Hacker News Reader

Comment by systemvoltage | Hacker News Reader

Why can't we get rid of Real-estate agents all together? Snipping off 3% of the house sale price is a ridiculous fee for shuffling some documents around and pretending to be acting in my interest. What's stopping Redfin/Zillow or SV tech scene to disrupt this arcane industry?

I haven't purchased a home before, but it seems like most things such as discovering homes, securing loans, touring the place, inspection, sending offers, closing and signing the deed - is very much automation-ready. There must be some reason.

Edit: I got a real estate agent to kick off house search from Redfin. We had a zoom call, he looked at what I've added as favorites and basically didn't do anything useful or provided anything more than what's already on Redfin wesbite. We browsed some homes together and had a bit of small talk. I didn't go as far as putting down the offer but why do I need to do this bullshit with a real estate agent? It's frivolous and unnecessary. May be he would be useful later down the process? If you've bought a home, would love to know what parts of that process are ripe for automation.

View on HN

The main reason why real-estate agents are a thing is because of logistics.

a) The buyers want to look at multiple properties as quickly as possible; b) The sellers don't want to or don't have the time to be manage all of the requests for viewings. c) If there is no viewing opportunity, then the buyer might miss a good property that matches their needs or the seller might miss a buyer.

The real-estate agents have a pool of properties that they manage and they can provide quick access to the properties. They meet the needs of both the buyer and the seller and increase the probability of a transaction.

Of course, if you can find a way to do that without a real-estate agent, you got a breakthrough innovation. However, it's fairly difficult to crack this problem since the transaction inherently tilts towards human interactions. This is why nobody has figured out an effective way to get rid of the real-estate agents yet.

I find it odd that no one has mentioned the interpersonal aspects / relationship aspects / sales skills here.

I went through a recruiter early in my career and I believe they negotiated better than I would have on my own (based on them getting rates I did not realise were possible).

Having an agent as a seller lets you outsource the grubby, sometimes grasping business of getting the best price you can, in a reasonable amount of time.

For people who are naturally good at that, an agent might not be such a good deal.

For some of us, especially the less "hard nosed", an an agent can be a good idea.

> For people who are naturally good at that, an agent might not be such a good deal.

Even for those of us who are good at it, we simply don’t have the domain knowledge an agent can bring.

Understanding the history of an area, regulations, costs of getting work done, lead times, liabilities, seller/buyer psychology etc, aren’t things you can acquire overnight.

> a) The buyers want to look at multiple properties as quickly as possible

Surely this could be optimised far beyond what (multiple different competing) real estate agents can offer, with the right tech solution? In my experience, real estate agents can be difficult to contact and schedule with in themselves; a central portal with assisted scheduling would improve things?

> b) The sellers don't want to or don't have the time to be manage all of the requests for viewings.

- very good point - e.g. if a seller works regular hours, viewing opportunities would be greatly limited. I guess this is (a lot of) what you pay the %3 for.

- could be somewhat mitigated by better tech - the industry is slowly adopting (e.g.) 3D online house tours (partly driven by the pandemic lockdown) but there's probably lots more to be done in this area.

> real estate agents can be difficult to contact and schedule with in themselves

This doesn’t match my experience. Every real estate agent I ever dealt was very responsive. This makes sense for someone who is going to make five figures if a sale happens.

I used to joke with my wife that if someone ever needed someone to talk to at 3.30 AM on a Sunday, they should call a real estate agent. Those people seem to never get time off.

3d tours being used a lot in UK by decent agents. Paired up with my Oculus quest and saved myself at least a few weekends and hundred of miles on gas , co2 through unwanted viewings.

3d tours are amazing, but unfortunately, at least in Iowa, they're almost never used by real estate agents. There is a for sale by owner company (FSBOHomes) who charges a flat fee for marketing your house, and includes it as part of their base fee.

I ended up buying and selling a house through that platform. It saved me tons of time on the buy side since it provides a great virtual walk through as well as a floor plan with dimensions. Floor plans were never available if a real estate agent posted the house.

Did the 3d view match your expectations.. Oddly, I find them hard to physically visualize.

Overall, pretty well. It saved us a lot of time compared to spending a day going to open houses which aren't a good fit (outside of basic specs on paper) or driving around town with a real estate agent looking at houses.

It was far better than the photos normally posted online. Most websites host ~25 photos of the property, and my last house had 8 rooms. It's really tough to assess a house and understand how the rooms flow together with so few pictures.

The floorplans generated by Matterport may be more helpful if you have trouble visualizing it. I would pull up those floorplans and measure the room we were in and say "the living room is 3 feet wider, and the couch would take up about half of this wall" to help put things into perspective.

I wasn't using VR, just looking through on a computer. Not sure if VR would help.

Yea especially with vr.

Agents photos are really misleading but with 3d a small room feels like a small room.

Edit: One thing I did notice with matterport was a lot of personal information can leak out about who lives there.

Made the BBC recently: https://www.bbc.com/news/technology-56718046

Glad to be up to date on what's happening in Iowa

You don't even need VR for a good filter. When I bought my house in the mid-90s, essentially pre-Web, I can't tell you how many houses I went to check out just the interiors of that that were a quick nope for various reasons. Even Google Street View would have saved me a ton of driving.

As a seller you can do it all yourself in some countries (not sure about US). You don't need license or training, you just have to manage your time properly and book viewings after work hours.

At least from my very limited experience, the only aspect that's worth paying for are nice pictures for the ads, if you can't do it yourself. The rest is posting on real estate aggregators which at least in Europe are very popular, mostly free, and for sure not 3%.

Paying a percentage of the sale for what is effectively an assistant type work isn't something I recommend.

Everyone can't just collectively move away from the MLS database. I'm sure redfin is trying to figure it out.

I like to say that the reason you need two agents to sell a house is because you need one agent to convince the seller to sign that contract and another agent to push the buyer.

In an ideal world the seller would hire someone to show the house to potential buyers (e.g. redfin pays a fixed hourly rate to its agents who show the house) and then both seller and buyer hire real estate attorney to close the deal. 3K usd max. This nice plan falls apart when sellers and buyers can't agree where houses will be listed for sale (don't offer craiglist).

We need you know.. Tinder for houses.

>Tinder for houses.

Woah. Stop. Great idea.

I can only imagine the sexism, racism, and religious discrimination that would result from person-to-person transactions like these.

I think the world is far less sexist, racist and discriminatory than what we hear on the internet. Most people are nice in the world.

I take it you're a person not subject to racism, sexism, and other common forms of discrimination?

Rather than hearing about it from the internet, you might spend some time talking with those individuals who do experience it. They're often reluctant to talk about it -- especially if you're likely to respond with some variant of "Oh, that's not really so bad".

Most people are nice in this world, but there are enough non-nice people that everybody in some marginalized group gets subjected to it -- often every single day. Often it's small, but a small thing every day adds up. And being unable to talk about it for fear of being told "it's not so bad" is, itself, just one more small thing. And that means that some people who think they're nice aren't as nice as they think they are.

We had no buyers agent in Australia, only a seller's agent. Buying a house in the US is unnecessarily complicated.

> Snipping off 3% of the house sale price is a ridiculous fee for . What's stopping Redfin/Zillow or SV tech scene to disrupt this arcane industry?

There have been lots of attempts. Perhaps agents do more than “shuffle some documents around and pretend to be acting in their principal’s interest.” (Certainly the agent we’ve worked with through two sales—one a short-sale—and a purchase has.)

From my experience a buyer doesn't pay if there's already a seller's agent. The standard contract is usually something like 6% is set aside for agents and is split among the buyer and seller's agent if each exist (you don't want the seller's agent representing your interests). Sure, if you and the buyer were comfortable and experienced enough you could go without (you may want a property lawyer instead to look over things). I've never met the other party when buying/selling. I think agents are very good at helping the deal close. Buyers and sellers can get very hung up on minor details--I had a seller bump the price $5k for no reason after we agreed on a price. Negotiating repairs is over 100s of dollars in a multi-hundred-thousand dollar transaction.

While they don't usually pass along properties for sale (since it's faster to research yourself) I have found them helpful when talking about the local area (history, schools, etc). They often negotiate tours before properties go on the market. They'll get the keys and follow your schedule. They've been very helpful in scheduling and coordinating things like inspections in repairs--often being the one on site and letting me stay at work.

I don't trust they have 100% of my interest in mind (they want to close and get their cut), but they have an answer for inspections, repairs, mortgage company, etc. I'll usually go with their people to close and change insurance or refinance later when time to close isn't an issue.

All funds, repeat ALL FUNDS, from a real estate transaction come from buyer. Some of these funds are returned to seller, and buyer receives title to a house.

Study this. It is more subtle than it sounds, especially in light of the closing statement.

Is this like saying “your income tax is paid your employer”? It seems true in some sense (the withheld money goes from the employer’s account to the government’s account) but false in another.

The buyer does not pay for the costs of using real estate agents in upfront money. They pay the cost of using agents by paying a higher price for the property, all other things being equal, if no agents are used.

The buyer pays the costs of EVERYTHING. This does not mean that the deal isn’t good.

The seller does not bring money to the closing. He brings the house title, figuratively.

Let’s imagine that two identical homes are for sale, and it’s a buyer’s market. The owner of home A has contracted with a real estate agent to pay a 1% commission if there’s a sale, and the owner of home B has contracted to pay 2% to a different agent. Both homes have a market value of $1 million. The buyer will pay $1 million for either home, and won’t be willing to pay more for home B just because the seller has agreed to pay their agent more. We can see that the incidence of the agent’s fee is on the seller in this case. Put differently, increasing the agent fee decreased the net worth of the seller after the transaction, not the buyer.

Given different facts, the incidence could be on the buyer. The fact that the buyer is supplying the cash doesn’t tell us who the cost falls on. The buyer could pay by adding more cash or the seller could pay by gaining less cash.

I’m cribbing from the concept of tax incidence here: https://en.m.wikipedia.org/wiki/Tax_incidence

Indeed, various actions by seller can affect his yield.

Nevertheless, all funds in a real estate transaction COME from buyer. Once you get this, you've learned something.

Your income tax is indeed paid by your employer? Is there any other way to look at it for employees on payroll? It's just that you do the calculations to tell what rate you're supposed to be on..

“Your income tax is paid by your employer” is untrue if you have 2 jobs at the same time. If they where on the hook based on what they pay you then it wouldn’t matter that you have a second job. However, because you’re on the hook for the total amount, having a second job does matter and the IRS goes after you if you mess up the calculation.

This is similar because a bank could be providing the money, but the buyer is ultimately on the hook for it.

No, it’s not. Read it again. ONLY THE BUYER brings money to the closing. Of course, how much is open to negotiation.

The buyer brings the money but the seller brings the house.

Tax incidence depends on the elasticity of either buyer vs seller (whether or not it's a seller's market or a buyer's market)

I mean yes the literal money is paid out but the money is just the abstraction over the real thing.

Surprising to read: 6% and two agents is obscene. In UK it is different, I don't like it but it seems leaner. A single agent handles everything, hired by the seller, and charges about 1.5% of sale fee + VAT (once haggled down). Expect higher fees on smaller transactions or with 'prime' agents, meaning those with free coffee and gaudy suits. Legals usually cost £1500 all in. Add survey and mortgage costs if needed.

> A single agent handles everything, hired by the seller, and charges about 1.5% of sale fee + VAT (once haggled down).

That seems like there's a huge conflict of interest there. A buyer's agent isn't legally required in the US (and I've heard of people negotiating lower fees if there's no buyer's agent to share with), but I don't think I'd want to be in a situation where I, a layperson, am negotiating with a professional. The buyer's agent provides knowledge of the area (building materials, typical maintenance items and costs, how to make a competitive offer) and a non-emotional set of eyes to look at things.

Yes, they are incentivized to make a sale happen, but they make far more money in the long run with a happy client (who will refer others and ideally use them as a Seller's agent in the future).

From Poland, situation may be different elsewhere: plenty of offers go through real-estate agent adding 3% or sometimes 5% fee.

But it is also possible to buy directly from owners who just post their offers.

> discovering homes

Done via websites. Some with paid access for contact detail, but price minuscule compared to a real estate cost or fee taken by a real estate agent.

Websites are also funded by paying for positioning of ad by seller.

> securing loans

Can be done via going to a bank (and in Poland real-estate agent is usually not doing it anyway).

> touring the place, inspection, sending offers

Done by seller and buyer

> closing and signing the deed

Done at notary, also would be done at notary in case of a real-estate agent

In Norway it is possible to buy and sell houses without involving any real estate agents.

Here is a page in Norwegian with a checklist for selling a house in Norway without a real estate agent: https://www.forbrukerradet.no/forside/bolig/kjop-og-salg-av-...

The page I link to is written by Forbrukerrådet. They are an independent interest organization that helps consumers.

Notice that Consumer Council's page is about selling a house without a real-estate agent. In the US, buyers also have a real-estate agent. In Norwegian and Danish (and presumably Swedish too), they are known as «mekler»/»mægler«, i.e. mediator in English.

In Scandinavia, at least, only sellers hire real-estate agents, buyers at most hire an attorney (which they probably should anyway).

I am personally on the lookout for a house in Denmark, but have not closed (or come close to) a deal yet, since it's not urgent. But my general perspective is that the housing markets in Scandinavia are very different from those in the US.

It's similar in New Zealand: sellers (usually) hire a real-estate agent, and buyers (usually) hire a lawyer to check the sale and purchase agreement, provide advice, and manage the exchange of money (kind of like escrow). The lawyer is much cheaper than the real-estate agent.

It's also apparently possible to do this in the US: https://www.redfin.com/blog/everything-to-know-about-buying-...

I'll need to research more to see what the caveats are.

Agents aren’t required in the US at all.

This is possible everywhere. Practicality varies.

The pricing structure especially baffles me. My house is worth about 300. Why should I pay th anything if they sell it for 250? On the other hand if they can get 350 for it I'd happily turn over 10% of that extra 50...

All the ones I've dealt with just wanna push trough whatever offer comes first because 3% of whatever figure with zero work is better than 3% of a much better figure...

> The pricing structure especially baffles me. My house is worth about 300. Why should I pay th anything if they sell it for 250?

If you are willing to sell at that price, and thet are relieving you of work you would need to do to achieve that, they’ve provided value.

If you aren’t willing to sell at that price...you should not accept offers at that price.

I’m just saying the incentives are badly misaligned, I’m not saying they’re cheating me. The work needed to sell a house for 50k less than market price is a lot less than for 50k over market price. But the incentive is only a little more.

""a ridiculous fee for shuffling some documents around""

Wait til you buy a house an realize the title company handles all that.

I'm a long time Redfin investor and user. They are slowing chipping away at things, but old habits die hard.

The legacy Real Estate industry has a pretty good stranglehold on the status quo. From the MLS (Multiple Listing Service), to laws against rebates, to NAR (National Association of Realators), etc. etc. its hard for these new player to do what they want.

Redfin still needs Realtors to do its thing, so you will never see a FAANGM style hyper-growth quarter. They have said recently that they could capture a larger share of the market, but they are hamstrung by hiring realtors. They don't want to hire too many and end up in a 2006-08 era where they have to then fire a bunch of them.

Until laws and social norms (pay nothing a head of time, realtor does all the work, FSBO = the devil, etc. ) around home selling change I expect the new real estate companies to simply chip around the edges.

I had someone tell me my architect’s fee was too expensive at 7% they said that thier previous architect had charged 3%. I need to remember to prempt this in my sales patter by working into the conversation what estate agents charge for taking some photos and showing a few people around.

Agents act for the seller, not the buyer. It's the agent's job to manage a pool of prospective buyers and to negotiate the price up. The ideal is a bidding war between two keen buyers.

The last property I sold went for around 15% more than I would have asked for. The agent more than earned their fee there. (He then tried to pad the agreed fee, but that's another story.)

Agents do not act for buyers and they are not interested in selling to you at the lowest possible price. They are interested in selling to you, but obviously they qualify buyers based on market segment and keenness. If you're sort-of-thinking-about-moving you'll get less attention than someone who slaps a huge pile of cash on their desk and says they need something by the end of the day.

as a buyer my agent totally acted for me and negotiated a 10% lower price for the property. Lower commission for them but still higher than 0% if the sale hadn’t gone through.

As a buyer you can have an agent too.

So I do agree with you from a certain point of view, but from another point of view, 3% seems too low.

Consider that this is a very large transaction for an asset that changes in price over time, and no two homes are the same. Even buying cars usually involves a lot of negotiation. I got 15% off after negotiating my car price and a house is 10 to 20x what I paid for the car. The idea of ensuring you get your best price is worth introducing an expert. Sure, ML might solve home pricing eventually, but you still have to communicate, justify and sell it at that price, which is going to be something you want an expert to do. All of this doesn't even touch on the game theory aspect of auctions and bidding. It's a big mess.

To call the average real estate agent and expert at anything is a joke. Every generation seems to have this outrageously vapid profession that mediocre people take up (and more often than they truly deserve, make buttloads of money from) and perpetuate for no reason other than their own existential worries. For the current and past generation the real estate agent seems to be that, and I can see crypto Bros being the next generations one..

SV is disrupting the market. Opendoor, Zillow offers etc.. will buy your home and give you 90 days to close on a new one. So they are assuming the risk. You can even work within their system. A lot of new home manufacturers are employing the same model.

If you have a higher risk tolerance you can list your home at a higher price and wait it out.

In NYC, there are multiple options for buyers and sellers that want to save on realtor fees. I just bought a condo and worked with Yoreevo who gave me back 2% of the purchase price at closing (meaning they only kept 1% for themselves). They provide all the same services, but make it up in scale

Redfin at least takes a smaller cut than 3%...well they kick some of it back (to the buyer they represent, the seller pays the commission, I think they do something similar when they represent the sell side).

It’s common to dislike everything about the industry when you’ve never done a transaction, and when you’ve done ten transactions. In between, you find you pretty much have to play ball with these people.

> Why can't we get rid of Real-estate agents all together?

You can. Buy a home from the owner. If everyone did that, the real-estate agents will actually provide value when they exist.

Agents split the commission. It's not 3% of the house sale price but 6%. There's a complicated answer as to why the multi-billion dollar legacy real estate industry persists today.

Regulatory capture is the short answer.

Until you have a good real estate agent you don’t know their value. The barrier for entry for becoming a real estate agent is low so there’s a lot of crappy ones out there.

YOU DO NOT HAVE TO use a real estate agent. Legally you are not prohibited from NOT using one in the USA. But it's riskier not to, but sure, for simple real estate sales, it's quite possibly moot and unnecessary.

But the threshold for "simple" is far lower than you realize. Say you merely buy a plot of land. What if the land is land-locked - is there an easement for access? You probably didn't think of that first but a real estate agent will.

The reason why agents exist for ANYTHING is to save time, money and reduce risk due to lack of knowledge of the law, lack of knowledge of construction or lack of knowledge of financial matters. Humans have finite memory and skills - even if you have an IQ of 200. You can't know or learn everything. And you wouldn't have time even if you could. Enter the concept of "agency" - a proxy person or organization that represents your interests and has more knowledge and time that you do.

I'm guessing you are young and because you have plenty of time, you don't see the value of any type of "agent" relationship. I understand - when I was young I was the same way. And I was 100% wrong in thinking that way.

Today, I see enormous value in using "agents" for just about everything because I have plenty of money but little time and I KNOW what I do not know.

So I keep a lawyer on retainer now (an agent for legal issues) who helps with selecting lawyers for IP, business, real estate, family law, etc.)

I also use doctors (an agent for medical/health issues). I also use a tax lawyer/accountant (an agent for financial issues).

And often people will hire engineers and programmers as "agents" to accomplish things that people with money use as their agents to invest in companies of people who can make things work. These agents are called Angel Investors and VCs. And you as a technical person are an agent of creating technology value that ultimate "uses" the investor's money to best use despite the fact the investors know LITTLE about technology but see creating it as a good investment.

The reason such agents make more money on homes they own is pretty obvious:

1. They know all the details of maximizing selling price ranging from Staging to Negotiation techniques. They have practice at it. The 3% they take is necessary and reasonable because why the hell would they work for free. Would YOU work for free?

2. They have incentives to use every trick and skill because of their experience at the job - a real estate agent knows that Staging can raise the selling price by 10%-20% despite costing $5K-$20K - in many markets that is a trivial positive ROI (my ex wife is both a real estate agent and stager in the SF Bay Area, for instance).

EDIT:

So one thing agents do is handle HUMAN issues. My ex, for example, uses what we in B2B sales call "consultative selling" where you do NOT lead with taking customers out to see homes. Instead you spend time upfront and preselect only the homes that fit what the customer really values and what they can afford. Honestly I don't see a computer program duplicating that kind of thing any time soon. Certainly not in real estate and not in B2B sales. There is far too much nuance, psychology and hand-holding to ever expect a computer to duplicate - and it's all 100% "real time".

It's completely delusional to imagine Redfin achieving that any time in the next 100-200 years even with exponential improvements in technology (which are not going to happen as most people predict - my B2B is selling into semiconductor markets and we know what that's going to look like in 10-20 years because of "continuity").

Note also: Singularity and Transhumanism is not real nor based on any Science. It's a cult based on anti-scientific faith-based assumptions that are trivially proven to be untrue.

This is a great response, thanks. I didn't see them as doctors and lawyers but it makes sense. I guess, then their fees should be just hourly or per consultation such as doctors and lawyers? 3% of a million dollar house is $30k!

I recently bought a home with an agent. The agent was able to negotiate the home price down by close to 9% (the original price was out of my budget). I had no idea that the seller was willing to go that low - but the agent guessed it, and explained his logic to me.

While looking at other properties, the agent was very helpful in guesstimating how expensive and how long various problems with the homes we saw would be to fix.

The homes we saw were distributed over several neighborhoods. The agent was helpful in explaining that in certain neighborhoods, almost everyone engages in certain not-quite-legal but socially harmless things, while in another, very demographically-uniform neighborhood, your neighbors may report you for it.

TL;DR - a good agent brings up to date domain expertise which you are unlikely to have, and which a general-purpose algorithm might not be able to provide without generating outrage.

nothing, except for momentum and that real estate transactions don't happen enough for people to investigate an app to do it.

The person who invents a way to save 3% of the house sale price will make 1.5% of the house sale with their automation, while screwing a bunch of people out of an income.

and I don't even like real estate agents.

Downvote all you want, that just means I hit a nerve.

If new service would be cheaper and provide the same service then it would be highly beneficial.

If you disagree - please pay me 2% of things you buy for providing no useful service.

Reply on news.ycombinator.com