Add in closing attorneys and home inspectors being brought in-house to reduce costs, it can be a very expensive start-up cost that would require lots of capital to achieve. Zillow/Opendoor got REALLY close, but they stopped (Zillow) or, like you said, lowball offers because they're fronting all of the backend costs that used to be spread across 4 or 5 different services.
You are right, a party trying to fix this will need great funding, large scale, and they can't be someone that will just sell out (ala zillow). With the NAR's ability to block out parties that they don't like, it might not even be practically possible.
In my area, since I bought my first house 10 years ago house prices have 4X'd. I don't think the wages of most professions have, the demand for housing makes it easier to sell, so why should agents be making 4X more?
While I do think RE agents are overpaid in expensive markets, I also kind of think...good for them. Pegging your wages to your most expensive living cost is a supremely intelligent move.
I'm trying to figure out why nobody's figured out "DIY MLS listing as a service without having to pay for a realtor". Maybe everyone who does this just gets a realtor's license or something.
1. I could not list the home in MLS as That system requires annual fees to use and you need to have a realtor license.
2. You still need to pay the purchasing side’s realtor otherwise they will simply not consider your home for their clients. That’s 3% that’s hard to get any lower.
I ended up negotiating my realtor’s selling fee down to 1.5% with the promise of using them for my purchase as well.
Additionally, if you were to decide to list "For Sale by Owner" and market it yourself, you can submit it to the major aggregators (Zillow et al), but their contracts with the MLS systems often disallow them from mixing MLS and FSBO listings in the same search result set, so the FSBO listings are hidden behind a toggle or something and go unseen by the great majority of people browsing.
Thanks for your reply
Maybe I'm misunderstanding how this works.
With (often) the seller holding a lot of the cards, they could simply insist that any buyer pay their own agent, or buy elsewhere.
If the demand is even minimally high it wouldn't take a lot of sellers to cause people looking to buy to avoid signing on with an agent just to find a house.
If the seller's agent is comfortable acting as the intermediary, and recognizing the limits of conflict of interest, then it's in their best interest to keep all of the 6% commission instead of giving half of it to the buyer's agent.
Your area might be different, of course.
It also just seems kinda dumb that realtors get paid a percentage rather than a flat fee. On the buyer side, it's essentially the same amount of work to help someone find and buy a $200k house as it is for a $1M house. For the two properties I've purchased, things moved so quickly that I don't think the realtors had to do all that much. Conservatively, the first one made at least $2k/hr, and the second at least $1k/hr (and I'm probably underestimating there). I'm not saying their services weren't valuable -- they certainly were -- but I can't see most people agreeing to pay that rate if it were presented to them that way.
And I'm not convinced there's all that much of a difference on the seller side, either. The staging is going to cost more for a larger/nicer house, but the sellers are paying separately for the staging anyway. I was also reading somewhere recently that orgs that control access to the MLS will not even allow you to list if there's no buyer's realtor's commission, and there's a floor, like it has to be at least 2% or something.
From the buyer's perspective, I really liked Redfin's pre-pandemic model, where they'd give you part of the buyer's commission as a "refund", because their realtors are salaried. I assume they figure out from the traditional commission how much they need in order to pay their own operating costs (plus whatever profit margin they've decided to take), and then give you the rest. Of course, they stopped doing that during the pandemic, and now pocket the entire buyer's commission.
Granted, the realtors we've worked with through Redfin were hit-or-miss. One we worked with was fantastic and knowledgeable, and helped a ton, but another (in a different region) let us put an offer on a home that we wouldn't have been able to rent out legally in the way we wanted to, which is something she absolutely should have known (a non-realtor friend alerted us to the issue; fortunately we were able to rescind the offer before it was acted upon). I haven't listed anything on Redfin as a seller, but they charge 1% of the sale price, which is a lot better than the 2.5%-3% traditional realtors take. Still, the percentage model seems unnecessary there too; the amount of work needed to sell houses of different values shouldn't necessarily be directly linked to the eventual sale price.
> But if you think about that wholistically, that means sellers are paying 8-10% of the cost of a house every time they sell!
I can only assume this also is part of our housing affordability issues. Sellers need to see some minimum amount of appreciation (and a fairly large amount at that) in order to break even (without even taking inflation into account), so homes sell for higher than they would otherwise, especially in markets where sellers have the upper hand.
Title insurance is a total scam. Title insurers pay 3-6% of their premiums in claims [0]. Compare to auto insurance, which is ~80% [1], or home insurance (~50-70%) [2].
[0] https://www.ceicdata.com/en/united-states/title-insurance-in... [1] https://www.insurancejournal.com/news/national/2023/05/12/72... [2] https://www.spglobal.com/marketintelligence/en/news-insights...
Title insurance is relatively cheap compared to home or auto insurance. It’s a one time purchase cheaper than the 6 month premium of either of the others.
Are you intentionally glossing over that it could/should cost less than 1 month of premiums of either of the other types of insurance?
I don't think you've quite understood the idea of looking at loss ratio. On the aggregate, title insurance is incredibly expensive compared to home or auto insurance. These bits of friction add up over an entire market, especially in states where title insurance is fixed by regulation at an extraordinarily high price.
The weirdest thing I've found about title insurance is that people who have purchased it come out of the woodwork to try to convince themselves they weren't scammed. It's not just title insurance salesmen astroturfing; people honestly just never want to admit they were scammed and will somehow fight tooth and nail against cold hard mathematical facts.
On that note, I can also offer you rapture insurance for $10/lifetime! That's cheaper than even a day of your homeowner's insurance and it's a one time purchase! By your logic, this insurance is therefore a good deal and totally not a scam!
[0] https://subscriber.politicopro.com/article/2023/03/fannie-mo...
But if you think about that wholistically, that means sellers are paying 8-10% of the cost of a house every time they sell!
Surely that means someone could cut the cost in half and make a much more attractive platform, right? Opendoor comes kind of close, but they end up shouldering a lot of the risk of the transaction and therefore tend to lowball.