As a result you end up losing out on a large surface area of buyers who rely on their buying agent to find properties, which puts you at a disadvantage.
That tells you how the agents view their job responsibilities, the buyers agent ultimately sells a house (to the buyer), the sellers agent advertises (lists) it.
That entirely solved our purchasing problem - we got automated daily or sometimes hourly emails parametrically filtered by school district, build date, price, square footage, and lot size whenever a new listing went up. It would have been stupid to have our agent filter them based on the deals that were better for him or his industry.
We had a uniquely good agent who spent hundreds of hours with us filtering hundreds of listings, visiting probably 60 different houses at all times of day over the course of a year before we finally bought, submitting a dozen offers, and helping us through the closing process, and then using his builder's license to help us ready the home we bought for move-in. He was extremely knowledgeable about all kinds of building inspection issues and the procedural minutiae. We happily paid him the 6%, it would have been far more costly to bring along an inspector/attorney/general contractor at an hourly rate.
For their reduced work, we’d ask a reduction of their commission.
When I bought my last house, my agent was able to send me dozens of listings from MLS for homes that weren't listed on public websites.
One of our agents would still send MLS postings to us. We usually got that email after we’d gotten the same email listing from Redfin. And not once was there an MLS listing that wasn’t listed on Redfin.
*Pocket listings are something more of the public should understand, as they are almost universally bad. Listing creates a market and gets your property in front of the most potential buyers.
Setup alerts for the type of house you want, draw the geographic boundaries on Zillow, and spend 2 minutes looking at the listing and maps to find out everything an agent would have been able to tell you.
I wish I had a recent example, but I tested this theory multiple times when I was house hunting, and I don't think I'm hallucinating the issue.
These websites are great and I'm glad the public has the information they have, but they don't tell the whole story - especially for someone coming from outside the market.
I'm thinking here of just the last few of my transactions - flood zone issues, title issues, broken sewer lines, pricing, emblements, water rights - like needing to cure in order to preserve, surveying, sub-division, zoning use, farm tax status. Plus finding all the professionals needed to support the process - I'm spending my day calling plumbers so that I can keep a deal together for buyer and seller, for example. I don't think the public appreciates what life was like before listing services - it's one of the major advantages for consumers that we have in this country over other places, IE: attempting to reduce information asymmetry.
A) If you want to work with a flat rate agent, go find one. Every property I have in my pipeline right now is on a different commission level, and only a couple of them are this magical "6%" the public loves to believe is "standard". Some of them are even fixed amounts.
B) It's only "6%" if the agent does both sides, otherwise it's whatever the agreed upon split might be - say 50/50, so you are only getting 3%. And, as a few astute observers in this thread have noted, the brokerage is going to further reduce what goes into the pocket of the agent themselves. I've had plenty of deals where my actual net was at or under 1% - I've even had deals where I lost money.
C) So if I sell a $10MM property that takes a year to sell and needs tens of thousands in marketing dollars to sell, I should accept only $10K in compensation?
D) Let's say you've got some shitty dilapidated house or scrub ground with zoning issues, maybe a barely inhabitable cabin somewhere. I find a buyer for it to get the monkey off your back. What's that worth to you, to have the pain gone? You think I don't deserve compensation for spending potentially months or even years to bring you a deal? When I sell properties like that, it is at best a break-even proposition for me, but someone has to step up and assist the public.
E) Everything I listed in my post is about risk management. I am assisting you with not buying a foot gun. In some cases, I am assisting you with buying an asset that will bring cash flow or other financial benefits. In other cases, I may be assisting you with getting a financial drain off your back. Perhaps not for you, but do you begin to see why these service do have value for many consumers?
It's normally about this point that someone in one of these threads says "but I'm taking about 'normal' deals!" Dude - anyone who has been in the real estate business for more than 5 minutes knows that the so-called "normal" deals that the public loves to talk about are maybe one deal a year for an active agent. They are the unicorns of the real estate world. Likewise, people in urban markets have likely no idea the variety of real estate transaction that happen in the world. At the moment I've got transactions in my pipeline for land development, commercial, leases, duplexes, not to mention basic residential work. And every single one of those have unique challenges.
As average prices have increased commission has also gone up.
Realtor fees are high for their low level of digital literacy and competency.
Realtors will be disrupted by tech folks who take a simple licensing exam and make software work for the customers.
Running anything more than a basic level of search is usually impossible for Realtors.
It’s this old realtor exchange which has more than had its clock tick past expiry.
A software dev buddy had some decent parameters (distance to school, work, family, etc) and it seemed to boil Realtors brains to find a way to map this.
It was more about making a sale.
It was almost to the point where my friend almost was going to become a realtor to get access to the data to run his own searches. He calculated getting a license was cheaper than the commission.
Realtors are like lawyers, too many don’t know everything but act like they do.
The ones who specialize and actually are experts are worth it.
Most sales are not that specialized
Neither of these things require an agent, and neither are worth $40K.
Or it may not.
Worse: If I use the agent, I don't know whether the agent gained me 6% of the price in the negotiations. If I don't use the agent, I don't know if I cost myself 6% of the price (or more!) in the negotiations.
Someone could do a study, looking at sale prices of "for sale by owner" versus sale prices of comparable sales through agents, for comparable periods. Even that study is fraught - for us to trust it, it would have to be by non-realtors, but also by people not involved in the "for sale by owner" world in some way. And yet the study would have to get the comparables right - not just right, but clearly right, so that the results of the study will be believed.
Without such a study, we're all kind of just believing what we believe.
The Freakonomics book went into this in detail.
https://freakonomics.com/2008/02/real-estate-agents-revisite...
If your house sales for $50K more, each agent gets $1500 more and the brokerage gets 20-40% of that. Let’s say 30%. That means the agent will get a little over $1000 extra.
They would much rather sell your house for $50K less and move on than convincing you to hold out for $50K more.
if we're all for transparent markets, these commissions interfere and it doesn't matter how close to reality they are as we can agree that they're largely not real, but synthetic amalgamations of something not related to the market.
Typically, agents (on both sides) are incentivized to doing whatever makes the sale happen with the least time, risk, and effort, because what they lose on commission if that involves a (not extraordinarily unreasonable) price cut they make up for in volume.
The argument I've seen made is that the buyer's agent's motivation to lower the price comes from wanting their client to actually make the purchase. That said, I'd think that this is only motivating them to get down to the highest price that the buyer will accept paying, rather than the actual lowest price that's theoretically possible.
I'm a better negotiator than any agent I've ever dealt with. Add in the white hot market the last decade and the only 'negotiation' happening was figuring out how much to overbid.
Not exclusive to realtors.
Many realtors works take a consulting fee too navigate things. Try.
Beyond that getting a lawyer to handle a sale doesn’t seem much different with or without a realtor. They have their own liability insurance.
Realtors def help navigate the market agent they are competent in it.
For realtors it's very simple. Why spend time on something they won't get paid for? Why bother arranging a tour of a FSBO house, unless that one says "agents welcome" in its listing which means they will pay the buyer agent fee. But if that contract is standard, what's the disincentive? Just the unpleasantness of actually enforcing it when necessary?
Common here seem to be "flat rate MLS listing" services, where you pay a few hundred dollars and they list it, and you're your own selling agent. You still pay the 2.5% to the buying agent and say so in the listing.
And yeah, the dream customer of every selling agent is a clueless first-time buyer who just calls up the agent on the for-sale sign. Double commission!
Isn't that almost everyone doing work? I don't do work for free.
>the dream customer of every selling agent is a clueless first-time buyer
I've purchased multiple homes without a 'buyer's agent'. I'm certainly not clueless. It's actually a great negotiating tactic and often yields real savings.
Agents are grossly overpaid, but buyer agents in particular are just an enormous waste of time. It was actually our first home purchase where we did use a buyer agent and it was...eye opening. People under illusions that buyer agents are actually informed or acting in the buyer's interests are the most clueless of all.
* If I were a member of the public, I'd be more upset about referral fees than commissions. This is a far more grey / nebulous area of real estate compensation. We have to disclose and discuss commissions up front, but referral fees are often in the shadows and definitely can cause buyers / sellers to pay more.
Right now one of the realtors we've interviewed takes 5% and offers 2.5% to the buyer's agent. Not much better. They also offer 4% if they are a dual agent.
But I know of cases where a buyer without an agent got the seller agent to accept 4% overall while only representing the seller (but handling the paperwork necessary to complete the transaction.) That 2% was a worthwhile part of negotiating, allowing the buyer to get a lower price.