^ this is good advice. There are really two things you need to rely on in real estate deals. The first is the legal aspect, which 100% absolutely should be handled by a lawyer. The second is negotiations, assuming you yourself aren't a skilled negotiator.

Neither of these things require an agent, and neither are worth $40K.

Negotiations could easily be worth $40K. It could easily be worth 6%.

Or it may not.

Worse: If I use the agent, I don't know whether the agent gained me 6% of the price in the negotiations. If I don't use the agent, I don't know if I cost myself 6% of the price (or more!) in the negotiations.

Someone could do a study, looking at sale prices of "for sale by owner" versus sale prices of comparable sales through agents, for comparable periods. Even that study is fraught - for us to trust it, it would have to be by non-realtors, but also by people not involved in the "for sale by owner" world in some way. And yet the study would have to get the comparables right - not just right, but clearly right, so that the results of the study will be believed.

Without such a study, we're all kind of just believing what we believe.

True. But agents aren't incentivized to negotiate lower prices because payment on both sides is proportional to total price sold. So logically only sellers would benefit from this.

Actually they are. It’s about volume not the few extra pennies they get on a sale - especially once you consider the brokerage takes some of that money.

The Freakonomics book went into this in detail.

https://freakonomics.com/2008/02/real-estate-agents-revisite...

If your house sales for $50K more, each agent gets $1500 more and the brokerage gets 20-40% of that. Let’s say 30%. That means the agent will get a little over $1000 extra.

They would much rather sell your house for $50K less and move on than convincing you to hold out for $50K more.

This. Though also worth noting: these agents are often working with the same small pool of other agents throughout their career. Their relationship with them is often more valuable than with any individual client, so it doesn't really pay for them to be adversarial on behalf of their client. Both agents are incentivized to keep a healthy working relationship and focus on closing the sale despite the commission percentage.

right and their negotiations are likely synthetic and geared towards mass deal making, which distorts the market in nuclear ways.

if we're all for transparent markets, these commissions interfere and it doesn't matter how close to reality they are as we can agree that they're largely not real, but synthetic amalgamations of something not related to the market.

> But agents aren't incentivized to negotiate lower prices because payment on both sides is proportional to total price sold

Typically, agents (on both sides) are incentivized to doing whatever makes the sale happen with the least time, risk, and effort, because what they lose on commission if that involves a (not extraordinarily unreasonable) price cut they make up for in volume.

[delayed]

I think that technically the seller's agent is the one given that 6%, but then they split it with the buyer's agent 50/50.

The argument I've seen made is that the buyer's agent's motivation to lower the price comes from wanting their client to actually make the purchase. That said, I'd think that this is only motivating them to get down to the highest price that the buyer will accept paying, rather than the actual lowest price that's theoretically possible.

> Negotiations could easily be worth $40K.

I'm a better negotiator than any agent I've ever dealt with. Add in the white hot market the last decade and the only 'negotiation' happening was figuring out how much to overbid.

That could be true in your case, but for many people that might not be the case.

HN is full of self-professed master negotiators. Just look at any salary thread. I am absolutely willing to pay a realtor to negotiate for me (and in general to have knowledge of the market and know how to find the real market price) because I suck at negotiating and have no idea how to do it.

Well, the average real estate agent is also a shit negotiator on your behalf. The incentive structure makes it so irrespective of the skill set. The agent’s primary job is to sell themselves to you when they get the listing not to sell your house at max price. On the buy side they are also incentivized to close the deal rather than make you do a wise bid. That said during a bidding war, if you are a buyer and your agent is a rando or you don’t have one, the seller agent almost certainly will give the last word to their buddies in the industry so you’ll lose the bidding war. That’s about the only value I’ve seen an agent provide.

I don't consider myself to be a master negotiator at all, but I can look at Zillow and know how much I want to spend or how much I want to sell for. The internet has removed a vast majority of the information asymmetry involved in house transactions.

There is insurance on real estate transactions for a reason.

Not exclusive to realtors.

Many realtors works take a consulting fee too navigate things. Try.

I never understood Title Insurance. Isn't the whole point of a lawyer handling the transaction to look for potential gotchas? As opposed to just rubber stamp it and let the insurance handle it if something does come up?

One case is titles don’t transfer instantly. If there’s a backlog and something happens during then, insurance can help with that:

Beyond that getting a lawyer to handle a sale doesn’t seem much different with or without a realtor. They have their own liability insurance.

Realtors def help navigate the market agent they are competent in it.

Here's an example: I've got a house under contract and in the title report it shows that in 1906 (!!) the then owner of the land (prior to the house being built in 1946) signed away mineral and timber rights. Unclear at this point who those rights belong to, but doesn't appear to be the homeowner. In another case, I had a seller client who had been a victim of title fraud on a piece of scrub land. Title insurance is something you hope to never need, and admittedly it mostly involves family esoteric scenarios, but it really is there to protect buyer and seller in their ability to convey property.

The problem in this case is that the seller's agent takes the whole 6%. It's not that they only take 3% (which is the most disgusting part here).

It is customary, at least in some locales (US-AK), that the commission is split evenly between the agents.

I would caution against assuming that anything related to commissions is actually customary, including an even split. All of this really is negotiable, and when I think about the past year, I've seen multiple occasions where different splits were offered. For example - I referred some business to an agent in Tennessee, who in order to pay my referral* convinced seller to offer a lesser split to the buyer's agent. I know of at least one agent in my market who does similar. I know of another agent who charges at least 10% on any land deal, while others are flat-fee.

* If I were a member of the public, I'd be more upset about referral fees than commissions. This is a far more grey / nebulous area of real estate compensation. We have to disclose and discuss commissions up front, but referral fees are often in the shadows and definitely can cause buyers / sellers to pay more.

yep, agreed. I know and have talked to some brokers about this in the past, and also closed a few deals as both a buyer and a seller. The commission was split evenly in my experiences but I should have said ‚typical‘ even if only as a starting point in negotiations.

6% and 3% are negotiable figures.

Right now one of the realtors we've interviewed takes 5% and offers 2.5% to the buyer's agent. Not much better. They also offer 4% if they are a dual agent.

But I know of cases where a buyer without an agent got the seller agent to accept 4% overall while only representing the seller (but handling the paperwork necessary to complete the transaction.) That 2% was a worthwhile part of negotiating, allowing the buyer to get a lower price.

Canadian here. Sadly, it's common practice around these parts for buyer agents to completely ignore listings that don't have a selling agent attached; it's their form of industry protectionism.

As a result you end up losing out on a large surface area of buyers who rely on their buying agent to find properties, which puts you at a disadvantage.

A "selling" agent IS the buyer's agent, a "seller's" agent (listing agent) works for the seller.

That tells you how the agents view their job responsibilities, the buyers agent ultimately sells a house (to the buyer), the sellers agent advertises (lists) it.

Are the buyers not getting a feed of every MLS listing in their target area?

That entirely solved our purchasing problem - we got automated daily or sometimes hourly emails parametrically filtered by school district, build date, price, square footage, and lot size whenever a new listing went up. It would have been stupid to have our agent filter them based on the deals that were better for him or his industry.

We had a uniquely good agent who spent hundreds of hours with us filtering hundreds of listings, visiting probably 60 different houses at all times of day over the course of a year before we finally bought, submitting a dozen offers, and helping us through the closing process, and then using his builder's license to help us ready the home we bought for move-in. He was extremely knowledgeable about all kinds of building inspection issues and the procedural minutiae. We happily paid him the 6%, it would have been far more costly to bring along an inspector/attorney/general contractor at an hourly rate.

Whenever we’ve bought a house, we told the agent to not bother sending us listings or set up viewings. We simply checked open houses on Redfin and Zillow ourselves, and if we liked a house, we’d ask the agent to prepare an offer, at a price we set. It is not to figure out what a house will sell for if there are enough other sales in that neighborhood.

For their reduced work, we’d ask a reduction of their commission.

In the US, this will severely limit your options. Most houses are posted to MLS first, and don't make it to public sites until later. If you want to get the best deals, you gotta have an agent send you MLS listings daily, swoop in and make an offer on the first day before anyone else sees it.

When I bought my last house, my agent was able to send me dozens of listings from MLS for homes that weren't listed on public websites.

Then this is why agents exist. That’s gate keeping to protect their patch.

Definitely. But if you want to get a deal, for now, you have to play the game.

That was not our experience in California.

One of our agents would still send MLS postings to us. We usually got that email after we’d gotten the same email listing from Redfin. And not once was there an MLS listing that wasn’t listed on Redfin.

I'm curious about your location and whether your agent was engaged in pocket listings*. When I push new listings to the two MLSs I belong to, they syndicate to all the various sites almost instantaneously.

*Pocket listings are something more of the public should understand, as they are almost universally bad. Listing creates a market and gets your property in front of the most potential buyers.

You can pay a flat fee to put your house in mls without an agency - it’s couple hundred bucks

Did you reply to the wrong comment? I am talking about buying a house.

Websites have obviated the utility of a buyer’s agent “finding” houses for 90% of buyers.

Setup alerts for the type of house you want, draw the geographic boundaries on Zillow, and spend 2 minutes looking at the listing and maps to find out everything an agent would have been able to tell you.

I have routinely found more homes by looking around the neighborhoods I wanted to buy in than what I found on Zillow. They don't seem to capture all data sources well (or something else may be afoot, I'm not sure)

I presume their data source is MLS. Perhaps the homes you are finding are not listed in MLS?

Its possible, but I don't think thats the only thing, the reason being that they are listed via Realtors (usually) and I can sometimes find them on other websites (e.g. Redfin) or in the local real estate flyer booklet, but it simply isn't on Zillow for some reason.

I wish I had a recent example, but I tested this theory multiple times when I was house hunting, and I don't think I'm hallucinating the issue.

There are multiple MLSes and Zillow only has deals with most of them. It's possible you're in a region with prominent "local MLSes" that decided Zillow wasn't paying them enough for access.

The following video explains some of the possible discrepancy due to pocket listings not appearing in Zillow. It also suggested that realtor.com had more listings in its database in some neighborhoods.

https://www.youtube.com/watch?v=_emO4Dl8sUM&t=1740s

> find out everything an agent would have been able to tell you

These websites are great and I'm glad the public has the information they have, but they don't tell the whole story - especially for someone coming from outside the market.

I'm thinking here of just the last few of my transactions - flood zone issues, title issues, broken sewer lines, pricing, emblements, water rights - like needing to cure in order to preserve, surveying, sub-division, zoning use, farm tax status. Plus finding all the professionals needed to support the process - I'm spending my day calling plumbers so that I can keep a deal together for buyer and seller, for example. I don't think the public appreciates what life was like before listing services - it's one of the major advantages for consumers that we have in this country over other places, IE: attempting to reduce information asymmetry.

How can these services justify a large percentage of an asset with zero guarantees or clawbacks? You are seriously justifying all of that for a 6% of the most expensive asset anyone will ever buy? Why is it not a flat rate, i.e. $1-10k to sell a home?

Because:

A) If you want to work with a flat rate agent, go find one. Every property I have in my pipeline right now is on a different commission level, and only a couple of them are this magical "6%" the public loves to believe is "standard". Some of them are even fixed amounts.

B) It's only "6%" if the agent does both sides, otherwise it's whatever the agreed upon split might be - say 50/50, so you are only getting 3%. And, as a few astute observers in this thread have noted, the brokerage is going to further reduce what goes into the pocket of the agent themselves. I've had plenty of deals where my actual net was at or under 1% - I've even had deals where I lost money.

C) So if I sell a $10MM property that takes a year to sell and needs tens of thousands in marketing dollars to sell, I should accept only $10K in compensation?

D) Let's say you've got some shitty dilapidated house or scrub ground with zoning issues, maybe a barely inhabitable cabin somewhere. I find a buyer for it to get the monkey off your back. What's that worth to you, to have the pain gone? You think I don't deserve compensation for spending potentially months or even years to bring you a deal? When I sell properties like that, it is at best a break-even proposition for me, but someone has to step up and assist the public.

E) Everything I listed in my post is about risk management. I am assisting you with not buying a foot gun. In some cases, I am assisting you with buying an asset that will bring cash flow or other financial benefits. In other cases, I may be assisting you with getting a financial drain off your back. Perhaps not for you, but do you begin to see why these service do have value for many consumers?

It's normally about this point that someone in one of these threads says "but I'm taking about 'normal' deals!" Dude - anyone who has been in the real estate business for more than 5 minutes knows that the so-called "normal" deals that the public loves to talk about are maybe one deal a year for an active agent. They are the unicorns of the real estate world. Likewise, people in urban markets have likely no idea the variety of real estate transaction that happen in the world. At the moment I've got transactions in my pipeline for land development, commercial, leases, duplexes, not to mention basic residential work. And every single one of those have unique challenges.

Canada is typically 7% commission on the first 100k and 3.5% on the balance.

As the average price has increase this has also gone up.

The fees are high for a low level of digital literacy and competency. Running anything more than a basic level of search is usually impossible.

A friend of mine had some decent parameters (distance to school, work, family, etc) and it seemed to boil their brain to find a way to map this.

It was almost o the point where my friend almost was going to become a realtor tog dt access to the data to run his own searches.

He calculated it was cheaper than the commission.

Realtors are like lawyers, too many don’t know everything but act like they do. The ones who specialize and actually are experts are worth it.

Not showing houses that don’t have a selling agent is a great reason for buyers to avoid having a buyer’s agent.

But if the buyers see your property on Zillow wouldn’t they insist on seeing it?

Canadian here too. I only ever bought one house, in 2005, and I'm still living in it. But I seem to recall that the agent - a good one, referred by friends, and referred onward - had a boilerplate contract in which I was responsible for his commission even if I independently bought a FSBO (pronounced "fizzbo" in realtor lingo, i.e. completely off-system For Sale By Owner house) during the contract period. I had that scratched out before signing.

For realtors it's very simple. Why spend time on something they won't get paid for? Why bother arranging a tour of a FSBO house, unless that one says "agents welcome" in its listing which means they will pay the buyer agent fee. But if that contract is standard, what's the disincentive? Just the unpleasantness of actually enforcing it when necessary?

Common here seem to be "flat rate MLS listing" services, where you pay a few hundred dollars and they list it, and you're your own selling agent. You still pay the 2.5% to the buying agent and say so in the listing.

And yeah, the dream customer of every selling agent is a clueless first-time buyer who just calls up the agent on the for-sale sign. Double commission!

>For realtors it's very simple. Why spend time on something they won't get paid for?

Isn't that almost everyone doing work? I don't do work for free.

>the dream customer of every selling agent is a clueless first-time buyer

I've purchased multiple homes without a 'buyer's agent'. I'm certainly not clueless. It's actually a great negotiating tactic and often yields real savings.

Agents are grossly overpaid, but buyer agents in particular are just an enormous waste of time. It was actually our first home purchase where we did use a buyer agent and it was...eye opening. People under illusions that buyer agents are actually informed or acting in the buyer's interests are the most clueless of all.

It does depend on the agent. I trusted mine and saw no red flags during, or after the transaction. He was referred to me by a colleague who is a serial house ownership addict, and I referred him on to several others, and all were pleased. My own house was listed at $X, so I simply asked him "what's it really worth?" He said $Y, where, at the time, Y<X and houses took time to sell, and we went through a few rounds of the haggling thing with the seller until they counteroffered $Y, and then accepted, easy peasy. And the house I now live in is one he added to a tour of several I had picked, and THAT was the one I instinctively liked and still do. That's really how it's supposed to go, right?

If you were in the US, most likely the Sellers agent then kept the full 6% fee unless you negotiated it down on that first transaction.

In our case, the agent accepted a lower commission because both they and the seller got more money from our offer then they would have from the competing offer which had a buyer's agent. We didn't negotiate that though, because that's entirely between the seller and their agent.

How is it cheaper? Typically the seller's agent pays the buyer's agent.

If you're a buyer and your agent demands payment, they're probably taking you for a ride...