Not having a realtor as a buyer really helps, because you can add that 3% to the purchase price of the house saving you 3% which can be a huge amount in expensive markets like the bay area.
Rational agents want to get as much money as they can for their homes, and begrudgingly pay any fees that they are forced to. If the seller gave you a 3% discount here for no reason, it would be the same as if they'd hired an agent- except, they wouldn't be getting anything for it? So why would they discount you the 3%? It's a zero sum transaction where your gain of 3% (very significant money in the Bay Area, as you note!) is the seller's loss.
IRL, real sellers will charge as much as they can. They are not giving out 4 or 5 figure discounts randomly or because they're nice. Do you randomly give strangers 4 figures of money for no reason?
While, sure, I would love to get more and pay less commission, I don’t care how that 3% is distributed. It’s fixed part of the transaction and is in the MLS listing because I was afraid of missing some buyers.
When I bought a house, my contract with my buying agent said that 50% of the buying commission came back to me at closing as a prepaid closing cost.
In the eyes of the buyer it might not matter if you got your 3% off... but that seller probably isn't saving any money on his/her end.
Particularly in expensive markets in the Bay Area, the real estate agent is there to tell you when you're being stupid - unrealistic with your demands (under or _over_ paying) and keeping you from stomping away in a huff during the stressful negotiations.
This is buying and selling the most expensive asset most people will ever own. People hire in help to buy and sell their business, this is equivalent.
Some people will be very comfortable with dealing with negotiations, pricing their house (the quasi-ethical can even talk to a few realtors before hand to get their opinion), and doing the paper legwork.
Just because someone chooses to use their time and effort rather than forking out what could amount to several months salary doesn't mean they're stupid.
With that said, we've tried to sell a home by owner, with a good realtor, and a bad realtor (same home, different time periods with renting in between). The bad realtor was worse than doing it by myself (got 2 more offers doing it ourselves...we just felt it was worth more to us renting it than selling it at that time). The good realtor was fantastic and easily earned their commission by pitting buyers against each other and creating a bidding frenzy (it was a good market, but we got way more than we expected).
I would wholeheartedly recommend a good realtor, and say absolutely avoid bad ones. But how do you know?
When you're selling, they will always tell you that you are priced too high. They want a quick sale with minimal work.
I've used realtors on the buy and sell side of the first house I owned. I was disappointed both times in that they seemed to do almost nothing except show up at the closing for their take.
I've bought and sold two other homes FSBO since then, and the process was much easier.
Respectfully, I'm curious... How would doing it yourself be easier?
I think a realtor is not incentived to get you the best price once you select a home and are in negotiation because a few thousand doesn’t matter if the deal is skunked.
I’ve bought 3 properties and every time my realtor was really good about showing value and basis for valuation on tons of houses before we visited or offered.
I think it’s very different for selling because you only have one house to sell.
Our real estate agent certainly told us if she thought a house was overpriced. And she told us when she thought we should avoid a house and why - e.g. one was a questionable "flip", another had a huge tree a bit close to the house that we didn't notice (think of the foundation).
We ultimately went for the cheapest house we saw. We had 20% more in our budget but the real estate agent was fine showing us houses that fit our parameters but were less expensive than what we could afford. I did some looking for houses to see too, and when I asked her about those she would say why she didn't show them to us.
Not all realtors are out to maximize the commission on a single transaction. Many are like lawyers and are working for the best interests of their client (which is also in their long term interest).
Your annual property taxes (In San Jose) on that USD$1m will be on the order of $14,000. Your mortgage payment with a 10% mortgage will be another $4,255/month. That's $65,000/yr just to hold the house, with insurance adding another $3k (earthquake insurance!). Don't forget a maintenance budget of 1%/yr!
Additionally, you're going to be spending ~$8,500 in tax and fees just to close.
To repeat, if 3% is going to make or break your ability to buy the house, you can not afford that house. Imagine what happens when it drops 10% in value? What happens if it drops 10% in value, you need to move and market rents don't cover your mortgage[1]? The Bay Area has 30% swings from peak to trough, 10% is (slightly exaggerating) the peak to trough swing in a single year.
I never said that people who chose to go without an agent were stupid. I said agents were there to keep you from making stupid mistakes - but that was my experience. I had no concept of what the prices were in the area, or how to deal with selling agents who didn't want to close. The agent talked my partner down off the ledge a couple of times.
However, that doesn't mean that other people shouldn't consider managing their own purchase or sale. My comment was purely around the statement that saving 3% would allow you to buy a home.
[1] SF rent - https://medium.com/@mccannatron/1979-to-2015-average-rent-in...