The model's pretty broken now, when anyone can look up listings on realtor.com or Redfin, and get customized alerts based on preferences. I mean what special skills do agents even bring on the buy side? I can mediate things with the seller myself, thank you very much.
On the sell side, an experienced agent can be much more of a help. Even there, we used Redfin the last time we sold, and the difference in commission was a full 2% when compared to a more conventional broker.
I purchased my first home in 2017. I absolutely would not have known half of what to do without my agent. In retrospect there are some things that he swept under the rug that I'm paying for now, but all of the paperwork and having someone who knew what to ask for was invaluable. If I was left to my own devices I would have made some probably very stupid offers and lost the chance at my property. This might just be because there is another agent on the other end, but the whole system isn't exactly beginner friendly.
What were the things swept under the rug? A home purchase is arguably the largest purchase most people will make in the US. This is an area where I would actually want some laws requiring the agent to work on behalf of/ in the interest of their customer instead of only their own wallet.
We couldn't test the furnace due to the gas being off when the inspector came.
I didn't think anything of it since I didn't know anything about furnaces but my realtor put an extra contingency in to get another inspection of it paid for by the seller. The closing was within 30 days and they never got around to it in the week or two left after the first inspection, once I signed it was just forgotten. Maybe it was my job to get them on top of it, but he should have at the least brought it up near the signing to postpone it a day and enforce the contingency.
I ended up replacing it the next year. It wasn't terrible for me since I moved in with extra cash ready for such things, but could have been very bad for someone else who put everything into the down payment.
There were other things he was on top of though. He got the seller to come back and fix some wiring that the inspection had missed free of charge on my part which was fantastic. Not a safety issue, just usability. I didn't like what some of the switches controlled so I know they had no obligation to do it. The company who remodeled my house sells a lot of houses around here, so I suspect he has a rapport with them.
These seem like useful services, but the seller paid at least 3% of the home value towards them. Wouldn't you have rather just had that as cash instead?
I don't really follow the proposal. Are you saying that there should have been just their realtor and I keep the 3% I would have paid to have my own representative?
I don't expect their realtor to act in my best interest if so. Our goals aren't aligned. I almost fell into a situation where the realtor I was choosing was the buyers representative as well, which a family member who is a realtor as well as my bank advised was a terrible idea.
If you're proposing that realtors are just half price then I don't have a problem with paying less for things :)
No, what I mean is more straighforward. Let's say your signed offer is for $600k. Literally $18k is being set aside for your agent to point out these (IMO rather minor) things, and do some other pretty minor stuff, very akin to what a tax accountant might do during filing season.
What if you could just buy the house for $282k and never had to have an agent? Perhaps you would have missed these issues. Or more likely you would have Googled for a robust checklist of things to look for in an inspection, and discovered them yourself.
This is a structural reimagining of things could be.
I think it could work in certain scenarios. I just would not want to be alone for a major purpose were something to come up. Some years my taxes are super simple, some they are more difficult. When it's difficult I hire an accountant to do them. Same with a house, but there are a million little things that people might not realize they don't know about a house.
For example my house had a situation with taxes where I had to pay investor rated taxes for a year since it was held by an investor previously. That's the tax rate I see when I look at the MLS. I would have said no to the house if my realtor had not told me the way it worked, and that they would fall off the next year. I don't know that a generic list can capture that since its specific to my locale (or not, I don't know how it works in other places and that's great since I don't have to be an expert on it).
Mine made an offer way below asking that I thought was insulting, but he told me to go with it, so I did. And they took it, and even on top of that he said I should ask for a few repairs to be made, and they even did that too at 100%.
So I too am in the bucket of people who think's the 3% is well worth it. Not to mention the time spent showing houses and the research he did. I get some peoples issue with it being a percentage of the house, but for the house I bought at least, I see no problem with the amount of money he made. If I was buying a million dollar house, I'd probably think differently.
I still don't see why your experience means the pay should be percentage-based. Why not a flat fee? Why not hourly? Or a base fee plus hourly? The advice the realtor gave you was obviously valuable - but it shouldn't vary if you were purchasing a $100k house or a $2MM house.
The market for a $2 million house is going to be much smaller than for a $100k house. That big ass house can sit on the market for a lot longer, and have much pickier buyers. Houses like that also get a LOT more marketing. Would you spend 6 months unpaid working for a $3000 commission, or would you rather only list cheap houses that turn around more quickly for the same price?
Besides, if you can afford a $2MM house, please don't tell me you'd also be crying about paying a percentage.
I still think you're describing hourly work for the challenges of selling a $2MM house. Charge the seller hourly for open houses, pass through marketing expenses, etc.
At least I think we can agree that buyers and sellers should have choices! Today it is difficult to find anyone who doesn't play by the 6% rule, and realtors like keeping it that way.
I was replying to ApolloFortyNine. I definitely agree an agent who knows what they're doing can make a difference in the sale and have happily paid realtors in my life as well. I don't agree that that advice is somehow variable relative to the price of the sale.
Not sure how it is in different countries but in Sweden I haven't heard of anyone using an agent on the buying side. Not sure anyone would need one.
I personally think the whole real estate agent thing is a huge scam that will be solved with tech pretty soon. There are already options here for selling your house yourself through a DIY agency that just provides the boiler plate legal papers needed for 1/10th the cost. The only thing a conventional real estate agent does extra on that is pretty much host the showings.
Anybody can look up listings. And anybody can go directly to the selling agent to buy the house. It's not about negotiating a price, it's about making sure that everything is legit with the transaction. Are you going to make sure that everything is properly filed? Are you going to keep on top of all the other people involved to make sure they're doing their jobs? Are you going to go through 4000 pages of legal paperwork? Are you going to ride the sellers' asses to make sure the sale closes, so you aren't stuck homeless after moving out of your old place?
There's nothing stopping you from hiring a real estate lawyer instead of an agent. I'm sure he'll be happy to charge you by the hour.
And also as the buyer, you don't typically pay anything to the agent.
A slew of what you mentioned is the responsibility of the closing office and attorney. Your real estate agent is not our there verifying deeds, ownership interests, liens, titlework, or insurance. They have real estate attorney/title offices they generally work with, you always have a choice and generally the spend is the same.
The best bang for your buck buying/selling is choosing a great closing office. Even boutique ones tend to be within a margin of cheap ones and their the people making sure everything will be smooth, from loan closing to property transfer.
Same, my real estate lawyer charged $350 flat fee. He used standard documents, private sale. He probably spent about 1 hour on it in total, and that was about it.
You don't pay anything to the agent, directly. Why do you think for sale buy owner homes are cheaper? The seller can knock off a few percentage points because they don't have the overhead of paying 6%.
I'm not sure this is true. Short of actually colluding with the other agent, I don't think there's anything the buyer's agent can do that would be worthwhile to bring a lawsuit over.
Having a real estate agent as a buyer can be extremely useful. Time savings: they'll actively search out properties that fit your needs, handle negotiations, schedule inspections and work with the city or county, etc. They're also experienced with all of the legal aspects, and work with mortgage and insurance companies.
"Tech Bros" have a stereotype of thinking they can do everything themselves. Sometimes they should maybe step back and acknowledge that someone's profession is a bit more than what they can pick up in the course of reading blogs for a few weeks.
Now, it's understandable that there's plenty of bad real estate agents -- finding a good one can be difficult. And I'm not saying that the industry is perfect, there's certainly room for improvement. I just think that it's unfair to say they don't have value.
> Having a real estate agent as a buyer can be extremely useful. ... handle negotiations ...
I'll never understand how anyone can think someone who get's paid only if you agree to a deal could have their best interests in mind.
Even the seller's agent generally have perverse incentives as pushing to close a deal for $N,000 more only get's them $N,000 x %C vs. losing 100% of it if the deal does not close.
If you are working with some random real estate agent then sure. They are just going to push crap on you and hope you sign.
You should build a rapport with one you trust. Then they don't get paid until you are happy, since you aren't going to buy something you aren't happy with and they know that. It took 2 or 3 to find one that I felt was working for me. Dragged him to all 20 properties I wanted to see in a day and told him no on everything and that was that, until the one I wanted popped up. Then I let him argue with the seller about things that I wouldn't have any idea how to approach.
I understand all that, which is why I said the industry has room for improvement. What I'm arguing is that they have value -- they save you from taking on what is essentially a part time job that you're going to be bad at, and that they have potentially years of experience in. Whether the way in which they're compensated is fair or not is a different argument.
The tech bros are right about searching out and notifying you about properties, computers do just fine at that. As far as title, legal, etc, certainly something best left to a professional. But it should be fee based, not 6% of the value of the asset.
Even with an agent you separately hire a fee-based lawyer, title search, appraisal, and house inspection. The agent helps coordinate things but that's not really a specialized skill.
On the sell side, an experienced agent can be much more of a help. Even there, we used Redfin the last time we sold, and the difference in commission was a full 2% when compared to a more conventional broker.