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

#211

Post by dg08 » Fri, Nov 17, 2023, 4:21 PM UTC

foobarian wrote: post #98

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 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?

They do exist. When I sold in NYC a few years ago, I paid 2.5% all in. When I bought, I used the same broker and got a 2/3 buyer's commission rebated to me at closing. It was a decent chunk of money and helped me pay the closing costs. I recommended it to all my friends and several got the rebates as well.

There are a bunch of these brokers now.

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

#212

Post by walthamstow » Fri, Nov 17, 2023, 4:21 PM UTC

PaulDavisThe1st wrote: post #187

walthamstow wrote: post #94

Earlier quoted context omitted.

I remember the John Oliver segment from a few years ago The added layer that blew my tiny British mind was that the licensing is done by states (because somehow licensing barbers was omitted from the constitution) The consequence of this is that if you want to move or if you live in a state border city like KCMO, you have to do the licensing all over again with another state. Bonkers, as we say here.

Imagine living in Dover, and deciding to move just 26 miles to Calais. Quelle horror! You will need to do the licensing all over again! (at least, you certainly will post-Brexit; not 100% sure what the pre-Brexit story was on that, but I have a feeling it may have similar)

I'd rather not imagine living in Dover if you don't mind

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

#213

Post by kbf » Fri, Nov 17, 2023, 4:21 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!

I was surprised when I went to the US and had to pay taxes on everything I bought. On a logical level, I know I pay sales tax in Europe too, but it’s all integrated into the price tag of items so on a more psychological level it doesn’t really feel like the tax is there. Compare that to the US where you pick up a few items in a store, mentally add up an approximate price you have to pay and the cashier asks for significantly more. I’ve also noticed some products sold internationally will have very similar prices in the US and EU, probably because the company wants to hit some certain price for marketing reasons, but the EU price has the taxes included in it.

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

#214

Post by j45 » Fri, Nov 17, 2023, 4:27 PM UTC

danielvaughn wrote: post #87

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…

^ 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.

There is insurance on real estate transactions for a reason.

Not exclusive to realtors.

Many realtors works take a consulting fee too navigate things. Try.

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

#215

Post by marcandre » Fri, Nov 17, 2023, 4:27 PM UTC

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…

In Spain, not only are that vast majority of properties sold through agents (anywhere from 3 to 10% commission, and there's a transfer tax of 10% on top of it all) but even apartment rentals are almost all done through agents and renters used to pay directly that fee, but the law changed and it has to be absorbed by the owner.

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

#216

Post by mcoliver » Fri, Nov 17, 2023, 4:28 PM UTC

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 hour / cost+. The good ones charge more, you pay for what you need, etc...

One other thing. I'm not usually for more government intervention but at least in the USA, the government backstops the vast majority of mortgages (Fannie and Freddie), and collects rent in perpetuity through property taxes. They are so integral to the housing market that they should be providing the standardized forms and checklists that would cover most residential real estate transactions. Not Redfin/Zillow and definitely not NAR/MLS.

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

#217

Post by ineptech » Fri, Nov 17, 2023, 4:29 PM UTC

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…

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 realtors I know are nice people who work hard, but the industry as a whole is pretty obviously maintained by collusion, and I'm glad it finally seems to be crumbling.

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

#218

Post by ilikehurdles » Fri, Nov 17, 2023, 4:31 PM UTC

DOSUser67 wrote: post #185

foogazi wrote: post #137

Earlier quoted context omitted.

> The buyer doesn't bear the cost at all The buyer is the only one bringing money into the deal so they pay for both agents

That's not true, the agent fees come from the seller's money. It's only true if you consider your employer to be paying for everything you have in your house, because they gave you the money you used to pay for your stuff.

I think their view is that money is fungible, and ultimately factored into the price the buyer pays. The agents aren’t getting paid unless there’s a buyer, so everything in a real estate transaction (the commissions and the property) is paid for using the buyer’s liquid assets.

When I’ve been a seller I’d have been willing to lower the price in a slow market more, had commissions not been a factor. Instead I shelved the listing until the market improved because I reached the lowest price I was willing to close at. So in that sense, the buyer is definitely paying for that commission via inflated price.

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

#219

Post by Auracle » Fri, Nov 17, 2023, 4:32 PM UTC

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.

The US is a very low tax country for the bottom 50% of income earners compared to many countries.

From a quick Google: The US federal income tax rate for low earners is something like 12%. In the UK it's 20%. In Sweden it looks like the municipal tax is 32%. The few other countries I looked up had complicated tax systems that made it hard to compare, not that the above examples (and the US) aren't missing their deductions.

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

#220

Post by tylersmith » Fri, Nov 17, 2023, 4:33 PM UTC

cgh wrote: post #203

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!).

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

Money is only one half of a trade. Giving up some value of an asset when trading it is also form of payment.