Hacker News Reader

Comment by akavi | Hacker News Reader

I read the article, but I still don't understand how the National Association of Retailers enforce the 5-6% total commission. Does anyone know?

The incidence question (is the fee "paid" by the buyer or seller) is a semantic one, but if the cartel is able to inflate the total fees, that's something else entirely.

View on HN

It's mostly due to the fact that in order to list a house or find a house you need to use a system called MLS. In order to use the system you need to be a realtor. It's quite simple actually

Technically, you don’t need to use MLS.

You can put your house up on Craigslist, Facebook marketplace, make your own website, put a sign on your front lawn, etc.

But most people predict they will earn per time they invest in selling by going with MLS, where the home buying audience is largest.

Technically no. But it's an uphill battle. Technically you can sell your own house without an agent.

While my mom is a mortgage agent that always had access to MLS (which she shares with me), I'd argue some realtors (my realtor I've known since I was 4) are worth the 5% without MLS. She has like 4 assistants managing everything in the background that are so well-trained that I didn't even need to mention updating my converted Single to a Multi-family because they somehow figured it out and just did it. She also seems to conjure an army of prospective buyers to show up on the day she schedules and twice blew my expectations away. I was just joking that my multi-family was worth over $300k and she got $312k somehow. So there are realtors that are worth the cost, but she's kind of a rare exception to the norm.

> an army of prospective buyers to show up on the day

that's what i hate about realtors. in germany they will gladly invite a hundred interested people for a flat and by that make searching for an appartment a huge waste of time. it's easier for them and probably a nice ego stroke.

My question was always where the hell she finds all these people and always manages to achieve a rather large premium to my somewhat rigorously estimated value based on all the comparables I find on BrightMLS. They're obviously not getting a great deal. All 3 sales were also Philadelphia suburbs, which is not a lucrative market for speculative gentrification. The only major spike in values in the past 25 years was during COVID with like a single massive 80% jump because in a world where pandemics are real, urban market plummeted. But you'd think this army of buyers would see the name and say, "Screw that! I'm not going to Diane's open houses ever again."

it's easier than you'd think. all it takes is a market with large demand and desperation.

Now imagine a world where realtor fees are 1% instead of 6%. On a 300k house, that's 15k you don't pay to the realtor. In this world, your realtor doesn't bring you an extra 12k from the buyer, but you still come ahead. And the buyer pays less too.

That's a win win world for everyone (except the realtor, who are redundant middlemen in the internet eta).

First off, I'm not opposed to such a world in general. However, you, like the other replier, failed to read how my $300k number was intended as a joke about my optimism. Thus, it makes more sense to conclude my estimates (made with both a degree in Finance and access to BrightMLS comparables to rigorously draw my conclusions) was obviously far lower than $300k and your numbers don't really make much sense. Remember, also, that I'm really only defending her ability to achieve those kinds of results and justify the 5% number. In general, you don't get a team of well-trained professionals diligently finding every possible angle to ensure you get a higher value and an army of prospective buyers. In fact, it's rather rare and it's really the only case where 5% is justified. Had I sold it privately, I'd expect far less than the price I'd joke about wanting.

Unless you did an experiment with different realtors, you have no idea if someone else besides the realtor (since you have known since 4) would have found you the $300k.

I have no doubt that there is a range of talent for realtors, just like SWEs. The problem is the 6%. Why doesn't your realtor get 10% and everyone else get 1%? The system is rigged.

>Unless you did an experiment with different realtors, you have no idea if someone else besides the realtor (since you have known since 4) would have found you the $300k.

Neither do you. Am I to believe you know more about one of the houses I owned than I do? Again, I'm all for lifting the fixed commissions. I'm just saying there does exist exceptions that I would still pay 5% for. Although, like I said, her operation isn't just some aspiring salesman acting slick. It's a team of about 4 professionals under her that go over every single angle to prepare it for the market. She's not even that persuasive or talkative. All they do are value-added services, which is how it should be. I wouldn't even know how to update the records to classify it a multi-family, yet they do it all automatically.

So she got you $12k over asking, but cost you $15k+. That math doesn't support your conclusion.

Again, $300k+ was a joke I made to her. So, obviously, my estimates were far lower and the price she achieved exceeded your estimated premium. Unless you think my joke was that a $297k property was worth $3k more, in which case I'd ask you to devote more thought to your conclusions.

But what's preventing realtors from defecting and offering their services for a lower rate?

The other agent won't bring clients to you if the cut is too low.

This was part of the evidence used in the case. They had recordings from buyer's agents who called about non-MLS homes. The agents were on-tape saying things like, "I am going to make sure no other agent shows your house." All because the seller refused to pay a buyer's agent commission.

This is very true. A home I purchased recently, the sellers had a very new realtor, who was friends with them. She had listed the commissions very low - probably thinking she was doing them a service.

I purchased the home without a realtor, and one of the ways I had a much stronger position was because no one else was being shown the property. (As in, realtors weren’t mentioning it to their clients).

I had a friend of mine who is known locally in the area as one of the best realtors look at the mls and listing, and that was the take I got from him.

Yep. It's basically a cartel. You can do whatever you want technically. But you instantly lose the the market reach if you don't pay your realtor tax.

Plenty do. I and many friends do RE transactions with agents who are not “realtors”

That's all good and possible but not quite mainstream yet.

There are a ton of websites that say it’s possible to create an MLS listing for a small fee, for a for sale by owner house.Are you suggesting there is some catch or that that is not actually possible?

I did that with my house. But I had to publish on the listing that we would pay a buyer commission otherwise, no one would come. Luckily, another unrepresented person bought it so I didn't have to pay the commission.

The catch is realtors will not bring people to your house if you don't pay the commission, MLS listed or otherwise.

With sites like Redfin and Zillow making searching easy. Don’t need realtors as much.

Most of my realtors said me to look at some sites and get back to them when I liked something.

And buyers side commission split is a blank box that you fill in

> I still don't understand how the National Association of Retailers enforce the 5-6% total commission.

Plaintiffs submitted some recordings in either this or a related case of an agent who said she wouldn’t even bother to show a house that didn’t have a guaranteed commission. The NAR is not so stupid as to have a “you must sign here that you will only show houses with a commission” form.

>> the incidence question … is a semantic one

Definitely not semantics. This relates to the elasticity of demand and supply in the market. The incidence can be on the buyer OR the seller OR shared. Depends on the good and the demand.

Do you have an example of a market where it's not shared?

I bought some undeveloped land a few months ago. I started off doing everything myself, but I found numerous instances where the selling agent wouldn't provide documents on the listing unless I had an agent. I ended up getting an agent just for that.

THEY DON’T

It’s a huge part of the law that commissions are to be up for negotiation, always. RE agents might forget that but it’s a foundation level principle that there are no set commissions. You could lose your license or at least be fined for even suggesting it to a client

Reply on news.ycombinator.com