Good agents can be worth it.

Redfin provides a refund of a portion of their commission as a seller's agent. I considered them when selling a house. However, after having meetings with an agent of theirs and another independent agent that charged the normal 3% seller's fee, I decided to go with the independent.

The Redfin agent had suggested a price of $649k, while the independent suggested $745k. The house wound up selling just under ask of $738k. The Redfin agent did very little work to understand the value of the property and what it could be sold for, and only used an automated tool, while the independent agent did more work to select better comparable properties. And the more expensive broker wound up paying for some items such as light landscaping and staging, so the price difference was less than the percentage differential.

Obviously in this case the discounts Redfin provided did not nearly make up for the difference in selling price. A good broker can get a price that is vastly larger than the difference in their price.

However, Redfin would probably be great for selling properties that are part of subdivisions, or in a condo building, where the automated tool would work very well and not as much "human intelligence" is required to get the job done.

A good real estate agent you can trust is worth the 3%. They can foresee potential roadblocks, help you navigate the somewhat complicated process and really find you your dream home. The real trick is finding one of those agents.

I used to work in the RE business and there are good agents that earn that value and there are bad agents that don't.

You are paying for market expertise, negotiating experience and arms length distance.

On a slightly different note, this podcast and the book "The Middleman Economy" go into detail about why middle men (like real estate agents) are useful: http://www.econtalk.org/archives/2016/03/marina_krakovsk.htm...

Edit: typos

you pay them a commission because real estate deals can get ugly, fast, especially in competitive markets like in the coastal US.

a good agent has seen it all before, knows what to do when the seller or buyer starts making threats or is trying to angle the deal somehow. he knows what lawyers to call, what finance people to call, and yes, networks and has relationships with agents to get you properties that haven't hit the market yet.

out of my peer group who has ever bought property, i'd say a good third of them had some kind of issue during the deal that required an expert to mitigate.

of course a shitty real estate agent isn't worth their pay - but that goes for any job. but otherwise, it's the same old shit -- things are going great, what am i paying you for? things are going shitty, what am i paying you for?

I have a great real estate agent. He knew the math equations that HUD used to price their homes at auction, and what percentage of that price they'd take. Our first house (bought in 2008), he suggested that if we waited to make a bid on a house until a certain day, the price would drop, and they'd take 80% of the asking price. He was correct and we made a lot of money by selling when the market came back.

On the next house, he looked at the roof and knew that the house probably had a recalled shingle on it, and we couldn't even get insurance on the house with that shingle. The homeowner was stuck between replacing the shingles or taking a chance that the next buyer would have less attentive real estate/home inspectors.

Twice I have greatly benefited financially by his expertise. I'm not paying him a lot for his services necessarily (although he's great at it), I'm paying him for his expertise.

Some people really want to talk back and forth with a human and have an ear that will listen to their questions. Instead of shopping for their own house, researching areas, etc. So it's convenience cost for the hand-holding.