Could be the end of real estate buyers agents | Hacker News Reader

Could be the end of real estate buyers agents

notorious-rob.com

33 pointswndoom25 comments

Buyers agents get paid more if the home sells for more. They should be incented to drive the price down for the buyers, not up.

Even so, it’s really better for any agent to accept the first reasonable offer, close it out and as quickly as possible move on to the next house. They are not incented to drag the sale on to get a better deal for the party they represent.

Freakonomics! https://youtu.be/aFYlgqv3T-w

The real incentive is the latter one you mentioned. Buyers aren't going to care about driving the price up to get a bigger commission. The potential hit to their reputation probably wouldn't be worth it.

But they definitely are incentivized to get a sale done asap.

This is the same reason your selling agent isn't really incentivized to get you the highest price possible. The small increase in fees isn't worth forgoing the money that could be in your pocket now.

Restricting home sales listings to realtors is anti-competitive behavior. They have gotten away with it because they are politically powerful.

However, fashions change and it does seem that high home prices have become a real issue today.

Listing a hike isn't restricted though. You can still list online at places like Zillow and Craigslist. Signage as well. You are just restricted from their private MLS.

Of course even then, there are online brokers that will list you in the MLS for a flat fee. I think I paid $250 to put my house on the MLS when I sold without an agent.

Just as egregious, many contracts require the agent to be the member of a realtor organization to get the commission, and if not, both commissions are required to go to the seller agent.

So if you utilize nobody, or a skilled acquaintance, you can find that the seller is legally prohibited from paying the commission (that I agree is just as insidious).

That seems like something you may have a decent chance or redlining, particularly if it is a competitive offer, no?

Yeah it always seemed odd to me that we have to pay the "buyers" commission when we are selling "our" home... crazy

Don’t these cases come up all the time and nothing ever comes from it?

Also, it’s hard to see sellers as getting ripped off when the buyers agent fee is factored into the price. If there was no fee included you would expect to see a drop in price, and this is what happens when a buyer purchases a home without an agent.

Nope this one is different, and it will go to the Supreme Court. The plaintiffs are two of the most successful and feared law firms. They've won billion dollar judgements against Apple, Toyota, etc.

MLS is a racket, and I wish them the best of luck.

Except for the contracts which state that if the buyer purchases without an agent (or accredited agent), then their commission _also_ goes to the sales agent. You don't get off easier in those situations.

The article addresses this

>What should be concerning to MLS leadership, to Associations, and to large brokerages and national franchises is that the lawyers involved in this case are seriously scary dudes. In past legal actions against NAR, against the MLS, and against large real estate companies, the lawyers bringing the case tended to be small plaintiff’s lawyers seeking a relatively quick payday. Those smaller law firms can’t take on a protracted multi-year litigation with expert witnesses, motion practice, deluging the other side in paperwork and discovery requests and so on... The two lead law firms in this case are Cohen Milstein Sellers & Toll and Hagens Berman Sobol & Shapiro. These are two of the most successful class action plaintiff’s law firms in the country. They both appear on the list of Law 360’s “Most Feared Plaintiffs Firms” with some significant victories over really significant companies... Cohen Milstein beat on Apple, for example, in the electronic books antitrust lawsuit.... Hagens Berman is the firm that took a $1.6 billion bite out of Toyota for the “sudden acceleration” problem with some of its cars.... They have hundred of billions in victories between the two of them, quite a lot of lawyers in offices across the country, and a huge war chest for these kinds of complex class-action lawsuits. These are not your average ambulance chasers; these are the guys that cause tightened sphincters for the General Counsel at major corporations, banks, and institutions.... They can keep a lawsuit going for years and years if need be, as they have the capital to keep paying lawyers and expert witnesses and so on. This lawsuit is a serious threat.

Most contracts state that if there’s no buyer’s agent, then the seller’s agent gets all the commission. So, no discount.

But is that a requirement? Or can I negotiate that with my agent before I sign on?

It's a requirement. It's negotiated during deciding on the sale price.

This is not how contract negotiation works. In a market where housing demand is weak, it would be perfectly reasonable and possible to propose terms of sale which reduce the seller's agent fee or return it to the buyer in the form of a discount. Worth remembering in all forms of contract negotiation (buying cars, etc.) - just because they write it down doesn't mean you (the buyer) have to agree to it.

You're absolutely right that you can negotiate, but one of the consequences of regulatory capture (real estate agents must be licensed by the state, and may be required to complete a transaction) is that agents are disincentivized to negotiate on commission. Also agree that when the market is soft, you're more likely to be able to win a concession.

In some states, a buyer must be represented by a Realtor. If the buyer has no representation, then generally what happens is that the seller's Realtor nominally represents the buyer as well (dual agency). If you were to try to negotiate to not pay the commission, then your Realtor would probably refuse to represent the buyer, and they might not be able to close.

The requirement is almost certainly for a real estate agent licensed by the state, not a Realtor®, which is a registered trademark of a particular trade association for it's members.

Yes, you are absolutely right, and I'm aware of the trademarking of the Realtor name - that's an interesting story in its own right, and a very interesting approach to regulatory capture. I was just looking for statistics to find out how many people are licensed real estate professionals but not Realtors, but I couldn't find the number -- I'm betting not many. Since we are picking nits -- many states have a different licenses -- agents vs. brokers -- but both can be Realtors. Here's a good link for people who aren't in the know: https://www.frameworkhomeownership.org/blog/broker-vs-agent?...

Cant you just use one of those services that'll sell your home for a flat fee? then you don't need to pay the buyers agent, right?

In those services, you often end up paying most of the money you pay to the buyer’s agent. Otherwise, the house won’t get listed in MLS, and nobody will see it.

You can list on Zillow or Craigslist, maybe redfin, etc. I paid a $250 flat fee to list my fsbo on the MLS. I advertised that I would work with buying agents because I heard that agents will tend to not tell their clients about your house since they may not get a commission.

I ended up selling to a buyer without an agent who saw the sign. But my understanding was that if a buyer approached me I could have told them no commission and they could have proceeded as they wish.

That's definitely true. The question to ask (and I mean quantitatively, not rhetorically -- economists can gather data on this) is whether paying a Realtor 6% nets you more profit on the sale, e.g. whether a house listed on MLS and marketed well sells for 6% more (or sells significantly faster, such that the cost of capital nets you some gain). I expect that it depends heavily on the local market dynamics.

Would be really good for RedFin if this succeeds.

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