redfin, Zillow, etc were all bets on the opening of the listing services that misunderstood the regulatory capture of the National, State and Local Realtor associations. They ended up selling ads to Realtors rather than opening up a new way for owners to sell their homes directly.

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

#173

Post by PaulDavisThe1st »

no_wizard wrote: post #107
foobarian wrote: post #98

Earlier quoted context omitted.

> 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?

This was the Redfin model and it had mixed results, I think they thought their non commissioned agents would upend the market, but that didn't really happen. The staying power of the Realtor Association may have something to do with it as well

It's not so much staying power as "access to the MLS"

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

#174

Post by seanmcdirmid »

koolba wrote: post #45
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.

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!).

Home assessments are based on property value, not sales prices, in many jurisdictions.

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

#175

Post by matwood »

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?

I think you end up with a similar distribution like in software. A few are making Google AI money, while the majority are not.

I still think 6% is too high, there are just too many RE agents out there right now. It was seen as an easy job to make decent money until the recent slow down.

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

#176

Post by patall »

namibj wrote: post #161
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…

Don't be misleading: capital gains tax is on capital gains, not on capital. The sale fees are effectively on capital when it changes hands.

Also, you do not pay them when investing the capital again (within EU I think) within 5 years.

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

#177

Post by plagiarist »

ProllyInfamous wrote: post #106
plagiarist wrote: post #31

Earlier quoted context omitted.

You encountered a great example of how not only is the fee ridiculous, but also the agents are not incentivized to work for you. They are incentivized to move houses as fast as they can.

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 government inspections to certify habitability.

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

#178

Post by PaulDavisThe1st »

ssharp wrote: post #145
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…

> 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 e…

Anecdata to be sure, but I successfully FSBO-sold 2 houses in the Phila. area using Zillow only (no MLS listing). And 18 years before that, before there was a Zillow etc., sold 2 other homes, one in Seattle and one in Phila. with no MLS listing.

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

#179

Post by readams »

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?

Real estate agents' job is not so much buying or selling houses but getting clients. There are so many agents ready to grab those insane fees that most agents can only manage an occasional transaction.

Then there are a few that are great at marketing themselves and can make truly insane money.

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

#180

Post by koolba »

seanmcdirmid wrote: post #174
koolba wrote: post #45

Earlier quoted context omitted.

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!).

Home assessments are based on property value, not sales prices, in many jurisdictions.

Sales prices (for an arms length sale) are de facto assessments. Every jurisdiction accepts or at least factors them in if you request an assessment to lower your property taxes.

In some jurisdictions where the growth rate is capped (like CA), a 3-6% drop in price will be locked in essentially forever.

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