Do agents provide tens of thousands of dollars of value?
Also note the percentages I gave, it obviously depends on the price of the house.
Maybe real estate agents should structure their commission more like M&A bankers and account executives, which often have tiered or ramped fees that encourage the best prices, e.g. if the selling price is below X you get 5%, everything above X you get 10%, etc
It's sort of analogous to the American tax situation - many, many people I've talked to refuse to do their own taxes (even a very simple 100EZ) - or even use software to do it - because they've been convinced culturally that filing taxes is so incredibly complex and if they screw up they're going to be severely punished, so instead they pay an accountant a few hundred bucks to file a 1040EZ and get their tax refund - which they don't really feel because they just take it out of the refund.
I'm sure if I moved up tax brackets, the accountant would start providing specific feedback on minimizing exposure.
The 6% exists in a marketplace of various fees (some charging less) based on other arrangements (discount brokers, For-Sale-Buy-Owner). E.g. Redfin charges 1%: https://www.redfin.com/why-redfin-how-you-save
Apparently, Redfin has never made a profit.
Reminder that Amazon and Salesforce took multiple decades to make a profit
I might have implied I did much of this work. I didn't, outside of negotiating. The marketing is simply getting the house on real estate sites and in-front of buyer agents, which is what MLS self-listing services do for you for a flat rate. The showings were still handled by the buyer agents. The only thing I had to do was represent myself in negotiations, which was not that difficult.
Understood that some may want to do that, but the price difference is insane. If you save 4.5% (assuming buyer agent gets the 1.5% difference from 6%) on a $400k house, that's $18,000.
Regarding FSBO, this is where MLS self-listing plays a huge role. I tried selling my house for a few months by listing on Zillow (assuming Zillow is way more popular a decade later, but still) and sticking a sign in my front-yard. MLS gets you on every real estate site and at the fingertips of buying agents.
Lastly, as you say in your replies, the issue is justification of the 6%. There are lots of issues here -- super expensive, there is already a very serious principle-agent issue incentive misalignment, and the value is questionable. When housing prices skyrocketed, did their value skyrocket in tandem?
It's a puzzle to you because you had the personality & motivation to do the work of marketing+showing+negotiating the house yourself. You have inadvertently projected your DIY savvy onto other homeowners to do the same thing. But, a lot of home sellers don't want to DIY a home listing.
- some homeowners don't want to deal directly with potential buyers (pre-qualify buyer's bank financials, show them around the property, etc). Some homeowners are uncomfortable wearing a "salesmen" hat.
- some homeowners are not savvy about how to present and market their home. Sure there are endless books and youtube videos on jazzing up "curb appeal" but some people simply want a "professional" to advise them.
- some homeowners feel uncomfortable with legal aspects and even hiring an attorney specializing in real estate feels "weird". It's just more "normal and easier" to use a real estate agent.
Analogous situation in people selling things on ebay. What's the value in a service like iSoldIt[1] charging a commission for ebaying on sellers behalf when the seller can save money by DIY by taking own photos, using ebay website to upload the photos and list the item, and then pack & ship the item themselves?!? The value is that some people don't want to DIY certain tasks. I had a friend sell his camera via iSoldIt. I sell stuff myself on ebay all the time and thought he was crazy for paying the iSoldIt commission. He was a young programmer so he's not an old grandfather that would find ebay's website intimidating. He simply didn't want to deal with the whole ebay workflow and wanted some cash as quickly as possible. Consider that ebaying a camera is way simpler than selling a house and yet some still offload it to a service to handle it for them.
EDIT to replies:
>, but I don't think most people would be willing to spend 12k just to be more comfortable,
>Agents provide value. [...] Do agents provide tens of thousands of dollars of value?
To be clear, I wasn't trying to justify their 6% commission rate. I was explaining why most homeowners don't go the DIY route to save money which seemed more "logical" to the gp.
For decades, I saw endless commercials on tv for FSBO (For Sale Buy Owner) services trying to educate viewers on "don't pay seller commissions and pocket the savings yourself!" And yet, real estate agents persist. People are already aware of "selling by owner"; they just don't want to do it and would rather pay a commission.
[1] https://www.i-soldit.com/how-it-works/