I consider them very similar to car dealers, but slightly better because good ones have a network to help buyers out. The commission they get is too high though.
Both sides are incentivized to move each house ASAP, rather than for the best price, as they make 3% of any marginal price difference, but 3% of the total price of an additional sale.
Consequently, you're really only getting value from a realtor if "getting the deal done ASAP" is your priority.
Essentially the cartel prevents this. If you started a flat-fee agency, you would not be allowed access to MLS listings to show your buyers. Homes you represented to sell would not be allowed into MLS, and Realtors would not bring buyers to your home (because you're not prepared to give them 3% of the deal).
This is not an accident of the free market.
There absolutely are flat-fee agents and there is no “cartel” or anything preventing any agent or brokerage from charging anything they wish.
Redfin literally just removed itself from the NAR for that reason (and also alleged sexual harassment in the organization). https://www.redfin.com/news/redfin-is-leaving-nar/
>> In the many marketplaces governed by its policies, NAR still blocks sellers from listing homes that don’t pay a commission to the buyer’s agent, and it blocks websites like Redfin.com from showing for-sale-by-owner listings alongside agent-listed homes.
>> In about half the U.S., including in cities like Charlotte, Dallas, Houston, Las Vegas, Long Island, Minneapolis, Nashville, Phoenix and Salt Lake City, we can’t quit NAR individually or en masse, because NAR membership is required for agents to access listing databases, lockboxes, and industry-standard contracts. It’s impossible to be an agent if you can’t see which homes are for sale, or unlock the door to those homes, or even write an offer.
The DoJ also alleged exactly that in 2019. https://www.justice.gov/media/1105806/dl?inline
>> These NAR rules, policies, and practices include: (a) prohibiting NAR-affiliated multiple-listing services (“MLSs”) from disclosing to prospective buyers the amount of commission that the buyer broker will earn if the buyer purchases a home listed on the MLS; (b) allowing buyer brokers to misrepresent to buyers that a buyer broker’s services are free; (c) enabling buyer brokers to filter MLS listings based on the level of buyer broker commissions offered and to exclude homes with lower commissions from consideration by potential home buyers; and (d) limiting access to the lockboxes that provide licensed brokers with physical access to a home that is for sale to only brokers who are members of a NAR-affiliated MLS
And then there was People v. National Association of Realtors, 1981 https://law.justia.com/cases/california/court-of-appeal/3d/1...
>> The original three-count complaint alleged: (1) unlawful restrictions of trade under the Cartwright Act through certain restrictive regulations of the multiple listing service (MLS) operated by SDBR, including the fact only board members were entitled to access to that necessary service; (2) restraint of trade because of commission rate price fixing; [...]
>> On the first cause of action the court found a group boycott and issued an injunction guaranteeing access, on conditions, to the residential portion of the MLS to all licensed brokers and their salespersons without regard to SDBR membership. The court found no such boycott as to the MLS investment property portion. All other MLS operating rules were found to be reasonable, including a requirement excluding all listings except exclusive-right-to-sell agreements.
>> [On the second] Based in part on [expert witness] testimony, the trial court found the standard rates prevailing over a long period of time to be evidence of collusive price setting or other artificial influence. It also found four activities attributable to SDBR policies which are useful to maintain such uniformity: publishing and distributing sample literature using 6 percent and 50/50 split as examples; requiring the listing commission to be included in the published MLS, thus aiding those who would bring pressure to bear on price cutters; entertaining complaints against undercutters through its ethics or arbitration machinery brought by persons motivated by the undercutter's deviation from the usual 6 percent rate and 50/50 commission split, and continuing the foregoing practices even after it ceased publicly recommending adherence to the standard rate it had developed and maintained for many years. Each of the above findings is supported by substantial evidence.
Then DoJ and NAR got into an argument about whether or not the consent decree prevented DoJ from bringing future actions.
As a result of NAR wanting a guarantee they'd be covered, DoJ decided to request dismissal of the case.
https://www.justice.gov/atr/case/us-v-national-association-r...
Reading between the lines, I'd guess either (a) ongoing investigation or (b) chickenshit prosecutor.
Given that, it seems facile for anyone else to argue that NAR isn't engaging in behavior prohibited by our antitrust laws. If/when we resume robust enforcement of our antitrust laws, NAR would appear to be a prime target. Certainly, their behavior and marketshare are at least as anticompetitive than most of the primary Big Tech targets of antitrust discussion. And NAR hits the biggest transactions most consumers ever engage in, where e.g. folks spend vastly less at Amazon.
It is kind of curious the DoJ didn't pursue, but I assume most USAs are looking for a flawless record, so maybe didn't want to pursue it at this time.
Only if you don't care about your reputation or repeat/referral business (which is the lifeblood of a successful realtor)
I drove to the property and made my offer in person. I lived there for 7 years.
Use of the standard form (https://orforms.org/forms/) requires purchasing a license to the form, and licenses are only sold to licensed real estate agents and lawyers. I ended up buying the license to the form and a license for software required to fill out the form. (The website selling licenses didn't actually validate that you entered a valid state license id.)
It cost me a couple hundred bucks, but the seller accepted my offer. I doubt that the seller's agent gave the seller back the 2.5-3% that didn't have to be paid to a buyer's agent.
I concur! The amount of work they need to do has declined significantly since the days of faxing and phone calls (now most tours are scheduled via app, and the MLS database is easily searchable), and yet their commissions are still a percentage. Oh, and they are a percentage of assets that have gone up way faster than inflation!
My agent basically picked up all of that admin for me and I never once questioned his commission. Buying a house is basically a part-time job for the buyer now and being able to respond instantly is so important.
The job has changed, just like all jobs have, but good agents get shit done because the market is so competitive. Real estate is a very high-turnover industry with little long-term stability for those that don’t absolutely kill it.
"Answers a call at any time of the day" is definitely a great nice to have, but I suspect that puts your particular agent in the top 10% of the field. Most agents I have used will just let all phone calls go to voicemail and then text back or call you back hours or days later. YMMV a lot on this one.
As far as agents you’ve worked with, that’s partially on you for choosing to work with bad people. I had several agents and I wasn’t afraid to drop them when I found the one that worked for me. Given that 87% of agents quit in the first 5 years, I definitely suspect my agent was top of his field, which is why he got my business.
Given that, my personal strategy when buying was to just do as much of the legwork as possible myself, rather than risk leaving due diligence to somebody whose financial incentives are not aligned with my own. My agent essentially ended up mostly relegated to docusign-forwarding duties.
We looked at almost 2 dozen houses compared to my parents that looked at 2 houses in 2004.
We bought from a builder and they insisted we be represented by a realtor or they wouldn't sell to us.
An approach used by other service providers is hourly billing. Realtors could even offer distinct service packages like accountants ($XXXX to prepare taxes). A reason they don't is because the line items or hourly rates would be absurdly high to generate the same level of fees they get today.