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Comment by StillBored | Hacker News Reader

Part of the problem is that most realtors want it that way. I live in Austin, and the push for a few years now has been to have a "silent market" where a buyer picks a "full service" realtor (AKA full commission), and gets a week or so jump on properties being listed in the MLS. This gives them a better chance to get the property before the MLS hordes descend and start bidding it up.

The part I've never understood is, as a seller, why wouldn't I want my property to have the largest exposure and the most interested buyers. Presumably, having people getting into bidding wars for something i'm selling is a benefit.

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> "Part of the problem is that most realtors want it that way."

absolutely. the cartel doesn't help the top 2% of agents, because they're good enough to earn the 6% (or higher) anyway, but the monopoly works because the overwhelming majority of interested stakeholders benefit.

(that's not to imply that most agents are lazy though. a stat i dimly recall is that only about 10% of agents make enough to be full time.)

Well its a pyramid scheme like many of the state licensed businesses. The low level agents have to work for a broker who soaks up the majority of the commission. Only after being an indentured slave for a few years do they get the "privilege" of themselves becoming a broker. The problem is that once that happens no one will hire you, so your on your own for finding clients/advertising/etc. That takes capital most low level agents haven't managed to accumulate working for someone else. So its likely they need a significant other/whatever to support them while they build the business while competing with the larger agencies that have the money to plaster signs down the freeway and run advertisements.

Given some luck/skill and a lot of hard work, maybe they become large enough to start hiring agents themselves, and the cycle repeats.

Agents make at least 60% from day one. It is easy to find a brokerage who will offer 70-80% day one. So in that respect I don't think it is a pyramid scheme at all. Also, there are plenty of brokers who work in a larger organization without being the broker of record. But as you noted, advertising is not free. It is extremely expensive to market as a real estate agent, and that marketing cost is why most agents fail. It is just too expensive to start. In my area, I would allot at least 30,000 a year to get going as an agent for the first year, and more each year after that.

Source: On the fence about dropping my license right now.

yah, it's not a pyramid scheme so much as it exhibits power law characteristics (80-20 rule and such).

Sounds like software engineering today.

Where most engineering interns are probably paid more than the median national household income? Where starting salaries are in the 6 digits?

I mean come on, sure 120-150k starting salary out of university is only a thing in SF, Seattle etc but even in other parts software engineers are paid well. 80-90k in some city in midwest where housing is super cheap is a great middle class salary.

Only in Tech Hubs like NYC or SV...

How much lower is the starting pay in Boise, or Kansas City or some non-tech hub? My startup company pays well over 100k for college hires with no experience. And other companies pay more. Yes, we are in one of the tech hubs (Seattle). If other companies don't pay nearly as much, why would people work there?). You might pay 20k a year for your cool apartment in walking distance to bars, shops etc, but you have a great lifestyle.

One of the key functions of a broker is to provide plausible deniability, such as screening potential buyers who you think might waste your time or to avoid accusations of discrimination.

Brokers have to present all offers.

They may have to present all offers, but they don't have to present them in the same light. When I've been presented offers they DEFINITELY tell me about the strength of the buyer, what kind of financing, and what the deal terms are signalling. This stuff definitely matters to me because I've had to hassle with cash-poor buyers before and it just isn't worth the time, even in a buyers market.

The information about the strength of the buyer comes from their proof of funds or pre approval.

Legally the broker is presenting an off utilizing an agent. An extension of them essentially.

But at least they can waste the brokers time rather than yours.

Perhaps a pocket listing isn’t paying the Buyers Agent half of the fee, so saving 3% right there. Depending on the market that may be worth it versus going to the broad market and having to pay both sides of the commission.

Pocket listings still pay both halves but are often discounted down to e.g. 5% instead of 6%. The agent tries to spin the situation as a discount to the buyer and seller as they "save" 1% on commission. One of the main justifications for why the agent "deserves" a 3% cut of the deal is that they are working to represent you and safeguard your interests. That can't happen when they're representing both sides. It's as perverse as a plaintiff and a defendant using the same lawyer to save 1% on legal fees.

In a given market area there are literally thousands of real estate agents. Even with a 1% discount off the top, what do you think the odds are that the best offer on the market just so happens to be a listing that your real estate agent just so happens to be the listing agent for?

Real estate is a racket.

I get the impression the austin market is more formalized and is run more like a mini private MLS... (might be wrong), but part of the goal seems to be to keep out the discount realtors/redfin/etc.

Why would someone sell their home without listing it if they are still paying for a commission?

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