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Comment by naveen99 | Hacker News Reader

Sellers agent paying the buyers agent is a kickback. Kickbacks aren’t allowed for referring Medicare patients. They aren’t allowed in bribing government agents. They aren’t allowed in corporate contracting. Somehow in real estate, they are required.

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And if you have bought a couple of houses a decide to buy one without your own realtor it's not like you get the kickback. No. Seller's agent keeps all.

The buyer's agent's incentive is the same as the seller's, which is to turn houses as fast as possible. That's a huge misalignment on the buy side. If the buyer dislikes the house enough to move after several months, that increased liquidity benefits agents.

I wish the buy side agents' compensation were more like a vesting schedule, that would incentivize them more along the lines of getting buyers into long-term residence.

I can see this point of view for a developer/builder, maybe… but that often comes in the form of a warranty or builder guarantees. You talk about increased liquidity as if homes are a commodity, traded quickly and often. This isn’t the case. I can’t even imagine how this scenario you’ve imagined plays out.

The real estate agent should not be required to guarantee that their clients home will be “liked” for X months or years. This makes no sense.

For 3% of the purchase price on inventory of $100k+ they absolutely should be accountable for their client being satisfied with the purchase.

These are specific lines you’ve drawn. Maybe you can provide a scenario in which this is accountability is required…

A good agent will spend the entire 30-45 day process ensuring their client is getting what they want and what they are paying for. A good agent does not want a buyer to end up in a house that is bad for them in any way. And even then that’s only counting the days between the acceptance of an offer to closing day. Oftentimes an agent will spend months or even a year or more with clients.

It is strange that you claim you cannot imagine how selling a primary residence sooner than expected increases the number of houses being sold, but you do have the imagination to pretend an agent is working full time for single clients in 30-45 day stretches to ensure they get what they want (despite misaligned incentives to do so). And that they "often" spend a year on this.

You’re exaggerating my claims and won’t answer for your own.

There's also a misalignment on the sell side. Since the seller's agent gets paid a percentage of the sale price you'd think they're incentivized to sell at the highest price possible. But they don't make any money at all until the sale actually goes through. They'd much prefer to sell 2 houses at $125,000 than 1 house at $175,000 for roughly the same amount of time and work. Since cost is the only knob they control of the three affecting the time/effort it takes to sell a house (the others being condition and location), they are going to turn it as low as possible.

Agree. A listing agent would much rather that the house sells for 2M than try to eke another 100k out of it and risk the house sitting on the market for months. The 3% of the incremental amount is just not enough to matter. They’re incentivized only by getting the deal done. Full stop.

There is no “kickback”. And payment from seller’s agent to buyer’s agent is not “required”.

I can’t stand realtors, but even I find this argument disingenuous. The difference is that the “kickbacks” in real estate are all publicly known upfront and offered to any buyer agent, rather than used privately for one agent to get ahead of others like in your other examples.

It is my understanding the buyers agent commission is a line item on the MLS entry. So only agents can see it, not the public. Too low? Now your buyers agent will refuse to show that house.

I agree with you, but every agent does know the offer up front.

> Now your buyers agent will refuse to show that house.

By the same token should developers be required to work with clients that pay well below the market rate? Often on this website we talk about telling a client to pound sand when they want to pay next to nothing and they want the moon, how is this any different? The work an agent does is not always constant (sometimes you show a person literally over a hundred houses, sometimes they find their dream house after 2 showings) but there is a baseline of work they have to do. I don't find it so crazy that if another agent doesn't want to pay me for that work that I don't engage with that agent.

It's rational for the buyer's agent to do that, but that doesn't make the system less utterly corrupt.

The buyer's agent represents the buyer. They should be paid by the buyer. The payment from the seller's agent to the buyer's agent, if it affects the buyer's agent's decision, must mean the buyer's agent is no longer acting in the buyer's best interest.

technically they are breaking the law by refusing to show a house because of the low commission.

Laws that you cant prove are jokes of laws.

Buyers agent: "I know the house, and didn't think it met your qualifications of what you verbally described to me."

(in reality, its perfect, but has low commissions)

It's a cartel that uses price fixing, which perversely makes price discovery trivial. So everyone in a market generally can assume the level of the buy-side commission (for ex: here it's 3%). That will be accurate unless the sell-side agent says otherwise.

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