A good sellers agent will know better than you how to prep your home for sale, how to market it, where to find qualified leads, what price to set it to, where to get contractors to make repairs, what kind of repairs are worth making, and when you get to the deal phase, how to negotiate and what paperwork is necessary, and how to deal with contingencies.
A good buyers agent will have deep knowledge of the neighborhood you're looking at (or can take your requirements and find you a good one), will have strong knowledge of the local schools, local demographics, local issues that can affect homeowners, what to look for in a home that could be a problem after purchase, red flags, and can help you negotiate the best deal and extract the most concessions from a seller.
But in both cases, I don't see why the value they provide changes based on the value of the home. Some of them might change based on the size of the home or property, but not the home value.
I don't see why we don't push for fixed fee based services, perhaps with an adjustment for local cost of living and size of the home/property? I know the Realtor cartel doesn't want that, but how can we citizens make that change happen?
I absolutely agree that a good agent adds value. They are worth their commission.
The problem is: the vast majority of agents are useless. As seller agents, they cannot put together a decent portfolio, they know little or nothing about house construction and repair, and they will show the house to literally anyone - not just qualified and suitable buyers.
As buyers agents, they don't listen to your requirements. They show you what they want to sell, not what you want to buy. Plus the lack of knowledge mentioned above.
If commissions fall, maybe at least some of the incompetents will find something else to do...
It is really a big jump from “they add value” to “worth their commission”. When you see the amount of time and effort that goes into them adding value and compare to other parties that add value to a house, like trades building a new washroom or kitchen or garage for ballpark the same dollar values, and the effort required there, it shows how absurd the agent commission really is.
But where do you find a good agent? My experiences have been of sellers agents dramatically undervaluing my property hoping for a quick sale and buyers agents with none of the qualities you mention, just a desire to push me to buy at any price asap regardless of whether the property they are showing me is a decent fit or not. I have yet to experience any value added from an agent on either side of the transaction.
I had the luxury of time in my last move, which I used to go to a lot of open houses and talk to the attending realtor (which is not always the listing agent btw). Treat it like a behavioral interview and judge agreeableness and conscientiousness. Also, study basics of sales tactics so you know when they are being deployed on you. This will filter for honest, hardworking people in many situations.
It's worse than that, how do you know it's a good agent without completing the transaction? It seems you pretty much need trusted word of mouth referral.
> But in both cases, I don't see why the value they provide changes based on the value of the home. Some of them might change based on the size of the home or property, but not the home value.
It’s pretty simple, more expensive homes are less liquid and take significantly longer to sell, because there are fewer people with deep enough pockets to buy them. This equates to more effort in actually finding a buyer. A $20 million dollar home may be on the market for years before it gets sold.
I’m guessing that if just one side of the deal was getting a % of the value, there would be a significant imbalance between the sellers and buyers agents, in terms of effort, which is something that you don’t want as a buyer.
paying the seller's agent a percentage of the home sale makes sense still. it is more difficult to sell a very expensive home vs a cheaper one, so i wouldn't say at all the value they provide selling a $400k house vs a $4m one is the same.
it didn't make sense to pay the buyer's agent a percent of the home value which is what these lawsuits focused on. buyer's agent fees will most likely move to a fixed fee model.
> it is more difficult to sell a very expensive home vs a cheaper one
I don't know where you are, but in Bay Area this is not true. And even for mega-expensive homes that don't sell as fast, the agent can't really accelerate this much -- certainly not commensurate to the giant commission they receive.
paying a percentage based fee gives me confidence that my agent's interests are aligned with mine. And I have two interests only. One, close a deal. Two, get the highest price.
One of the key things a realtor do is set the asking price. the higher they set it, the more work for them. of course i want it high, so i want them incented to make it as high as possible, and to push me to stage it properly, have knowledge of WHEN to sell and then CRUCIALLY help me evaluate competing offers. Because often the highest offer is a scam.
Its a wild world out there you absolutely need a seasoned professional in your corner, who knows your market, fighting for you.
Actually, do the math and you'll realize that a selling agent is incentivized to quickly take lower offers rather than hold out for higher offers. They more than make up the difference by increasing the volume of closings.
When people have done studies, they have found real estate agents on average sell their own homes for 10% more than anyone else. Because think about it. If their commission is 3%, are they really gonna fight to sell for $350,000 in a week if they can sell it for $300,000 today and get a new client, when the difference to them is $1,500?
If they can get even one extra client per year for the other $9,000, it's much more worth it to do that than to hold out for a better offer.
but with the run up in house prices, the percentage doesnt really do that anymore. For many areas in cali with a median > 1mil... The agent is getting 30k on your 1mil sale. If they push REALLY hard and get it to 1.1 mil, they get 3k extra, which is something, but not much extra incentive compared to the 30k.
What they are actually incentivized to do in expensive housing markets, is do the minimal possible effort per house, but sell more volume.
You could of course design a better incentive structure (fixed fee for median sale, tiered incentives for every % over that), and thats what i hope happens from these changes.
> But in both cases, I don't see why the value they provide changes based on the value of the home.
In both cases, the value they provide is relative to the value of the house being transacted.
A seller's agent definitely makes sense to take some percentage of the purchase.
The services they render - for say a $20M home in the Beverly Hills - are completely different than when selling a $1M house in San Jose or a $200k condo in Chicago.
I disagree in how valuable buyer's agents are, though. The value they provide is mainly for people who are completely clueless about real estate - which I guess could be a lot of buyers.
> I disagree in how valuable buyer's agents are, though. The value they provide is mainly for people who are completely clueless about real estate - which I guess could be a lot of buyers.
When buying a house, I viewed around 100 houses with my agent, and he called in multiple specialists to answer various questions we had on different houses we took a look at. When it came time to buy he demonstrated excellent negotiating ability and after we had purchased he helped us prep our house for move in by recommending trusted people to do the work we wanted done.
He worked with us for over a year and he earned his commission.
> In both cases, the value they provide is relative to the value of the house being transacted.
No, they do more for more expensive homes because they are harder to sell, but there is no reason "renting staging furniture" and "an extra open house with champagne and cookies" can't be itemized.
> red flags, can help you negotiate the best deal and extract the most concessions from a seller
... but under the current system, the buyer's agent is also incentivized to get the buyer to pay as much as possible, to maximize their commission.
I agree we should push for a fixed fee model, including if no sale occurs, because while the buyer agent _could_ add value in a lot of these ways, there is not always reason for them to do so today.
An under appreciated aspect of the "housing crisis" (define that however you want) is how illiquid the market is. A big factor in this is the 3-6% cost of each transaction. That's $11-23K for the median US house price of $387,600. Compare that to the $100 title transfer fee of a car. There would be a lot more housing transactions if it didn't cost the equivalent of a year's rent to do so.
Three are two housing crises. The first is a market-rate housing crisis which is caused by government zoning that limits the construction of new homes and thus leads to supply shortages and high prices. Zoning reform will fix this crisis. The second housing crisis is one of people who can’t afford housing no matter the price. These people need govt assistance, preferably in the form of vouchers.
The transactional costs from realtor fees does reduce liquidity, but it is a secondary factor compared to zoning.
More than just vouchers, these people need services provisioned in places other than those with the most expensive housing costs in the country.
The quality of services offered by NYC and SF to the homeless is unparalleled but it simply is not economical/borderline absurd to try to house them in the economic agglomeration centers of the US.
Many speculators get their license specifically to avoid these fees; so the professional speculators can speculate for less marginal overhead than an individual that intends to live in the home.
Most housing that is “speculated” on is still rented out. Encouraging price discovery lets us provide cheaper housing in areas of high demand before it becomes a major problem.
"The settlement includes many significant rule changes. It bans N.A.R. from establishing any sort of rules that would allow a seller’s agent to set compensation for a buyer’s agent, a practice that critics say has long led to “steering,” in which buyers’ agents direct their clients to pricier homes in a bid to collect a bigger commission check."
To me this reads that a transaction cost of selling a house will come down drastically from where its at now -- 6%.
P.S. I havent read the actual settlement, this NYTimes comment reads like buyers agents will now compete for their compensation, but it doesnt tell me if I would still have to pay 3% to the seller agent and whether that compensation will be open to market forces now
It is possible that little changes for consumers in the near term because many sellers are used to including the cost of a buyer’s agent in their sale price. But over time, new brokerage business models could emerge that make it easier for buyers to choose low-cost options
"could" not "should" or will.
Except for a huge payout for the lawyers, I don't see how this ruling is going to affect home buyers, or sellers in the near future. There would have to be a law put in place, so going forward it's still an agreement between private parties to sell or buy a house.
I'm also troubled by what the Wall Street Journal claims is that this might push a lot of young realtors out of the career field. That can't be seen as a positive outcome.
Overall, I'm still unclear exactly how this is going to help anyone. Especially for the overwhelming majority of buyers and sellers who DON'T want to be their own agent, and want to hire the best realtor to do it for them. I remember when this first came out and lots of people on HN said I'll just be my own agent. Well, that's fine, but that's not an option for most people.
I think regardless there will still be plenty of realtors doing business, and they will still make bank.
This ruling helps eliminate incentives that prevented innovation in agent services. There was zero need to innovate because Realtor controlled the entire market and nobody wanted to give up the cash cow, even though the only people it was really good for was agents.
> I'm also troubled by what the Wall Street Journal claims is that this might push a lot of young realtors out of the career field. That can't be seen as a positive outcome.
I guess that's one way to look at it. This was a service that provided very little value to the people needing the service but there was not really a feasible alternative. Sure some young people who find success in the field may no longer be able to but we shouldn't prop up nefarious businesses just to keep jobs going. Rather, what should be more likely to happen now is that young people will be able to move into this space and start out innovating the old practices, carve out a more impactful and scalable business model for themselves, and still do very well.
> Overall, I'm still unclear exactly how this is going to help anyone. Especially for the overwhelming majority of buyers and sellers who DON'T want to be their own agent, and want to hire the best realtor to do it for them. I remember when this first came out and lots of people on HN said I'll just be my own agent. Well, that's fine, but that's not an option for most people.
This option will almost certainly still be available and will now cost less. If you ever want to hear someone spout of a truckload of B.S., just ask an agent why a 3% commission is justified on either end of the transaction. The value simply isn't there and it's a huge benefit that this initial hurdle has been toppled.
> I don't see how this ruling is going to affect home buyers, or sellers in the near future.
That seems obvious...?
Either the prices will drop, which benefits buyers (and, to some extent, increases the liquidity in the entire market), or they will not, which means the sellers get to keep more of the value of the home they sold (even if it's with the assistance of a seller's agent, it's still their home).
> I'm also troubled by what the Wall Street Journal claims is that this might push a lot of young realtors out of the career field.
The WSJ has a very strong incentive to side with the entrenched wealthy interests here, and paint this as a bad thing.
Frankly, any realtor this pushes out of the field was likely only in it in the first place because they thought it would be easy money.
> Overall, I'm still unclear exactly how this is going to help anyone.
That also seems obvious: home buyers and sellers will get the same agents as before (because it's not like the entire industry is going to dry up and blow away overnight, or be entirely replaced with worse agents), and have to pay less for the privilege of having access to the MLS (plus the other small services an agent offers).
> I think regardless there will still be plenty of realtors doing business, and they will still make bank.
This seems to completely contradict your previous statement about people who want an agent.
I just sold my rather expensive house without hiring a seller agent. The most useful thing that brought buyers was using https://homecoin.com/ (not a crypto company) to make a flat $99 fee MLS listing. I got the buyer to cover their agent fee. People should just do the same - it is not that difficult.
Readit News
A good sellers agent will know better than you how to prep your home for sale, how to market it, where to find qualified leads, what price to set it to, where to get contractors to make repairs, what kind of repairs are worth making, and when you get to the deal phase, how to negotiate and what paperwork is necessary, and how to deal with contingencies.
A good buyers agent will have deep knowledge of the neighborhood you're looking at (or can take your requirements and find you a good one), will have strong knowledge of the local schools, local demographics, local issues that can affect homeowners, what to look for in a home that could be a problem after purchase, red flags, and can help you negotiate the best deal and extract the most concessions from a seller.
But in both cases, I don't see why the value they provide changes based on the value of the home. Some of them might change based on the size of the home or property, but not the home value.
I don't see why we don't push for fixed fee based services, perhaps with an adjustment for local cost of living and size of the home/property? I know the Realtor cartel doesn't want that, but how can we citizens make that change happen?
The problem is: the vast majority of agents are useless. As seller agents, they cannot put together a decent portfolio, they know little or nothing about house construction and repair, and they will show the house to literally anyone - not just qualified and suitable buyers.
As buyers agents, they don't listen to your requirements. They show you what they want to sell, not what you want to buy. Plus the lack of knowledge mentioned above.
If commissions fall, maybe at least some of the incompetents will find something else to do...
It is really a big jump from “they add value” to “worth their commission”. When you see the amount of time and effort that goes into them adding value and compare to other parties that add value to a house, like trades building a new washroom or kitchen or garage for ballpark the same dollar values, and the effort required there, it shows how absurd the agent commission really is.
Word of mouth, or maybe Yelp reviews?
It’s pretty simple, more expensive homes are less liquid and take significantly longer to sell, because there are fewer people with deep enough pockets to buy them. This equates to more effort in actually finding a buyer. A $20 million dollar home may be on the market for years before it gets sold.
I’m guessing that if just one side of the deal was getting a % of the value, there would be a significant imbalance between the sellers and buyers agents, in terms of effort, which is something that you don’t want as a buyer.
it didn't make sense to pay the buyer's agent a percent of the home value which is what these lawsuits focused on. buyer's agent fees will most likely move to a fixed fee model.
I don't know where you are, but in Bay Area this is not true. And even for mega-expensive homes that don't sell as fast, the agent can't really accelerate this much -- certainly not commensurate to the giant commission they receive.
Happy to pay them a few $100 for offer writing.
But most have little ideas about neighborhoods, builds etc. you have to do soooooo much of your own diligence.
One of the key things a realtor do is set the asking price. the higher they set it, the more work for them. of course i want it high, so i want them incented to make it as high as possible, and to push me to stage it properly, have knowledge of WHEN to sell and then CRUCIALLY help me evaluate competing offers. Because often the highest offer is a scam.
Its a wild world out there you absolutely need a seasoned professional in your corner, who knows your market, fighting for you.
If they can get even one extra client per year for the other $9,000, it's much more worth it to do that than to hold out for a better offer.
What they are actually incentivized to do in expensive housing markets, is do the minimal possible effort per house, but sell more volume.
You could of course design a better incentive structure (fixed fee for median sale, tiered incentives for every % over that), and thats what i hope happens from these changes.
In both cases, the value they provide is relative to the value of the house being transacted.
A seller's agent definitely makes sense to take some percentage of the purchase.
The services they render - for say a $20M home in the Beverly Hills - are completely different than when selling a $1M house in San Jose or a $200k condo in Chicago.
I disagree in how valuable buyer's agents are, though. The value they provide is mainly for people who are completely clueless about real estate - which I guess could be a lot of buyers.
When buying a house, I viewed around 100 houses with my agent, and he called in multiple specialists to answer various questions we had on different houses we took a look at. When it came time to buy he demonstrated excellent negotiating ability and after we had purchased he helped us prep our house for move in by recommending trusted people to do the work we wanted done.
He worked with us for over a year and he earned his commission.
No, they do more for more expensive homes because they are harder to sell, but there is no reason "renting staging furniture" and "an extra open house with champagne and cookies" can't be itemized.
... but under the current system, the buyer's agent is also incentivized to get the buyer to pay as much as possible, to maximize their commission.
I agree we should push for a fixed fee model, including if no sale occurs, because while the buyer agent _could_ add value in a lot of these ways, there is not always reason for them to do so today.
The transactional costs from realtor fees does reduce liquidity, but it is a secondary factor compared to zoning.
The quality of services offered by NYC and SF to the homeless is unparalleled but it simply is not economical/borderline absurd to try to house them in the economic agglomeration centers of the US.
I'm not sure that is really one of the main reasons why a seller decides to sell a home or not.
Most homeowners are not jumping houses every year or so.
"The settlement includes many significant rule changes. It bans N.A.R. from establishing any sort of rules that would allow a seller’s agent to set compensation for a buyer’s agent, a practice that critics say has long led to “steering,” in which buyers’ agents direct their clients to pricier homes in a bid to collect a bigger commission check."
To me this reads that a transaction cost of selling a house will come down drastically from where its at now -- 6%.
[1] https://archive.is/1O8Mh
It is possible that little changes for consumers in the near term because many sellers are used to including the cost of a buyer’s agent in their sale price. But over time, new brokerage business models could emerge that make it easier for buyers to choose low-cost options
"could" not "should" or will.
Except for a huge payout for the lawyers, I don't see how this ruling is going to affect home buyers, or sellers in the near future. There would have to be a law put in place, so going forward it's still an agreement between private parties to sell or buy a house.
I'm also troubled by what the Wall Street Journal claims is that this might push a lot of young realtors out of the career field. That can't be seen as a positive outcome.
Overall, I'm still unclear exactly how this is going to help anyone. Especially for the overwhelming majority of buyers and sellers who DON'T want to be their own agent, and want to hire the best realtor to do it for them. I remember when this first came out and lots of people on HN said I'll just be my own agent. Well, that's fine, but that's not an option for most people.
I think regardless there will still be plenty of realtors doing business, and they will still make bank.
> I'm also troubled by what the Wall Street Journal claims is that this might push a lot of young realtors out of the career field. That can't be seen as a positive outcome.
I guess that's one way to look at it. This was a service that provided very little value to the people needing the service but there was not really a feasible alternative. Sure some young people who find success in the field may no longer be able to but we shouldn't prop up nefarious businesses just to keep jobs going. Rather, what should be more likely to happen now is that young people will be able to move into this space and start out innovating the old practices, carve out a more impactful and scalable business model for themselves, and still do very well.
> Overall, I'm still unclear exactly how this is going to help anyone. Especially for the overwhelming majority of buyers and sellers who DON'T want to be their own agent, and want to hire the best realtor to do it for them. I remember when this first came out and lots of people on HN said I'll just be my own agent. Well, that's fine, but that's not an option for most people.
This option will almost certainly still be available and will now cost less. If you ever want to hear someone spout of a truckload of B.S., just ask an agent why a 3% commission is justified on either end of the transaction. The value simply isn't there and it's a huge benefit that this initial hurdle has been toppled.
That seems obvious...?
Either the prices will drop, which benefits buyers (and, to some extent, increases the liquidity in the entire market), or they will not, which means the sellers get to keep more of the value of the home they sold (even if it's with the assistance of a seller's agent, it's still their home).
> I'm also troubled by what the Wall Street Journal claims is that this might push a lot of young realtors out of the career field.
The WSJ has a very strong incentive to side with the entrenched wealthy interests here, and paint this as a bad thing.
Frankly, any realtor this pushes out of the field was likely only in it in the first place because they thought it would be easy money.
> Overall, I'm still unclear exactly how this is going to help anyone.
That also seems obvious: home buyers and sellers will get the same agents as before (because it's not like the entire industry is going to dry up and blow away overnight, or be entirely replaced with worse agents), and have to pay less for the privilege of having access to the MLS (plus the other small services an agent offers).
> I think regardless there will still be plenty of realtors doing business, and they will still make bank.
This seems to completely contradict your previous statement about people who want an agent.
the person you are entrusting to get you the best value is compensated on the opposite.
Real estate agent fees are ludicrous for the amount of work they do.
Efficient markets are better markets.