Hacker News Reader

Comment by dreyfan | Hacker News Reader

I understand that, I'm not suggesting it's a scam or anything (though typically in the US a home seller pays 3% to the buyers agent and 3% to the sellers agent). I'm saying when Bloomberg exclaims "Zillow is selling homes at a loss!" they're missing the point of the strategy. As long as the price they sell for still exceeds the fees they take, it's a profitable move.

Also many of these transactions do not involve traditional brokerages whatsoever. People sell their homes directly to Zillow and other people buy the homes directly from Zillow.

View on HN

3%? 6%?

My last house sale in the U.K. was 0.5% of the sale price to the estate agent (the buyer doesn’t pay anything). Legal fees on my side for selling and buying were another 0.5%, and a little for a survey. Total cost to sell and buy well under 1.5%.

Why do you get for that 6%?

6% has been the norm in the US for a long time. It is absurdly high and is why opportunities like iBuying exist.

In the UK, there is no wiggle room for such ventures, but as the transactional costs in the US is steep, the market was ripe for disruption. You can usually expect your total transaction costs to be 8-10%, so there is a lot of margin in there for Zillow/Opendoor to operate as the only intermediary (buyer & seller agent, lender, stager, etc).

Can confirm that 6% is the norm and average cut the agents take in the US. Typically 3% for seller's agent and 3% for buyer's agent. The entire commission is paid by the seller so the buyer never sees this, though technically those fees are baked into the final price they pay for the house. RedFin and others are trying to disrupt this model but made very little inroads so far.

At a minimum, the real estate agent manages coordination. Good agents are familiar with the local ordinances and can save you time and hassle (a city I once lived in insisted that homes had to have a city inspector go through prior to listing, and neither I nor my agent knew until we found out from a buyer's agent).

Great agents will organize staging, professional photos (some companies put up "3d" walkthroughs on their websites), open houses, advertising, recommend investing in remodelling to list at higher prices (or when to pass on those things depending on the local market).

Sometimes, paying an agent more than makes up for the cost by getting a better sale price. Other times, it is kinda pointless.

(If you didnt know, seller customarily pays for both agents as well in the US).

That was what the traditional agent told me a few months ago. I asked how much he sold an identical house next door to me 2 months earlier, he didn’t know. He wanted an obscene 1.5%.

Turns out it was for 3% less than I got with my online broker which cost half what he wanted (and did professional photos, I didn’t want the 3D walkthrough for £99 extra, we don’t do open houses in the U.K.

Reply on news.ycombinator.com