Part of the problem is that most realtors want it that way. I live in Austin, and the push for a few years now has been to have a "silent market" where a buyer picks a "full service" realtor (AKA full commission), and gets a week or so jump on properties being listed in the MLS. This gives them a better chance to get the property before the MLS hordes descend and start bidding it up.

The part I've never understood is, as a seller, why wouldn't I want my property to have the largest exposure and the most interested buyers. Presumably, having people getting into bidding wars for something i'm selling is a benefit.

> "Part of the problem is that most realtors want it that way."

absolutely. the cartel doesn't help the top 2% of agents, because they're good enough to earn the 6% (or higher) anyway, but the monopoly works because the overwhelming majority of interested stakeholders benefit.

(that's not to imply that most agents are lazy though. a stat i dimly recall is that only about 10% of agents make enough to be full time.)

Well its a pyramid scheme like many of the state licensed businesses. The low level agents have to work for a broker who soaks up the majority of the commission. Only after being an indentured slave for a few years do they get the "privilege" of themselves becoming a broker. The problem is that once that happens no one will hire you, so your on your own for finding clients/advertising/etc. That takes capital most low level agents haven't managed to accumulate working for someone else. So its likely they need a significant other/whatever to support them while they build the business while competing with the larger agencies that have the money to plaster signs down the freeway and run advertisements.

Given some luck/skill and a lot of hard work, maybe they become large enough to start hiring agents themselves, and the cycle repeats.

Agents make at least 60% from day one. It is easy to find a brokerage who will offer 70-80% day one. So in that respect I don't think it is a pyramid scheme at all. Also, there are plenty of brokers who work in a larger organization without being the broker of record. But as you noted, advertising is not free. It is extremely expensive to market as a real estate agent, and that marketing cost is why most agents fail. It is just too expensive to start. In my area, I would allot at least 30,000 a year to get going as an agent for the first year, and more each year after that.

Source: On the fence about dropping my license right now.

yah, it's not a pyramid scheme so much as it exhibits power law characteristics (80-20 rule and such).

Sounds like software engineering today.

Where most engineering interns are probably paid more than the median national household income? Where starting salaries are in the 6 digits?

I mean come on, sure 120-150k starting salary out of university is only a thing in SF, Seattle etc but even in other parts software engineers are paid well. 80-90k in some city in midwest where housing is super cheap is a great middle class salary.

Only in Tech Hubs like NYC or SV...

How much lower is the starting pay in Boise, or Kansas City or some non-tech hub? My startup company pays well over 100k for college hires with no experience. And other companies pay more. Yes, we are in one of the tech hubs (Seattle). If other companies don't pay nearly as much, why would people work there?). You might pay 20k a year for your cool apartment in walking distance to bars, shops etc, but you have a great lifestyle.

One of the key functions of a broker is to provide plausible deniability, such as screening potential buyers who you think might waste your time or to avoid accusations of discrimination.

Brokers have to present all offers.

They may have to present all offers, but they don't have to present them in the same light. When I've been presented offers they DEFINITELY tell me about the strength of the buyer, what kind of financing, and what the deal terms are signalling. This stuff definitely matters to me because I've had to hassle with cash-poor buyers before and it just isn't worth the time, even in a buyers market.

The information about the strength of the buyer comes from their proof of funds or pre approval.

Legally the broker is presenting an off utilizing an agent. An extension of them essentially.

But at least they can waste the brokers time rather than yours.

Perhaps a pocket listing isn’t paying the Buyers Agent half of the fee, so saving 3% right there. Depending on the market that may be worth it versus going to the broad market and having to pay both sides of the commission.

Pocket listings still pay both halves but are often discounted down to e.g. 5% instead of 6%. The agent tries to spin the situation as a discount to the buyer and seller as they "save" 1% on commission. One of the main justifications for why the agent "deserves" a 3% cut of the deal is that they are working to represent you and safeguard your interests. That can't happen when they're representing both sides. It's as perverse as a plaintiff and a defendant using the same lawyer to save 1% on legal fees.

In a given market area there are literally thousands of real estate agents. Even with a 1% discount off the top, what do you think the odds are that the best offer on the market just so happens to be a listing that your real estate agent just so happens to be the listing agent for?

Real estate is a racket.

I get the impression the austin market is more formalized and is run more like a mini private MLS... (might be wrong), but part of the goal seems to be to keep out the discount realtors/redfin/etc.

Why would someone sell their home without listing it if they are still paying for a commission?

Zillow CEO argument falls on it's face. If this was such an important transaction, buyers would chose top dollar firms across the board, contractors, architects, masons, etc. Yet the fact all these survive the most competitive, bottom dollar market. Only realtors who carry no liability compared to the above, they still enjoy top dollar. This is a rigged market signal.

>Only realtors who carry no liability compared to the above, they still enjoy top dollar. This is a rigged market signal.

Realtors are among the most sued profession out there... I'm not sure why you don't think they carry any liability.

An engineer or an architects is responsible for life safety, structure, etc. All carry a substantial liability insurance. What could be a pitfall for a realtor if there is above the board transaction?

Nothing came of it? The whole Virtual Office Website (VOW) thing got created.. before meetings NAR and RESO intone legalese about encouraging competition. There's a lot of fear that the FTC will step back in and do something. With the level of MLS balkanization, innovation has a bunch of high hurdles.

VOW, and IDX also. The whole reason that sites like Zillow, Redfin, etc. exist is because of the (successful) lawsuit against NAR causing them to open up their data to third party companies.

I worked for a real estate company building an online real estate service since before the creation of VOW/IDX. Prior to that, the way we got access was through my boss's own real estate brokerage account with the state's main MLS. We expanded to support more MLS's in the area and each one was a huge pain in the ass. We had to have customers who were members of that MLS BEFORE they would give us access to their data. They would limit the data we had access to as much as they possibly could, and had absurd rules about what could/could not be displayed publicly, as well as privately when members of our customers' sites were logged in. It became much easier to get access to the data after the VOW/IDX implementations rolled out at each MLS.

Oh god the horrors that are idx. I just had flashbacks of dealing with the various schemas from different MLSs

i mean, relative to what they could have done (sued for damages and broken up the monopoly), structurally nothing changed.

but if you promote free and fair markets, you'd discourage/dismantle this kind of protectionism.

The Bush Justice Department did sue! https://www.justice.gov/archive/atr/public/press_releases/20...

There's a reason that NAR has their logo on a nice building a few blocks down from the US Capitol (500 New Jersey Ave NW). :-)

> a truly competitive market would probably put the commission in the 1-2% range.

This depends a lot on the price of the house. Selling a million dollar home isn't 10 times more work than selling a $100,000 condo.

And handling a money transaction is mostly orthogonal to the amount yet many (most?) are charged as base fee + percentages.

But that's not really a competitive market either.

Yes it is. Becuase the hard part is not selling it, its getting the listing. And you bet your ass that a the 10 million dollar home goes to the well dressed, swanky offices top ads agent, not your "aunt's best friend".

You took my word "selling" replaced with "customer acquisition" then argued I was wrong.

You're right, that the majority of the work of a 10 million dollar house is customer acquisition. And this isn't true of a 100k condo.

But this was my point, 3% of a 100k home is close to the competitive market price. But 3% of a 10 million dollar home is pretty far away from the competitive market price.

I'll try to rephrase it:

100x the comission might have 100x the competition. As a seller of the house, you pay more but you also get better agents.

You're not getting a 100x better agent, and most of the best i.e. most successful agents I've seen weren't necessarily better negotiators, better at contracts, or more responsive. They were specifically better @ marketing and selling themselves.

The most successful agents I know close houses twice as fast as other agents. But they close them twice as fast as other agents because they're listing them under market value.

My wife was a real estate agent for 5 years but she got out of it because all of the most successful agents she met were more successful in ways that hurt the client not helped them.

Examples - convincing their clients to settle for homes quickly, convincing clients to list their house less than market value, weeding out easy clients.

My wife is also in the real estate market: the reality is that people's incentives are not maximized on house value, they also care about other things , like safety, patient, attention, etc.

It is what it is. RE is not a perfect market because goods really cant be commoditized.

I reiterate my point with one more argument: the average income of a realtor is very low: they make very little money. The number of active realtors is almost perfectly correlated with house prices: that means a highly competitive , and thus relatively efficient, system.

Looks like you've got a lot going on but I'd love to learn more about your thesis and thoughts on RE. I'm working on some projects in the area.

i'm a bit rusty on the details, but happy to help how i can. we were looking at the auction model as a potentially viable alternative to the commission model predominant in the US. we found this stranglehold by NAR & it's MLS network to be a key barrier to entry.

Property transfers, including buyer, seller, and sales price, are public record. It's all published in the newspaper. How can MLS control access to that information? Is it just that nobody else bothers to compile it from the county records?

As others have mentioned, that is after the property has sold. If you are looking to buy a house, that information is not going to help you. However, even for sold information, depending on the county you are in, those public records aren't always accurate. I don't know how frequent that is, but I suggested using public records when we lost access to MLS data a few years ago, and a coworker said they had problems with that data from some counties in the past.

If you are buying a house, the MLS is the place you need to go. And that is mediated by a Realtor or Broker in most cases.

Those are completed transactions, not properties listed for sale.

there's usually a 30-60 day delay on the public records. MLS gets that info in a day or two, if not hours, usually from the listing agent/brokerage iirc.

Purchase price is not public in all states

It isn't? What states don't put that information in the property tax records?

Montana for another. There have been attempts to change that which have all failed in the face of industry lobbying and (more importantly) a Republican controlled legislature

In Texas I was able to lookup the original mortgage amount on a house, but not the actual purchase price.

Texas for one. No duty by either buyer or seller to report the sale price.

That's not useful to someone looking to buy. Listing data is held exclusively by the MLS.