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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

#201

Post by moduspol »

scarface_74 wrote: post #186
corethree wrote: post #155

Earlier quoted context omitted.

True. But agents aren't incentivized to negotiate lower prices because payment on both sides is proportional to total price sold. So logically only sellers would benefit from this.

Actually they are. It’s about volume not the few extra pennies they get on a sale - especially once you consider the brokerage takes some of that money. The Freakonomics book went into this in detail. https://freakonomics.com/2008/02/real-estate-agents-revisite... If your house sales for $50K more, each agent gets $1500 more and the brokerage gets 20-40% of that. Let’s say 30%. That means the agent will get a little…

This. Though also worth noting: these agents are often working with the same small pool of other agents throughout their career. Their relationship with them is often more valuable than with any individual client, so it doesn't really pay for them to be adversarial on behalf of their client. Both agents are incentivized to keep a healthy working relationship and focus on closing the sale despite the commission percentage.

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

#202

Post by kemayo »

j4yav wrote: post #169
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,…

Are buyer agents also paid at a % of the closing price? If so they also have an incentive to get their clients to pay more for the house.

I think that technically the seller's agent is the one given that 6%, but then they split it with the buyer's agent 50/50.

The argument I've seen made is that the buyer's agent's motivation to lower the price comes from wanting their client to actually make the purchase. That said, I'd think that this is only motivating them to get down to the highest price that the buyer will accept paying, rather than the actual lowest price that's theoretically possible.

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

#203

Post by cgh »

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!).

Correct. There’s only one party putting money on the table here. “The seller pays the commission” is real estate agent doublespeak.

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

#204

Post by Tempest1981 »

Tempest1981 wrote: post #199

Is there mention of this recent lawsuit? Should have some impact. (No WSJ subscription) Americans are taxed $60 billion in real-estate commissions, says attorney who just won a $1.8 billion mega-verdict against National Association of Realtors https://fortune.com/2023/11/02/national-association-realtors...

Discussed 5 days ago:

Jury Finds Realtors Conspired, Awards Nearly $1.8B in Damages

https://news.ycombinator.com/item?id=38089356 (276 comments)

And from 5 years before (same lawsuit? Began in 2019)

https://news.ycombinator.com/item?id=19431927 (336 comments)

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

#205

Post by arcticgeek »

WirelessGigabit wrote: post #152
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…

The problem in this case is that the seller's agent takes the whole 6%. It's not that they only take 3% (which is the most disgusting part here).

It is customary, at least in some locales (US-AK), that the commission is split evenly between the agents.

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

#207

Post by neogodless »

WirelessGigabit wrote: post #152
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…

The problem in this case is that the seller's agent takes the whole 6%. It's not that they only take 3% (which is the most disgusting part here).

6% and 3% are negotiable figures.

Right now one of the realtors we've interviewed takes 5% and offers 2.5% to the buyer's agent. Not much better. They also offer 4% if they are a dual agent.

But I know of cases where a buyer without an agent got the seller agent to accept 4% overall while only representing the seller (but handling the paperwork necessary to complete the transaction.) That 2% was a worthwhile part of negotiating, allowing the buyer to get a lower price.

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

#209

Post by mytailorisrich »

PaulDavisThe1st wrote: post #193
mytailorisrich wrote: post #109

Earlier quoted context omitted.

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…

As a Brit-by-birth but Usonian-by-choice, I'm always amazed whenever I go to visit family in the UK how much "chains" feature in real estate listings there. You almost never see anyone refer to this in US sales listings, other than perhaps a vague alusion to "motivated seller". Wandering around RE agent shops in Bath, it seems that 30-50% of every window-displayed listing mentions something about the chain status. Od…

They tend to highlight if there is no chain because that's a selling point. Likewise if you're looking to buy and have no chain (e.g. you're renting) it's worth mentioning it to the agent as that also makes you a 'good' buyer.

Also perhaps if the chain is in place apart from finding a buyer for the advertised property (i.e. seller has already found their next property, etc) because, indeed, that means that the seller wants to get on with it ASAP.

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

#210

Post by jperras »

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. 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.

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