OT: Adios 6% Realtor Commission

[Called3rdstrikedawg]

I don't follow what you're saying. Can you explain that in more detail so I can understand your line of thinking?

Here's a hypothetical scenario: I hire a real estate agent to list my house for sale and agree to pay the agent 6%, of which 3% will go to the buyer's agent. My real estate agent does all the typical normal stuff that seller's agents do, and my house is listed. Continuing with my hypo, I have two offers within a 4 days. A few days later, I agree with one of the buyers on a final price of $1.4MM. 6% of $1.4MM is $84k.

Question: did the agents do $84k worth of work?

In your hypo, where do you live where you get 2 offers of nearly $1.4 million? Those price homes sit on the market in Mississippi sometimes for 6 months. Let's extrapolate your hypo on out.
First thing a good agent is going to do is use his own marketing funds to pay a photographer. Now in this home at over a million in Mississippi is going to be well over 4000 sf unless it is a recent build. Some photographers charge by the sf. Some have a flat rate. If you want video walk through and drone footage expect it to be around $250 on the low end. The agent is going to run Ads on Facebook and a Instagram. This price range has a very small demographic for multiple reasons. So the agent needs to reach a larger audience in hopes of getting the most eyeballs who might be in the market for a million plus priced home. So the agent runs weekly ads for about $35-$50 minimum for a few weeks again out of their marketing funds. Now the agent schedules a series of open houses for Saturday and Sunday for 3 to 5 weekends. Generally the agent is going to buy snacks and maybe soft drinks or water out if their marketing fund for each open house. The good agents are going to create colorful flyers and print however many they need to place on the doors of every neighbor within the subdivision. Thst is an expense to the agent. The agent is going to buy multiple for sale and open house signs( suggestion is at least 20 signs leading potential buyers to the neighborhood and into the street the home is on. Most agents are going to buy balloons, often the Mylar type which are not cheap for every major sign. Some agents buy banners or the wind flags which also aren't cheap because they are special made.
the agent pays twice a year to be able to list in the MLS, over $550 per year. The agent pays for E&O insurance. The agent pays an annual fee to be in the realtors association both nationally and state. The agent pays about $100 per month to their brokerage for various fees whether they sell a house or not. The agent is more often than not paying for a coach or a tech trainer in the brokerage. The agent pays for an office space or cubicle if they want the fee benefit of access to office space. The agent pays for the use of their personal vehicle to travel back and forth. Some agents hire a virtual assistant or pay a lead generation company. Now in you hypo, say the listing agent is also going to pay out a share of the commission to the buyers brokerage who then gives the buyers agent their split and the sellers agent's commission goes to their broker who then pays the agent their cut. Now how else does the sellers agent try to promote and market this $1.4 million home? Networking through their fellow agents in their brokers, hosting Realtor open houses, often getting sponsors but sometimes paying for gift cards for door prizes to get agents to come tour the home. And yes, some agents negotiate a 6% commission, but on a hit priced home a lot of agents will agree to a 5% commission and an even spilt as it has been until this law suit. So we will take your example and break it out. 5% of $1.4 mil is $70k. $35 k to the sellers brokerage and $35k to the buyers brokerage. Each brokerage takes their %, usually 30%, then takes admin fees, transaction Coach fees depending on the brokerage(usually 2% of the total commission ). So an agent is probably going to clear $23,000+ individually, which is nice. But I can assure you most good agents are going to spend more time promoting and marketing and pushing to get that home sold then they will on their $125k listing going at the same time. Human nature. In Mississippi the average Real Estate earnings is less then $75,000 annually before expenses and taxes. It amazes me sometimes when people begrudge a 1099 sales person making all they can negotiate, while having so much equity in their homes that might clear more on the sale than that Agent they resent might earn in whole year.
By the way the average sale price of a home in Mississippi is around $260k and that is up 15% from 12 months ago. There are agent selling 25 homes a year in central Mississippi and only making $60,000 gross because of the price of homes in Jackson where most of the homes are for sale. A buyers agent, the one that is getting sort of screwed on this lawsuit, may show clients 35 to 40 homes before they find the right one. At $3 a gallon, and the amount of miles put in a vehicle, making under $60k could definitely send them back to an 8-5 job.

 

[PooPopsBaldHead]

In your hypo, where do you live where you get 2 offers of nearly $1.4 million? Those price homes sit on the market in Mississippi sometimes for 6 months. Let's extrapolate your hypo on out.
First thing a good agent is going to do is use his own marketing funds to pay a photographer. Now in this home at over a million in Mississippi is going to be well over 4000 sf unless it is a recent build. Some photographers charge by the sf. Some have a flat rate. If you want video walk through and drone footage expect it to be around $250 on the low end. The agent is going to run Ads on Facebook and a Instagram. This price range has a very small demographic for multiple reasons. So the agent needs to reach a larger audience in hopes of getting the most eyeballs who might be in the market for a million plus priced home. So the agent runs weekly ads for about $35-$50 minimum for a few weeks again out of their marketing funds. Now the agent schedules a series of open houses for Saturday and Sunday for 3 to 5 weekends. Generally the agent is going to buy snacks and maybe soft drinks or water out if their marketing fund for each open house. The good agents are going to create colorful flyers and print however many they need to place on the doors of every neighbor within the subdivision. Thst is an expense to the agent. The agent is going to buy multiple for sale and open house signs( suggestion is at least 20 signs leading potential buyers to the neighborhood and into the street the home is on. Most agents are going to buy balloons, often the Mylar type which are not cheap for every major sign. Some agents buy banners or the wind flags which also aren't cheap because they are special made.
the agent pays twice a year to be able to list in the MLS, over $550 per year. The agent pays for E&O insurance. The agent pays an annual fee to be in the realtors association both nationally and state. The agent pays about $100 per month to their brokerage for various fees whether they sell a house or not. The agent is more often than not paying for a coach or a tech trainer in the brokerage. The agent pays for an office space or cubicle if they want the fee benefit of access to office space. The agent pays for the use of their personal vehicle to travel back and forth. Some agents hire a virtual assistant or pay a lead generation company. Now in you hypo, say the listing agent is also going to pay out a share of the commission to the buyers brokerage who then gives the buyers agent their split and the sellers agent's commission goes to their broker who then pays the agent their cut. Now how else does the sellers agent try to promote and market this $1.4 million home? Networking through their fellow agents in their brokers, hosting Realtor open houses, often getting sponsors but sometimes paying for gift cards for door prizes to get agents to come tour the home. And yes, some agents negotiate a 6% commission, but on a hit priced home a lot of agents will agree to a 5% commission and an even spilt as it has been until this law suit. So we will take your example and break it out. 5% of $1.4 mil is $70k. $35 k to the sellers brokerage and $35k to the buyers brokerage. Each brokerage takes their %, usually 30%, then takes admin fees, transaction Coach fees depending on the brokerage(usually 2% of the total commission ). So an agent is probably going to clear $23,000+ individually, which is nice. But I can assure you most good agents are going to spend more time promoting and marketing and pushing to get that home sold then they will on their $125k listing going at the same time. Human nature. In Mississippi the average Real Estate earnings is less then $75,000 annually before expenses and taxes. It amazes me sometimes when people begrudge a 1099 sales person making all they can negotiate, while having so much equity in their homes that might clear more on the sale than that Agent they resent might earn in whole year.
By the way the average sale price of a home in Mississippi is around $260k and that is up 15% from 12 months ago. There are agent selling 25 homes a year in central Mississippi and only making $60,000 gross because of the price of homes in Jackson where most of the homes are for sale. A buyers agent, the one that is getting sort of screwed on this lawsuit, may show clients 35 to 40 homes before they find the right one. At $3 a gallon, and the amount of miles put in a vehicle, making under $60k could definitely send them back to an 8-5 job.

I want ^^^this guy to write my eulogy and for the rest of you 17ers to get spanked in the àss by a hot 27 year old chick while funneling 130 proof 11 year old low rye bourbon the entire time he speaks as we simultaneously win an SEC title in football and all spend eternity in Valhalla together.

My man knocks out 700 words per paragraph, so you're all coming with me...

Let it be so.

 

[Perd Hapley]

In your hypo, where do you live where you get 2 offers of nearly $1.4 million? Those price homes sit on the market in Mississippi sometimes for 6 months. Let's extrapolate your hypo on out.
First thing a good agent is going to do is use his own marketing funds to pay a photographer. Now in this home at over a million in Mississippi is going to be well over 4000 sf unless it is a recent build. Some photographers charge by the sf. Some have a flat rate. If you want video walk through and drone footage expect it to be around $250 on the low end. The agent is going to run Ads on Facebook and a Instagram. This price range has a very small demographic for multiple reasons. So the agent needs to reach a larger audience in hopes of getting the most eyeballs who might be in the market for a million plus priced home. So the agent runs weekly ads for about $35-$50 minimum for a few weeks again out of their marketing funds. Now the agent schedules a series of open houses for Saturday and Sunday for 3 to 5 weekends. Generally the agent is going to buy snacks and maybe soft drinks or water out if their marketing fund for each open house. The good agents are going to create colorful flyers and print however many they need to place on the doors of every neighbor within the subdivision. Thst is an expense to the agent. The agent is going to buy multiple for sale and open house signs( suggestion is at least 20 signs leading potential buyers to the neighborhood and into the street the home is on. Most agents are going to buy balloons, often the Mylar type which are not cheap for every major sign. Some agents buy banners or the wind flags which also aren't cheap because they are special made.
the agent pays twice a year to be able to list in the MLS, over $550 per year. The agent pays for E&O insurance. The agent pays an annual fee to be in the realtors association both nationally and state. The agent pays about $100 per month to their brokerage for various fees whether they sell a house or not. The agent is more often than not paying for a coach or a tech trainer in the brokerage. The agent pays for an office space or cubicle if they want the fee benefit of access to office space. The agent pays for the use of their personal vehicle to travel back and forth. Some agents hire a virtual assistant or pay a lead generation company. Now in you hypo, say the listing agent is also going to pay out a share of the commission to the buyers brokerage who then gives the buyers agent their split and the sellers agent's commission goes to their broker who then pays the agent their cut. Now how else does the sellers agent try to promote and market this $1.4 million home? Networking through their fellow agents in their brokers, hosting Realtor open houses, often getting sponsors but sometimes paying for gift cards for door prizes to get agents to come tour the home. And yes, some agents negotiate a 6% commission, but on a hit priced home a lot of agents will agree to a 5% commission and an even spilt as it has been until this law suit. So we will take your example and break it out. 5% of $1.4 mil is $70k. $35 k to the sellers brokerage and $35k to the buyers brokerage. Each brokerage takes their %, usually 30%, then takes admin fees, transaction Coach fees depending on the brokerage(usually 2% of the total commission ). So an agent is probably going to clear $23,000+ individually, which is nice. But I can assure you most good agents are going to spend more time promoting and marketing and pushing to get that home sold then they will on their $125k listing going at the same time. Human nature. In Mississippi the average Real Estate earnings is less then $75,000 annually before expenses and taxes. It amazes me sometimes when people begrudge a 1099 sales person making all they can negotiate, while having so much equity in their homes that might clear more on the sale than that Agent they resent might earn in whole year.
By the way the average sale price of a home in Mississippi is around $260k and that is up 15% from 12 months ago. There are agent selling 25 homes a year in central Mississippi and only making $60,000 gross because of the price of homes in Jackson where most of the homes are for sale. A buyers agent, the one that is getting sort of screwed on this lawsuit, may show clients 35 to 40 homes before they find the right one. At $3 a gallon, and the amount of miles put in a vehicle, making under $60k could definitely send them back to an 8-5 job.

That’s a lot of words, but to go back to what @patdog said earlier, what is the value being provided?

Balloons, signs, flyers. Ok. Is this 1997? I know all that stuff is industry standard….and its hard work to buy the materials, set everything up, and so forth. But let’s get real, we all have a device in our pocket / purse daily….with an app called Zillow that does a million times the marketing work of any of those forms of traditional marketing communication. How many times has literally anyone in the past 20 years bought a home that they only found out was for sale when on the way to the grocery store, they suddenly started following some Hansel and Gretel balloon trail for 2 miles? What’s the RoR there?

Social media ads? OK, getting warmer. But I’m still going to Zillow or directly to my local MLS site if I’m a serious buyer. The format is so much easier to see everything that’s out there. Chances are that the ad is going to take me directly there or to a similar site, anyway.

Traveling with buyers to multiple properties, at all hours of all days, mostly on weekends, etc. I certainly appreciate the time and effort being put in here. But really, for what? To open the lockbox? Sometimes this can even be a hinderance in regards to schedule alignment, because try as they might, realtors can’t accommodate every buyer request to see a home. They have other business and personal items to attend to. We’ve seen a few house solo before where we’ve facetimed with our agent during the showing. It went fine.

The best realtor I’ve ever had by far was my first one. She was able to show me 2-3 homes that weren’t even on the market. She was also valuable at the negotiating table with seller’s agent, and knew exactly how to cut through the BS from their end. She made sure I was thinking about all sorts of things I wouldn’t normally consider, made sure I didn’t take the process too seriously, and so forth. That’s the real value of a very good realtor. Networking / access, very technically knowledgable, and sometimes good at being your therapist when you need it. But they don’t grow on trees. These days, its really difficult to find a realtor that can do all of the above. Its a very over-saturated field, from my personal experience. I think just about all of them are either worth way more than the 3% they get from the sale, or worth almost nothing. There aren’t many that are in between.

 

[dog12]

In your hypo, where do you live where you get 2 offers of nearly $1.4 million? Those price homes sit on the market in Mississippi sometimes for 6 months. Let's extrapolate your hypo on out.
First thing a good agent is going to do is use his own marketing funds to pay a photographer. Now in this home at over a million in Mississippi is going to be well over 4000 sf unless it is a recent build. Some photographers charge by the sf. Some have a flat rate. If you want video walk through and drone footage expect it to be around $250 on the low end. The agent is going to run Ads on Facebook and a Instagram. This price range has a very small demographic for multiple reasons. So the agent needs to reach a larger audience in hopes of getting the most eyeballs who might be in the market for a million plus priced home. So the agent runs weekly ads for about $35-$50 minimum for a few weeks again out of their marketing funds. Now the agent schedules a series of open houses for Saturday and Sunday for 3 to 5 weekends. Generally the agent is going to buy snacks and maybe soft drinks or water out if their marketing fund for each open house. The good agents are going to create colorful flyers and print however many they need to place on the doors of every neighbor within the subdivision. Thst is an expense to the agent. The agent is going to buy multiple for sale and open house signs( suggestion is at least 20 signs leading potential buyers to the neighborhood and into the street the home is on. Most agents are going to buy balloons, often the Mylar type which are not cheap for every major sign. Some agents buy banners or the wind flags which also aren't cheap because they are special made.
the agent pays twice a year to be able to list in the MLS, over $550 per year. The agent pays for E&O insurance. The agent pays an annual fee to be in the realtors association both nationally and state. The agent pays about $100 per month to their brokerage for various fees whether they sell a house or not. The agent is more often than not paying for a coach or a tech trainer in the brokerage. The agent pays for an office space or cubicle if they want the fee benefit of access to office space. The agent pays for the use of their personal vehicle to travel back and forth. Some agents hire a virtual assistant or pay a lead generation company. Now in you hypo, say the listing agent is also going to pay out a share of the commission to the buyers brokerage who then gives the buyers agent their split and the sellers agent's commission goes to their broker who then pays the agent their cut. Now how else does the sellers agent try to promote and market this $1.4 million home? Networking through their fellow agents in their brokers, hosting Realtor open houses, often getting sponsors but sometimes paying for gift cards for door prizes to get agents to come tour the home. And yes, some agents negotiate a 6% commission, but on a hit priced home a lot of agents will agree to a 5% commission and an even spilt as it has been until this law suit. So we will take your example and break it out. 5% of $1.4 mil is $70k. $35 k to the sellers brokerage and $35k to the buyers brokerage. Each brokerage takes their %, usually 30%, then takes admin fees, transaction Coach fees depending on the brokerage(usually 2% of the total commission ). So an agent is probably going to clear $23,000+ individually, which is nice. But I can assure you most good agents are going to spend more time promoting and marketing and pushing to get that home sold then they will on their $125k listing going at the same time. Human nature. In Mississippi the average Real Estate earnings is less then $75,000 annually before expenses and taxes. It amazes me sometimes when people begrudge a 1099 sales person making all they can negotiate, while having so much equity in their homes that might clear more on the sale than that Agent they resent might earn in whole year.
By the way the average sale price of a home in Mississippi is around $260k and that is up 15% from 12 months ago. There are agent selling 25 homes a year in central Mississippi and only making $60,000 gross because of the price of homes in Jackson where most of the homes are for sale. A buyers agent, the one that is getting sort of screwed on this lawsuit, may show clients 35 to 40 homes before they find the right one. At $3 a gallon, and the amount of miles put in a vehicle, making under $60k could definitely send them back to an 8-5 job.

I live in Northern Virginia (Loudoun County), about 30 miles from DC.

I was born and raised in MS and moved to this area in 1998. When I moved here, I couldn't believe the cost of real estate . . . and it has risen somewhat significantly in the years since.

 

[ETK99]

Saw a stat yesterday that said there are approx 350K mortgage loan reps in the country. In January, 70% of them didn't close a loan. It's a bloated industry but that's a crazy number.

 

[aTotal360]

Hate to tell you, but all this is going to do is condense the market and give more of a monopoly to mega agents and mega teams. The smaller agents that are only doing 6-8 deals a year will go away. Lastly, all the problems this is going to cause will also make more money for attorneys. None of this will make fees disappear. Matter of fact, it's likely going to make them increase for buyers because of Fannie and Freddie regs.

Lastly, all the Grant Cardones on the board can still be Grant Cardones. No one has ever made you use an agent. No one has ever made you agree on a commission. Buyers and Sellers both mutually agreed to all of it.

 

[GloryDawg]

In your hypo, where do you live where you get 2 offers of nearly $1.4 million? Those price homes sit on the market in Mississippi sometimes for 6 months. Let's extrapolate your hypo on out.
First thing a good agent is going to do is use his own marketing funds to pay a photographer. Now in this home at over a million in Mississippi is going to be well over 4000 sf unless it is a recent build. Some photographers charge by the sf. Some have a flat rate. If you want video walk through and drone footage expect it to be around $250 on the low end. The agent is going to run Ads on Facebook and a Instagram. This price range has a very small demographic for multiple reasons. So the agent needs to reach a larger audience in hopes of getting the most eyeballs who might be in the market for a million plus priced home. So the agent runs weekly ads for about $35-$50 minimum for a few weeks again out of their marketing funds. Now the agent schedules a series of open houses for Saturday and Sunday for 3 to 5 weekends. Generally the agent is going to buy snacks and maybe soft drinks or water out if their marketing fund for each open house. The good agents are going to create colorful flyers and print however many they need to place on the doors of every neighbor within the subdivision. Thst is an expense to the agent. The agent is going to buy multiple for sale and open house signs( suggestion is at least 20 signs leading potential buyers to the neighborhood and into the street the home is on. Most agents are going to buy balloons, often the Mylar type which are not cheap for every major sign. Some agents buy banners or the wind flags which also aren't cheap because they are special made.
the agent pays twice a year to be able to list in the MLS, over $550 per year. The agent pays for E&O insurance. The agent pays an annual fee to be in the realtors association both nationally and state. The agent pays about $100 per month to their brokerage for various fees whether they sell a house or not. The agent is more often than not paying for a coach or a tech trainer in the brokerage. The agent pays for an office space or cubicle if they want the fee benefit of access to office space. The agent pays for the use of their personal vehicle to travel back and forth. Some agents hire a virtual assistant or pay a lead generation company. Now in you hypo, say the listing agent is also going to pay out a share of the commission to the buyers brokerage who then gives the buyers agent their split and the sellers agent's commission goes to their broker who then pays the agent their cut. Now how else does the sellers agent try to promote and market this $1.4 million home? Networking through their fellow agents in their brokers, hosting Realtor open houses, often getting sponsors but sometimes paying for gift cards for door prizes to get agents to come tour the home. And yes, some agents negotiate a 6% commission, but on a hit priced home a lot of agents will agree to a 5% commission and an even spilt as it has been until this law suit. So we will take your example and break it out. 5% of $1.4 mil is $70k. $35 k to the sellers brokerage and $35k to the buyers brokerage. Each brokerage takes their %, usually 30%, then takes admin fees, transaction Coach fees depending on the brokerage(usually 2% of the total commission ). So an agent is probably going to clear $23,000+ individually, which is nice. But I can assure you most good agents are going to spend more time promoting and marketing and pushing to get that home sold then they will on their $125k listing going at the same time. Human nature. In Mississippi the average Real Estate earnings is less then $75,000 annually before expenses and taxes. It amazes me sometimes when people begrudge a 1099 sales person making all they can negotiate, while having so much equity in their homes that might clear more on the sale than that Agent they resent might earn in whole year.
By the way the average sale price of a home in Mississippi is around $260k and that is up 15% from 12 months ago. There are agent selling 25 homes a year in central Mississippi and only making $60,000 gross because of the price of homes in Jackson where most of the homes are for sale. A buyers agent, the one that is getting sort of screwed on this lawsuit, may show clients 35 to 40 homes before they find the right one. At $3 a gallon, and the amount of miles put in a vehicle, making under $60k could definitely send them back to an 8-5 job.

 

[LordMcBuckethead]

I've never taken photos myself. I pay a professional to do it. Most people think agents are the scallywags of this industry. I firmly believe it's the lenders. So few of them will tell a buyer "no" or "that's not a good idea". They will drag someone along to the 11th hour and put a buyer's earnest money in jeopardy. I hate that.

Being an agent isn't some sort of get-rich-quick scam. 90% of them cannot do the job longer than 24 months because they suck and begin to starve. You pay 2-3% per side, then take out brokerage fees, MLS fees, association fees, transaction coordinator cost, photographer cost, team split, and finally Uncle Sam...the agent isn't nearly making the money you think. Most people judge the industry on the extreme examples. The bad ones and the gaudy ones. There are tons of great agents in the middle making an honest living.

And the work is actually less work on the bigger better houses in better neighborhoods.
But in reality, all can be done easily today without a Realtor. Zillow, and place a 1.5% commission on the site for anyone that brings a buyer to the table at or above asking price.
Hire a lawyer to handle all the legal stuff for closing. Mortgage loan officer does the rest of the work.
Done and done.

 

[LordMcBuckethead]

I agree. Message Board Real Estate Gurus are making a big deal out of historically average interests. The problem isn't the current rates. The real problem was having rates in the 2-3% range for several years. Now all the wannabe investors want to sound smart by complaining about the rates in the 6-7% range. That's actually normal.

The 7% rate is absolutely average or maybe even below average for the past 100 years.
Just when you look at 2.25% I got, that 7% will kick your ***.

 

[LordMcBuckethead]

The real question is, did the agent provide $84,000 worth of value. It depends. But if the best you could have done on your own was $1.3MM, the agent made you $16,000 plus did a lot of the work you would have had to do.

No they did not do 84k worth of work.

 

[johnson86-1]

Hate to tell you, but all this is going to do is condense the market and give more of a monopoly to mega agents and mega teams.

Without the threat that people won't look at your house if you don't offer them 3%, I don't think there's any way they're going to maintain the power to keep fees near 5 or 6%. They certainly might. If there end up being 3 or 4 mega brokerages, they might just not compete on price the same way say some gas stations don't compete on price in small towns. The challenge is that for places like gas stations, the pricing is open for everybody to see. For brokers, they won't really know if they are losing out on clients because of pricing so it's going to be hard to avoid competing without some collusion. Now it doesn't take much discussion to collude, but with lots of individual transactions, it will be really tempting for brokers/agents to at least offer to cut fees for houses that are high priced that they know will move relatively quickly.

The smaller agents that are only doing 6-8 deals a year will go away.

I mean, they probably should go away? The only way you can justify the fees is claiming they are offering some sort of expertise. I'm sure some of those agents are actually knowledgeable and good and just are bad salesmen and bad at procuring clients, not bad agents. But mostly I would guess these are essentially part time realtors proving that a lot of realtors aren't providing that much expertise.

Lastly, all the problems this is going to cause will also make more money for attorneys. None of this will make fees disappear. Matter of fact, it's likely going to make them increase for buyers because of Fannie and Freddie regs.

Lastly, all the Grant Cardones on the board can still be Grant Cardones. No one has ever made you use an agent. No one has ever made you agree on a commission. Buyers and Sellers both mutually agreed to all of it.

What is this relevant to? They didn't settle because of allegations that their fees are too high. They settled because they thought they were going to lose a law suit based on antitrust. Nobody is saying realtors can't charge 6% or even 10% commissions. They are just saying the NAR and mls can't be used to facilitate anticompetitive practices.

 

[aTotal360]

What is this relevant to? They didn't settle because of allegations that their fees are too high. They settled because they thought they were going to lose a law suit based on antitrust. Nobody is saying realtors can't charge 6% or even 10% commissions. They are just saying the NAR and mls can't be used to facilitate anticompetitive practices.

NAR accepted the terms because it's not really changing a damn thing. Moving forward compensations will no longer be shown on the MLS, so now you just have to text the agent. That's all that happened, but somehow people have interpreted this as some sweeping decision that will rock the industry.

 

[PooPopsBaldHead]

NAR accepted the terms because it's not really changing a damn thing. Moving forward compensations will no longer be shown on the MLS, so now you just have to text the agent. That's all that happened, but somehow people have interpreted this as some sweeping decision that will rock the industry.

View attachment 544667

I would think it will go back onto the buyer in a way...

Maybe something like this?

Agent has buyer sign contract to represent them for 2% of purchase price.

Buyer falls in love with house listed for $500k.

Buyer rep texts seller rep... "You offering a buyer agent percentage?"

Seller rep... "Nope, just include your fee in your offer."

Offer... $500k, seller pays all closing and 2% buyers agent fee.

Counter offer... $505k and seller pays closing and 2% buyer fee.

Deal.

It's a different way to skin the same cat, but it will probably create more agent fee negotiations than currently exist. The only crappy scenario I see for good agents is in the beginning, the shìtty agents that will eventually go away could whòre up the market before they leave by doing everything for rock bottom percentages or flat flees...

IE the soccer mom with a 30A sticker on the new Telluride puts an Instagram out that she will rep any buyer for $1500 flat fee. Then after showing 8 houses to a buyer that decides to sit tight, she eventually goes back to work at the hair salon.

 

[aTotal360]

I would think it will go back onto the buyer in a way...

Maybe something like this?

Agent has buyer sign contract to represent them for 2% of purchase price.

Buyer falls in love with house listed for $500k.

Buyer rep texts seller rep... "You offering a buyer agent percentage?"

Seller rep... "Nope, just include your fee in your offer."

Offer... $500k, seller pays all closing and 2% buyers agent fee.

Counter offer... $505k and seller pays closing and 2% buyer fee.

Deal.

It's a different way to skin the same cat, but it will probably create more agent fee negotiations than currently exist. The only crappy scenario I see for good agents is in the beginning, the shìtty agents that will eventually go away could whòre up the market before they leave by doing everything for rock bottom percentages or flat flees...

IE the soccer mom with a 30A sticker on the new Telluride puts an Instagram out that she will rep any buyer for $1500 flat fee. Then after showing 8 houses to a buyer that decides to sit tight, she eventually goes back to work at the hair salon.

You hit the nail on the head. That's exactly how I expect it to work.

The problem is, as of today, Fannie and Freddie doesn't allow you to add that as a line item to the purchase. So next year a buyer must come out of pocket to pay the agent. The buyer gets to finance it in the current way we do it.

And now think of first-time buyers that are scraping together 3-5% for a downpayment. They may only have access to houses whose sellers are covering some sort of commission. They don't have the money in hand to cover all the expenses involved.

The lending aspect of all of this is the elephant in the room. It's even a bigger deal for FHA and VA buyers where the seller HAS to pay it. That is per federal guidelines. So next year, if a seller is not offering to pay buyers commissions, they just eliminated a segment of their buyer base. I'm going to assume the Fed will tweak these guidelines, but who knows...

Commissions aren't going away. Only the flow of money will change (and the semantics). The people clamoring for an attorney to do it will soon see attorneys charging $10k to facilitate a transaction.

Again, NAR accepted the new terms for a reason.

 

[johnson86-1]

NAR accepted the terms because it's not really changing a damn thing. Moving forward compensations will no longer be shown on the MLS, so now you just have to text the agent. That's all that happened, but somehow people have interpreted this as some sweeping decision that will rock the industry.

View attachment 544667

Smart unethical agents aren't going to ask by text. They aren't going to want to leave a trail of evidence that they steer clients away from houses not offering a certain percentage.

But I think the requirement that buyer's agents enter into a written agreement and the publicity of this case is going to move the needle more than you think. Going to be hard for buyer's agents to tell their clients "we don't cost you anything" and have clients believe them. The short term interest of the seller's agent is to just put in a 3% fee and tell the client the buyer's agent is probably going to want something, and at that point it's 100% going to fall on the buyer in the form of an increased price. To avoid that, you are going to be counting on seller's agents working against their client's interests out of concerns about when they are on the buyers side. I'm not sure how well that will hold up in most markets. I think agents can do that for some of the nicest neighborhoods where I live because those neighborhoods are dominated by a 3 or 4 agents and 2 of them are going to be in on just about every sale that has two agents. But once you get to the more interchangeable neighborhoods, I just don't see their being enough trust and enough people acting as repeat players with each other for that to last.

 

[aTotal360]

Going to be hard for buyer's agents to tell their clients "we don't cost you anything" and have clients believe them.

You do realize buyers are the ones paying agents, right? I tell all my clients that.

 

[johnson86-1]

You hit the nail on the head. That's exactly how I expect it to work.

The problem is, as of today, Fannie and Freddie doesn't allow you to add that as a line item to the purchase. So next year a buyer must come out of pocket to pay the agent. The buyer gets to finance it in the current way we do it.

And now think of first-time buyers that are scraping together 3-5% for a downpayment. They may only have access to houses whose sellers are covering some sort of commission. They don't have the money in hand to cover all the expenses involved.

The lending aspect of all of this is the elephant in the room. It's even a bigger deal for FHA and VA buyers where the seller HAS to pay it. That is per federal guidelines. So next year, if a seller is not offering to pay buyers commissions, they just eliminated a segment of their buyer base. I'm going to assume the Fed will tweak these guidelines, but who knows...

Commissions aren't going away. Only the flow of money will change (and the semantics). The people clamoring for an attorney to do it will soon see attorneys charging $10k to facilitate a transaction.

Again, NAR accepted the new terms for a reason.

How would that not be a big win for most sellers and buyers? Even if that is completely separate from attorneys fees and the cost of title insurance, that'd be a huge win for most buyers and sellers. I've sold one house with neither side represented and it didn't cost anywhere near $10k though (excluding the title insurance). Think the fees we wouldn't have paid anyway were probably less than $1k, granted he didn't have to do contract negotiations and review.

 

[johnson86-1]

You do realize buyers are the ones paying agents, right? I tell all my clients that.

And virtually every buyer's agent I've ever heard make a pitch says it doesn't cost the buyers anything. Obviously both aren't true and who actually bears the burden depends on the market and even the particular house/neighborhood since outside of truly cookie cutter neighborhoods and condos, the supply isn't really interchangeable and you don't have just one elasticity of demand or supply. So you are almost certainly being misleading when you tell sellers that the buyers are the ones paying.

 

[aTotal360]

How would that now be a big win for most sellers and buyers? Even if that is completely separate from attorneys fees and the cost of title insurance, that'd be a huge win for most buyers and sellers. I've sold one house with neither side represented and it didn't cost anywhere near $10k though (excluding the title insurance). Think the fees we wouldn't have paid anyway were probably less than $1k, granted he didn't have to do contract negotiations and review.

This whole scramble drill isn't designed to be a "big win" for anyone. It's just rearranging the cart and moving some liability around.

The good news is you can keep doing real estate as you have been. No one is stopping you and no one has ever tried.

Most people who get huffy puffy about this aren't arguing the process. They simply don't see the value in the agents they have used. I can totally respect that position. I got into real estate because an agent I used screwed me over. I hated it so badly that I decided to leave my marketing job and become a realtor to try to fix the problem.

 

[aTotal360]

And virtually every buyer's agent I've ever heard make a pitch says it doesn't cost the buyers anything. Obviously both aren't true and who actually bears the burden depends on the market and even the particular house/neighborhood since outside of truly cookie cutter neighborhoods and condos, the supply isn't really interchangeable and you don't have just one elasticity of demand or supply. So you are almost certainly being misleading when you tell sellers that the buyers are the ones paying.

I tell my buyer clients the reality is they pay commissions but for some odd reason, the commissions you pay is dictated by the seller (listing agreement). I never understood it either. Seems illogical to me.

 

[johnson86-1]

This whole scramble drill isn't designed to be a "big win" for anyone. It's just rearranging the cart and moving some liability around.

I was just pointing out that $10k would be a big win as far as costs born by most buyers and sellers.

The good news is you can keep doing real estate as you have been. No one is stopping you and no one has ever tried.

Most people who get huffy puffy about this aren't arguing the process. They simply don't see the value in the agents they have used. I can totally respect that position. I got into real estate because an agent I used screwed me over. I hated it so badly that I decided to leave my marketing job and become a realtor to try to fix the problem.

They are complaining that the process allows prices to be kept artificially high. Trade associations are widely recognized as hotbeds for potential anticompetitive practices. And I'm not aware of any trade association that facilitates coordination on pricing the way NAR does. Be interested to see how brokers of boats operate. I'm assuming their world is small enough they can establish customary splits without relying on centralized coordination, but maybe not. Other trade associations do pricing, cost, salary surveys and those can certainly be used to put upward pressure on pricing and decrease competition, but it's still nothing like the NAR using MLS to standardized a percentage pricing.

ETA: I should say that I think this becoming less and less relevant at this point as I don't think NAR is going to maintain the market power to make it difficult on people wanting something other than the traditional arrangement. Probably 15 years ago there was a discount brokerage that opened up where I lived and other realtors basically drove them out of business. All the other agents were basically offended that they would offer something other than the 6%, 3/3 split model. Enough buyer's agents just wouldn't show their houses that it made it untenable, and other realtor's openly bashed them and basically advertised that they wouldn't deal with them. I was surprised that they would basically advertise that they either have no ethical obligations to their clients or that they were willing to breach their ethical obligations to the extent they had them.

I don't think realtors would bat an eye now. I've sold 2 houses on zillow since and only advertised that buyers agents are welcome and had no shortage of realtors willing to bring their clients by. It was established that I was offering 3% pretty quickly, but the second one was in a hot market and desirable area and I think I could have gone to 2.5% and maybe even 2% and still have plenty of takers. Maybe when it becomes a buyers market again that will give realtors some more juice but I don't think we're far off from finding out what the market price is for real estate agents.

 

[HRMSU]

The real question is, did the agent provide $84,000 worth of value. It depends. But if the best you could have done on your own was $1.3MM, the agent made you $16,000 plus did a lot of the work you would have had to do.

Value is the proper lens to view all financial transactions. I don't give a rip how much or how long someone works for me as long as they create value and the value they create is > the cost I pay.

 

[Perd Hapley]

NAR accepted the terms because it's not really changing a damn thing. Moving forward compensations will no longer be shown on the MLS, so now you just have to text the agent. That's all that happened, but somehow people have interpreted this as some sweeping decision that will rock the industry.

View attachment 544667

They agreed to pay nearly half a billion dollars for something that doesn’t really change anything? That seems unlikely.

Whether or not a change actually happens, I think they feared a far worse outcome if they are paying out that much to make this go away. Hard to say that it being “not a big change” is the only reason.

 

[johnson86-1]

They agreed to pay nearly half a billion dollars for something that doesn’t really change anything? That seems unlikely.

Whether or not a change actually happens, I think they feared a far worse outcome if they are paying out that much to make this go away. Hard to say that it being “not a big change” is the only reason.

They paid a decent amount of money in exchange for protecting a huge number of their members from greater liability for past anticompetitive practices. Realtors in local markets can still coordinate to keep pricing high and try to do it in more or less the same way they're doing now, but there is much less risk of class action liability if there are a bunch of individual realtors in individual markets coordinating pricing in informal ways than there is if they have a centralized software that coordinates it in more or less the same way in every market they're active.

 

[Podgy]

Here's what's now gonna happen: Smart, educated, energetic people are going to figure out how to adjust and arrange economic outcomes that benefit them. That's a big part of how our system operates.

 

[HWY51dog]

The feds are now going after Title Insurance. Trying to say that’s not needed and it will save people money. That would be a huge mistake.

Regardless of what you think about Realtors, (85% failure rate in the first 5 years) homeownership is under attack and will be less affordable for your kids and grandkids because the real issues are not being addressed.

 

[PooPopsBaldHead]

Regardless of what you think about Realtors, (85% failure rate in the first 5 years) homeownership is under attack and will be less affordable for your kids and grandkids because the real issues are not being addressed.

What are the real issues in your opinion? What market are you in?

 

[Boom Boom]

The feds are now going after Title Insurance. Trying to say that’s not needed and it will save people money. That would be a huge mistake.

It does seem pretty useless. I'm buying something from someone, paying two agents a large fee, paying a lawyer to close the deal, and I have to pay insurance that covers me if all of those missed that the seller can't actually sell the property?

Regardless of what you think about Realtors, (85% failure rate in the first 5 years) homeownership is under attack and will be less affordable for your kids and grandkids because the real issues are not being addressed.

Wut?

 

[Podgy]

Home ownership rates are about what they were at the peak of the Trump admin and they're higher than they were in 1990. They aren't as high as in 2004 when Bush had all sorts of handouts and lending rules allowed just about anyone to get a mortgage. A massive financial crisis followed. Owning a home is really a challenge in progressive cities because of NIMBY, progressives don't like adding to housing stock. They make up for that by putting BLM signs in their yards.

 

[dog12]

Value is the proper lens to view all financial transactions. I don't give a rip how much or how long someone works for me as long as they create value and the value they create is > the cost I pay.

The feds are now going after Title Insurance. Trying to say that’s not needed and it will save people money. That would be a huge mistake.

Regardless of what you think about Realtors, (85% failure rate in the first 5 years) homeownership is under attack and will be less affordable for your kids and grandkids because the real issues are not being addressed.

We closed on our current primary home in 2013. The seller was the developer/builder of all the houses in our brand new neighborhood.

I expressly told the closing company that we did not want Title Insurance. When we showed up on closing day, there was a line item showing Title Insurance for $1800.

I pointed to it and said what is that? The nice lady told me that was the charge for Tile Insurance. I told the nice lady we don't want Title Insurance and please remove it.

The nice lady got a sour look on her face, and it took about 30 minutes to get it removed. She was not happy that a piece of the kickback got taken away.

 

[patdog]

We closed on our current primary home in 2013. The seller was the developer/builder of all the houses in our brand new neighborhood.

I expressly told the closing company that we did not want Title Insurance. When we showed up on closing day, there was a line item showing Title Insurance for $1800.

I pointed to it and said what is that? The nice lady told me that was the charge for Tile Insurance. I told the nice lady we don't want Title Insurance and please remove it.

The nice lady got a sour look on her face, and it took about 30 minutes to get it removed. She was not happy that a piece of the kickback got taken away.

The scam of title insurance is that if they’ll write the policy, you don’t need the coverage. If you need the coverage, they won’t write the policy.

 

[dog12]

The scam of title insurance is that if they’ll write the policy, you don’t need the coverage. If you need the coverage, they won’t write the policy.

Right.

We figured that our builders, who have been building houses in the area for years, had already confirmed that their title to our lot was legit. Plus, we'd know who to go after, and where they are located, if there ever is a problem with our title.

 

[Perd Hapley]

The scam of title insurance is that if they’ll write the policy, you don’t need the coverage. If you need the coverage, they won’t write the policy.

The main cost is just the billable hours for checking the title history, right? All the underwriting. Didn’t think the actual policy was really that much.

I always thought that was strange, too, but lender’s always seem to require it where I live. Not something I thought was optional unless I was paying cash.

 

[HWY51dog]

It does seem pretty useless. I'm buying something from someone, paying two agents a large fee, paying a lawyer to close the deal, and I have to pay insurance that covers me if all of those missed that the seller can't actually sell the property?

It’s because the title search goes back only 30 years normally. You can think it’s a scam all you want but I have seen it save people several times over the years. It’s like all insurance, you don’t need until you do. Btw it’s not the agents job to do the title search history. Only to make sure the current owner is correct.

 

[HWY51dog]

What are the real issues in your opinion? What market are you in?

The main issue since Covid is hedge funds buying up property. Anything under 300,000 in Desoto County they would offer 20-30,000 over list price in cash. No buyer can compete with that, first time buyers had no chance. They bought 20-25 house a month. This occurred all over the country and a lot of these homes sat empty. They finally stopped Jan of 24. A lot of the sales number you saw in 21-23 are inflated due to hedge funds.

 

[HRMSU]

We closed on our current primary home in 2013. The seller was the developer/builder of all the houses in our brand new neighborhood.

I expressly told the closing company that we did not want Title Insurance. When we showed up on closing day, there was a line item showing Title Insurance for $1800.

I pointed to it and said what is that? The nice lady told me that was the charge for Tile Insurance. I told the nice lady we don't want Title Insurance and please remove it.

The nice lady got a sour look on her face, and it took about 30 minutes to get it removed. She was not happy that a piece of the kickback got taken away.

In a galaxy long long ago I was a mortgage broker. You can charge fees for just about anything. They are called junk fees and if a broker gets it they get it but they will never jeopardize a closing for a fee. Great job taking advantage of that and everyone should....,the buyer has the most leverage at the closing table....assuming it's not a crazy seller's market with offers lined up .

 

[PooPopsBaldHead]

The main issue since Covid is hedge funds buying up property. Anything under 300,000 in Desoto County they would offer 20-30,000 over list price in cash. No buyer can compete with that, first time buyers had no chance. They bought 20-25 house a month. This occurred all over the country and a lot of these homes sat empty. They finally stopped Jan of 24. A lot of the sales number you saw in 21-23 are inflated due to hedge funds.

You may have a hyper local case of this as sub $300k homes in a suburb of a blue collar metro might be a niche's hedgies are gobbling up, but nationally, it a ridiculous narrative.

There have been so many bad articles about this. Just read one that said "By last March (the most recent data available), hedge funds accounted for 27% of all single-family home purchases in the United States."

That 27% is investors share of purchases, but 95% of housing investors are not institutions. In fact 80% are mom and pops.



The fact is there are 145 million housing units in this country. Hedge funds own around 600,000 of them... They have been buying for more than a decade and still don't represent more than 1/2 of 1% of total US homeownership.

CoreLogic data shows that nearly half (49%) of investment properties purchased in Q3 of 2022 were made by small mom-and-pop investors, those with fewer than 10 properties. The other half was made up of medium-sized investors (11-100 properties) at 33%, large investors (101-1000) at 8%, and mega investors (more than 1000) at 11%. And remember that's 11% of 27% of total sales since 73% of purchase are by owner-occupiers not investors... So mega investors are under 3% of total purchases nationally.


So while in your little area, hedge funds may be making a dent with +10% of total purchases let's say, but they aren't touching my neck of the woods with a ten foot pole and our home values are up 48% over the last 4 years and 185% over the last decade. There's much more to it than hedge funds I promise.

 

[goindhoo]

Hate to tell you, but all this is going to do is condense the market and give more of a monopoly to mega agents and mega teams. The smaller agents that are only doing 6-8 deals a year will go away. Lastly, all the problems this is going to cause will also make more money for attorneys. None of this will make fees disappear. Matter of fact, it's likely going to make them increase for buyers because of Fannie and Freddie regs.

Lastly, all the Grant Cardones on the board can still be Grant Cardones. No one has ever made you use an agent. No one has ever made you agree on a commission. Buyers and Sellers both mutually agreed to all of it.

Sorry but that last sentence is completely false. Seller agrees to paying the listing agent a percentage. Listing broker agrees how they gonna split it with selling agent. Buyer has no input or agreement.

 

[goindhoo]

It does seem pretty useless. I'm buying something from someone, paying two agents a large fee, paying a lawyer to close the deal, and I have to pay insurance that covers me if all of those missed that the seller can't actually sell the property?

Wut?

All insurance is useless until it’s not. Chances of lightning hitting your house are slim. But you want insurance if it does. Same thing with title insurance. Unforeseen events happen

 

[goindhoo]

I don’t see how this litigation changes anything. The settlement agreement only requires that the coop not be disclosed on mls. They can disclose it on their own website, fb, Zillow, etc. Lot of you on here are savy enough not to need a realtor and that’s great. The other 90% of people aren’t and they need representation. A good argument can be made that 6% is too much. But this settlement agreement more than likely is not going to change any of that. It may just be contracted differently.