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

#311

Post by reducesuffering » Fri, Nov 17, 2023, 7:07 PM UTC

mcoliver wrote: post #276

psunavy03 wrote: post #257

This is worth reforming, but almost no one except Americans also gets to get a 30-year fixed-rate mortgage. And this is a major boon for stability and predictability in American homeowners' finances.

Wait till that becomes a 40yr fixed rate. I see two viable ways to unlock the current supply/demand stalemate in the US (please chime in if you can think of other alternatives). People can't afford the 30yr payment (interest rates), can't drop interest rates (inflation), supply dried up because who is giving up that low rate for a higher one. So push the payments out over a longer period of time and drop the monthly…

> That or allow people to carry their mortgage under the current rate to a new property.

This would probably increase the interest rate of new mortgages. Right now, lenders have data that these loans average around ~10 years, and thus have a premium over the 10 year treasury. If they get closed less often, because they can be carried around, we'll see the average as maybe ~15 years, which is a higher interest rate treasury (10-20) and will have higher interest rate costs.

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

#312

Post by rgbrgb » Fri, Nov 17, 2023, 7:07 PM UTC

FWIW in America you can totally ask for a refund on agent commission when looking for an agent to buy with. Not all agents will do it but it is straightforward for them to credit their commission against the closing costs. With online listings, agents today do so much less than they did when those commissions were set and home prices have obviously ballooned faster than inflation.

The end-state of our startup, Open Listings, was basically a (magnificent) listings site + easy way to connect with vetted buyers agents who had pre-negotiated refunds (50% of their commission).

For anecdata, I bought a home recently in a market our service never supported. We googled and quickly found a great agent who was happy to refund half their commission.

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

#313

Post by eldavido » Fri, Nov 17, 2023, 7:10 PM UTC

closeparen wrote: post #261

rgbrgb wrote: post #252

Earlier quoted context omitted.

Title companies are already pretty efficient and relatively cheap... not a lot of margin or process to improve with technology.

Exactly! I’m pretty sure Old Republic’s fee was a couple grand, nowhere near the mid-range luxury car price that the realtors collectively made on the transaction.

Keep in mind this has to include downside protection to cover the very real risk of someone initiating a suit in case they screw up (which I'm sure happens from time to time).

I think overall, what a lot of this entire discussion misses is that 90, maybe 99% of transactions are pretty straightforward, but the 1% where things go haywire, might cost 10, even 100x as much in wasted time, money, etc. Real estate brokerage is a regulated professional service which means by law, there's a minimum standard of care owed to anyone who uses these peoples' services. This costs money to provide which ultimately means a lot of the costs of the problem cases end up socialized/spread out, over everyone.

This feels quite unfair if you've got your act together and everything goes smoothly, but it seems hard to know upfront which ones will be the hard cases, or not.

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

#314

Post by mbostleman » Fri, Nov 17, 2023, 7:13 PM UTC

Yea, it's time for this whole NAR thing to be disassembled. It's unfortunate how much we undervalue the impact of collusion on the health of a free market. And worse, how out in the open and right in front of everyone this was. There are a lot of shady corners of industries that the mainstream doesn't know about or have regular exposure to, so it's not surprising that monopolies and regulatory capture shenanigans exist like this, but this is something that almost everyone uses multiple times in adulthood.

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

#315

Post by poulsbohemian » Fri, Nov 17, 2023, 7:16 PM UTC

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 it's actually more nuanced than that, and this is important... the client actually has a contract with a brokerage, where their agent is actually a sub-agent. The commission fee goes to the brokerage and in many cases the agent doesn't have the ability to negotiate it with the client (despite being an independent contractor). When the commission is paid, it is paid to the listing brokerage and then split out according to the agreement - some to the listing agent, and then in many cases to the buyer's brokerage who then splits it with the buyer's agent according to their agreement.

This is all important because there's a layer of legalities and agency relationships that the public completely ignores, but is relevant if we're going to have a conversation about commissions. It's also relevant because some states have begun to change their laws to be more in line with what the public thinks happens, which has its own weird twists.

*Brokers and lawyers in the audience will probably say I'm still handwaving away some nuances here regarding agency laws. Mea culpa, I'm trying to keep this simple.

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

#316

Post by poulsbohemian » Fri, Nov 17, 2023, 7:22 PM UTC

jstanley wrote: post #70

poulsbohemian wrote: post #53

Earlier quoted context omitted.

And yet the stats tell us the average U.S. agent is only making on the order of $60k / year, so… how’s that work?

The commission attracts entrants until it is no longer worth new people taking the job? That's what you'd expect to happen! What's surprising is that this competition doesn't reduce the fee rate, that's the part I don't understand.

This is a combination of factors:

-- In any market, there are agents with a range of compensation options. It really isn't as straightforward as the "6%" that the public believes.

-- Brokerages more than agents set the commission. So you can have loads of new agents in a market and it won't change the commission.

-- It costs money to represent buyers and sellers. Drones, video, photography, glossy magazine spreads, social media, advertising buys, brokerage, MLS, and other fees, signs, key boxes - I can spend thousands on a property listing or dozens+ hours with a buyer with absolutely no guarantees that I'm going to get paid.

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

#317

Post by MarkusWandel » Fri, Nov 17, 2023, 7:25 PM UTC

llm_nerd wrote: post #272

MarkusWandel wrote: post #237

Earlier quoted context omitted.

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…

>For realtors it's very simple. Why spend time on something they won't get paid for? Isn't that almost everyone doing work? I don't do work for free. >the dream customer of every selling agent is a clueless first-time buyer I've purchased multiple homes without a 'buyer's agent'. I'm certainly not clueless. It's actually a great negotiating tactic and often yields real savings. Agents are grossly overpaid, but buyer…

It does depend on the agent. I trusted mine and saw no red flags during, or after the transaction. He was referred to me by a colleague who is a serial house ownership addict, and I referred him on to several others, and all were pleased. My own house was listed at $X, so I simply asked him "what's it really worth?" He said $Y, where, at the time, Y<X and houses took time to sell, and we went through a few rounds of the haggling thing with the seller until they counteroffered $Y, and then accepted, easy peasy. And the house I now live in is one he added to a tour of several I had picked, and THAT was the one I instinctively liked and still do. That's really how it's supposed to go, right?

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

#318

Post by poulsbohemian » Fri, Nov 17, 2023, 7:27 PM UTC

kube-system wrote: post #263

tverbeure wrote: post #246

Earlier quoted context omitted.

Whenever we’ve bought a house, we told the agent to not bother sending us listings or set up viewings. We simply checked open houses on Redfin and Zillow ourselves, and if we liked a house, we’d ask the agent to prepare an offer, at a price we set. It is not to figure out what a house will sell for if there are enough other sales in that neighborhood. For their reduced work, we’d ask a reduction of their commission.

In the US, this will severely limit your options. Most houses are posted to MLS first, and don't make it to public sites until later. If you want to get the best deals, you gotta have an agent send you MLS listings daily, swoop in and make an offer on the first day before anyone else sees it. When I bought my last house, my agent was able to send me dozens of listings from MLS for homes that weren't listed on public…

I'm curious about your location and whether your agent was engaged in pocket listings*. When I push new listings to the two MLSs I belong to, they syndicate to all the various sites almost instantaneously.

*Pocket listings are something more of the public should understand, as they are almost universally bad. Listing creates a market and gets your property in front of the most potential buyers.

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

#319

Post by anonfromsomewhe » Fri, Nov 17, 2023, 7:27 PM UTC

iterminate wrote: post #260

Multiplayer wrote: post #172

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 o…

> The irony? High end home sales require much less work/effort than low end. Far fewer showings. No open houses, ever. That's true of most work. Software engineering is much less work/effort than a minimum wage job. The higher you go, the easier it is.

Some SE teams solve billion $ worth of problems and create that market cap to only get few % of it. I mean real problems not random saas startup.

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

#320

Post by psunavy03 » Fri, Nov 17, 2023, 7:56 PM UTC

mcoliver wrote: post #276

psunavy03 wrote: post #257

This is worth reforming, but almost no one except Americans also gets to get a 30-year fixed-rate mortgage. And this is a major boon for stability and predictability in American homeowners' finances.

Wait till that becomes a 40yr fixed rate. I see two viable ways to unlock the current supply/demand stalemate in the US (please chime in if you can think of other alternatives). People can't afford the 30yr payment (interest rates), can't drop interest rates (inflation), supply dried up because who is giving up that low rate for a higher one. So push the payments out over a longer period of time and drop the monthly…

You can only go so far before you defeat the main purpose of the 30-year mortgage, which is to allow retirees to pay the house off and be able to retire on a smaller nest egg because they only have to pay property tax and maintenance.