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Comment by bkohlmann | Hacker News Reader

Where you stand really depends on where you sit.

My wife recently became an agent, and prior to that I was all about disrupting the industry.

But I’ve come to see the 3% on each side as an almost market clearing price. It’s really hard work, with low barriers to entry, and significant upfront costs.

In a tight market, being a buyers agent can be a blessing or a curse. She’s been working with one client for nearly a year, submitting over 20 offers and going all over the metroplex with nothing to show for it. On the other hand, she’s had buyers who found something within a month. It works out to a decent standard of living, but it takes a long time to develop a pipeline. Most agents quit within a year.

I’m all for disruption, and it’s an industry with a lot of legacy, slow moving players. Buts it also a complex one with lots of challenges on the individual agent level.

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> Where you stand really depends on where you sit.

There's really only two seating sections. The one's paying the outrageous commissions or the one's receiving them.

> But I’ve come to see the 3% on each side as an almost market clearing price. It’s really hard work, with low barriers to entry, and significant upfront costs.

The vast majority of the upfront costs are a moat dug by the established players. Everything from mandatory trainings, registration to insurance requirements.

> In a tight market, being a buyers agent can be a blessing or a curse. She’s been working with one client for nearly a year, submitting over 20 offers and going all over the metroplex with nothing to show for it. On the other hand, she’s had buyers who found something within a month. It works out to a decent standard of living, but it takes a long time to develop a pipeline. Most agents quit within a year.

That's the natural pros and cons of sales working on commission. When you're making money it's great. When you're not, it's not. There's nothing special about real estate.

Everything from mandatory trainings, registration to insurance requirements.

People pay hundreds of thousands of dollars on their homes. It's the single largest transaction of most people's lives. I certainly hope the individuals hired to negotiate and manage these transactions are trained and insured...

When I last bought a house, I had an agent to show me houses. Then when it came offer time, I actually had my lawyer do the final review and he essentially did the bulk of the negotiation, the agent was simply a mouth piece with access to the databases and someone the other agents would talk to. It was during the 2008 time and I placed a bid on a short sell, my lawyer gave me distinctly different advice than the agent did (a personal friend, no less) the seller made some demands that he wanted in the contract and the agent simply wasn't capable of giving sound advice about it. Probably saved me about $50,000.

The big problem is agents are incentivized to have sales in the market. If you sell your house for $100,000 vs $110,000 is could make a difference of months and they're paid nearly the same even though it's a pretty large difference to the seller. To many of the people "helping" you sell, it's better for you to take less money now than 10% more in 3 months. Nevermind the roles they helped play in the big 2008 crisis... And this is a profession that has a claimed "code of ethics"

Most people can't afford to have a lawyer go over their home purchase/sales contract. They have to rely on their agent. So some training and insurance is absolutely better than nothing, which is what the comment I was replying to suggested.

I’ve been quoted $500 an hour and $750 an hour from various attorneys. I think that’s pretty easy to swing on a $100,000 house.

Sure, for a single hour. A real estate contract is dozens of pages long, and a good attorney would review all of those.

$500/hour for one hour? Doable for most people.

$5000+? That changes the economics of buying, especially if we're talking a $100k house, since that $100k is spread out over 30 years but the lawyer's bill is due in 30 days.

For contract reviews I've only been quoted 1-3 hours. Nowhere near $5,000.

What were the demands the seller wanted in the contract? And what was the bad advice that your agent gave? Just curious.

It's not that people don't do something worthwhile. It's more a question that is it worth paying 60,000 when selling your house? It's not. At $100 an hour, do you get 600 hours out of work of them? No. It's not about market prices, because the cartel (real estate industry) prevents lowering percentages - and they fight to the death any upstart who wants to do it.

It should not be a percentage, it should be a fixed rate. A few thousand dollars. Or hourly.

Until people can set different rates, or you have the option of fixed rates if that is the preference of agent & buyer it won't be honest.

> It's more a question that is it worth paying 60,000 when selling your house? It's not.

So why does anyone use them? Other people must think they bring more value than they cost. And if they're too expensive why aren't people undercutting?

They are undercutting. Online brokerages like Redfin and Opendoor are challenging the 6% fee. Their success has led to the "standard" fee now being 5% in many markets, but if you use these platforms on both the seller and buyer side, you may now be able to get down to 2.5%. I expect the fees will continue to drop.

As the article points out, the realtor cartel works to de-platform individual realtors who undercut the fee by shutting them out of associations (broker networks) and in some cases removing local MLS access. By law, you have to be a licensed realtor to broker real estate sales.

I keep seeing people incorrectly using the word 'Realtor'. A Realtor is a member of the National Association of Realtors. Not all real estate agents are Realtors. And not all Realtors are real estate agents (some are appraisers, home inspectors, etc.) The "realtor cartel" will not de-platform individual Realtors as much as they will deplatform non-realtor real estate agents. To get access to MLS you must be a Realtor though.

They do not have to be a Realtor to broker real estate sales. They need to be licensed real estate brokers. Being a Realtor is optional.

Source: am a non practicing licensed sales person in my home state. I can't do anything without a broker supervising me. Also I am no longer a Realtor, I was when I was an agent for a broker who was and required NAR membership.

Thanks for the correction. I'm not in this industry, so still learning and dialing in my terminology :)

I am able to get MLS access as a licensed real estate agent as long as I am a member of the local board and pay for that membership and MLS access. I am not a realtor.

Also, it may be different where you are, but 25% is the standard for referrals (from the buyer or seller side).

To me, it seems easier to generate quality leads, and then refer them to a buyer agent.

The reason you must pay the commission comes back to the cartel nature. If you won't pay the 3% to each side as the buyer, then many agents refuse to show the sellers the house. I don't think they ask the buyers, they just don't tell them about it. Then when redfin in Seattle started selling houses for lower commissions, it again was difficult because of buyer agents not wanting to bring their customers to the lower commission redfin houses. Redfin I think experimented with only reducing the commission on the seller side, not the buyer side, to try to break the 6%.

> the cartel (real estate industry) prevents lowering percentages - and they fight to the death any upstart who wants to do it.

Do they? I had a realtor once who worked for 2%. Anecdotally, it didn't seem like she was being run out of town. In retrospect, I'd rather have paid 3% for a realtor who did a better job. That extra percent was not worth the months the property sat unsold.

Who is paying $60,000 to sell their house? Most houses and agents aren't selling million dollar houses. There are some, but that's not the majority. Also houses that are priced like that don't have as many buyers, they take longer to sell. They have to market them to the right people, and have connections to sell those kinds of places quicker.

People gotta remember, the commission is split 4 ways unless one of the agents is a broker. Most agents themselves are only getting 1.5%

People CAN set different rates. Redfin charges a very low percentage compared to others. There are brokerages who charge flat fees, and will just slap your house in the MLS and then call it a day. You wanna list with a discount broker go for it... You can even sell your house yourself!

This whole thread reads like a bunch of people talking about tech people. "Oh you just sit at your computer all day surfing the web, why do you make so much?" or "Why pay you so much, I can just set up a website on Wix for $10."

Yeah there's some shady shit with the NAR and access to listing services, I'm not disagreeing with it 100%, but the average agent is doing a lot more work than you realize.

> Who is paying $60,000 to sell their house?

Allow me to introduce you to a place called California. In Santa Monica, where I live, median home price is over $1.5M. Yes, median. La Jolla is about the same. Irvine is just shy of $1M. In San Francisco it's over $1.2M median. San Jose is right around $1M. Mountain View is north of $1.7M. Etc. These places represent thousands of homes and average time on market is generally around a month. It's really that insane.

I am in the Seattle area, where the average home price is slightly above $800k. I'm fortunate to have a house that was a little above that average.

"Why pay you so much, I can just set up a website on Wix for $10."

I mean, that's a valid point in the age of Wix and Squarespace. I'm certainly glad I'm no longer in the business of building brochureware sites for small clients.

I understand your larger point that we shouldn't be quick to assume a realtor's work is not difficult. However, I think the issue is the buyer doesn't really have the option to forego the buyer's agent service and capture (through a reduced price) the commission that would have otherwise been paid. Not everyone needs a full-service realtor in the same way not everyone needs a bespoke CMS.

It'd be less work if the tools and information were more open and transparent. It might be hard work, but a lot of it doesn't need to exist and only does because of the information asymmetry that realtors maintain

The real big issue here is not the agents -- although there's built-in systemic conflicts of interest that the industry engenders -- it's the people above the agents that really benefit from this system...

The companies who normally take about 50% of that commission from the agent do not provide anywhere close to the kind of value that they charge for.

These are the real winners and gate-keepers in the current system. These are the people that pay millions for lobbyists to keep the status-quo.

> It’s really hard work, with low barriers to entry, and significant upfront costs.

So then pay by the hour.

Does this just incentivize them to spend a lot of time without actually selling the house? While I think 3% is outrageous, it at least incentivizes selling it quickly (even if it doesn't incentivize getting the best price).

They should be paid by the hour with an additional commission based on the sale price.

The industry should also be completely transparent as to how quickly each agent sells houses and how much their houses sell for.

As a client, you should do your own comparison shopping, do your due diligence, and get recommendations. Then go with the ones who've been recommended by people you trust and who have a track record of selling homes quickly and for the most money compared to other agents, or buying homes quickly for less money than other agents.

Agents should also be allowed to charge however much they want. The agents who buy/sell quickly and manage to get great prices will naturally be able to sustain charging more than those who can't.

Wouldn't it make more sense to charge by the hour? Or perhaps you live in a location with low housing prices. In either case, it seems to highlight the fact that the system is broken.

> But I’ve come to see the 3% on each side as an almost market clearing price

What do you base your claim on? If you increased the fee to 30%, many more realtors would enter the market, the average earnings (per realtor) would stay roughly the same, the sellers would be paying much more, and you'd still have the impression that it's the "market clearing price".

Similar story. We ended up beingvery undecisive buyers, and our agent ended up working really hard. I felt sorry. She is doing honest work, and there are too many agents in the market who is in it for the quick buck.

I would consider getting a license myself for my own investments, nothing more.

I definitely think 3% is a little high, BUT, if I were to sell my house, I'd much prefer to have the expertise on my side.

I'm sure in a healthy housing market, working with a great agent can easily make you more than their commission when it comes to pricing strategy.

Having done several real estate transactions by now, realtors sometimes take their 3% without having to do a lot of work. But sometimes, that 3% is an absolute bargain. The way I see it, it's worth the 3% to make sure things go smoothly.

If her client isn't providing a return, she should drop them. The fact that she doesn't means that the 3% she is hoping for is enough to cover all of that hassle. And most sales aren't worth the hassle.

If she adds value and the price is really market clearing, then surely she will thrive without the monopoly on brokerage that real estate agents have achieved.

Personally, I have seen what real estate agents do, I refuse to pay their fees, and I resent their stranglehold on the market. I consider them part of the cause of the housing affordability crisis. I'm happy that online platforms are cutting the fees, but I won't be content until the brokerage charges a flat fee or charges by the hour.

I’ll also add value I’ve seen she adds from a buyers perspective:

-she has access to a lot of off market listings via her networks. Sellers will somethings keep things off market so that when they sell, the tax base stays relatively the same - the appraisers don’t see a sale in the official pipeline -my wife also is really good at sending bespoke letters to target homes of folks not yet willing to sell. She’ll ID a group of homes in the buyers range, send them letters, and usually gets a 5%+ response rate. These are from folks who wouldn’t have sold otherwise

"the appraisers don’t see a sale in the official pipeline"

huh? tax appraisals are based on recent sold values.. not MSRP pending. You have to record the sale with the county to transfer the property so there's no way to escape the ta x man.

You dont have to disclose the price paid, at least in Texas. They'll ask but its optional.

That's not typical in the western US. Most western states have a public recording of the sale price and often the amount financed held at the county recorder. There can be a small tax (on the order of 0.1%) levied by the county that is a percentage of sale price.

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