This is disappointing. I feel like the realtor cartel got off way too easy here
On the one hand, yes, brokering these transaction is limited to a specific group. But getting into that group seems not that hard, and lots of people do it.
- sale by owner without a realtor is a thing (at least many places?)
- all you need to do to be "them" is take a test and get a license, right? I.e. if as a buyer willing to pay 6-7 figures for a home, the cost of getting that license is negligible. If you wanted to recoup the buyer agent commission, you could represent yourself and do so.
Like, you also need a license (or multiple) to operate a restaurant, and it's really hard to do a prepared-meal-for-money transaction without one side of the transaction being such a license holder ... but we wouldn't in general say that restaurants are a "cartel" in virtue of this fact, because there's healthy competition.
Realtors are not allowed to help you buy FSBO properties. If you have a contract with a buying agent (which most will require) then you can't buy an FSBO. So basically you have to choose -- get access to the 97% of listings that are done by Realtors, or the 3% that are FSBO (and get no help with it).
You also can't buy a house listed by a Realtor without your own Realtor.
That is why it is a cartel. Because the monopolize the listings and then refuse to work with anyone not in their system.
And it's not that easy to get a Real Estate license.
To your restaurant analogy, imagine if you could only eat in a restaurant if also owned one and had a restaurant license. It would be similar to that.
Getting in to the bottom floor, sure. Working your way up? Not so easy. Same for any other cartel like the mafia and so on.
NAR was taught as a model case of broker collusion in my economics classes.
A real punishment would be destroying their business, returning money illegally gotten to individuals profited on, and opening up criminal proceedings on cartel and monopolization.
But no, here's your slap on the wrist. And they'll just make a 10x more convoluted plan that does the same.
Why is it allowed? Cause "they're too big to fail".
Compensation isn’t in line with value, and the cartel nature of the business puts a lot of friction on the pricing.
This isn’t unique to real estate. A lot of sales guys are driving Porsches based on earnings of questionable value. The difference is your Oracle salesman doesn’t have a monopoly backed by state law on blowing hot air.
A good buyers agent won’t pressure you into any purchase and may end up showing you at least a dozen homes and can give you advice on bidding / actual value of the home, and can identify issues with the house before you’ve bid.
The key is that they’re prioritizing the long term network effects of being well recommended. Our buyers agent was great and I’d recommend her in a heartbeat. She definitely saved us from a couple of potential disasters, and from overbidding (likely saved us low six figures all things considered).
But obviously there are a lot of agents that prioritize turnover rather than actually helping you. You definitely have to either judge them carefully or get a positive recommendation from someone trustworthy.
Yes, they both provide value. But $42k of value each? At that price, they only need to sell one house a month to have a $500k gross income. And they definitely aren't doing a month of fulltime labor to close my sale.
I think that $15k is probably fair for the amount of labor that a realtor provides. But the whole realtor system really is a huge predatory monopoly, and they are squeezing too much money out of the market. And now they're starting to get to the "find out" part.
30% goes to the brokerage, 20% goes to taxes. Add NAR fees and team split, and the real estate agent is getting maybe 25-30% of the commission. So at the end of the day they are pocketing ~13K (versus 42K).
It is fair to ask whether the brokerage deserves their 30% cut.
In a sellers market, with competitive bids, over asking, and sometimes sight unseen / waiving inspection, (and in 90% of markets unfurnished) -- staging is the equivalent of lipstick -- and in correlation to this case, much less meaningful than realtors blacklisting FSBO/Redfin/Zillow listings.