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Comment by muhneesh | Hacker News Reader

I see at least three counterpoints:

1. Real estate agents aren't often "experts" at real estate valuation, inspection or execution; They have dependencies on appraisers, inspectors, and lawyers. The work an average agent does is more or less cookie-cutter from my anecdotal experience, though I think there is a proportion of rockstar agents that do much more.

2. Not every buyer wants homebuying to be a client-services relationship. I'd rather have a trusted intelligent ratings system based on criteria like location, price and so on. I would hypothesize that there is a divide here with boomers and millenials / gen z. If I sell my house, it will be on a technology platform that takes 1%, not through an agent.

3. The vig an agent takes is insane in urban centers - 3% might make sense in areas where the avg. home costs 200-250K, and is harder to sell. In dramatic sellers markets where homes are in the 600K - $2M range, the take should be much much lower.

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Most of the appraisers, inspectors and attorneys are filling a compliance role.

The reality is the real estate person usually drives the process. Good ones know which appraisers to call and which inspectors to avoid. There's no real professional ethics involved, so most of them have arrangements with preferred folks whom they get referral fees from. (It's one of the reasons why home inspectors are almost completely useless.)

Real estate is ultimately a shady business that is about who you know.

>(It's one of the reasons why home inspectors are almost completely useless.)

I think this is more accurately "home inspectors recommended by the realtor". Home inspections are extremely useful, so long as they are working in your best interest.

Yes but such a crap shoot. And you'll easily spend $500 paying for one. Best advice I ever got was to just hire a general contractor to do it for roughly the same price. They find way more stuff and generally know the codes better. I've had inspectors miss huge structural problems that destroyed me later.

You may hit a roadblock as the sales contract may require that any inspection be performed by a "licensed home inspector" not a general contractor. Its just another siphon in the residential real estate pipeline.

Many GCs are licensed home inspectors because they give free estimates all day so they may as well get paid for a few of them. A lot of people buy homes then immediately get work done and if you're not an obvious scumbag the fact that you've already conducted one transaction with the new owner will not hurt you.

That is just made part of the offer. Take it or leave it.

After my most recent (second) home purchase I vowed never to pay for an inspector again. They assume no liability for the things they miss making them effectively useless if you have even the most basic knowledge of home issues. In both cases major issues were missed, most recently the complete absence of any air return ducts, and an illegally installed furnace. I had to find these issues myself later when constant HVAC problems finally drove me to take some time and climb into the attic/basement to investigate. Upon confronting the inspector, I was shown the portion of the contract indicating they had no liability and told even experts miss things. Luckily I knew the right people to put some pressure on and got my ~$500 back, but ultimately lost thousands to have appropriate repairs done for the work they missed.

"Good" real estate agents are interested in moving as many houses as quickly as they can, to gain as much vig revenue as possible.

"Good" real estate agents from the buyers perspective would be slowing down sales, reducing the overall price they make a percentage on anyway (which is why fixed rate for a "class" of real estate would work better) as a disincentive.

Why would a real estate agent dissuade someone from buying something? They can compartmentalize/offload the moral responsibility to the inspector (which are pretty hit or miss too).

They might know the house will not appraise for what they're trying to buy it at, so it'd be a non-starter without additional substantial down payment that they might not have. there's non-permitted additions, construction is suspect, insurance will be crazy due to proximity to ocean bluff, etc.

and the inspector is financially responsible for exactly the cost of the inspection.

No more.

I think you've really hit the nail on the head here. There's a built-in conflict of interest for the agent in every transaction.

They are rewarded by moving inventory, not serving their client.

> and the inspector is financially responsible for exactly the > cost of the inspection. > No more.

And gets more business the more time he stamps yes for the realtor.

(also true of the broker and appraiser)

I've forgone the home inspection during the most recent transaction. In the previous few houses, I've found things immediately after the sale, which the home inspector didn't find. OTOH, they find tons of trivial things that frequently don't matter (or are just plain wrong).

And of course, while they might be able to tell you if they find termites, or foundation problems, they aren't actually doing a deep analysis, so they will themselves tell you to get an engineer or termite inspector if your concerned about those things. AC/mechanical problems are in the same boat. The inspector will tell you something like "the AC is 15 years old, but has a 15 degree drop" (something you can discover yourself in 30 seconds with a picture of the nameplate) and a thermometer. Actually measuring the subcool/superheat, no way. The latter will actually give you a good idea about the state of the machine.

Making the seller pay for a home guarantee for the first year is probably a far more effective way to spend money. Although again, don't use them until you know whats going on. Your AC gets warm, they are just as likely to send a guy that looks the other way, pumps a 1/2 lb in the system and kicks the problem down the road a few months.

The Principal-Agent Problem: https://en.wikipedia.org/wiki/Principal%E2%80%93agent_proble...

Totally agree - my original post was too kind. I share your sentiment.

> Why would a real estate agent dissuade someone from buying something?

Story time!

When I was looking at buying my (now current) house, I had a realtor on my side, and my wife actually found the listing (no knock on the realtor there - my wife was just that on top of things) and the house was actually for sale from a realtor at the same company as my realtor.

As we were doing the inspection, I had questions about the pipes (lots of trees, and I knew of some horror stories). I was told the required inspection only covered the house itself, and the pipes would be someone else. My realtor was careful (IMHO) to not dissuade me in any way, but neither did she encourage me. I could tell she wasn't excited about me getting the pipes inspected - in part, I would later find out, because anything bad I discovered would then legally have to be disclosed to future prospects, whereas ignorance was a shield. So she was not a very useful source of guidance for getting this thing done.

But I did get it done, and when the result was a clean bill of health (the inspector showed me the video and was remarking that the pipes were basically pristine, which was amazing for 30+ year old concrete pipes) she was suddenly much more enthusiastic about the inspection. All smiles and congrats and saying what a good decision it had been.

It was a revelation into the incentives involved. To think what might happen to someone else with an agent who would cross the ethical line instead of just being unenthused.

More than just not wanting to know about problems agents want to avoid any liability for when the home inspector misses something and it comes back to cost the buyer after the sale. Agents nowadays, at least at the franchise that I am familiar with don't want to recommend a particular inspector, they'll list a few decent ones and leave all of those decisions up to the buyer. They also try to avoid being present while the home inspector is there. There's just no reason to take on any added liability when there's no reward for it.

That's also not just hypothetical either, we've been sued a couple times as a brokerage because one of our agents recommended a particular inspector who missed major termite damage.

Add to that the title company which actually does much of important legwork of getting all the ducks in a row, and doing the research and insuring the transaction. I've never had a real-estate agent that did much more than recommend inspectors/mortgage companies/etc. In the end I've never actually used any of the recommended people because I've been able to find better deals on my own. Pretty much once the title company is named, its more a case of relaying all the information to them where they distribute it to interested parties.

AKA, much of what you think your real-estate agent was doing was likely the title company. Even more so from the perspective of the seller.

https://smallbusiness.chron.com/duties-roles-title-company-2...

>The work an average agent does is more or less cookie-cutter from my anecdotal experience

indeed majority are uneducated, there is a low/no barrier of entry with a similar shark mindset as it exists in recruiting - a lot of promises by your employer (profit sharing etc) but the competition is fierce. I doubt it's an industry that can easily be disrupted. at least to date I've seen no tech proposals/ideas that can compete with this setup because it's already a race to the bottom (and unlike recruiting) requires interfacing with old-school bureaucratic notaries, legal advise etc. In the end you still need a human making an appointment with another human to view the property and a robot doesn't cut it.

The listing agent should have expertise in the valuation for the ask price. I don't think appraisers are generally involved. Appraisers are primarily working for the mortgage company. My last 4 appraisals have been within a couple thousand of the purchase price.

"My last 4 appraisals have been within a couple thousand of the purchase price."

Is that a reasonable metric, or is time on market?

I ask because there are a number of studies, that indicate that real-estate agent's houses themselves frequently sit for sale for much longer than the ones they are selling. The idea being that the agents are pushing the market and willing to absorb the longer time-frame in exchange for a much higher selling price.

OTOH, it seems sometimes the strategy is the reverse if the market is really hot. Under-pricing and getting a half dozen people into a bidding war which ends up being double digit percentages above ask seems a frequent strategy to get maximal returns and fast sales.

My take is that the appraiser is simply protecting the bank from making a giant mistake. They'll prevent a 100K house for getting a 200k loan. Our previous house sold for 330K when most of the previous sales had been 250-300 for the neighborhood. We even had a comp of the exact same floorplan/elevation at 275. Our agent thought we would probably find buyers at the higher listing price, but didn't know if the house would appraise without any comps in the ballpark.

The low price attracting a bidding war doesn't really work in our market. My brother had something like a dozen showings and half that many offers on listing day, but only got a couple thousand over list. My house had 4 offers, but everyone stuck to their initial numbers when we asked for best and final offers.

Since the market has been hot, there is a stigma of "something must be wrong with that house" if it's been on the market 90+ days. Our strategy has been to price at the top of the comps and reduce quickly if we're not getting good leads.

> it will be on a technology platform that takes 1%

1% sounds crazy expensive to me.

Indeed. Why would they get paid more if the house happens to be more expensive?! That's like a doctor charging 1% of the patients income... "rich people should pay more".

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