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.