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Comment by keeptrying | Hacker News Reader

The ludicrous 6% fee is whats going to drive adoption by end users and in turn by brokers.

Move that fee to 1% for buyer agent and you have a massive market.

It's a corrupt market imo, like car dealerships - they work to legislate their continued existence.

Any market structured where you have some people doing many transactions and some doing few ends up skewed to benefit the person doing many while screwing the person doing few.

It's true with realtors, IPOs with investment banks, car dealerships, funeral homes etc. and it's a hard problem to fix.

How else would a car manufacturer put staff and inventory in every town across the country? They would either build dealerships themselves or franchise it out. Their cost structures don't cover this brick and mortar presence currently so costs would rise across the board.

Car dealerships are mostly middlemen between customer, manufacturer, and state government for registration and tax collection.

I just can't see how you eliminate the need to have locations to store and move around 5000lb metal objects without them.

Tesla does all of this and they do it without dealerships. The problem with dealerships is they’re independent franchised businesses that extract but do not create value, not that they are buildings full of cars.

I think you missed the part about "towns across the country". For almost 20k towns and cities in the US there are 245 Tesla storefronts.

The idea that you have to go to a dealership is what’s being challenged.

If you have faith in the brand, is it that much more absurd to buy via transfer?

I’m not sure what you’re getting at. A dealership isn’t just a place of purchase. They facilitate test drives, let people shop around for different makes and models, do trade ins. A lot of people want to see what they’re paying for before dropping 5 figures on a single purchase.

You don't need a dealership for that, you can do it with corporate store fronts and the experience would be better for the buyer (and the seller) because the incentives are actually properly aligned.

That's pretty good considering quite a few states straight up ban Tesla storefronts.

Where do you think a Tesla goes to get new tie rods or a body panel replacement? They lean on the existing service location network.

My friend needed body work on his Model 3 after someone hit him. They sent him to a traditional dealership body shop an hour away that was booked solid for 3 months. His insurance only covered a month of rental. His life situation allowed him to do the remaining 2 months without a car but not everyone has that luxury.

Tesla has to do this via partnerships and has little control over the customer experience. Great for people are willing to suffer for the brand but most will take the path with least headache.

The 6% fee was paid by the sellers, not the buyers. Buyers didn't pay anything to the agents.

But even then, the buyer's agents would "refund" the buyer ~2% of the fee as a cashback incentive to use a specific agent.

but recently, the rule changed so the sellers are only required to pay the 3% fee to the seller's agent and buyers need to negotiate their own deal with the buyer's agent.

Currently, there are many brokerages competing on buyer's fees, dropping the fee to 1% or offering a flat-rate fee.

I'm very skeptical that a 1% buyer's agent fee (matching the existing players) would move the needle much.

The 6% fee (more normally 5% around these parts, western US) is paid by the sellers, but with the buyer's money. Usually. However, it's important to note that there was never a requirement for anyone to pay anything; it was simply what was commonly put into contracts. The settlement didn't change anything about that in particular.

I just sold a house a couple weeks ago. I agreed to pay my seller's agent 2.5% out of the sale price. I also, in the contract, offered to pay 2.5% to the buyer's agent. In the event that my seller's agent was also the buyer's agent, that 2.5% would be refunded to me. What actually ended up happening was that in the offer that we ended up accepting, the buyer asked us to pay 3% instead of 2.5% to their agent. We agreed.

The primary driving factor on all these rates is the net take home for the seller. The reason why the total fee of 6% in a 3/3 split is because if this is done, then the seller will net about 10% higher than if they used no realtor. Similarly, for the buy agent half, they will get multiple extra % of home price above that 2.5%.

The structure of the MLS / commission system incentivizes sellers to take out these large fees because they will be rewarded for doing so. Only when the system is upgraded to allow sellers and buyers to find each other and pay market rates will the fees go down (we want to provide our own MLS in the longer term future)

"Our own MLS" already exists in multiple forms; getting everyone to agree to use the same one is the problem, and AI isn't going to solve that.

As a non american, why arent the other sites getting used? And why does MLS cause this fee structure anyway? Why dont sellers give a 3% discount or cashback to agentless buyers too? It would be in their interest. The cashback would effectively reduce the downpayment.

The buyer's agent handles some matters of the contract like properly notifying the seller of defects found during an inspection by form. There's a process for that that is meant to prevent the buyer from disadvantaging the seller if the house ends up back on the market. There are other things the buyer's agent does, like ours would sometimes temper our reactions when representing us to the seller's agent. She would also let us know when items on the contingency timeline were expiring and what our options were after those deadlines. That's not something I had the time to figure out on my own.

>then the seller will net about 10% higher than if they used no realtor

See this is the bit where a good Realtor makes their money... on nearly every deal I do, I am saving or making more money for my buyers and sellers over what they could either do on their own or what they would get from another Realtor. Why? Because I have a strong analytical approach to the market and I actually do my job. The typical agent waits for offers to come in and makes no effort to negotiate a better outcome for their seller. Likewise, many agents are lazy and have no idea how to advise their buyers on what to offer or how to create an overall compelling offer, IE: what are the possible levers we can use to create a competitive offer apart from cash on the barrel? It makes me cry when I see agents who don't even know what acting in their client's best interest means - but I don't blame them, I blame the public that makes no effort to interview or get to know their agent. Way easier to pick the person from your church or who you went to high school with than to actually interview and ask questions. I often wonder - does the public also act ignorantly when picking a lawyer, an accountant, a doctor, or other professionals?

Yes, most of the public uses the doctor which is assigned to them when they have something go wrong.

The trouble is that it’s hard to distinguish between “friendly and nice” and “competent”. This is how people end up paying a financial advisor almost 2% to buy index funds.

It would be nice if we could rely on certification by third parties as a mark of competence, but clearly that’s not enough.

> The 6% fee was paid by the sellers, not the buyers. Buyers didn't pay anything to the agents.

It’s the buyer’s money, which becomes the seller’s money, which gets paid to the agents. Realtors need to stop lying about who pays the fees.

The seller is the one who signs the contract with the agent and determines what percentage of the purchase price goes to the agent. It doesn’t matter that the buyer was the source of the money, the seller is who decided what to do with it.

If the seller uses 10% of the sale price to buy a boat, are you going to say that the house buyer bought the boat?

That’s a transaction that occurs after the sale. The paying of agents is something that happens as part of the sale, so yes the buyer is very much paying the agent fees.

It's coming out of the seller's cut, though.

Houses aren't sold at a fixed price. Buyers all put in bids and the seller chooses the best one.

The amount paid for the house isn't going to be less if there were no agent fees. The buyer is paying the specific price because there are other buyers who would pay slightly less. It isn't like buyers are adding money to their offer because of agent fees, and sellers aren't going to sell the house for less if they didn't have agent fees. The price point is market equilibrium, which means the agent fees come out of the seller's total.

Now, you might try to argue that more sellers would enter the market if sellers made 6% more on selling their house, which would increase supply and decrease price, but that's a big stretch... sellers are usually selling their house for reasons besides making 6 percent more.

2 identical appartments in a block. All equal. Both sell for $400k the going rate. One seller pays 6% and hell they pay income tax on it too. The other pays 0%. Which buyer paid for what again?

> The 6% fee was paid by the sellers, not the buyers. Buyers didn't pay anything to the agents.

Buyers are the ones paying everything.

At 6%, that means the seller is willing to accept 94% of the sale price for the deal. So with a lower fee or simply less middle men feasting on low information transacters, a buyer with 94-100% could purchase that house and both parties would be happier.

No. Buyers never consent for "their" money to go to the buyer's agent or sellers agent. The selling agent's contract with the seller (not the buyer) is the seller will pay the 3% fee to seller's agent and offer a 3% fee to the buyer's agent.

Buyers historically have never negotiated the fee paid to their agent, other than choosing an agent that would refund part of their fee.

> Buyers historically have never negotiated the fee paid to their agent

Negotiated, no. Paid, yes. If the government adds a 6% tax on shoes, I promise that doesn't mean a 6% drop in Nike stock. It just causes the price to go up.

You can switch the words “buyer” and “seller” in your statement and it still works. If you want to consider it being paid by the buyer, you can, or you can say the seller pays it. It is all factored into the deal either way.

I would argue, though, that it is more accurate to say it is paid by the seller, though, since they are the ones who agree to the percentage with the agent, and who signs the contract to pay the agent.

Probably extra true for peoperties owned by salaried employees whose price is in a large part dictacted by income multiples. In other words market sets the price.

>The 6% fee was paid by the sellers

The buyer is the only source of money. The rest of it is just a shell game.

Well, the buyer’s employer is actually the one paying the buyer the money that goes to the mortgage, are we going to start saying the employer is the one buying the house? No, because that is just how the economy works, money changes hands constantly.

We say the person who makes the choice for the purchase is the one who paid for something… the seller signs the contract with the agent, so they are the ones paying.

When you selling any kind of product or service the price you gonna charge will take into account expenses that you have to sell or make this product, e.g. if you sell app in appstore and Apple and other taxes will eat 45% of your app price and you know you will break even at $1 per app profit then definitely you will ask user for $2.

This doesn’t apply to most people selling a house. Sellers are not setting the price for their house, buyers bidding for it do.

Anyone selling a house using an agent isn’t someone who manufactures houses. They are mostly people selling their own home because they are moving to a different home.

They are going to put their house up for sale, buyers will make offers, and the seller will choose the best offer. The buyers are making offers based on what they are willing and able to pay; they don’t care whether 100% of that sale price goes to the seller or if only 94% does. They are making the same offer no matter what.

And sellers aren’t going to take 6% less if they don’t have an agent. They are going to take the same offer whether they get 94% of it or 100%; they are taking the best offer made.

Even your app example isn’t how it works. There is no “break even” price for a digital good that doesn’t have a COG (cost of good). App manufacturing has a fixed price, and then every unit sold costs them zero dollars.

They are going to set the price to be what maximizes the value of “cost per unit * units sold”. That equation is going to be the same no matter what the App Store percentage is. The only thing the percentage does will be to change the amount of money the company makes and change the equation on whether it is worth making the app at all; once the app is created, the only thing that will determine the price is the equation above, not the cost per sale.

So many people seem to have this idea that prices for things are based on some “cost per good + profit margin = price”, but that isn’t how any good is priced. Many goods end up being priced in a way that is close to that, but that is only because of robust competition. Prices are set by the seller trying to figure out which price will generate them the most profit; the cost to make the good only sets a price floor, where if they can’t get more than that amount, it simply isn’t even worth it to make and sell the good. It has nothing to do with the price ceiling.

> They are making the same offer no matter what

Obviously seller can decide if agree on minimum price. Otherwise I doubt if someone would sell if bidding would end at $1k for a home. If seller wanna sell apartment for $100k then they expect that someone bids with $105k to covert agent fee.

> And sellers aren’t going to take 6% less if they don’t have an agent.

Why not? I many times did a deal with AirBnB host after few weeks of renting by talking with them directly and asking for the same rent minus AirBnB fees. They had no problems with that because they would earn the same amount and only cutting the middle man.

> the cost to make the good only sets a price floor,

Fee based on percent like 6% doesn't have any floor. You really believe that if we now change this fee to 66% this wouldn't have any impact on buyer and buyer would be fine because this 66% fee is paid buy seller?

AirBnB is very different. They are taking that deal because it is easy, and they don't have an easy way to find other renters without airbnb... airbnb is providing a match making service between renters and rentees. When you are selling the house, it is a one time sale for a large amount of money. In this market, you will get a LOT of offers for your house; you will obviously accept the highest offer, whether you have an agent or not. Why would a seller choose to make less money? Your airbnb example wasnt the person taking less money, they were getting the same money; the house example would actually be taking less money. They would never do that.

But will they pay? They may or may not, it depends on what it is. If you could get $2 without losing sales why would you have ever charged $1?

I get that middlemen and trends can affect price anchroring. So it isnt completely black and white.

The fee is already 1% in a lot of places after the NAR ruling earlier this year so that arbitrage is mostly gone.

Is there any data or statistics you could point to? I’m really curious as to how much shift has occurred since the shift by NaR

If there was a serious opportunity to arbitrage under the 6% fee, you bet that someone would have done it already — and well before the AI era.

To be fair, NAR goes to great lengths to maintain their monopoly and lock out anyone who tries to buy or sell a house without using them....specifically because they know they're priced insanely high for the services they provide and are in real danger of being undercut.

You can buy, for example, literally millions of dollars of corporate bonds for “The smaller of $250 or 1% of Trade Value” at IB.

https://www.interactivebrokers.com/en/pricing/commissions-bo...

The real estate market is still largely price fixed and quite inefficient.

> NAR goes to great lengths to maintain their monopoly

Went to great lengths, considering they've lost a few major court cases and are now prohibited from their prior shenanigans.

https://en.m.wikipedia.org/wiki/National_Association_of_Real...

It’s not stopping them. It’s just causing them to change tactics. NAR still has a stranglehold even after the lawsuits.

Ever since Zillow/Redfin came out, there hasn’t been a need to use a real estate agent. All buyers are getting push notifications 24/7.

If you want to save on commission, then get the pics taken yourself, and pay a listing service a few hundred dollars for your property to show up on Zillow/Redfin.

To be fair to realtors. There is A TON more work and expertise that goes into any transaction than just taking pictures and listing the property.

> When the National Association of Realtors signed a landmark $418 million settlement in March, economists and academics predicted that the deal — which included an agreement to upend key practices concerning how real estate agents are paid — would create the most significant shift to the industry in a century.

[1] https://www.nytimes.com/2024/08/16/realestate/realtor-commis...

We are already seeing the shift in practice. The changes went into effect just over a month ago (August 17th).

What exactly are we seeing?

Yes that's what Redfin does actually. And I'm sure a bunch of others.

Redfin only charges 1% if you both buy and sell with them within a window of time (365 days if I recall from our Redfin broker). I've used them exactly once on both the buy side and sell side, and I was not impressed. I would not use them again, even with the 1% vs a more traditional 5% broker fee.

They're a bit sneaky on this one too. You pay full when you buy, but then they only charge 1% when you sell. So you only save on the sell, pay full price for the buy.

Things changed with the NAR settlement, it's 1.5% to buy and 1.5% to sell in most markets now

This is the thing, the NAR settlement didn’t really change anything, the fee was always negotiable and there always were agents who would offer under 6%. They were typically scummy agents who didn’t last long (they popped up when real estate was hot then disappeared after they burned enough clients and/or the market cooled off).

As in all things you will get what you pay for. I’m not interested in fighting with anyone about what a realtor is worth but I will say:

* All agents are not created equal

* A good agent is absolutely worth it

* 6% is only high if you don’t value your time and/or if you are ok getting a worse deal because you don’t know what you are doing

This logic justifies any amount of fees. They can be excellent brokers and still not deserve $6000 (selling a $1M house) for maybe 40 hours of work as a very generous estimate.

They don't deserve $6,000, or $60,000 which is 6%!

6% of $1M = $60,000

More typically in that price range: 5% of 1m = 50k. / 2 brokerages so 2.5% = 25k. * 80% to agent = 20k. - agent costs = You would cry at how little net most agents make.

You are not paying an agent hourly for the amount of time they work on your transaction, but for their knowledge and experience - which cost them significant amounts of money - to guide you through the transaction and not shoot yourself in the foot. There is a fine line to walk between getting rejected outright and a deal never happening, and overpaying. You also might be buying a lemon (and not just from the perspective of a home inspection - people *regularly* want to do things with properties and transactions that just won't fly. They need to hear that from somebody on their side before they wind up losing much more than a couple percent). An agent will help you avoid them. Add on top of that how agents can help avoid the many lawsuits there are when people feel slighted and/or are actually slighted in RE transactions, and real estate agents are a decent value.

Agents are functionally like mini-attorneys + advisors for real estate. You wouldn't walk into a court room without a lawyer, and it is not a whole lot smarter to enter into a real estate transaction without an agent.

It would be $60,000, not $6,000 but they don’t make $60K. They spit the commission, $30K and then there are other people (broker) that get paid out of that amount, call it $20K to the agent in that case, sometimes less if they gave their client a discount (again this happened all the time before the settlement, I know agents that offered .5% off for repeat clients or friends and family and that came wholly out of their cut, so call it $15K in that case).

Even at $60K there are things an agent can do to swing the value of a house that much or more. Maybe you, the seller, will do some/all of those things, maybe you won’t.

Agents are effectively on-call 24/7 (your agent wasn’t? Sorry, see above: not all agents are created equal) and they often work in the off-hours for every other profession (aka nights and weekends).

Here is the thing, /most/ people buying or selling a $1M+ houses are not nickel and dimming. I sure HN has an outsized group of people who disagree, cool, I’ve seen it first hand.

I find it ironic that on a technology forum people are so quick to jump to “agents aren’t worth it” with so many people think the same thing about software developers and/or their quotes for building software.

> I find it ironic that on a technology forum people are so quick to jump to “agents aren’t worth it” with so many people think the same thing about software developers and/or their quotes for building software.

This isn't exactly an honest comparison. The vast majority of software engineers do not make a percentage of the earnings of the product they're developing. If I work for a company making 150k/year, I don't suddenly start making 300k/year if the company sells my software for twice as much. Likewise, I can't charge twice as much for consulting just because the company I'm consulting for makes twice as much money.

An agent makes a commission based only on the value of the house, which incentivizes them to sell more expensive houses. When I purchased my house, I did most of the work (found the house, hired a home inspector, found my own mortgage, used my own lawyer) - the agent existed because it was basically required, and made 11k for roughly 15 hours of work. If I was wealthier, and could have afforded a more expensive house, they could have made 20k for 15 hours of work. In both cases, they did the exact same amount of work (minimal); why did they make more in the second scenario?

Now that I know how the system works, I will be avoiding agents if at all possible when I sell my current house and buy my next. They're about as useful as used car salesmen, but somehow have convinced the entire continent that the housing market will fall apart without them.

* All agents are not created equal

* A good agent is absolutely worth it

People aren't really arguing against these things. I don't get it, if the settlement didn't really change anything, why is everyone making such a fuss about it?

My other question is, is there a linear correlation between effort to sell a home and its price? Is a 3 million dollar home 3x the effort to sell over a 1 million dollar home? Because I pay 3x the money to sell it...or am I paying for the "connections"?

That may be a bad example - I'd imagine once you're into the multi-millions, connections actually do matter in a way they don't if you're trying to sell a $400k house.

I doubt it's much harder to sell a 600k house than a 300k house, but it could be quite a bit harder to sell a 4m house than a 2m house just because there's so many less buyers in the pool and they're likely to be a lot more particular than just wanting a roof over their head.

>I doubt it's much harder to sell a 600k house than a 300k house

It's not about the price per se, it's about the house. If median income in an area is such that the $600k house is "luxury" then it is going to be a lot harder sell. Or for example, I've got a property right now at $559K that is extremely unique and needs probably $150K+ worth of work - so there it sits. Meanwhile, sometimes those $300K houses are super hard to sell if they need a new roof, new HVAC, etc but no one in the area has the $15K it is going to take to actually do the updates because they have just barely enough cash to make the down payment.

I feel like I need to comment here that just because $600K is the cost of a shoebox in a place like Silicon Valley doesn't mean that it isn't a lot of money in many other markets. There are many places in this country where $10K or so in needed repairs to a home might truly be a breaking point for some people.

I was asked to put together a listing presentation on multiple properties that when combined together represented approximately $18MM in luxury real estate. At that level, it's connections but also the cost of marketing. I estimated I needed a minimum of $100K marketing budget - and ironically the sellers representatives laughed at me and then struggled to sell the properties for years because they couldn't market them effectively.

$3MM anymore may not be a particularly luxury property anymore in many markets. That said - it can cost $$$$ / month for staging and $$$$ for drone work, video and photo work, all the social media and other marketing. Even that $300K house someone else in the thread mentioned, I am in it easily $1000 in my marketing costs before the sign even goes up.

Prior to the changes which only went into place in August, agents were colluding to keep fees artificially high. Buyers' agents would actually hide listings that promised less than what they wanted and all of that information was hidden from buyers until the buy/sell agreement. It is way too early to say exactly what the impact will be, but as an anecdote my agent accepted 2% on the home I just closed on. My prediction is fees will decrease significantly, because it just doesn't make financial sense to pay agents as much as people have been. Also, agents wouldn't have been colluding to the extent they had been if they believed a free market was good for their bottom lines.

Some fees will drop, there will definitely be an H&R Block version of agents.

Other agents will have such demand, their fees will remain high.

It’s not clear to me as a potential buyer that I want to go with the commodity, especially in quirky areas like TICs in San Francisco. We’re in for an interesting ride, best of luck to this team!

>agents were colluding to keep fees artificially high

Sitzer-Burnett involved a very narrow definition of collusion... essentially one Kansas City MLS had a mandatory input field for a seller-paid buyer commission. Realizing the risk of copycat lawsuits, the NAR got involved and decided to settle. Both Sitzer and Burnett should have gone after their own agents rather than turning this into a national issue.

>My prediction is fees will decrease significantly

And my prediction as an agent is somewhere between "business as usual" and "buyers are going to pay more out of pocket and will find it harder to buy homes." Further - many buyers will opt to not use an agent and I'm already making popcorn waiting to see what a clusterfuck that will be as buyers and sellers sue each other into oblivion.

The mandatory "Buyer Broker Commission Rule" was in the NAR Handbook, which was binding for MLSs. Moehrl vs NAR went after twenty offending MLSs and the four largest national real estate broker franchisors in America. They got caught red handed price fixing they had no choice but to settle.

Realtor services are valuable, but they aren't worth 6% of a person's largest investment. On the median home that's $24k, which is considerably more than other professional services related to buying a home.

I just sold a house. In August I signed some paperwork saying we would offer 2.5/2.5 to buyer and seller, just verbally. The seller agent heavily pushed this, saying that we don’t want to work with an attorney and put everything at risk; he wants to work in his network.

All the buyer offers we received were also expecting 2.5%.

The more things change, the more they stay the same.

Yeah buyer's agent comp will be the norm for the interim on listings. However, people are already listing without buyer's comp or like in my instance lower than usual comp, and as time goes on I would expect to see more buyers going the attorney route and factoring that they are saving sellers a few percent into the offer.

At the end of the day, it's not your agent's job to decide which agents he will work with, it is to sell your home and leave as much money in your pocket without exposing you to unnecessary risk. You'll still have the title insurance, the inspections, and the buy/sell agreement, so what is his problem with someone coming to the table without an agent if their paperwork is in order? To me, him insisting to only "work within his network" sounds like a huge red flag.

Agreed that it’s a red flag, but at this point we weren’t super interested in switching things up. Which is my point- if you’re not confident that your house will basically sell itself (and we weren’t, the house had been sitting on the market) then you’re vulnerable to scare tactics. It’s the same as before, except that commission is offered over text instead of being on MLS.

Not having an agent works great here in EU, you just hire an engineer to inspect the home to find any issues and then the bank reviews some of it as well (if you are getting a mortgage) and finally you get the sale contract notarized by the banks laziest employee and done. Not sure what an agent will help with these days where everything is online.

Someone has tried - it's called OpenDoor and its stock is ummm not doing well: https://www.cnbc.com/quotes/OPEN

Is this the rate in the USA? In the uk it’s a standard 1% for the seller.

It actually varies a bit in the UK (always for the seller as you say) with a possibly surprising relationship with property value: properties at the top end typically pay a higher % than those in the middle or at the bottom.

To tack on what others said, the fee reduction is huge but that is what RedFin has been doing and while I believe it to be a better workfow as a buyer/seller, I do not believe they have been a massive disruption to the market.

IF they can deliver a product that actually works, yes.

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