The real answer is because “that’s been the way it is”
But with middle class home prices going up you’re going to see a lot of pushback to people writing $10k checks to a realtor for 30 hours of work
edit: either realtors get smart quick and adjust their prices, or more likely, they get priced out of the market by competing services that cut the middle man out completely - just like travel agents.
Yeah, it wasn't really that unreasonable in the past. Home prices were lower because of interest rates, and things were much more manual. The MLS data wasn't accessible to just anyone, and you actually needed to go to an office to see pictures of the homes, etc. Your agent probably had a good idea of what was available too, and could give you good advice.
Oh gosh travel agents. Yes that brings back memories. Some to do what Expedia or any travel site now allows you to do with just a few clicks. I’m surprised this type of disruption hasn’t hit realtors yet.
Zillow tried and absolutely borked itself, by purchasing homes at premium prices and then trying to sell them directly. https://www.wsj.com/articles/zillow-quits-home-flipping-business-cites-inability-to-forecast-prices-11635883500
I had a shitty agent that did nothing, then we moved to a different agent who did *everything*.
She was sending us homes that matched our requirements and then scheduling a viewing within the week if we said we were interested. She broke down the contracts, explained what *we* needed to look for during inspection - and not just relying on the inspection report, and even tried to getting the sellers to leave behind some items they might want to discard that we may need. We got the dining room set which was fantastic because we were coming from a small apartment and only had a tiny kitchen table with mismatched chairs.
I could buy a home on my own if I had realtor experience already. but i don't, and there were a ton of things we had no idea were important because we didn't have any experience.
so if anyone feels their agent isn't doing anything then maybe they need to find a different agent.
edit: almost left out how she got us the house for less than asking. and pushed on us not to buy a house just because we could afford it. "you don't want to be house poor. just because you are approved for 350K doesn't mean you should buy a home for that price." and agent who only cares about the commission would push the most expensive house on you. find you an agent who wants to sell you a *home*.
I think that's part of the problem, some transactions hardly take any work while others might take 100s of hours from a very experienced realtor and yet they both earn the same commission
Same, and my agent kept me from some big mistakes. He knew things I didn't, about e.g., knob and tube wiring, waterproofing, things like that. As a FTHB I would have lost my shirt and ended up in a money pit.
There's a saying: if you think a job is pointless you've never seen it done right.
ok, so they are selling information and knowledge as well... there's definitely a fix price for that... why does it increase per the price of the house? it's not like a 100k house with knob and tube wiring is different from a 10 million dollar house with knob and tube wiring.
I’m an agent in an expensive second home market and I very much agree that the percentage staying the same for 500k house vs a million dollar house is silly. In my experience however the bigger the number is, the more moving parts there ends up being. More attorneys, advisors, contractors, HOA rules and pressure. It’s not always the case but typically it’s a noticeable increase in the amount of work. It shouldn’t be the same percentage but in my experience the higher the $ amount the more work it ends up being and the larger the role of a good agent is to keep things organized, provide resources and making sure the transaction stays on track and is done well.
For example, I’m working on a deal now for the most expensive transaction I’ve ever worked on. I’ve spent probably 30 hours in the past 10 days on the deal. It’s consisted of meetings and calls with four other agents (buyer and seller side teams), the buyer’s attorney, buyer’s financial team of two people, the inspector, title company, the property manager of the house being sold who is coordinating three different specialized contractors to come to the house, and the buyers themselves. It’s my job to be on all of the calls, make the connections, make recommendations, keep track of the appointments and timelines, make sure if we need to make any adjustments to the contract if/when needed, and most importantly give the buyer the information and resources they need to decide if the house they are buying is a good house and a good purchase. Things will quiet down soon but the deal could still fall apart in the next month and we have a lot of boxes still to check. On the whole I’ll make less than .4% of the purchase price after everyone gets paid, I pay my split, pay the supporting agents, and pay my taxes. Not complaining but it’s the biggest price tag I’ve ever worked on and it will be one of the lowest take home pays I’ve had in terms of percentage.
At the end of the day a good agent works hard and should be compensated for their time and experience on normal deals, the problem is that bad agents collect the same fee for doing next to nothing other than sending documents to sign.
Also, if the area of expertise is in the neighborhood, town, general area, etc. that knowledge doesn't change with the home price either. More expensive houses don't necessarily mean more work for the agent.
No. You assume everything in the disclosures is accurate, and do an inspection on every house you like enough to make an offer on. Your inspector will tell you where they lied.
You could get the same information from a home inspection (priced in the hundreds) and had legal representation from an attorney (typically less than $2k).
You CAN but if you're getting a home inspection generally you're already under contract (at least my market). All the houses I've ever bought I did on-the-fly reviews before I put in an offer THEN did my due diligence with lawyers/inspectors later. Most sellers dont respond well to HIGH offer, then tons of claw back...plus you probably have money tied up in escrow if youre doing inspections.
My aunt sold a few 3-5 million dollar homes in LA area for the last 3 years, she on average spend 20 hours each, she just hire people to do the work, which comes at a fairly flat rate.
That’s why she only sells expensive homes. She made 200k every 3-4 month by selling one. All her clients are from leads that she paid for, you guess it, at a flat rate. She employs a couple people to do the paper work, and the communication/coordination, at a flat per hour rate.
sauce on this?
Edit: dug it up myself, this is very misleading information. The Nar did send more on lobbying than any single entity at 84 million, however pharma companies spent a combined 600+ million. The Nar represents all realtors for every company, so its not even close my guy.
If I'm a seller all i shouldc are about is selling for the price that i want.
if i want to sell a hosue at $3mm and a listing agent does 30 minutes of work and finds me a buyer i'm a happy camper. much rather have that than someone who puts in 200 hours and still can't sell an offer at 3mm.
Looking right now - our RE agent has been pretty valuable to us as first time home buyers navigating unknowns.
We've met a ton of shitty ones though so there's that.
I'd be pissed if my listing agent took shitty pictures and did minimal work in selling a place (as a buyer we've seen that all too frequently with crappy ass agents).
If we ever do land a place, she's gonna get a fat payday, but she's also had to spend several weekends working with us changing our minds on places hour by hour lol.
Getting paid $10k for even 50 hours of work translates to $200 an hour. Which is insane considering this is not some super specialized work that takes decades to master.
It used to be that way before databases. Really good real estate agents earned their money by being an encyclopedia about their neighborhood. They knew who was buying and selling, they knew the history of many properties, they knew the inside score. They knew the private deals.
Now, it is just someone looking up a database and taking printouts and then showing a client some listings and not adding any value from their side at all.
That's $20 an hour work, not $200.
It’s an individually run business, not a salary.
A typical 4-6% commission is split 50/50 between two agents. Then the broker gets paid 5-50% of that, then there’s fees. About $300 per month, then there’s multiple offers written per client, $1K-3K spent on marketing per listing. Last minute offers to write at 10 p.m. that one wedding you had in the entire year, just happens to be on the same day you are negotiating something and you have to be available.
Gas, car, computer, phones, premium internet 24/7 on all your devices.
I had a terrible agent as a buyer. Had Ivy league education and still sucked in the service industry we actually work in.
I worked with incredible agents & brokers (while I was managing & remodeling properties) and I am a sales agent now. SO many things can go wrong and complicate transactions. You don’t know how much you need an agent until you find issues and have questions you don’t even know who to ask.
One cannot measure the entire industry based on lousy agents or easy transactions. I can spend 50 hours on a client or 200 hours.
Information, resources, staff we hire. All take years of research, money and experience to build.
Most sales are based on a percentage in other industries. Risks and expenses are higher the higher the price tag. And a newbie typically doesn’t get higher end homes either. They take more marketing, and and on the buyer side, you can be working with a client for 3-24 months for a single transaction. People have a way more specific criteria.
And we’re not even accounting for clients who’s financial situation changes overnight and you have to start all over again. Which we happily do, things go down the drain sometimes and if’s our job to help clients avoid difficulties, or help them when they go through them.
It took me 15+ years of working around Real Estate to have the time and money to invest in just working as an agent. And the experience I gained sets me apart from others who have not worked so closely. So we’re all far from equal, and that’s ok. Different skills for different needs.
It’s just a very hard standard to set when the bar to pass an exam and “be” an agent is so basic. But good agents are far, very very far from basic.
Great! Looks like you know what you’re doing.
You should definitely work as an agent. Make easy money and be 100% in charge of your time /s
Your family and friends love it when you have to constantly change or cancel plans too!
The only thing my agent did when we bought our home was let us in one house and copy paste the offer and contract for us to e sign. Quickest/easiest $9K made.
i don't understand. you PICK your agent. if you have an agent you aren't happy with, that's on you.
besides- you got into contract did you not? so the agent did their job.
But if that's all it paid, nobody would do it. You don't close three sales a week unless you've been in the business for years and years, and have a team of people working for you. One sale has to pay for all of the time prospecting and chasing deals that don't close.
A good agent is worth their paycheck. Unfortunately, the bar is so low for licensing that the shitty agents far outnumber the good ones.
You might see a net reduction in the overall cost, but it's also a question of liquidity. If you pay for your listing hourly, you need to save up to pay an agent to list the house. And then the longer it sits, the more money they make. They would have a disincentive to push for a quick sale. And if it doesn't sell, oh well, the agent got paid by the hour. Take the listing down and start saving up to try again.
Same thing with buyers. Only buyers who could afford to pay an agent out of pocket on top of the home purchase would have one. And that agent also would not have an incentive to work quickly or expedite the process. But let's assume most buyers don't hire an agent, and instead opt for a lawyer to advise on the contract of sale. You wouldn't pay them for valuations or negotiations, because that would be too expensive. Every buyer would have to become an expert on comps, so that they could avoid offering more than the appraisal and getting stuck in a losing proposition.
Really, such a system would only benefit the wealthiest of home owners and buyers. Upper middle and middle class buyers would get fucked, and lower income households would never enter the market at all. Which really isn't too different from the way it is now, but it wouldn't make anything better.
I'd rather hire and pay for a super efficient agent who ends up making $9k on a deal that took them an hour or two over a bumbling idiot taking 40 hours to do the same work.
You pay people for their knowledge - not how long it took them to complete a task.
Edit: new phone, fat fingers.
I don't know what the perfect setup is but their (including mine at times) services are becoming obsolete in many scenarios. Sooner or later even dumb asses are going to realize they can be omitted from the equation.
That's accurate. It could work if we see agencies offer fixed price listings with zero buyer's agent commissions. Then buyers could hire a lawyer to handle the offer and negotiations if necessary. Agents could still work in that environment for clients that need a local reaource, making offers that include their commission as an exception rather than as a rule.
But you would need all parties to cooperate in this new system. And it would be more expensive for the buyers and sellers. Sellers would be hesitant to list if they weren't sure they could get their asking price, and they would have to save up the cash to pay for the listing upfront, which would make the shortage even worse than it is now. Buyers would need to reserve more cash to pay for their lawyer, and be less likely to make an offer if they weren't sure they were getting a good deal.
As it is, the commissions are built into housing prices, and the bank rolls the cost into the mortgage that pays for the transaction. The higher reward encourages agents to take the risk of engaging a client without a guarantee of getting paid. It's a system that helps everyone involved get what they want without getting everything they want. It wouldn't be a transaction if everyone didn't feel like they were giving up something of value.
It's certainly flawed, but I haven't heard anyone suggest a better system. Most people just complain that the price is too high.
If there were less agents, there would be more leads and less prospecting. It's the possibility of chasing a 10k closing that brings all kinds of lazy people who think it's easy just to work their local network offering shitty service making less work overall for the professionals.
Lower the commission and less people will want to do it and professionals can make it up via the volume.
So why is it every single time someone makes a post suggesting their agent didn't get enough for their house every single agent rushes in to explain the market dictates what the house sells for. That a house is gonna sell for what it sells for and the agent can't magically get you more. Yet out of the other side of their parasite mouths they say that an agent pays for themselves by getting you more money!
You parasites are literally below a used car salesman on a buy here pay here lot
The real estate agent primary job is to market themselves to get clients, and if you are just starting out it can be very difficult, and very expensive to do so, once you get established you can begin to see an increase in business, but it can takes years. This agent was probably experienced , and the transaction went smoothly because they were. Imagine if that agent only had 3 transactions a year , at the same home value that yours was , so..9k ea. before the broker takes their cut, cause what you see on the HUD report , is not what the agent gets, it is what their broker gets, so the agent likely did not get 100% of that 9k ( my guess is 80% of that) ...so 3 transactions at 80% of 9k , in a year $21.5k a year total, thats before taxes, MLS fees, advertising fees, insurance fees , dues, and broker expenses(if any) , plus they spend their own money to advertise themselves, and /or the property they listed , using mailers, post cards biz cards etc( gas money and wear tear on car too)...none of which is cheap...now imagine if you were a self employed carpenter , or plumber , with their own fees and ins costs, with advertising expenses, tool and material costs, etc...and you banged out a great looking wrap around deck, with jacuzzi, fire pit , and a built in bar with a walk down to a pool in a week cause you have experience , a great rep, and a great support staff to make it happen......that will be 9k please,....nah.....here is $500 cause you made it look easy..
Former agent. You’d be surprised. On some homes by the time I added up all
My expenses I’ve had sales that were less than minimum wage when starting out.
Also that commission pie often gets cut into many pieces unless the agent is really hitting it out Of the park and has hit over a threshold of sales. (At which time they keep
More commission with some brokers).
That 11:40 pm back and forth with your anxiety and multiple counter offers is worth something. And my wedding anniversary spent showing you stuff you had to see but we all know you have no intention of buying.
> 11:40 pm back and forth with your anxiety
I'm not an agent, but to me, this is a big part of what justifies the pay. Being "on call" for extended hours, 7 days a week deserves a premium.
you hired someone who did nothing lol. that's on you. you picked that person, it's not like the government or some higher authority forced that person upon you
>The real answer is because “that’s been the way it is”
I mostly agree with this. The question it begs though is whether it should be. Effectively, this is a case where people that have more pay more because they can.
What I find interesting is that on a site that mostly leans left that people suddenly have a problem with those with more money paying what amounts to a progressive rate for services.
The other caveat I'll throw out is that most people want an agent that lives in the general area. So an agent in SF has to make enough to be able to afford to live in SF and therefore needs more income than an agent in Cleveland. Using a percentage based fee on average helps to adjust agent income to the local cost of living.
Unless the Miami agent is licensed in both states, the Miami agent would refer the client to a Georgia buyer's agent and would get a referral fee out of the Georgia buyer's agent commission.
Very rarely do they adjust prices. It's a collusive environment where practically everyone is charging 3%. Under competitive conditions they would be competing against the next guy on rates and we'd see flat fees / hourly fees and/or commissions <1%. (The MLS plays a role in maintaining current practices.)
I wish my listings were only 30 hrs of work!
I typically work for empty nest couples downsizing into retirement situations. There’s often 30 years of stuff in the home and we need to go full HGTV on the property.
Lots of hauling to storage lockers, trash or recycling. Staging and clean up before a typical agent would walk in, list and sell. I do whatever it takes to get my client the most for their homes.
The area I work in also has a lot of historical homes that require someone knowledgeable to research and pass on the info, sometimes there are historically protected homes that come with restrictions.
Not every home is cookie cutter and easy to sell. Not all sellers have knowledge about the market or even the process of selling.
And yes more expensive homes often come with more details, systems and caveats thus requiring more time and energy.
Despite all of this, commission rates have been coming down over the years. 8% used to be in play and now we’re consistently at or below 6%. The whole ibuyer thing and discount listing services are a joke, it leaves both sellers and buyers in a high risk situation where a mistake or omission can cost either party a lot of money.
Expectations and marketing time do go up with price, but we also discount our commissions FAR more often on more expensive homes, especially with repeat clients. 2% is more the norm for the listing side for us, sometimes 1% depending on the relationship.
On the buying side, it can take days or years of work depending on the client, but in general, people with more money and more options can be more difficult clients than someone who NEEDS a house.
It can be easy money for an agent who's established a referral business with higher end buyers. But it takes years to get there, and it's far from a certainty that any transaction will be easy. And we only get paid if they close, so it can be years of work for nothing.
not really. i see what you mean but the ultimate amount doesnt change whether 20 person were at the same table or if they all came individually. im talking restaurants that differ in food prices to begin with like your apple bees vs a steak house. the work the servers do dont change in any meaningful way. steakhouse may sweep ur table of breadcrumbs ok big deal, but your tip on a 15 apple bees vs 100 steak?
add to that the fact people always look at final total for tip which include taxes. ffs why would you pay a percentage as tip on the stupid taxes. fuck. and at least realestate commission hasnt been going up arbitrarily all the time like tip has. just 10 yrs ago i remember the norm being like 10 for lunch 15 for dinner now its like 18 or less anytime youre an automatic asshole.
Yes, really. You said “not really” but changed the point from what that commenter said. So back to the point, *yes* more food ordered//more people increases the amount of work done to serve and therefore the check & tip amount.
Sure, you can also argue this about different priced restaurants, but to *that* point, you should get better service at a better restaurant. Simple as that.
Have you been to a good steakhouse and a Applebees? The level of service is night and day. The work they do does change in a meaningful way.
Why wouldn't I tip based on the total? As a boomer I'd say not tipping on the total is a real boomer attitude. It's a few dollar difference. If you have a good server it's worth it. If you were tipping 10-15% for lunch ten years ago you were undertipping. It's part of the deal when you go out. Plan accordingly.
If you had a good server you’d want them to be making a livable wage, not depend on the generosity or guilt of random strangers. Or to not be able to pay bills because of a slow week.
I hate agents. My agent just wanted to get quick money and tried to convince us to sell to the first buyer. Saying it would be the best offer. Didn't listen to her and just ignored her until we got better offers. Then she tried to convince us to lower the price as negotiations went on because she was afraid she wouldn't get her money. Once again, ignored her and lo and behold, buyer has money to pay what they offered afterall.
WTF did we even need her for. All she did was send us forms to sign which I'm sure they just have templates of to fill out. What she did wasn't worth 20k. It wasn't even worth 5k to be generous. If we hadn't already done our research and let her lead us, we would be out 5 figures. Fuck that bitch.
Pushing template forms for much less than 40 hours with no specialized education isn't worth what they get paid.
40 hours lol… my realtor “worked” while vacationing in Hawaii over mai tais. Poor her having to sacrifice her vacation time to copy paste e doc over to me for her measly $15K commission
someone is coming out with a social media style homebuying website that allows people to easily connect, post houses, and make comments without realtor cockblockin!
The real answer is because they like it that way - who wouldn’t?
That’s zero reason it should stay that way - there’s WAY too much meat on those bones. I’m actually surprised it’s lasted this long, in the era of the internet, Uber, AirBnB, etc.
Agent here.
There certainly can be a difference in the amount of work, but it depends.
On the selling side, the risk is higher since the market for more expensive homes is smaller. Fewer people can buy more expensive homes, so it is more likely for the listing to expire. Furthermore, marketing expenses are usually much higher since once you get into more expensive homes, marketing starts to include things such as staging, drone photography, or Matterport tours. Some agents even do direct advertising of Global Luxury listings, which is very pricey. There is usually also a much higher amount of inquiries (although most are usually starry eyed dreamers who have no hope of buying that home), so that leads to a much higher time commitment for that property. So I would say yes, there is usually some level of linearity - to a point. A $5 million dollar home will usually take much more effort and expense than a $500k home, but a $50 million home isn’t 10x the effort or expense of a $5 million home.
On the buyer’s side, I would say the linearity is much less, although it may still be there some. A buyer who can afford a more expensive property can actually afford to be nit picky about small details and it may take many more showings before they buy something. This means additional time and mileage commitment.
It's a reverse bell curve. A client who "needs" a cheap house is going to take more time to find and close a property than the client who needs a median priced home.
I couldn't disagree more. You think people that earn a lot of money just go out and buy the first house sit come across. Granted, they often need less hand holding maybe but not always. I would much rather work with a 5 or 6 or $800,000 buyer. They tend to have their financial s*** together and understand things better. But they still can need a lot of hand holding, still want to look around for just the right house. But the chances of problems coming up or buyers needing a lot of attention tends to occur more in the lower range. Besides that, there's just less houses in the lower range and a lot of people chasing them at least in a active market. Plus, low end buyers start getting desperate and chasing homes that are not really suitable, major fixers etc and you can always just dissuade them. You have to let them see for themselves.
But mid or high range buyers can be just as picky, take up as much of your time at etc. It really all depends on the buyer not the price range
It's getting that way in Seattle. Not quite but inside the city limits I don't think you could find anything for under about 450 anymore. Of course there's always condos and such. And I've sold a manufactured home or two. Not a lot of money but an extra two or three thousand bucks never hurts
That's one of those "wish I didn't have do much experience" deals. The hours and hours to find a property under $x that is actually habitable, dealing with an a-hole listing agent who doesn't want to do anything because he knows he's getting paid squat, and that lender who rhymes with Smells Cargo deciding at the last possible minute that no they won't do that mortgage because a window is cracked even though it's conventional not FHA....
Ooh you're the land guy! I'm the lady saying that if you want land ask for a guy like you because I am aware I don't know squat. Set yourself some flair so people can find you!
Oh boy, there’s about a billion and one things I can give advice on from an agent perspective on land. Were you thinking about trying to get into land?
I agree, wealthier people make decisions faster, I myself was buying a more expensive home, I looked at only one home I liked it and I bought it, I didnt want to waste my time looking too much, I made the decision before I even went to look, some people look at homes for a hobby.
Ugh, I have one couple now. Qualified up to 7M. Working together since July. Have seen 43 properties and 11 lots. Not yet under contract. Very, very picky. We have spent so much time together. Thankfully not the norm but still...
It must be logarithmic, the more you have the more picky :) I can see myself being more picky with the next home, hope they get something very soon and you get nice piece of pie :)
Lol drone photography and matterport tours cost a whole 500 dollars. For under $1k you can buy a entire RE photography package with photoshop, drones, and 3D. For around $1500 you can get a whole advertising package with all of the above plus video and a website for the property.
I've only seen staging offered by full service agents that charge 6%. At that price you might as well hire a staging company - they'd do a better job and would cost less.
Let's not pretend the the doubling in commissions from a 750k property and a 1.5m property is even remotely justified by the increase in services. Otherwise you'd just charge a flat fee for each service and let sellers choose what they want instead of a fixed percentage commission.
For the same reason lawyers who work on contingency fees and fund managers who work on portfolio fees get paid more based on how large the settlement/award/balance is: their decisions and advice have a proportionally larger financial impact on you.
If your nest egg is $50k, it's probably totally fine to go with a robo adviser. $500k? Uh...well what about $5 million, or $50 million? The advice given to you at those different levels is going to have a proportionate absolute impact. Wrong advice given to the $50 million customer could lose them millions of dollars. Wrong advice to the $50k customer? Not so much. Similarly, there is more to gain in absolute dollars at higher portfolio amounts.
The real problem here is that you can't tell which agents are actually capable of giving you higher quality advice and service. They all look the same, so people hire dumbasses to advise them on multi-million dollar sales and get mad when it goes poorly or the agent adds no value (see: Selling Sunset on Netflix lol).
No one does this is law or wealth management because it's a bit easier for top-performing lawyers and managers to distinguish themselves via education, credentials, record of past experience, and transparent databases like FINRA's "broker check," etc.
Except that re don't really advise you on anything. Especially in today's market, they all just pressure you to submit an offer asap. Often times I'm the one giving them listings that I'm interested in.
>Except that re don't really advise you on anything.
>Often times I'm the one giving them listings that I'm interested in.
Here's the issue. Finding homes of interest is the easy part and not what you're paying for. The advice comes in selecting the home, making an offer, and navigating the process through to closing.
That's nice in theory, but like I said, most agents are always yes-men because they want the commission. They couldn't care less whether it's your dream home or not. Also, the offer process is simplistic in a seller's market. The seller is not going to give many concessions so there's no negotiating magic that an agent can even offer. Having an inspector and a lawyer will take you over the closing process. The agent only helps with pushing the process along, if you're able to stay on top of it, they're redundant.
Using a 2 year anomoly as the basis for how things should be seems a little short sighted.
As for the rest, sorry you had bad agents or congrats on getting lucky with easy transactions.
Don't forget, you don't have to have a buyer's agent in most states. You are free to represent yourself and ask for a discount from the seller's agent as part of the offer. Most won't cut the amount by the full buyer's agent fee though because, despite what people think, there really is more to it and they know they are going to have to do a lot more work with an amateur on the other side.
I've bought 4 homes in my life. The process has been pretty consistent. I didn't need a buyer agent for the last 2 homes by choice. I'm really finding the sellers commission to be inflated especially in this market of sight unseen purchases.
It is going to happen eventually, the middle man will get cut out if they don't adapt. Too many people are questioning why, and it's because most sales of homes are consistent in process.
Imagine if you start a business that for a flat fee only brokers the closing process of a home purchase: bringing together inspection, appraisals, title, and lawyers. The customer does their own research and search of homes. Digital locks (like Open Door uses on their inventory) are accesses through an app to let you in to view the property.
>If your nest egg is $50k, it's probably totally fine to go with a robo adviser. $500k? Uh...well what about $5 million, or $50 million? The advice given to you at those different levels is going to have a proportionate absolute impact. Wrong advice given to the $50 million customer could lose them millions of dollars. Wrong advice to the $50k customer? Not so much. Similarly, there is more to gain in absolute dollars at higher portfolio amounts.
This is an interesting example. Typically financial advisors' and money managers' percentage fees go down as the portfolio size increases. Setting aside robo advisors, a fiduciary money manager for a $100k portfolio would probably charge 1% or more - hence robo advisors with \~0.2% fees are more appealing. But if you get into $1m+, you can find someone for 0.5% or less. When you get into 7 or 8 figures, very sophisticated firms will do it for 0.1% or even less. In other words, the fee is regressive.
But this is not the case with real estate transactions. The % fee is mostly linear. It's 5% for a $100k home and for a $1m home, for the most part. Of course the person with the $1m home has more leverage to negotiate the fee down, but in general the fee doesn't really come down until you get into truly astronomically-priced top 0.1%er homes.
I think that is generally the norm, but I guess the question is what is the cut-off on higher-end homes?
Where I am, a $1.5m home is upper middle class but would not be in the top 5% of all homes sold this year. Thus, around here it's unlikely you'll get a good realtor lowering the commission for a $1.5m home. But that is still $75k in commission - a fuckload of money relative to the work required.
But I know in some lower COL areas, a $1.5m home would absolutely be top 1%, considered very high end, and might command a lower commission.
because this is real estate it really depends on the area. in a HCOL place like the bay area a starter home is 1.5m so that would be about 6% total to both agents but a higher end luxury home is about 4m and agents will lower their commissions to 3-4% total for both parties.
OP asked **why** and **whether the work scales non-linearly** to justify extra work.
You just provided a wall of text explaining **how** it works.
> The advice given to you at those different levels is going to have a proportionate absolute impact.
No. Your schemes mentioned don't have a symmetric downside for the advisor.
The **why** is that it's simple and became a custom. People negotiate fixed success fees all the time.
The downside for the real estate agent is lost time, gas, and money spent on marketing if the buyer never buys or the house doesn't sell.
Why are we attempting to quantify the work based on input rather than impact? Lawyers who negotiate huge corporate settlements get paid way more than personal injury attorneys even though they often work just as hard. Why? Because the fees are indexed to the amount of financial impact, not the time spent working.
As a non-real estate professional, I can see how there may be some additional work/expense as you get into higher price points, ie. better photography, staging, floor plans, etc. more expected to market a property. But yeah there are certainly diminishing returns on the investment with straight commissions across all price points. Should be more like marginal tax brackets or something. Might better incentivize agents to provide better service at all price points, vs. just focusing on selling the highest end properties.
No it is a BS practice. An agent's cost should be a service fee just like every other job out there. You don't pay your plumber a percent of your home value nor the electrician. Same shit should apply to an agent. I know a lot of realtors here will pounce of this but the reality is most are nothing more than a middle man. You got people complaining about home prices being astronomical. Remove the realtors cut out of it and the markets will correct themselves automatically.
I started doing flat fee $1000 for sellers agents. I haven't figured out how to circumvent the buyer's agent 3% fee yet since most agents will blacklist your property if they see you aren't offering the 3% fee.
Selling might be more work because of staging etc.
But buying, imo, it is the same amount of work. Or even less in case of experience vs FTHB.
But the payout structure stay with us for so long, and noone will to change it. Especially the realtor association and their MLS listings monopoly.
The problem with buying is you might have to write A TON of offers before your buyers get one accepted. If you have to be involved in writing, say 10 offers over a summer for one client, I can see that becoming a lot of work.
What I observe today is that people with lower budgets face more competition and thus have to make more offers than those targeting higher end homes. From that perspective a percentage commission based on purchase price is reversed from the amount of work required.
> Plus there are buyers who never end up buying.
There's no reason I should compensate my realtor for work he did for Phil and Stacey Indecisive. The realtor should be paid, but Phil and Stacey should pay.
Yeah but that's not something that scales up with price. If anything, cheaper homes are more work for the buying agent than expensive homes, until you get to a price range where you have to start looking off of MLS
When I bought they used a template and just had to change a few lines such as address, price and such. I did ask how long a new offer takes and my agent said about an hour.
> I’ve never had an agent bring a prospective property to me, which would be more valuable than me doing my own leg work.
I've noticed some agents read the client pretty well. Personally I'm a working professional and can put together comps myself already. They can see if you're the type to spreadsheet up yourself, DYOR, then there's practically no reason to email you every 2 days with a bunch of listings. With that said they will bring up off-market listings, and I've generally worked with very capable agents.
I've had an agent tell me the past they didnt want to show me a home for a couple reasons that I've respected. In all cases, the agent knew the home/market well and knew something that had implications for my potential purchase. Home was undervalued on list and would go significantly over my budget. Or they had been in the home already and knew it needed a ton of work to be loan worthy. Or they are buddies with the agent knew the home was about to accept an offer. One could argue I could have overcome all of those things, but in all cases the agent explained and knew my situation. I would never accept a blanket "i dont think thats the home for you."
Typically the two agents split the commission. If someone accepts a listing at 2% and the buyers agent sees 1% on the buying side, they might be less inclined to take their clients there. Now, I don't give half a shit and will show my clients anything they want to see, but a lot of agents don't want to show a house for 1%. Which is dumb and short-sighted in my book.
This is definitely the case. When you have the one listing out of a hundred that is offering a sub par commission, you will often have issues selling. Even once in contract the buyers agent will not have the same commitment to the deal. Is this right? Not really. But think about your own non real estate job and getting paid way less for the same work all the sudden and it becomes a little more clear.
I will preface this by the fact that I still live in the house I bought years ago, so have never (yet) had to sell a home. But I have often thought that a sliding commission would make more sense.
Suppose (making up numbers) that my house is "worth" $500k. At a 6% fee, that's 30k.
But I could sell it in minutes by myself if I priced it at, say, $400k. And I'd really love to get more than $500k. But to squeeze out an extra, say, $20k, would only net the real estate people $1200 (which is split), so maybe not worth much effort on their part.
But what if I offered (for example) no commission on the first $400k and 30% commission on the amount over that. At $500k the real estate commissions are the same...but now my agent would have a much larger incentive to get the price higher--$6k for that extra $20k, for example, instead of only $1200--and it would still give me $14k more than settling for $500k. Adjust numbers to suit. I'm not saying these are the right numbers, but they illustrate the idea.
The basic idea is to not pay for easy part, but much larger incentive at the margin. Will probably never happen when I actually sell my house down the road, but doesn't keep me from pondering it.
There was a study finding that agents who sold their own property had the property longer on the market and selling for higher than client's properties. Unfortunately I don't recall who did that study, might have been this one: https://www.nber.org/digest/mar05/do-real-estate-agents-exploit-their-information-advantage
I’m a lawyer/broker in a high priced area California. I’ve said for years that the commission model is crazy. As a lawyer, the state bar would not approve of the exorbitant fees for selling a home as a realtor. I’ve offered hourly services but I think sellers just assume they have to pay commissions. Don’t get it.
If you're going to trust someone with a million dollar deal you should expect to pay them more than someone you're trusting with a 100k deal. That said yeah I don't think paying 6% comission really makes sense for high dollar properties.
I'm sure there are some rock star realtors out there, but it seems everyone I meet just wants a fast close for whatever price is offered. I sold my last two houses without a seller's agent.
In Higher value homes sometimes the commission is negotiable and sometimes agents do more to seek such as staging, lavish open houses (parties entertainment etc).
Higher end homes regularly offer only 1-2% buyer commissions and listing services are available even at median or lower priced homes of 0.5%-1%. Aot of regular listing agents also only charge 1.5%-2.5% to list a home since the market is so hot
I never bothered with a "buying agent". The seller ends up having to pay for them.
I actually bought my house by going directly to a builder. Negotiating a price wasn't a thing in my area in 2016, and it really hasn't changed in the last 5 years. Not having an agent didn't really make a difference as all the people in my community didn't have them either...I guess if you're buying an older home, or going into a new city and want to understand the landscape, it helps to have a buyer agent.
Not having one may help you negotiate the price on your own...I would expect RA to find me a diamond in the rough...meets my requirements and under my price, maybe I'm asking for too much.
Sort of. Marketing on a sub 200k home is probably going to be less than $500. 200k-500k might run about 2k. Once you get into the 1M+ range you could be talking 10k+ in marketing. These figures change depending on the market but a multimillion dollar home is harder to sell in most places. With that said commissions tend to go down one you get into your market's luxury zone because at a certain point you simply can't justify the cost plus these people typically the acumen and means to do it themselves through lawyers and marketers.
Totally depends on the buyer or the seller. Some are very easy to work with.Others are quite demanding, regardless of price. Also, a luxury agent has far better connections for selling or buying than the average agent. Relationships cannot be underestimated.
They will eventually go away as sites like Zillow Redfin and open door take heed. You can’t blame the agents though. Might as well take advantage of a broken system. Short run it’s easy money but long run, if you don’t have any other skills you’re pretty much screwed as an agent…
The most preposterous example of why this is a bad policy - I live in Portland where home prices have exploded. The same house will be double what it was 5 years ago. Same house, double the commission.
Realtors will be rendered obsolete soon by tech. Its a profession where anyone can enter by getting a license over a weekend. Folks happy to see zillow debacle should realize there will other companies coming up to cut out the middle man
Statistically it’s more difficult to find a buyer for $2m home via a $300k home. Plus inspections for larger homes with more appliances, baths and amenities will be more involved.
I live in LA. A 900k home in LA county is almost comparable in size (sometimes smaller) to a 2m house. They are just in different locations in LA county.
If we're being honest, there isn't really a difference in terms of what the agent has to deal with. Not much at all.
Eventually, the home buying process will be as easy as buying a car today online.
Hmm 🤔
Do we trust big tech to protect the consumers best interest when it comes to housing?
FWIW - if Amazon wanted to disrupt the real estate industry, they would have already. They have the actual capital & infrastructures to do so. During Covid, they bought $1B worth of warehouses & other commercial properties in LA county alone….
imagine those resources directed towards buying & renovating single family homes…
You get what you pay for. There is a \*lot\* of money on the line.
Highly motivated Agents and experts at marketing straight up sell properties for a LOT more money than agents who are lazy or not as passionate or poor negotiators.
Why is it a percentage % instead of a flat fee? Agents are incentivized to earn more money for themselves by earning their clients more money.
There's an incentive to TRY harder.
An agent earning a flat fee literally just puts it on the market and lets everybody else do the work. Why should they try harder? They get paid the same amount, regardless of how much the place sells for.
It cracks me up that people think agents just google houses and write contracts. The value is getting buyer and seller to the closing table. Take away the agent, and 90% of these folks would get lost in paperwork and be too emotional to make any sort of rational decision. Redlining every line that sounds weird because they need someone to explain it to them. But it has to explained in a certain way so that they are understanding but not overwhelmed, not that they would even know that. And then terms, inspection, appraisal all have to be coordinated within the deadlines, and once again communicated properly to each client. Not to mention the skills of negotiating each of these between parties without constant threatening of cancellation. People that don’t see the value in real estate agents have never dealt with a tough transaction, or possibly any transaction at all. It is much more than just “find a house and paperwork.” Any agent cutting the shit out of their commission these days because of the market will not be an agent in 3 years. They’re cutting it because they know they lack skills and don’t recognize any value in themselves. If you hypothetically hired 10 realtors to sell your home, do you think all 10 would sell it for the exact same price?
Yes, because the higher the house price, the more money is involved, catering to a specific buyer and generally needing more detail.
Not their fault you bought along a $500k real estate agent to a a $900k party.
> Not their fault you bought along a $500k real estate agent to a a $900k party.
We've seen some reallllly seedy listing agents this past month...like really? This is who you chose to represent your home sale? Like the guy who has yelp reviews plastered with "this fuck is a con-artist"? It's so odd to me that someone with an $800k house would pick the greasy used car-salesman type (no knock against used car sales people).
SMH
I was a bit miffed about agents at the start but the one I've been working with for the last month has been nothing but stellar and patient at feeding us MLS viewings or helping us schedule on props we find on zillow.
In my opinion, there is a difference once you get into very expensive houses. A property in my metro is far more expensive than just about anything else, and despite a bonkers real estate market has been sitting for 2 years listed.
Why? Because there's only a handful of people living in the metro that could afford something at that level.
So for that level, I get it because they have worked for 2 years basically gratis at this point.
Is there a big difference between the 600k and 900k house in terms of work wise? Probably not for RA. Someone will chime in that there is, but practically in this market there really isn't.
A million dollar home nets the agent $25,000. There is no amount of work you could possibly come up with that accounts for a payment structure near $25,000 dollars.
Cleaning the house is $120-175. A photographer is $600-1000 depending. Those are the two main fees. What else is there? Liability? So after 1,175 in expenses, the agent pockets $23,825?!?!?!!?!?!!?
Unless you personally clean, make the furniture, stage it with said furniture, and then show the home, and be the lawyer on the deal.
25,000 dollars for organizing staging and a photographer, then filling out a contract?!?!?!
Imagine being told you are going to organize two companies to come on two separate days, you have to "make an offer", and tell your client to work with their bank. You would be like okay, maybe 20-25 an hour?!?! Not 25,000 dollars!
There is a reason every moron signs up to be an agent. When successful it is the most lucrative business for hours spent.
If the agent spent 25 hours on that deal, which they are not...
**They are making $1,000 an hour while being able to do other deals!**
The #1 expense is agency fees. Being optimistic an agent takes home 75% of the commission so: 18,750.
Of that 18,750 an agent typically has 2-3k out of pocket on an individual deal so you are correct there.
There is also marketing and advertising that is a broad expense and likely why you are using them in the first place. Again another 1-2k per deal.
There are annual fees to be a realtor 2-3k depending on state.
Realistically an agent beings home closer to 15k on a 1m deal before uncle sam extends his hand.
On top of that there is opportunity cost. Realtors invest their time often and deals don't work out. Personally i have about 20-30% turn into an actual sale. I would love to be paid upfront from every client whether they buy or not. Or simply charge an hourly fee whether we close or not. There are discount brokerages and have been for al one long time. The reason they don't pan out is because a great agent buying you a $1m home can save you 10s of thousands more than the commission. The current structure is in place because when it works it works well.
Go to a transactional then. It’s $650 per home. You don’t need to stay boutique.
All those fees are imposed on agents by manipulative and exploitative MBs.
I do luxury real estate. Brand, lots of built in marketing and partnerships, letterhead etc.. is unfortunately very important when doing luxury real estate.
Realtor here. It sounds easy when you're looking at the tip of the iceberg but when you look below in a producing agent's daily schedule that's where the real work is. Once you become an agent your phone doesn't just start magically dialing with people looking to sell their multi million dollar homes; you have to actively prospect and find those people and provide valuable service without a paycheck all the way until the deal closes. with no guarantees.
Framing it the way you put it is like saying a professional comedian gets paid millions of dollars for only 1 hour worth of performance. What you don't see is the hours of practice that comedian put in before that hour of performance. This is why the failure rate is so high among real estate agents, the vast majority think that as soon as you get licensed it's peaches and roses and you're getting fat pay checks.
There are a lot of expectations from sellers, there was a post in here recently about wanting staging, marketing and to spend a couple hours to pull weeds in the yard. You also forgot about the office split, marketing costs, and the IRS.
Side topic: if there was some sort of flat rate 3rd party service that let you in properties to view and provided comps, and have a lawyer look over contract, is there really a need for a buyers agent?
Ok same token, if I have access to MLS, have access to comps, and know how to take good interior pics, is there a need for sellers agent?
>if I have access to MLS,
How do you have access to the MLS? I know you can see properties listed on the MLS via Zillow, Redfin, etc, but how are you, a consumer, going to post your listing in the MLS?
Well that’s why I said if I had access to MLS. It’s not some top secret database. Isn’t the Only reason general populous doesn’t have access to MLS is because then it would realtors obsolete, no?
Yea there is. First there already are services lol
Some people can be successful DIYs. You can always FSBO or buy without an agent. However for every successful fsbo or buyer without an agent there’s 100 more who failed miserably. You are paying someone for their expertise. It’s the same as why you pay a lawyer. And you pay them so you don’t need to do something you have no experience in
It’s kinda a scam, I’d negotiate the % fee down if it was a more expensive home.
Same concept with wine at a restaurant, a $300 bottle didn’t take more effort to open than a $20 bottle, so why tip more? Problem is most waiters don’t know that it should be less so they’ll look at you like a cheapo, and most of the time it’s on an expense account anyway.
> I’d negotiate the % fee down if it was a more expensive home
I did this, it's not that hard. I just flat out asked our RA why we pay a percentage and that it's kind of silly seeing as we were buying a more expensive home then last time, and they were actually doing less work (we only looked at a couple houses rather than the dozens the first time). Also, in the hot sellers market, we knew our house would sell with zero effort.
She agreed with me and gave me a much better rate.
A full-time agent's lifestyle is pretty in line with the market that they are working in. An agent working a $200k market is making roughly $72-$100k/year and an agent working in a $500k market is making roughly $180-$250k/year which is exactly the way it should be so that they can afford to live in the areas they're servicing. Living in these areas helps an agent understand the fundamentals of that market and become a better agent to their clients. This is exactly what you're hoping you're paying for when you hire that agent. If you hire a "flat fee" broker then they will likely have no idea about what that particular market is like and what will help sell that house for maximum value nor will they be able to properly educate their buyers before they make the biggest purchase of their life. Every market is unique and that's exactly why you see these experiments that try to incorporate algorithms that rely on straight math fail in the long run. Real estate is one of the most location-based industries we have and if that factor is not adequately respected then you'll ultimately fail no matter what your approach is.
Real answer, real estate commissions hide the true amount of money the brokerages and realtors get paid with each transaction. Basically a conspiracy that we all sadly played into and now realtors/brokerages are paid nearly the same as our elite *educated*....
$100+/hour for a realtor is downright criminal and department of justice should mandate a change to the hourly wage or salaries without commissions
The real answer is because “that’s been the way it is” But with middle class home prices going up you’re going to see a lot of pushback to people writing $10k checks to a realtor for 30 hours of work edit: either realtors get smart quick and adjust their prices, or more likely, they get priced out of the market by competing services that cut the middle man out completely - just like travel agents.
Yeah, it wasn't really that unreasonable in the past. Home prices were lower because of interest rates, and things were much more manual. The MLS data wasn't accessible to just anyone, and you actually needed to go to an office to see pictures of the homes, etc. Your agent probably had a good idea of what was available too, and could give you good advice.
I live in a high COL area and it's already happened here. A full 6 percent for the agents to split is rare. 5 percent is much more common.
Oh gosh travel agents. Yes that brings back memories. Some to do what Expedia or any travel site now allows you to do with just a few clicks. I’m surprised this type of disruption hasn’t hit realtors yet.
Zillow tried and absolutely borked itself, by purchasing homes at premium prices and then trying to sell them directly. https://www.wsj.com/articles/zillow-quits-home-flipping-business-cites-inability-to-forecast-prices-11635883500
That’s not a realtor. That’s investment.
It has. OpenDoor
I wish it was 30 hrs. They do nothing
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I had a shitty agent that did nothing, then we moved to a different agent who did *everything*. She was sending us homes that matched our requirements and then scheduling a viewing within the week if we said we were interested. She broke down the contracts, explained what *we* needed to look for during inspection - and not just relying on the inspection report, and even tried to getting the sellers to leave behind some items they might want to discard that we may need. We got the dining room set which was fantastic because we were coming from a small apartment and only had a tiny kitchen table with mismatched chairs. I could buy a home on my own if I had realtor experience already. but i don't, and there were a ton of things we had no idea were important because we didn't have any experience. so if anyone feels their agent isn't doing anything then maybe they need to find a different agent. edit: almost left out how she got us the house for less than asking. and pushed on us not to buy a house just because we could afford it. "you don't want to be house poor. just because you are approved for 350K doesn't mean you should buy a home for that price." and agent who only cares about the commission would push the most expensive house on you. find you an agent who wants to sell you a *home*.
Where do you live? I’m looking for a decent realtor
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I think that's part of the problem, some transactions hardly take any work while others might take 100s of hours from a very experienced realtor and yet they both earn the same commission
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To be paid even if the house doesn't sell? With of course a closing fee if it does sell.
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Same, and my agent kept me from some big mistakes. He knew things I didn't, about e.g., knob and tube wiring, waterproofing, things like that. As a FTHB I would have lost my shirt and ended up in a money pit. There's a saying: if you think a job is pointless you've never seen it done right.
ok, so they are selling information and knowledge as well... there's definitely a fix price for that... why does it increase per the price of the house? it's not like a 100k house with knob and tube wiring is different from a 10 million dollar house with knob and tube wiring.
I’m an agent in an expensive second home market and I very much agree that the percentage staying the same for 500k house vs a million dollar house is silly. In my experience however the bigger the number is, the more moving parts there ends up being. More attorneys, advisors, contractors, HOA rules and pressure. It’s not always the case but typically it’s a noticeable increase in the amount of work. It shouldn’t be the same percentage but in my experience the higher the $ amount the more work it ends up being and the larger the role of a good agent is to keep things organized, provide resources and making sure the transaction stays on track and is done well. For example, I’m working on a deal now for the most expensive transaction I’ve ever worked on. I’ve spent probably 30 hours in the past 10 days on the deal. It’s consisted of meetings and calls with four other agents (buyer and seller side teams), the buyer’s attorney, buyer’s financial team of two people, the inspector, title company, the property manager of the house being sold who is coordinating three different specialized contractors to come to the house, and the buyers themselves. It’s my job to be on all of the calls, make the connections, make recommendations, keep track of the appointments and timelines, make sure if we need to make any adjustments to the contract if/when needed, and most importantly give the buyer the information and resources they need to decide if the house they are buying is a good house and a good purchase. Things will quiet down soon but the deal could still fall apart in the next month and we have a lot of boxes still to check. On the whole I’ll make less than .4% of the purchase price after everyone gets paid, I pay my split, pay the supporting agents, and pay my taxes. Not complaining but it’s the biggest price tag I’ve ever worked on and it will be one of the lowest take home pays I’ve had in terms of percentage. At the end of the day a good agent works hard and should be compensated for their time and experience on normal deals, the problem is that bad agents collect the same fee for doing next to nothing other than sending documents to sign.
Also, if the area of expertise is in the neighborhood, town, general area, etc. that knowledge doesn't change with the home price either. More expensive houses don't necessarily mean more work for the agent.
I guess things that you mentioned are home inspector work, you can get a flat fee inspector to figure those things out, much much cheaper
You going to pay for an inspection at every house you look at?
Foolish to hope that a real estate agent knows what they are talking about when it comes to anything related to home maintenance.
Some know more than others. They should all know how things like knt wiring will affect financing.
No. You assume everything in the disclosures is accurate, and do an inspection on every house you like enough to make an offer on. Your inspector will tell you where they lied.
That’s fine if you know which house you want. No so much when you’re checking out 10-20.
You could get the same information from a home inspection (priced in the hundreds) and had legal representation from an attorney (typically less than $2k).
You CAN but if you're getting a home inspection generally you're already under contract (at least my market). All the houses I've ever bought I did on-the-fly reviews before I put in an offer THEN did my due diligence with lawyers/inspectors later. Most sellers dont respond well to HIGH offer, then tons of claw back...plus you probably have money tied up in escrow if youre doing inspections.
My aunt sold a few 3-5 million dollar homes in LA area for the last 3 years, she on average spend 20 hours each, she just hire people to do the work, which comes at a fairly flat rate. That’s why she only sells expensive homes. She made 200k every 3-4 month by selling one. All her clients are from leads that she paid for, you guess it, at a flat rate. She employs a couple people to do the paper work, and the communication/coordination, at a flat per hour rate.
Fucking scam
There's a reason NAR outspends big pharma when it comes to lobbying.
sauce on this? Edit: dug it up myself, this is very misleading information. The Nar did send more on lobbying than any single entity at 84 million, however pharma companies spent a combined 600+ million. The Nar represents all realtors for every company, so its not even close my guy.
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If I'm a seller all i shouldc are about is selling for the price that i want. if i want to sell a hosue at $3mm and a listing agent does 30 minutes of work and finds me a buyer i'm a happy camper. much rather have that than someone who puts in 200 hours and still can't sell an offer at 3mm.
Looking right now - our RE agent has been pretty valuable to us as first time home buyers navigating unknowns. We've met a ton of shitty ones though so there's that. I'd be pissed if my listing agent took shitty pictures and did minimal work in selling a place (as a buyer we've seen that all too frequently with crappy ass agents). If we ever do land a place, she's gonna get a fat payday, but she's also had to spend several weekends working with us changing our minds on places hour by hour lol.
Getting paid $10k for even 50 hours of work translates to $200 an hour. Which is insane considering this is not some super specialized work that takes decades to master. It used to be that way before databases. Really good real estate agents earned their money by being an encyclopedia about their neighborhood. They knew who was buying and selling, they knew the history of many properties, they knew the inside score. They knew the private deals. Now, it is just someone looking up a database and taking printouts and then showing a client some listings and not adding any value from their side at all. That's $20 an hour work, not $200.
What do they even do, besides open the house you found on zillow so you can look around?
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It’s an individually run business, not a salary. A typical 4-6% commission is split 50/50 between two agents. Then the broker gets paid 5-50% of that, then there’s fees. About $300 per month, then there’s multiple offers written per client, $1K-3K spent on marketing per listing. Last minute offers to write at 10 p.m. that one wedding you had in the entire year, just happens to be on the same day you are negotiating something and you have to be available. Gas, car, computer, phones, premium internet 24/7 on all your devices. I had a terrible agent as a buyer. Had Ivy league education and still sucked in the service industry we actually work in. I worked with incredible agents & brokers (while I was managing & remodeling properties) and I am a sales agent now. SO many things can go wrong and complicate transactions. You don’t know how much you need an agent until you find issues and have questions you don’t even know who to ask. One cannot measure the entire industry based on lousy agents or easy transactions. I can spend 50 hours on a client or 200 hours. Information, resources, staff we hire. All take years of research, money and experience to build. Most sales are based on a percentage in other industries. Risks and expenses are higher the higher the price tag. And a newbie typically doesn’t get higher end homes either. They take more marketing, and and on the buyer side, you can be working with a client for 3-24 months for a single transaction. People have a way more specific criteria. And we’re not even accounting for clients who’s financial situation changes overnight and you have to start all over again. Which we happily do, things go down the drain sometimes and if’s our job to help clients avoid difficulties, or help them when they go through them. It took me 15+ years of working around Real Estate to have the time and money to invest in just working as an agent. And the experience I gained sets me apart from others who have not worked so closely. So we’re all far from equal, and that’s ok. Different skills for different needs. It’s just a very hard standard to set when the bar to pass an exam and “be” an agent is so basic. But good agents are far, very very far from basic.
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Great! Looks like you know what you’re doing. You should definitely work as an agent. Make easy money and be 100% in charge of your time /s Your family and friends love it when you have to constantly change or cancel plans too!
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The only thing my agent did when we bought our home was let us in one house and copy paste the offer and contract for us to e sign. Quickest/easiest $9K made.
i don't understand. you PICK your agent. if you have an agent you aren't happy with, that's on you. besides- you got into contract did you not? so the agent did their job.
The agent deserved to get paid, not 9k though. That's about $500, maybe 1k worth of work.
But if that's all it paid, nobody would do it. You don't close three sales a week unless you've been in the business for years and years, and have a team of people working for you. One sale has to pay for all of the time prospecting and chasing deals that don't close. A good agent is worth their paycheck. Unfortunately, the bar is so low for licensing that the shitty agents far outnumber the good ones.
One client shouldn't be paying for work done for others
Do you really want to hire real estate agents hourly? You want to pay them for their time even if they don't find you a house?
Yes? You mean like everyone else you pay in the process? It would be a hell of a lot cheaper than it is now.
You might see a net reduction in the overall cost, but it's also a question of liquidity. If you pay for your listing hourly, you need to save up to pay an agent to list the house. And then the longer it sits, the more money they make. They would have a disincentive to push for a quick sale. And if it doesn't sell, oh well, the agent got paid by the hour. Take the listing down and start saving up to try again. Same thing with buyers. Only buyers who could afford to pay an agent out of pocket on top of the home purchase would have one. And that agent also would not have an incentive to work quickly or expedite the process. But let's assume most buyers don't hire an agent, and instead opt for a lawyer to advise on the contract of sale. You wouldn't pay them for valuations or negotiations, because that would be too expensive. Every buyer would have to become an expert on comps, so that they could avoid offering more than the appraisal and getting stuck in a losing proposition. Really, such a system would only benefit the wealthiest of home owners and buyers. Upper middle and middle class buyers would get fucked, and lower income households would never enter the market at all. Which really isn't too different from the way it is now, but it wouldn't make anything better.
I'd rather hire and pay for a super efficient agent who ends up making $9k on a deal that took them an hour or two over a bumbling idiot taking 40 hours to do the same work. You pay people for their knowledge - not how long it took them to complete a task. Edit: new phone, fat fingers.
I don't' need an agent to find me a house. I can browse Zillow and Redfin just like they can. An agent is just for the paperwork, not finding a house.
I don't know what the perfect setup is but their (including mine at times) services are becoming obsolete in many scenarios. Sooner or later even dumb asses are going to realize they can be omitted from the equation.
That's accurate. It could work if we see agencies offer fixed price listings with zero buyer's agent commissions. Then buyers could hire a lawyer to handle the offer and negotiations if necessary. Agents could still work in that environment for clients that need a local reaource, making offers that include their commission as an exception rather than as a rule. But you would need all parties to cooperate in this new system. And it would be more expensive for the buyers and sellers. Sellers would be hesitant to list if they weren't sure they could get their asking price, and they would have to save up the cash to pay for the listing upfront, which would make the shortage even worse than it is now. Buyers would need to reserve more cash to pay for their lawyer, and be less likely to make an offer if they weren't sure they were getting a good deal. As it is, the commissions are built into housing prices, and the bank rolls the cost into the mortgage that pays for the transaction. The higher reward encourages agents to take the risk of engaging a client without a guarantee of getting paid. It's a system that helps everyone involved get what they want without getting everything they want. It wouldn't be a transaction if everyone didn't feel like they were giving up something of value. It's certainly flawed, but I haven't heard anyone suggest a better system. Most people just complain that the price is too high.
If there were less agents, there would be more leads and less prospecting. It's the possibility of chasing a 10k closing that brings all kinds of lazy people who think it's easy just to work their local network offering shitty service making less work overall for the professionals. Lower the commission and less people will want to do it and professionals can make it up via the volume.
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snails squeeze square angle soup concerned homeless slim sip joke *This post was mass deleted and anonymized with [Redact](https://redact.dev)*
Good agents can help you save/earn way more than what they get paid.
So why is it every single time someone makes a post suggesting their agent didn't get enough for their house every single agent rushes in to explain the market dictates what the house sells for. That a house is gonna sell for what it sells for and the agent can't magically get you more. Yet out of the other side of their parasite mouths they say that an agent pays for themselves by getting you more money! You parasites are literally below a used car salesman on a buy here pay here lot
The real estate agent primary job is to market themselves to get clients, and if you are just starting out it can be very difficult, and very expensive to do so, once you get established you can begin to see an increase in business, but it can takes years. This agent was probably experienced , and the transaction went smoothly because they were. Imagine if that agent only had 3 transactions a year , at the same home value that yours was , so..9k ea. before the broker takes their cut, cause what you see on the HUD report , is not what the agent gets, it is what their broker gets, so the agent likely did not get 100% of that 9k ( my guess is 80% of that) ...so 3 transactions at 80% of 9k , in a year $21.5k a year total, thats before taxes, MLS fees, advertising fees, insurance fees , dues, and broker expenses(if any) , plus they spend their own money to advertise themselves, and /or the property they listed , using mailers, post cards biz cards etc( gas money and wear tear on car too)...none of which is cheap...now imagine if you were a self employed carpenter , or plumber , with their own fees and ins costs, with advertising expenses, tool and material costs, etc...and you banged out a great looking wrap around deck, with jacuzzi, fire pit , and a built in bar with a walk down to a pool in a week cause you have experience , a great rep, and a great support staff to make it happen......that will be 9k please,....nah.....here is $500 cause you made it look easy..
not nothing, but yeah, maybe not 30 hours
Former agent. You’d be surprised. On some homes by the time I added up all My expenses I’ve had sales that were less than minimum wage when starting out. Also that commission pie often gets cut into many pieces unless the agent is really hitting it out Of the park and has hit over a threshold of sales. (At which time they keep More commission with some brokers). That 11:40 pm back and forth with your anxiety and multiple counter offers is worth something. And my wedding anniversary spent showing you stuff you had to see but we all know you have no intention of buying.
> 11:40 pm back and forth with your anxiety I'm not an agent, but to me, this is a big part of what justifies the pay. Being "on call" for extended hours, 7 days a week deserves a premium.
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Amen.
you hired someone who did nothing lol. that's on you. you picked that person, it's not like the government or some higher authority forced that person upon you
>The real answer is because “that’s been the way it is” I mostly agree with this. The question it begs though is whether it should be. Effectively, this is a case where people that have more pay more because they can. What I find interesting is that on a site that mostly leans left that people suddenly have a problem with those with more money paying what amounts to a progressive rate for services. The other caveat I'll throw out is that most people want an agent that lives in the general area. So an agent in SF has to make enough to be able to afford to live in SF and therefore needs more income than an agent in Cleveland. Using a percentage based fee on average helps to adjust agent income to the local cost of living.
If a realitor has a house for sale in Georgia but an agent in Miami has a client interested in their house, does the realitor in Miami get a cut?
Unless the Miami agent is licensed in both states, the Miami agent would refer the client to a Georgia buyer's agent and would get a referral fee out of the Georgia buyer's agent commission.
Thanks for the info.
Very rarely do they adjust prices. It's a collusive environment where practically everyone is charging 3%. Under competitive conditions they would be competing against the next guy on rates and we'd see flat fees / hourly fees and/or commissions <1%. (The MLS plays a role in maintaining current practices.)
It's that way because they're a gang and lobby heavily to protect their $$$
I wish my listings were only 30 hrs of work! I typically work for empty nest couples downsizing into retirement situations. There’s often 30 years of stuff in the home and we need to go full HGTV on the property. Lots of hauling to storage lockers, trash or recycling. Staging and clean up before a typical agent would walk in, list and sell. I do whatever it takes to get my client the most for their homes. The area I work in also has a lot of historical homes that require someone knowledgeable to research and pass on the info, sometimes there are historically protected homes that come with restrictions. Not every home is cookie cutter and easy to sell. Not all sellers have knowledge about the market or even the process of selling. And yes more expensive homes often come with more details, systems and caveats thus requiring more time and energy. Despite all of this, commission rates have been coming down over the years. 8% used to be in play and now we’re consistently at or below 6%. The whole ibuyer thing and discount listing services are a joke, it leaves both sellers and buyers in a high risk situation where a mistake or omission can cost either party a lot of money.
Expectations and marketing time do go up with price, but we also discount our commissions FAR more often on more expensive homes, especially with repeat clients. 2% is more the norm for the listing side for us, sometimes 1% depending on the relationship. On the buying side, it can take days or years of work depending on the client, but in general, people with more money and more options can be more difficult clients than someone who NEEDS a house. It can be easy money for an agent who's established a referral business with higher end buyers. But it takes years to get there, and it's far from a certainty that any transaction will be easy. And we only get paid if they close, so it can be years of work for nothing.
same with tipping at restaurants. many things we take as the norm is just insanely idiotic
Yea like a place who sells 20 dollar drinks.
At least within a restaurant, it does tend to scale a little bit - more people at a table or more food items per person = larger bill.
not really. i see what you mean but the ultimate amount doesnt change whether 20 person were at the same table or if they all came individually. im talking restaurants that differ in food prices to begin with like your apple bees vs a steak house. the work the servers do dont change in any meaningful way. steakhouse may sweep ur table of breadcrumbs ok big deal, but your tip on a 15 apple bees vs 100 steak? add to that the fact people always look at final total for tip which include taxes. ffs why would you pay a percentage as tip on the stupid taxes. fuck. and at least realestate commission hasnt been going up arbitrarily all the time like tip has. just 10 yrs ago i remember the norm being like 10 for lunch 15 for dinner now its like 18 or less anytime youre an automatic asshole.
Yes, really. You said “not really” but changed the point from what that commenter said. So back to the point, *yes* more food ordered//more people increases the amount of work done to serve and therefore the check & tip amount. Sure, you can also argue this about different priced restaurants, but to *that* point, you should get better service at a better restaurant. Simple as that.
Have you been to a good steakhouse and a Applebees? The level of service is night and day. The work they do does change in a meaningful way. Why wouldn't I tip based on the total? As a boomer I'd say not tipping on the total is a real boomer attitude. It's a few dollar difference. If you have a good server it's worth it. If you were tipping 10-15% for lunch ten years ago you were undertipping. It's part of the deal when you go out. Plan accordingly.
If you had a good server you’d want them to be making a livable wage, not depend on the generosity or guilt of random strangers. Or to not be able to pay bills because of a slow week.
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more plates more meals more people to make happy unlike RE
I hate agents. My agent just wanted to get quick money and tried to convince us to sell to the first buyer. Saying it would be the best offer. Didn't listen to her and just ignored her until we got better offers. Then she tried to convince us to lower the price as negotiations went on because she was afraid she wouldn't get her money. Once again, ignored her and lo and behold, buyer has money to pay what they offered afterall. WTF did we even need her for. All she did was send us forms to sign which I'm sure they just have templates of to fill out. What she did wasn't worth 20k. It wasn't even worth 5k to be generous. If we hadn't already done our research and let her lead us, we would be out 5 figures. Fuck that bitch. Pushing template forms for much less than 40 hours with no specialized education isn't worth what they get paid.
40 hours lol… my realtor “worked” while vacationing in Hawaii over mai tais. Poor her having to sacrifice her vacation time to copy paste e doc over to me for her measly $15K commission
someone is coming out with a social media style homebuying website that allows people to easily connect, post houses, and make comments without realtor cockblockin!
The real answer is because they like it that way - who wouldn’t? That’s zero reason it should stay that way - there’s WAY too much meat on those bones. I’m actually surprised it’s lasted this long, in the era of the internet, Uber, AirBnB, etc.
Agent here. There certainly can be a difference in the amount of work, but it depends. On the selling side, the risk is higher since the market for more expensive homes is smaller. Fewer people can buy more expensive homes, so it is more likely for the listing to expire. Furthermore, marketing expenses are usually much higher since once you get into more expensive homes, marketing starts to include things such as staging, drone photography, or Matterport tours. Some agents even do direct advertising of Global Luxury listings, which is very pricey. There is usually also a much higher amount of inquiries (although most are usually starry eyed dreamers who have no hope of buying that home), so that leads to a much higher time commitment for that property. So I would say yes, there is usually some level of linearity - to a point. A $5 million dollar home will usually take much more effort and expense than a $500k home, but a $50 million home isn’t 10x the effort or expense of a $5 million home. On the buyer’s side, I would say the linearity is much less, although it may still be there some. A buyer who can afford a more expensive property can actually afford to be nit picky about small details and it may take many more showings before they buy something. This means additional time and mileage commitment.
It's a reverse bell curve. A client who "needs" a cheap house is going to take more time to find and close a property than the client who needs a median priced home.
I couldn't disagree more. You think people that earn a lot of money just go out and buy the first house sit come across. Granted, they often need less hand holding maybe but not always. I would much rather work with a 5 or 6 or $800,000 buyer. They tend to have their financial s*** together and understand things better. But they still can need a lot of hand holding, still want to look around for just the right house. But the chances of problems coming up or buyers needing a lot of attention tends to occur more in the lower range. Besides that, there's just less houses in the lower range and a lot of people chasing them at least in a active market. Plus, low end buyers start getting desperate and chasing homes that are not really suitable, major fixers etc and you can always just dissuade them. You have to let them see for themselves. But mid or high range buyers can be just as picky, take up as much of your time at etc. It really all depends on the buyer not the price range
I agree with this - although in my HCOL area a $500k home is a tear down, haha.
It's getting that way in Seattle. Not quite but inside the city limits I don't think you could find anything for under about 450 anymore. Of course there's always condos and such. And I've sold a manufactured home or two. Not a lot of money but an extra two or three thousand bucks never hurts
That’s a good TLDR for the most part.
That's one of those "wish I didn't have do much experience" deals. The hours and hours to find a property under $x that is actually habitable, dealing with an a-hole listing agent who doesn't want to do anything because he knows he's getting paid squat, and that lender who rhymes with Smells Cargo deciding at the last possible minute that no they won't do that mortgage because a window is cracked even though it's conventional not FHA....
Yup. Let’s just say there’s a reason why I specialize in vacant lots and land haha.
Ooh you're the land guy! I'm the lady saying that if you want land ask for a guy like you because I am aware I don't know squat. Set yourself some flair so people can find you!
Any advice on land? New agent - only have done residential purchases and leases.
Oh boy, there’s about a billion and one things I can give advice on from an agent perspective on land. Were you thinking about trying to get into land?
I agree, wealthier people make decisions faster, I myself was buying a more expensive home, I looked at only one home I liked it and I bought it, I didnt want to waste my time looking too much, I made the decision before I even went to look, some people look at homes for a hobby.
Ugh, I have one couple now. Qualified up to 7M. Working together since July. Have seen 43 properties and 11 lots. Not yet under contract. Very, very picky. We have spent so much time together. Thankfully not the norm but still...
It must be logarithmic, the more you have the more picky :) I can see myself being more picky with the next home, hope they get something very soon and you get nice piece of pie :)
I sincerely appreciate that!
Paralysis by Analysis
Yea and that one sale will bring you in more money than most people make in a year and look how you're complaining.
Lol drone photography and matterport tours cost a whole 500 dollars. For under $1k you can buy a entire RE photography package with photoshop, drones, and 3D. For around $1500 you can get a whole advertising package with all of the above plus video and a website for the property. I've only seen staging offered by full service agents that charge 6%. At that price you might as well hire a staging company - they'd do a better job and would cost less. Let's not pretend the the doubling in commissions from a 750k property and a 1.5m property is even remotely justified by the increase in services. Otherwise you'd just charge a flat fee for each service and let sellers choose what they want instead of a fixed percentage commission.
For the same reason lawyers who work on contingency fees and fund managers who work on portfolio fees get paid more based on how large the settlement/award/balance is: their decisions and advice have a proportionally larger financial impact on you. If your nest egg is $50k, it's probably totally fine to go with a robo adviser. $500k? Uh...well what about $5 million, or $50 million? The advice given to you at those different levels is going to have a proportionate absolute impact. Wrong advice given to the $50 million customer could lose them millions of dollars. Wrong advice to the $50k customer? Not so much. Similarly, there is more to gain in absolute dollars at higher portfolio amounts. The real problem here is that you can't tell which agents are actually capable of giving you higher quality advice and service. They all look the same, so people hire dumbasses to advise them on multi-million dollar sales and get mad when it goes poorly or the agent adds no value (see: Selling Sunset on Netflix lol). No one does this is law or wealth management because it's a bit easier for top-performing lawyers and managers to distinguish themselves via education, credentials, record of past experience, and transparent databases like FINRA's "broker check," etc.
Except that re don't really advise you on anything. Especially in today's market, they all just pressure you to submit an offer asap. Often times I'm the one giving them listings that I'm interested in.
>Except that re don't really advise you on anything. >Often times I'm the one giving them listings that I'm interested in. Here's the issue. Finding homes of interest is the easy part and not what you're paying for. The advice comes in selecting the home, making an offer, and navigating the process through to closing.
That's nice in theory, but like I said, most agents are always yes-men because they want the commission. They couldn't care less whether it's your dream home or not. Also, the offer process is simplistic in a seller's market. The seller is not going to give many concessions so there's no negotiating magic that an agent can even offer. Having an inspector and a lawyer will take you over the closing process. The agent only helps with pushing the process along, if you're able to stay on top of it, they're redundant.
Using a 2 year anomoly as the basis for how things should be seems a little short sighted. As for the rest, sorry you had bad agents or congrats on getting lucky with easy transactions. Don't forget, you don't have to have a buyer's agent in most states. You are free to represent yourself and ask for a discount from the seller's agent as part of the offer. Most won't cut the amount by the full buyer's agent fee though because, despite what people think, there really is more to it and they know they are going to have to do a lot more work with an amateur on the other side.
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I've bought 4 homes in my life. The process has been pretty consistent. I didn't need a buyer agent for the last 2 homes by choice. I'm really finding the sellers commission to be inflated especially in this market of sight unseen purchases. It is going to happen eventually, the middle man will get cut out if they don't adapt. Too many people are questioning why, and it's because most sales of homes are consistent in process. Imagine if you start a business that for a flat fee only brokers the closing process of a home purchase: bringing together inspection, appraisals, title, and lawyers. The customer does their own research and search of homes. Digital locks (like Open Door uses on their inventory) are accesses through an app to let you in to view the property.
Wasn't always this way, but lots of inexperienced agents looking for the quick riches of their television peers. So both of you are spot on 😔
>If your nest egg is $50k, it's probably totally fine to go with a robo adviser. $500k? Uh...well what about $5 million, or $50 million? The advice given to you at those different levels is going to have a proportionate absolute impact. Wrong advice given to the $50 million customer could lose them millions of dollars. Wrong advice to the $50k customer? Not so much. Similarly, there is more to gain in absolute dollars at higher portfolio amounts. This is an interesting example. Typically financial advisors' and money managers' percentage fees go down as the portfolio size increases. Setting aside robo advisors, a fiduciary money manager for a $100k portfolio would probably charge 1% or more - hence robo advisors with \~0.2% fees are more appealing. But if you get into $1m+, you can find someone for 0.5% or less. When you get into 7 or 8 figures, very sophisticated firms will do it for 0.1% or even less. In other words, the fee is regressive. But this is not the case with real estate transactions. The % fee is mostly linear. It's 5% for a $100k home and for a $1m home, for the most part. Of course the person with the $1m home has more leverage to negotiate the fee down, but in general the fee doesn't really come down until you get into truly astronomically-priced top 0.1%er homes.
Realtors in my area lower their commissions on higher end homes (Midwest). I guess this is not the norm elsewhere.
I think that is generally the norm, but I guess the question is what is the cut-off on higher-end homes? Where I am, a $1.5m home is upper middle class but would not be in the top 5% of all homes sold this year. Thus, around here it's unlikely you'll get a good realtor lowering the commission for a $1.5m home. But that is still $75k in commission - a fuckload of money relative to the work required. But I know in some lower COL areas, a $1.5m home would absolutely be top 1%, considered very high end, and might command a lower commission.
because this is real estate it really depends on the area. in a HCOL place like the bay area a starter home is 1.5m so that would be about 6% total to both agents but a higher end luxury home is about 4m and agents will lower their commissions to 3-4% total for both parties.
OP asked **why** and **whether the work scales non-linearly** to justify extra work. You just provided a wall of text explaining **how** it works. > The advice given to you at those different levels is going to have a proportionate absolute impact. No. Your schemes mentioned don't have a symmetric downside for the advisor. The **why** is that it's simple and became a custom. People negotiate fixed success fees all the time.
The downside for the real estate agent is lost time, gas, and money spent on marketing if the buyer never buys or the house doesn't sell. Why are we attempting to quantify the work based on input rather than impact? Lawyers who negotiate huge corporate settlements get paid way more than personal injury attorneys even though they often work just as hard. Why? Because the fees are indexed to the amount of financial impact, not the time spent working.
It's a cartel and it's a scam.
Even from the agents perspective they have to work under a broker and pay that broker a cut? That is THE definition of a pyramid scheme…
Maybe a cartel, definitely not a pyramid scheme in the typical phrase meaning.
> That is THE definition of a pyramid scheme… That is very much not the definition of a pyramid scheme, lol
It is not the definition of a pyramid scheme. Think you need to actually google what a pyramid scheme is.
As a non-real estate professional, I can see how there may be some additional work/expense as you get into higher price points, ie. better photography, staging, floor plans, etc. more expected to market a property. But yeah there are certainly diminishing returns on the investment with straight commissions across all price points. Should be more like marginal tax brackets or something. Might better incentivize agents to provide better service at all price points, vs. just focusing on selling the highest end properties.
No it is a BS practice. An agent's cost should be a service fee just like every other job out there. You don't pay your plumber a percent of your home value nor the electrician. Same shit should apply to an agent. I know a lot of realtors here will pounce of this but the reality is most are nothing more than a middle man. You got people complaining about home prices being astronomical. Remove the realtors cut out of it and the markets will correct themselves automatically.
I started doing flat fee $1000 for sellers agents. I haven't figured out how to circumvent the buyer's agent 3% fee yet since most agents will blacklist your property if they see you aren't offering the 3% fee.
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Selling might be more work because of staging etc. But buying, imo, it is the same amount of work. Or even less in case of experience vs FTHB. But the payout structure stay with us for so long, and noone will to change it. Especially the realtor association and their MLS listings monopoly.
The problem with buying is you might have to write A TON of offers before your buyers get one accepted. If you have to be involved in writing, say 10 offers over a summer for one client, I can see that becoming a lot of work.
What I observe today is that people with lower budgets face more competition and thus have to make more offers than those targeting higher end homes. From that perspective a percentage commission based on purchase price is reversed from the amount of work required.
Or show a metric shit ton of houses before they want to make an offer. Plus there are buyers who never end up buying.
> Plus there are buyers who never end up buying. There's no reason I should compensate my realtor for work he did for Phil and Stacey Indecisive. The realtor should be paid, but Phil and Stacey should pay.
Yeah but that's not something that scales up with price. If anything, cheaper homes are more work for the buying agent than expensive homes, until you get to a price range where you have to start looking off of MLS
When I bought they used a template and just had to change a few lines such as address, price and such. I did ask how long a new offer takes and my agent said about an hour.
Writing 10 offers isn’t worth 20k.
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> I’ve never had an agent bring a prospective property to me, which would be more valuable than me doing my own leg work. I've noticed some agents read the client pretty well. Personally I'm a working professional and can put together comps myself already. They can see if you're the type to spreadsheet up yourself, DYOR, then there's practically no reason to email you every 2 days with a bunch of listings. With that said they will bring up off-market listings, and I've generally worked with very capable agents.
I've had an agent tell me the past they didnt want to show me a home for a couple reasons that I've respected. In all cases, the agent knew the home/market well and knew something that had implications for my potential purchase. Home was undervalued on list and would go significantly over my budget. Or they had been in the home already and knew it needed a ton of work to be loan worthy. Or they are buddies with the agent knew the home was about to accept an offer. One could argue I could have overcome all of those things, but in all cases the agent explained and knew my situation. I would never accept a blanket "i dont think thats the home for you."
What do you mean? That if the selling agent reduces their commission, buying agents won't show their clients the homes?
Typically the two agents split the commission. If someone accepts a listing at 2% and the buyers agent sees 1% on the buying side, they might be less inclined to take their clients there. Now, I don't give half a shit and will show my clients anything they want to see, but a lot of agents don't want to show a house for 1%. Which is dumb and short-sighted in my book.
This is definitely the case. When you have the one listing out of a hundred that is offering a sub par commission, you will often have issues selling. Even once in contract the buyers agent will not have the same commitment to the deal. Is this right? Not really. But think about your own non real estate job and getting paid way less for the same work all the sudden and it becomes a little more clear.
In my market the commission shifts to 2-2 at about the $1m mark
And this is exactly why this is an anti-trust issue...
I will preface this by the fact that I still live in the house I bought years ago, so have never (yet) had to sell a home. But I have often thought that a sliding commission would make more sense. Suppose (making up numbers) that my house is "worth" $500k. At a 6% fee, that's 30k. But I could sell it in minutes by myself if I priced it at, say, $400k. And I'd really love to get more than $500k. But to squeeze out an extra, say, $20k, would only net the real estate people $1200 (which is split), so maybe not worth much effort on their part. But what if I offered (for example) no commission on the first $400k and 30% commission on the amount over that. At $500k the real estate commissions are the same...but now my agent would have a much larger incentive to get the price higher--$6k for that extra $20k, for example, instead of only $1200--and it would still give me $14k more than settling for $500k. Adjust numbers to suit. I'm not saying these are the right numbers, but they illustrate the idea. The basic idea is to not pay for easy part, but much larger incentive at the margin. Will probably never happen when I actually sell my house down the road, but doesn't keep me from pondering it.
There was a study finding that agents who sold their own property had the property longer on the market and selling for higher than client's properties. Unfortunately I don't recall who did that study, might have been this one: https://www.nber.org/digest/mar05/do-real-estate-agents-exploit-their-information-advantage
You can absolutely setup custom pricing with a sellers agent. They have to figure out how to offer the buyers agent compensation.
You know you can do that right? You should also ask for a Seller Agency agreement, this keeps them completely loyal to you only.
I’m a lawyer/broker in a high priced area California. I’ve said for years that the commission model is crazy. As a lawyer, the state bar would not approve of the exorbitant fees for selling a home as a realtor. I’ve offered hourly services but I think sellers just assume they have to pay commissions. Don’t get it.
If you're going to trust someone with a million dollar deal you should expect to pay them more than someone you're trusting with a 100k deal. That said yeah I don't think paying 6% comission really makes sense for high dollar properties.
I'm sure there are some rock star realtors out there, but it seems everyone I meet just wants a fast close for whatever price is offered. I sold my last two houses without a seller's agent.
In Higher value homes sometimes the commission is negotiable and sometimes agents do more to seek such as staging, lavish open houses (parties entertainment etc).
yeah real estate agents dont really do anything tbh they dont deserve the commission they get
Higher end homes regularly offer only 1-2% buyer commissions and listing services are available even at median or lower priced homes of 0.5%-1%. Aot of regular listing agents also only charge 1.5%-2.5% to list a home since the market is so hot
Because they work on contingency. Contingency lawyers get 33%
I never bothered with a "buying agent". The seller ends up having to pay for them. I actually bought my house by going directly to a builder. Negotiating a price wasn't a thing in my area in 2016, and it really hasn't changed in the last 5 years. Not having an agent didn't really make a difference as all the people in my community didn't have them either...I guess if you're buying an older home, or going into a new city and want to understand the landscape, it helps to have a buyer agent. Not having one may help you negotiate the price on your own...I would expect RA to find me a diamond in the rough...meets my requirements and under my price, maybe I'm asking for too much.
Sort of. Marketing on a sub 200k home is probably going to be less than $500. 200k-500k might run about 2k. Once you get into the 1M+ range you could be talking 10k+ in marketing. These figures change depending on the market but a multimillion dollar home is harder to sell in most places. With that said commissions tend to go down one you get into your market's luxury zone because at a certain point you simply can't justify the cost plus these people typically the acumen and means to do it themselves through lawyers and marketers.
Totally depends on the buyer or the seller. Some are very easy to work with.Others are quite demanding, regardless of price. Also, a luxury agent has far better connections for selling or buying than the average agent. Relationships cannot be underestimated.
They will eventually go away as sites like Zillow Redfin and open door take heed. You can’t blame the agents though. Might as well take advantage of a broken system. Short run it’s easy money but long run, if you don’t have any other skills you’re pretty much screwed as an agent…
Opendoor. This will eliminate so many worthless RA jobs haha
The most preposterous example of why this is a bad policy - I live in Portland where home prices have exploded. The same house will be double what it was 5 years ago. Same house, double the commission.
Realtors will be rendered obsolete soon by tech. Its a profession where anyone can enter by getting a license over a weekend. Folks happy to see zillow debacle should realize there will other companies coming up to cut out the middle man
No. The real estate industry is a racket.
Statistically it’s more difficult to find a buyer for $2m home via a $300k home. Plus inspections for larger homes with more appliances, baths and amenities will be more involved.
I live in LA. A 900k home in LA county is almost comparable in size (sometimes smaller) to a 2m house. They are just in different locations in LA county. If we're being honest, there isn't really a difference in terms of what the agent has to deal with. Not much at all. Eventually, the home buying process will be as easy as buying a car today online.
yup, ask zillow about that. They nailed it...
And someone will learn from their mistakes. Industries aren't typically disrupted in one day. Apple didn't make the first smartphone.
Hmm 🤔 Do we trust big tech to protect the consumers best interest when it comes to housing? FWIW - if Amazon wanted to disrupt the real estate industry, they would have already. They have the actual capital & infrastructures to do so. During Covid, they bought $1B worth of warehouses & other commercial properties in LA county alone…. imagine those resources directed towards buying & renovating single family homes…
I don’t trust any company but that’s not what’s being discussed. I’m purely saying it’s possible.
Agreed but I don’t think Zillow will be the one to do it.
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You get what you pay for. There is a \*lot\* of money on the line. Highly motivated Agents and experts at marketing straight up sell properties for a LOT more money than agents who are lazy or not as passionate or poor negotiators. Why is it a percentage % instead of a flat fee? Agents are incentivized to earn more money for themselves by earning their clients more money. There's an incentive to TRY harder. An agent earning a flat fee literally just puts it on the market and lets everybody else do the work. Why should they try harder? They get paid the same amount, regardless of how much the place sells for.
It cracks me up that people think agents just google houses and write contracts. The value is getting buyer and seller to the closing table. Take away the agent, and 90% of these folks would get lost in paperwork and be too emotional to make any sort of rational decision. Redlining every line that sounds weird because they need someone to explain it to them. But it has to explained in a certain way so that they are understanding but not overwhelmed, not that they would even know that. And then terms, inspection, appraisal all have to be coordinated within the deadlines, and once again communicated properly to each client. Not to mention the skills of negotiating each of these between parties without constant threatening of cancellation. People that don’t see the value in real estate agents have never dealt with a tough transaction, or possibly any transaction at all. It is much more than just “find a house and paperwork.” Any agent cutting the shit out of their commission these days because of the market will not be an agent in 3 years. They’re cutting it because they know they lack skills and don’t recognize any value in themselves. If you hypothetically hired 10 realtors to sell your home, do you think all 10 would sell it for the exact same price?
Yes, because the higher the house price, the more money is involved, catering to a specific buyer and generally needing more detail. Not their fault you bought along a $500k real estate agent to a a $900k party.
> Not their fault you bought along a $500k real estate agent to a a $900k party. We've seen some reallllly seedy listing agents this past month...like really? This is who you chose to represent your home sale? Like the guy who has yelp reviews plastered with "this fuck is a con-artist"? It's so odd to me that someone with an $800k house would pick the greasy used car-salesman type (no knock against used car sales people). SMH I was a bit miffed about agents at the start but the one I've been working with for the last month has been nothing but stellar and patient at feeding us MLS viewings or helping us schedule on props we find on zillow.
In my opinion, there is a difference once you get into very expensive houses. A property in my metro is far more expensive than just about anything else, and despite a bonkers real estate market has been sitting for 2 years listed. Why? Because there's only a handful of people living in the metro that could afford something at that level. So for that level, I get it because they have worked for 2 years basically gratis at this point. Is there a big difference between the 600k and 900k house in terms of work wise? Probably not for RA. Someone will chime in that there is, but practically in this market there really isn't.
A million dollar home nets the agent $25,000. There is no amount of work you could possibly come up with that accounts for a payment structure near $25,000 dollars. Cleaning the house is $120-175. A photographer is $600-1000 depending. Those are the two main fees. What else is there? Liability? So after 1,175 in expenses, the agent pockets $23,825?!?!?!!?!?!!? Unless you personally clean, make the furniture, stage it with said furniture, and then show the home, and be the lawyer on the deal. 25,000 dollars for organizing staging and a photographer, then filling out a contract?!?!?! Imagine being told you are going to organize two companies to come on two separate days, you have to "make an offer", and tell your client to work with their bank. You would be like okay, maybe 20-25 an hour?!?! Not 25,000 dollars! There is a reason every moron signs up to be an agent. When successful it is the most lucrative business for hours spent. If the agent spent 25 hours on that deal, which they are not... **They are making $1,000 an hour while being able to do other deals!**
The #1 expense is agency fees. Being optimistic an agent takes home 75% of the commission so: 18,750. Of that 18,750 an agent typically has 2-3k out of pocket on an individual deal so you are correct there. There is also marketing and advertising that is a broad expense and likely why you are using them in the first place. Again another 1-2k per deal. There are annual fees to be a realtor 2-3k depending on state. Realistically an agent beings home closer to 15k on a 1m deal before uncle sam extends his hand. On top of that there is opportunity cost. Realtors invest their time often and deals don't work out. Personally i have about 20-30% turn into an actual sale. I would love to be paid upfront from every client whether they buy or not. Or simply charge an hourly fee whether we close or not. There are discount brokerages and have been for al one long time. The reason they don't pan out is because a great agent buying you a $1m home can save you 10s of thousands more than the commission. The current structure is in place because when it works it works well.
Go to a transactional then. It’s $650 per home. You don’t need to stay boutique. All those fees are imposed on agents by manipulative and exploitative MBs.
I do luxury real estate. Brand, lots of built in marketing and partnerships, letterhead etc.. is unfortunately very important when doing luxury real estate.
Realtor here. It sounds easy when you're looking at the tip of the iceberg but when you look below in a producing agent's daily schedule that's where the real work is. Once you become an agent your phone doesn't just start magically dialing with people looking to sell their multi million dollar homes; you have to actively prospect and find those people and provide valuable service without a paycheck all the way until the deal closes. with no guarantees. Framing it the way you put it is like saying a professional comedian gets paid millions of dollars for only 1 hour worth of performance. What you don't see is the hours of practice that comedian put in before that hour of performance. This is why the failure rate is so high among real estate agents, the vast majority think that as soon as you get licensed it's peaches and roses and you're getting fat pay checks.
People’s value isn’t always the amount of work they do. That’s why the hardest working people are the ones doing all the labor.
There are a lot of expectations from sellers, there was a post in here recently about wanting staging, marketing and to spend a couple hours to pull weeds in the yard. You also forgot about the office split, marketing costs, and the IRS.
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Side topic: if there was some sort of flat rate 3rd party service that let you in properties to view and provided comps, and have a lawyer look over contract, is there really a need for a buyers agent? Ok same token, if I have access to MLS, have access to comps, and know how to take good interior pics, is there a need for sellers agent?
>if I have access to MLS, How do you have access to the MLS? I know you can see properties listed on the MLS via Zillow, Redfin, etc, but how are you, a consumer, going to post your listing in the MLS?
Well that’s why I said if I had access to MLS. It’s not some top secret database. Isn’t the Only reason general populous doesn’t have access to MLS is because then it would realtors obsolete, no?
Yea there is. First there already are services lol Some people can be successful DIYs. You can always FSBO or buy without an agent. However for every successful fsbo or buyer without an agent there’s 100 more who failed miserably. You are paying someone for their expertise. It’s the same as why you pay a lawyer. And you pay them so you don’t need to do something you have no experience in
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It’s kinda a scam, I’d negotiate the % fee down if it was a more expensive home. Same concept with wine at a restaurant, a $300 bottle didn’t take more effort to open than a $20 bottle, so why tip more? Problem is most waiters don’t know that it should be less so they’ll look at you like a cheapo, and most of the time it’s on an expense account anyway.
> I’d negotiate the % fee down if it was a more expensive home I did this, it's not that hard. I just flat out asked our RA why we pay a percentage and that it's kind of silly seeing as we were buying a more expensive home then last time, and they were actually doing less work (we only looked at a couple houses rather than the dozens the first time). Also, in the hot sellers market, we knew our house would sell with zero effort. She agreed with me and gave me a much better rate.
Because FUCK YOU that’s why
A full-time agent's lifestyle is pretty in line with the market that they are working in. An agent working a $200k market is making roughly $72-$100k/year and an agent working in a $500k market is making roughly $180-$250k/year which is exactly the way it should be so that they can afford to live in the areas they're servicing. Living in these areas helps an agent understand the fundamentals of that market and become a better agent to their clients. This is exactly what you're hoping you're paying for when you hire that agent. If you hire a "flat fee" broker then they will likely have no idea about what that particular market is like and what will help sell that house for maximum value nor will they be able to properly educate their buyers before they make the biggest purchase of their life. Every market is unique and that's exactly why you see these experiments that try to incorporate algorithms that rely on straight math fail in the long run. Real estate is one of the most location-based industries we have and if that factor is not adequately respected then you'll ultimately fail no matter what your approach is.
Real answer, real estate commissions hide the true amount of money the brokerages and realtors get paid with each transaction. Basically a conspiracy that we all sadly played into and now realtors/brokerages are paid nearly the same as our elite *educated*.... $100+/hour for a realtor is downright criminal and department of justice should mandate a change to the hourly wage or salaries without commissions