The problem is: the vast majority of agents are useless. As seller agents, they cannot put together a decent portfolio, they know little or nothing about house construction and repair, and they will show the house to literally anyone - not just qualified and suitable buyers.
As buyers agents, they don't listen to your requirements. They show you what they want to sell, not what you want to buy. Plus the lack of knowledge mentioned above.
If commissions fall, maybe at least some of the incompetents will find something else to do...
It is really a big jump from “they add value” to “worth their commission”. When you see the amount of time and effort that goes into them adding value and compare to other parties that add value to a house, like trades building a new washroom or kitchen or garage for ballpark the same dollar values, and the effort required there, it shows how absurd the agent commission really is.
I would think a referral is only really excellent if from a person who had to do many transactions recently, and sampled at least 2+ realtors. And that's something that's quite hard to come by.
Unfortunately, this process is what we have now.
Word of mouth, or maybe Yelp reviews?
It’s pretty simple, more expensive homes are less liquid and take significantly longer to sell, because there are fewer people with deep enough pockets to buy them. This equates to more effort in actually finding a buyer. A $20 million dollar home may be on the market for years before it gets sold.
I’m guessing that if just one side of the deal was getting a % of the value, there would be a significant imbalance between the sellers and buyers agents, in terms of effort, which is something that you don’t want as a buyer.
it didn't make sense to pay the buyer's agent a percent of the home value which is what these lawsuits focused on. buyer's agent fees will most likely move to a fixed fee model.
I don't know where you are, but in Bay Area this is not true. And even for mega-expensive homes that don't sell as fast, the agent can't really accelerate this much -- certainly not commensurate to the giant commission they receive.
With expensive luxury homes you have a smaller buyer pool and more discerning buyers and they will sit on the market longer than cheaper homes. So I still stand by the fact that they are going to be more difficult to sell than a cheaper one for fairly straightforward reasons.
One of the key things a realtor do is set the asking price. the higher they set it, the more work for them. of course i want it high, so i want them incented to make it as high as possible, and to push me to stage it properly, have knowledge of WHEN to sell and then CRUCIALLY help me evaluate competing offers. Because often the highest offer is a scam.
Its a wild world out there you absolutely need a seasoned professional in your corner, who knows your market, fighting for you.
If they can get even one extra client per year for the other $9,000, it's much more worth it to do that than to hold out for a better offer.
What they are actually incentivized to do in expensive housing markets, is do the minimal possible effort per house, but sell more volume.
You could of course design a better incentive structure (fixed fee for median sale, tiered incentives for every % over that), and thats what i hope happens from these changes.
In both cases, the value they provide is relative to the value of the house being transacted.
A seller's agent definitely makes sense to take some percentage of the purchase.
The services they render - for say a $20M home in the Beverly Hills - are completely different than when selling a $1M house in San Jose or a $200k condo in Chicago.
I disagree in how valuable buyer's agents are, though. The value they provide is mainly for people who are completely clueless about real estate - which I guess could be a lot of buyers.
When buying a house, I viewed around 100 houses with my agent, and he called in multiple specialists to answer various questions we had on different houses we took a look at. When it came time to buy he demonstrated excellent negotiating ability and after we had purchased he helped us prep our house for move in by recommending trusted people to do the work we wanted done.
He worked with us for over a year and he earned his commission.
If you're selling a $20M home, and you think a good seller's agent is going to get you $20M instead of $15M - most people don't really have a problem paying 3% for the services - otherwise we would've never gotten into this common deal structure.
It's only people on HN who think realtors sit around doing nothing and make $100k selling an expensive home - and then generalize that to all realtors.
SOME realtors are definitely doing that. So are some people in every industry.
No, they do more for more expensive homes because they are harder to sell, but there is no reason "renting staging furniture" and "an extra open house with champagne and cookies" can't be itemized.
... but under the current system, the buyer's agent is also incentivized to get the buyer to pay as much as possible, to maximize their commission.
I agree we should push for a fixed fee model, including if no sale occurs, because while the buyer agent _could_ add value in a lot of these ways, there is not always reason for them to do so today.
Happy to pay them a few $100 for offer writing.
But most have little ideas about neighborhoods, builds etc. you have to do soooooo much of your own diligence.
A good sellers agent will know better than you how to prep your home for sale, how to market it, where to find qualified leads, what price to set it to, where to get contractors to make repairs, what kind of repairs are worth making, and when you get to the deal phase, how to negotiate and what paperwork is necessary, and how to deal with contingencies.
A good buyers agent will have deep knowledge of the neighborhood you're looking at (or can take your requirements and find you a good one), will have strong knowledge of the local schools, local demographics, local issues that can affect homeowners, what to look for in a home that could be a problem after purchase, red flags, and can help you negotiate the best deal and extract the most concessions from a seller.
But in both cases, I don't see why the value they provide changes based on the value of the home. Some of them might change based on the size of the home or property, but not the home value.
I don't see why we don't push for fixed fee based services, perhaps with an adjustment for local cost of living and size of the home/property? I know the Realtor cartel doesn't want that, but how can we citizens make that change happen?