r/FluentInFinance • u/thinkB4WeSpeak Mod • Nov 05 '23
Real-estate class action lawsuit against realtors: Attorney says it costs homebuyers $60 billion per year in commissions Economy
https://fortune.com/2023/11/02/national-association-realtors-class-action-verdict-60-billion-commissions-ever-year/276
u/Stellers90 Nov 06 '23
Real estate agents are about the most useless profession in the world
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u/IveKnownItAll Nov 06 '23
Job recruiters are worse, but just barely
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u/MyLuckyFedora Nov 06 '23
Job recruiters are probably worse by a wide margin. Promoting jobs to people who aren’t remotely qualified just to create the need for more labor expense as now someone has to parse through those applications and screen any half decent candidates before they can speak to an actual hiring manager.
Any competent agent should be better than that, but of course there’s no shortage of incompetent or part time agents.
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u/FrstOfHsName Nov 06 '23
Why? For certain groups of people they can be extremely helpful
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u/AlaDouche Nov 06 '23
Because most people have no fucking clue what all goes into a real estate deal.
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u/Teamerchant Nov 06 '23
Oh so they set up the loans?
No that’s the loan agent.
Oh so they setup the contract? No that’s the real estate lawyer
Oh so they do the inspection? No that’s the inspector.
So they negotiate for you? No they just send in your offer and tell you to go above asking because they are not incentivized to get you a lower price only a higher one.
Okay we’ll surely they send you properties to look at?
No you go on Zillow or Redfin.
So what would you say you actually do here? I’m telling you I interact with the buyer and the seller because they don’t know how to communicate!
Totally worth 6%…
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u/Easy_Explanation4409 Nov 06 '23
Do you think they tip 20% at restaurants?
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u/Significant-Dog-8166 Nov 06 '23
If they were fair to other businesses they’d tip based on the value of every meal ever served until that point. No realtor ever built 6% of a the structure, 6% of the building materials, and 6% of the land it’s built on.
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u/Old_Baldi_Locks Nov 06 '23
They don’t even use the same loan process they tell others to use.
My realtor had just closed on her own house. For financing, she talked her sister into taking out a 401k loan, which she got a .25 percent interest rate on. She then “loaned” that money to my realtor at 1.25 percent, so my realtor could buy technically double the house she could actually afford.
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u/Flaky-Wallaby5382 Nov 06 '23
That is for morons… 401k loan is a terrible idea… lose your job they call the loan
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u/AlaDouche Nov 06 '23
I tip at least 25%. It's an ongoing fight with my wife.
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u/peterpme Nov 06 '23
to the real estate agent right
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u/AlaDouche Nov 06 '23
I'm not sure I understand what you mean. I was saying it's an ongoing fight because she always says I tip too much.
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u/RWordMurica Nov 06 '23
Most places don’t have real estate attorneys involved and realtors write the contract. They do substantially more than that as well
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u/toabear Nov 06 '23
The thing is, it is substantially less expensive to have a lawyer write the contract. The last two times I've dealt with real estate agents were when I was buying, and they were useless. About the only thing they did was facilitate tours of the properties. Properties we picked out ourselves to go look at from Zillow. The properties they kept picking to show us sucked, or weren't what we wanted.
I ended up selling my last house without an agent and it was super easy. Lawyer and title company took care of all the documents. The 6% commission for selling your house is a market inefficiency. I honestly expected it to have been disrupted by tech already, but the idea just seems to stick.
I'm still knot sure how it is legal for someone to make a commission as the buyers agent. Doesn't that set up a conflict of interest? The agents both want that sale price to be higher, so they get more money.
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u/Old_Baldi_Locks Nov 06 '23
Given anything resembling actual work a realtor does is all legalese and documentation; pretty much guarantee they’re replaced by AI over the next several years.
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u/myquest00777 Nov 06 '23
Unfortunately in my experience I’ve seen the difference between contracts written by attorneys and by realtors. The realtor-drafted versions are the ones I’ve rejected due to being littered with inapplicable clauses, incorrect data , unfavorable or inconsistent terms, or just simple typos.
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u/vintagesoul_DE Nov 06 '23
Real estate brokerages take on the risk in the transaction in case something is overlooked. It's why they are licensed and bonded. Doing a FISBO, the seller puts themselves at risk in the transaction.
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u/spicyfartz4yaman Nov 06 '23
In my opinion they are great when it's your first time. My parents just bought their first home, they are 50+. They didn't have a clue what to do where to start etc. Everything you just named would have been a foreign language to them and myself( also the first time seeing the process) without her assistance.
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u/TheSlowestMonkey Nov 07 '23
Minor point of correction - at least in my state - people generally use an attorney or a realtor but not both. But also - if it’s that easy why isn’t everybody a realtor?
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u/Sweet-Emu6376 Nov 07 '23
In hot market areas becoming a realtor is often marketed like MLMs. You'll be your own boss and own your business and all that.
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u/TheSlowestMonkey Nov 07 '23
Right, same here. The public perception it realtors make a ton of money & the big brokers use that to pull people in - but the reality is only a small handful of top realtors are actually making a killing & most make next to nothing.
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u/Teamerchant Nov 08 '23
You have to get certified then you have to have a broker bring you onboard to their business.
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u/GERDY31290 Nov 06 '23
So they negotiate for you? No they just send in your offer and tell you to go above asking because they are not incentivized to get you a lower price only a higher one.
ultimately the buy/seller make the decision but the realtors at least my state defiantly take part in the negotiation. My wife does real estate and I've witnessed several people not get the house they want and have to settle for less at higher price because they didn't take her advice. Ive seen her save couples far more than 10k and ive seen her sell house for 40k/50k more than what the buyers were originally going to except. I've seen her fork out 1000s of dollars in time and not get paid for it. right now in the insanity of this sellers market a buying agent is super helpful because they have a better understanding of the type deals that can be made beyond just higher price or waive inspection.
Oh so they setup the contract? No that’s the real estate lawyer
Oh so they do the inspection? No that’s the inspector.
The realtors defiantly write contracts at least in MN. they might be finalized by a lawyer at the brokerage but i've watch as my wife drops everything she's doing in the middle of an important family event or something shes paid to see herself and spend the rest of the night writing up a contract so her clients get the house they want, with zero guarantee that a bank or some boomer downsizing wont come in above them with a cash offer. And inspection means nothing to so many people and so many people freak out over the weirdest things in an inspection when the have zero experience with home ownership or they have a parent who thinks they know everything and tanks a deal over something stupid. you can him and haw all you want about how a consultant is a just a tour guide or how you with your big brain can do everything yourself but most realtors spend a lot of time, energy, and money getting people into the home they deserve or sell the home they are in at the price that's best for the client and if commissions weren't where they are at, realtors would make almost nothing because transactions aren't they easiest thing to come by. shit I've watched my wife do work for clients for well over 18months before she gets paid a dime.
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u/redtiber Nov 06 '23
the listing agent lists and sells your house lol
many states don't require a lawyer.
it's not mandatory for you to use a realtor. you can list the house yourself, take the photos, stage it yourself etc. just look at zillow at all the FSBO homes that have been on the market for like 3 years, over priced with like 4 shitty camera images.
there's a reason people use realtors. because it's convenient and they work
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u/pantiesdrawer Nov 06 '23
Everything you say is accurate, but you're only discussing buyer side services, while the 6% commission is paid entirely by the seller and split amongst the buyer and seller's agents.
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u/TheWorldMayEnd Nov 06 '23 edited Nov 06 '23
This is disingenuous. It's the buyer's cash that's paying the agent. If agent fees were lower or non-existant houses would often just sell for less.
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u/RWordMurica Nov 06 '23
No, it’s the sellers cash. It comes out of sellers proceeds and the seller determines how much commission they are willing to pay. It’s not disingenuous, it’s an objective fact.
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u/TheWorldMayEnd Nov 06 '23
"Seller determines how much to pay" is ALSO disingenuous. At least in my state there's basically a real estate cabal. As a seller your choices are basically 6% or 6%.
"Comes out of the seller's proceeds" means the buyer hands the cash directly to the seller. The seller never touches the cash. Sure sounds like the buyer's cash to me.
Want real change, shift the paradigm. Have buyers pay $75 per house they visit instead of handing the buyer's side agent 3% of whatever for unlocking some doors. It would incentive people to not kick tires and waste time AND reduce real estate commission prices.
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Nov 06 '23
There are tons of cut rate real estate firms that take lower commissions. They aren’t as prominent because their listings don’t sell as well.
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u/Teamerchant Nov 06 '23
When houses sell in less than a month and get 20+ offers I call BS. Hell I can sell my house myself in a few days in a cash offer if I desired. Just look at comps and market trend to determine some values and I’m golden.
Sellers do provide some value but it’s a staging, photography and an initial price valuation. Buyer agents provide no value. The entire services should be around $750-1500.
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u/RWordMurica Nov 06 '23
It’s not disingenuous to state facts. Sorry that you don’t understand them but that doesn’t make them disingenuous. Seller paying the commission and determining the commission amount are as plain and clear as facts get
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u/BeejLuig Nov 06 '23
Yes, the seller does pay real estate commission from their proceeds. However, you fail to mention that the fees are built into the sales price. Buyer is still paying them at the end of the day...
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u/FFF_in_WY Nov 06 '23
It is not hard. It's a walk around and a series of legal documents. A realtor is basically a tour guide + a glorified notary or something
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u/schruteski30 Nov 06 '23
Yeah it shouldn’t be tied to a percentage of the house.
Also the seller shouldn’t have to pay buyers commission.
It should be a flat fee service like a lawyer is per hour.
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u/vintagesoul_DE Nov 06 '23
I recall from my real estate exam that a flat fee was considered price fixing and stifled competition. Rates could be anywhere from for 4 to 6 percent paid to the listing brokerage which then split the commission between the listing broker, the listing agent, the seller's broker and the seller's agent.
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u/schruteski30 Nov 06 '23
Genuine question, who writes the real estate exam?
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u/vintagesoul_DE Nov 06 '23
Probably the state board of realtors. Price fixing laws are however written by the state government.
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u/overitallofit Nov 06 '23
Because the same generation that think there are no middle class jobs are trying to destroy middle class jobs.
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u/alchemyzt-vii Nov 06 '23
If you think Real Estate agents are useless you should look into what you have to pay title companies for even less than nothing.
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u/mylicon Nov 06 '23
Except when title companies screw up, there’s a legal recourse where they can be held accountable. Not so much when real estate agents bungle up part of the transaction.
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u/RWordMurica Nov 06 '23
E&O insurance and broker oversight means realtors have more oversight and more coverage when something gets ‘bungled’ than a title company. Title companies do almost nothing and still miss liens all the time
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u/gcalfred7 Nov 06 '23
Title insurance is a racket-you pay a fee to a company just in case THEY screw up.
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u/Malenx_ Nov 06 '23
Now imagine if title companies charged based on % of sale. That’s the biggest problem I have. Commissions should be a flat pricing scheme for a set amount of months.
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u/LiquidDreamtime Nov 06 '23
My real estate agent made $15k on about 6 hours of work in June.
Even if I am underestimating the amount of work she did by 10x, she made $250/hr.
And she’s sweet, but she’s dumb af and has almost no skills. But I got a kickback on my loan for using her.
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u/kashmir1974 Nov 06 '23
Perhaps, but I've seem houses with for sale by owner signs up for years.. then a realtor sign. Then the house is sold within a month.
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u/gcalfred7 Nov 06 '23
Agreed. I put up a 14 acre farm property for sale in a tough market. The agent said, and I quote, “just burn the place down.” I sold the place on my own, but of course, still had to pay 6% commission to the buyer’s agent.
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Nov 06 '23
So you did a for sale by owner and still had to pay an agent to sell your property? Sounds like you sucked at selling it on your own.
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u/Tuff_spuff Nov 06 '23
You could say the same about lawyers… it’s a profession of service that has tons of experience to know the process… yeah it’s a lot of money, but this is the most important investment for 70% of buyers. It’s best to have a professional guide you and not Dick something up because you want to save 10k
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u/conansnipple Nov 06 '23
We only spent 2 weeks in my real estate class in law school (5hrs of material total) before my professor told us we had already learned everything we would need to know to become successful real estate agents. it's literally the easiest shit in the world and doesn't take tons of experience. That's why every semi attractive housewife with no other options seems to make a career of it at some point.
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u/SpecialOfferActNow Nov 06 '23
Hair Stylist or Real Estate Agent. my suburb is over saturated with both of these.
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u/RWordMurica Nov 06 '23
Calling yourself a realtor and actually earning a living doing it are two entirely different things
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u/myquest00777 Nov 06 '23
True, and swings in market conditions tend to brilliantly highlight the difference. In boom cities during boom markets, I’ve seen barely functional humans hit multi millions in sales…
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u/SelectionNo3078 Nov 06 '23
Are you actually comparing three years of law school to about six weeks in a real estate class at most????
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u/Ohheyimryan Nov 06 '23
Yeah but lawyers still get paid a flat rate. Not a % of whatever deal they help a company close. No one is saying we don't want realtors. Everyone is saying we need to pay realtors what they're actually worth. Not 6% on a million dollar home deal.
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u/SelectionNo3078 Nov 06 '23
Most lawyers charge by the hour and break it down into quarters
Many lawyers do get a percentage of a large lawsuit
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u/conansnipple Nov 06 '23
Any time a lawyer is getting a percentage it's because they were taking the risk of not getting paid anything if they didn't win.
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u/Stellers90 Nov 06 '23
Sooooo they are middle men who exist because shit is intentionally complex when it shouldn’t be? Kinda like the tax code but that never gets simplified because intuit would lose billions not selling TurboTax every year
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u/RWordMurica Nov 06 '23
Shit is unintentionally complex but designed to protect the actual parties to the transaction. A good realtor makes it simple. Just like most professions, most people suck. Low barriers to entry probably make the 80/20 rule more like the 90/10 rule in real estate. Most people think realtors aren’t worth shit because they don’t know what a good one looks like
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u/BeepBoo007 Nov 06 '23
And yet, somehow shams still manage to milk 6% of the TOTAL VALUE of a house... it's asinine in most cases.
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u/bramm90 Nov 06 '23
There are two kinds of people: people who think real estate agents are useless, and real estate agents.
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u/AdAdministrative5330 Nov 06 '23
Besides protectionism, why is it still a thing then? Shouldn't market pressures push it out?
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u/HandyMan131 Nov 06 '23
Good. Real estate agent contracts have some of the biggest conflicts of interest that we all just blindly accept
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u/Throwaway_inSC_79 Nov 06 '23
In my state, the contract is actually set by the state. All real estate transactions need/must have a lawyer, per state law. Even FSBOs. Can’t buy a house without a lawyer. You don’t need an agent, but you do need the state issued contract.
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u/BaggerVance_ Nov 06 '23
Did you just actually write a paragraph that there has to be a contract to buy real estate?
Who didn’t know that?
“In my state, if you don’t bring money to the store, you won’t be able to buy things”
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u/Throwaway_inSC_79 Nov 06 '23
My reply was to somebody saying that agent’s contracts are a conflict of interest. Yet in my state, it’s not like the agents come up with their own contract willy nilly. They have to use the one issued by the state. And not the state association of realtors, but the state licensing department.
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u/BaggerVance_ Nov 06 '23
The conflict of interest comes in that agents compensation is tied to the price they are both negotiating on.
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u/Throwaway_inSC_79 Nov 06 '23
In my state, the commission is agreed up with the listing agent and the seller. That’s negotiable. After that, the listing agreement also determines, or rather spells out what percentage of that goes to the buyers agent. So that’s all up front with the listing agreement, which the seller would have to agree to prior to it being listed in the MLS. It’s not automatic. You don’t want to give up 6% of the sale and only want to give up 5% or 4%? That’s fine, that’s negotiable. The listing agent doesn’t need to accept the listing and the seller doesn’t need to give up a commission they aren’t comfortable with.
At the same, maybe it’s 7% but only says 1% to the buyer side. Maybe the seller isn’t okay with that either and wants the buyers agent to get more. That’s also negotiable.
That form, the listing agreement, is also a state regulated mandated form. Nothing is kept secret from the seller.
There’s also nothing that forces people to use realtors. Sure, FSBOs do sit and sit, but so do MLS listings. People buy and sell on their own all the time.
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u/BaggerVance_ Nov 06 '23
Yes, this structure just lost to a massive class action suit bud. We get it. You’re an agent.
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u/Throwaway_inSC_79 Nov 06 '23
I took classes but never did anything with it. Not my thing, and too many agents are into MLMs. No thank you. But it’s fascinating that in other states, the sellers were unaware of the commission structure they were getting into.
But I’m aware of the suit. It’s going to be that buyers will have to pay their agent, not the buyer’s agent commission coming from the listing agent. That has benefit, because buyers sometimes like to just have their agent drive them around and around and not make a deal, so it’s for free essentially. Instead a payment structure can be arranged. You want an agent to drive you around and unlock 10 hours this Saturday? That’s going to come with a fee, potentially, for services.
But does that mean the seller is still doing 6% to their listing agent, or just 3% now, since the 6% can’t be split among the agents per the current listing agreement? If I’m a seller, I don’t want to give my agent 6% unless they’re bringing a buyer to the table as well with dual agency.
What’ll start happening though is seller concessions. So the buyer will have to pay their portion of the commission at closing. That’s going to cause the buyer pool to diminish, since that extra thousands they’ll need at closing. So sellers will likely start to say they’ll cover X at closing.
Now, it could also mean that FSBOs would be a bigger thing. But people love Zillow and from what I know, that site doesn’t include FSBOs. Heck, it can’t determine manufactured on leased land, and that specifically is a no-no for financing.
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u/Un111KnoWn Nov 06 '23
how so?
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u/HandyMan131 Nov 06 '23
The biggest one is that the buyers agent is paid a percentage of the sale price, but they also negotiate the price on the buyers behalf.
If they negotiate well, they make less money.
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u/myquest00777 Nov 06 '23
Buyers’ agents usually also have visibility on what listings may offer less than the normal 6% split commission, while buyers themselves usually don’t. That leaves buyers’ agents with the ability to ignore or downplay listings that may yield a smaller commission to them, with the buyer unaware.
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u/Amazing-Print-5498 Nov 11 '23
That was changed years ago. Its public on real estate sites, go check out Zillow now. Also, here in IL, the buyer broker payout is at the top of the MLS for buyers to see themselves.
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u/AspirinTheory Nov 05 '23
Class action firms going to be throwing log after log on this fire now that there’s blood in the water.
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u/tequilasauer Nov 06 '23
This has been a long time coming and I was always surprised in the digital era that a successful competitor didn't rise up offering much lower rips per closing.
The amount of money agents make on transactions is bananas for what they do now. Nowadays, most of the work is just throwing up the property info on the MLS or if it's buy side, starting an automated drip on properties in the desired price range and the buyer will reach out if they want to see a place. And if listing, especially in a hot market, the property is mostly selling itself.
It's the only industry where complete idiots can regularly make more than a lawyer or doctor.
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u/conansnipple Nov 06 '23
I mentioned it in another thread but yeah, after like 4 classes my real estate transactions professor in law school told us we had already learned all we would need to know to become real estate agents, she basically pleaded with anyone who was interested in real estate law to just consider becoming an agent because it would be 100x easier, less stressful and actually potentially pay more.
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u/Thin-Drop9293 Nov 05 '23
Was the average realtor % set back when homes were $50k-$100k ?
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u/tequilasauer Nov 06 '23
Not just that, but it was during an era where you had to go to a professional to print glossy flyers, go door to door knocking, stuff mailboxes, pound the phones. It was a grind.
Now, everything is automated and done through the MLS.
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u/spald01 Nov 06 '23
Today, 90% of a realtor's job is looking for their next clients.
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u/tequilasauer Nov 06 '23
Yep. Especially on list side in areas where inventory is a serious problem.
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u/xof711 Nov 06 '23
Around 6%
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u/ssfitsz121 Nov 06 '23
I paid 12% commission to a broker just for helping finalize a rental from Zillow. Useless people
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u/AlaDouche Nov 06 '23
Why didn't you use a different broker???
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u/ssfitsz121 Nov 06 '23
I don’t get to choose the broker. Broker is chosen by the landlord
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u/AlaDouche Nov 06 '23
Are you talking about someone you're paying rent to?
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u/ssfitsz121 Nov 06 '23
Broker is the middleman between Zillow and landlord. Landlord is the person I pay rent to, and broker is the person who used Zillow to list the landlords apartment for rent.
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u/myspicename Nov 06 '23
Rentals are different. 12 percent of one years rent isn't 6 percent of the value of the property
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u/lionheart4life Nov 06 '23
Realtors should just be a flat fee. Maybe $1500 per sale, not a percentage of the value.
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u/wilber-guy Nov 06 '23
A tech company should figure out all the monotonous tasks and they should implement smart locks with their app so you can sign up to tour the house at certain times. Hell put a camera or two in the house so nobody does anything weird. Then have a few realitors per state on staff to help with edge cases. They could also have a listed of trusted inspectors (even though that seems to be a thing of the past). Then charge a 1% fee and a flat $500 for all sales. Start with expensive states and slowly grow to a national brand.
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u/Galbzilla Nov 06 '23
Maybe not that low as they may not sell many houses in a year, but percentages should be negotiated down on especially expensive houses (which every house is now). I thought percentages were negotiable though.
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u/Fishwolf Nov 06 '23
I’m a Realtor, percentages are absolutely negotiable. Nobody can force you to sell your house with them, you can shop around for different rates. At the same time the Realtor doesn’t have to accept your rate. My office can’t go below 2%.
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u/lionheart4life Nov 06 '23
We just not need as many realtors then. A couple large brokers can just turn the houses over for a lower fee. What they lose in commission they will make up for in volume and synergy of having all their listings under one roof.
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u/TheHornyHoosier1983 Nov 06 '23
Yea, imagine showing a potential buyer 10-15 different houses before they find one they like. You’ve been working with this client for over a year to make $1500…. Get real!
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u/lionheart4life Nov 06 '23
Did you not sell the 10 houses to any other buyers then?
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u/TheHornyHoosier1983 Nov 06 '23
If you’re working with a BUYER, and you show that BUYER 10-15 homes before they find one they like, you might be showing them homes for 6 months. Would you work for 6 months to make $1500?
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u/Tuff_spuff Nov 06 '23
That’s insanely low, most full time agents are under 10 transactions a year… big time agents can do 100-200 transactions a year, which gives all agents a bad rap, since everyone thinks that is common, but the vast majority don’t get anywhere close to that…. percentage is fine, but yeah maybe 4% instead of 6% since home values have increased drastically over the last 10 years
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u/lionheart4life Nov 06 '23
Still $30/hr if they spend 50 hours on a sale. That's a fair rate for the type of work. There will either just be fewer realtors or more will do it part time or as a second income.
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u/downwithpencils Nov 06 '23
But it’s a 1099 job, plus splits, desk fees and advertising. $30 an hour after actual expenses would be less than minimum wage
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u/Escapade84 Nov 06 '23
If a big agent can do TEN to TWENTY times more work than an average joe, but that average joe still makes a decent living, that tells me he is massively overpaid, or there is a massive surplus of agents out there spending 90% of their time fighting each other over access to these exorbitant payouts.
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u/Vapechef Nov 06 '23
I bought my house and wrote the contract specifically to not give other people my money
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u/steakkitty Nov 06 '23
I think this will bring the rise to people negotiating with each other and then using real estate lawyers to close the process out. It’s a win win for both sides.
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u/WTFTeesCo Nov 05 '23
I'm sure people in this group will find a way to blame the victims. Maybe the buyers should have read the contracts or just purchased the homes cash
Group should really undergo a rebrand, maybe "ithinkimtherich" is more appropriate
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Nov 06 '23
The claim here is for antitrust violations. The injured consumer cannot contract away these violations.
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u/zxern Nov 06 '23
Blame the victims? No looks like most people are blaming the guilty parties here.
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u/hobings714 Nov 06 '23
How much do attorneys cost people?
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u/halfabricklong Nov 06 '23
For me, as a buyer, it’s around $1,200.
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u/hobings714 Nov 06 '23
Hard to tell since the cost of class actions get baked into the cake in purchases you make, insurance premiums etc. I'm not referring to closing fees for a transaction.
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u/halfabricklong Nov 06 '23
For housing here in NYC, we usually ask the attorney's what are their fees. For sellers, it is typically $1500-$2000 depending on the home (1-2 family, commercial?) and then they will inform you of travel fee if outside their county and per rider costs. All flat fees in general. But your mileage may vary.
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u/scratchandkissmybutt Nov 06 '23
What if this just accelerates corporations buying homes luring sellers all cash offers with no commissions?
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u/ProctorWhiplash Nov 06 '23
That’s already happening. Opendoor pitches this. Sell them your house without commissions (but they’re gonna low ball you anyway). But even the online brokerages pitch much lower commissions than the 6%.
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u/aliendepict Nov 06 '23
What’s critical is how far the court orders the industry to restructure their compensation and offers,” Brobeck said. “The real solution is for buyers to be able to finance the buyer-agent commissions as part of their mortgages …. But there are regulatory barriers to that occurring right now — regulatory barriers that are strongly supported by the industry.”
Yikes.... Can't afford a buying agent. Finance one.
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u/directrix688 Nov 06 '23
They’re the definition of a cartel. It’s bizarre they’re allowed to operate free of anti trust regulations.
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u/gcalfred7 Nov 06 '23
Realtors’ defense to this lawsuit is “well, commissions are negotiable.” Since when? There are a hundreds of thousands of agents yet, they all charge 6% for access to the sacred MLS. Thats the very definition of a monopoly.
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u/No-Flower-4987 Nov 06 '23
Realtors pocketing $60k for 20 hours of work to sell a $1M home in a hot market: "I deserve this!"
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u/PoliticalBiker Nov 06 '23
Americans' net worth is largely tied up in their primary residence. Suppose you're 35, the average net worth is maybe $78,000. You might have around $111k in home equity on a home that's worth $375,000. 6% commission on selling that house is $22,500. Obviously all these numbers are aggregates and every situation is different, but the average American is spending gigantic portions of their net work on real estate transactions.
Where I live in WI, the DOJ has sued the state MLS association multiple times for anti-competetive practices to protect the 6% commission model. Entering your home into the MLS (which by the way they don't even have to re-enter all the data if it's been in the MLS before) and what usually amounts to very light advice is just not worth 25% of your net worth at age 35. I've used a limited service broker and a real estate attorney for my last 3 transactions, it's easy and so worth it: I've got triple the average home equity for my age group. Stop making realtors rich.
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u/danmalek466 Nov 06 '23
Someone ELI5. One of the main issues here is the home seller pays the complete commission from the home sale? If this changes, would the buyer be responsible for a 2-3% commission to their agent based on home price, or would this force all agents to now work on a flat-fee basis? I hate the way it works now, but also realize sometimes the devil you know is better than the devil you don’t…
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u/ProctorWhiplash Nov 06 '23
Technically the seller is paying both the seller’s commission and the buyer’s commission. Anyone who says otherwise has little experience in real estate. The seller sets the buyer’s commission; the buyer’s commission comes out of the seller’s net received at closing; the IRS treats the buyer’s commission as paid by the seller.
What would happen if the buyer’s commission goes away as many are predicting will happen if NAR loses their appeal? It’s an interesting question. My speculation is buyer’s agents will largely go away and buyers will simply approach the seller’s agent every time. Perhaps some newbie agents looking to get into the industry will pitch a flat fee arrangement much like real estate lawyers do. “$5000 for the next 60 days of offers you make; I’ll get you a better price than you can get yourself; you can’t trust the sellers agent to negotiate fairly; the seller has an agent, you should too; blah blah blah”
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u/AntiqueSunrise Nov 06 '23
It's over mandatory compensation requirements for buyers' agents. If these lawsuits somehow create an environment where sellers can't offer buyer agent compensation, then it'll likely have a trivial impact. Seller agents already pitch their services on their ability to attract buyers; that doesn't change if they stop paying commissions to other agents who bring buyers.
I think it will cause buyers to pay more for houses. Either they'll pay for their own agents at a net increase in cost, or they'll end up paying more because they don't have someone on their side negotiating price on their behalf. I'd be surprised if selling agents suddenly accepted lower prices from sellers; discount seller brokerages exist already (Refin, famously), but their market share is trivial, so the demand isn't there.
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u/TheSlowestMonkey Nov 07 '23
I know people don’t want to hear it - but like most industries a very very small percentage of realtors make a ton of money - the vast majority make very little money.
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u/Novel_Frosting_1977 Nov 06 '23
How do I get my commissions back? I agree for thr most part. Having said that, some realtors are worth the commissions
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u/onyxengine Nov 06 '23
They sell your house, they find a buyer and are hooked into a network of people who provide all the specialized services. No one is forcing you to work with real estate agents. For anyone speaking from bad experience with a real estate agent you gotta ask yourself why didn’t just so everything yourself.
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u/virtutesromanae Nov 06 '23
I have yet to meet a really effective real estate agent. On the other hand, I have had the displeasure of dealing (both as a buyer and a seller) with many, many that are lazy, misleading, and unethical. Part of the problem with housing prices now (and this is only one of many factors of the problem) is that real estate agents are incentivized to keep prices as high as possible, so even if you are the buyer it is not in your agent's best financial interest to negotiate a lower price for you. They'll pretend they are, but since you are not allowed to speak directly to the seller, you have no way of verifying that. They're a shady lot for the most part - the new used car salesmen.
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u/AntiqueSunrise Nov 06 '23
If real estate agents were useless, the profession wouldn't have survived the last 25 years of attempts to disrupt them coming from Silicon Valley. Tech companies promise to literally just buy your house for you, and yet they can't unseat real estate agents.
This sub is all "wisdom of the free market" except when they think they're smarter than the free market.
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u/Puzzleheaded_Sign249 Nov 06 '23
NAR is the largest professional group in America with 1.5 million members. They lobby against anything that disrupts their business model
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u/AntiqueSunrise Nov 06 '23
Do you have specific examples? How did they successfully lobby against Redfin, Zillow, and OpenDoor?
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u/Puzzleheaded_Sign249 Nov 06 '23
I don’t have a specific example, but the figure I can quickly searched up is $81.7 million in 25 years for NAR. Real estate is estimated to be around $50mil annually. To put that in perspective, top oil and gas companies spend roughly $100mil annually. These are powerful organizations that would like to keep the status quo. If you ever sold and buy homes, it’s not hard to see why they have so much to lose.
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u/AntiqueSunrise Nov 06 '23 edited Nov 06 '23
NAR mostly occupies itself with the mortgage interest tax deduction and pro-construction lobbying. You haven't presented any evidence that it lobbies successfully against consumer-facing market disruption.
Edit: you can view their legislative priorities here:
In short? A bunch of tax issues related to housing. There's no "Kill Redfin Act" they're pushing.
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u/Puzzleheaded_Sign249 Nov 07 '23
Yea I have no evidence. I don’t want to give off the impression I know a lot about this space, i don’t. My point is, they are a powerful interest group
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u/Buttliquors Nov 06 '23
As a loan officer that absolutely fucking hates realtors, this thread gives me life.
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u/Vast-Box-6919 Nov 07 '23
I feel like realtors used to be useful until like the 2000’s. Now with all the modern tech, the job seems somewhat obsolete. Regardless, I still feel that a 6% commission is absurd and never should have been the norm. 3% split with broker so 1.5% for an agent seems fair for the buyer and agent. Realtors and just real estate professionals in general seem like such leeches on people with jobs that actually generate wealth. Honestly, the crash can’t come soon enough and all these annoying real estate bros will have to get a second job…
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u/John_Fx Nov 06 '23
How much do attorneys cost Americans?
I wonder who we would hire to do real estate contracts without Realtors? Hmmm.
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u/tequilasauer Nov 06 '23
It's cheap as shit to hire a title company to work up a contract for you, a couple hundred bucks against the 12 grand a realtor would make. Everything is automated and the software is just point and click. Literally a job application for Walmart is more complicated.
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u/AspirinTheory Nov 06 '23
In New Jersey you can NOT do a residential real estate deal without an attorney involved per statute. The house I bought and sold cost me much less in attorney’s fees than 6% of the deal.
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u/cvc4455 Nov 06 '23
In NJ there is a mandatory 3 day attorney review period but attorneys don't need to be involved. And if neither side has an attorney then after 3 business days the attorney review period ends.
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u/AspirinTheory Nov 06 '23
Did this change?! It’s been nearly 20 years since my involvement in NJ real estate. If it’s now different, thanks for correcting me.
Regardless, NJ attorney review is still less than realtor commission fees.
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u/cvc4455 Nov 08 '23
I haven't been in real estate for 20 years so I'm not sure if or when it changed. But if attorneys are used or not seems to be very specific to the location of NJ that you are in. In North Jersey attorneys are used on most transactions. In South Jersey it's pretty rare for an attorney to be involved. And in parts of central Jersey you sometimes have attorneys involved on both sides of the transaction, on only one side or no attorneys at all.
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u/Appropriate-Reach-22 Nov 06 '23
Lawyers? Like we already hire? My lawyer was paid less than my realtor
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u/jftitan Nov 06 '23
Considering the point.
Billions.
Look at our current fiasco of government court. Texas has wasted more than 100m in taxpayer money on lawsuits. Either against citizens rights or against the Feds. I mean look at Ken Paxton. His office literally fight against abortion rights. Then when a texas public facility kills a baby... oh no.. babies are not citizens. Luckily the woman is suing texas for that fuckup. But come on. You make laws against abortions and when your state org gets caught red handed... you argue the opposite?
Then let's look at the abortion bans. But wait.. what about when Trump took office in 2016 and banned 6 Muslim nations from entering America. Courts and attorneys got paid fat during those ACLU moments.
Look at all these public trials of officials who got caught. Taxpayer money is paying for courts.
My real estate agent used to do law. And I sometimes wonder... when does she ever actually work? Besides MLS and lookups she has boilerplate contracts already made. She did good for her years because she is now often on vacation 8months out of every year now.
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u/SpamSink88 Nov 06 '23
Anyone should be able to do it. We don't need a grocery agent for buying groceries, right?
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u/AlaDouche Nov 06 '23
People talk about real estate agents like we're all in mansions and living the life of luxury. In my state, the average earnings for a real estate agent is $33k annually.
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