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There are now more Real Estate Agents than houses in the market. Why are fees still so HIGH? (6% still the norm)

JEDI

Lifer
Sep 25, 2001
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Because the pandemic, 130k people got a real estate license. (it's a low bar for entry.)

There are now 1.5 million members of the National Association of Realtors.
however, there were just a little more than 1.3 million homes for sale, down 27% compared to the same time last year.


Sellers are still paying 6% real estate fees for larger real estate firms. (3% to his real estate firm, 3% to the buyer's agent)
(yes, some smaller firms are only charging 4.5% (1.5% to his real estate firm, 3% to the buyer's agent)).

it's been 6% for like forever.
why is it still so high??
Shouldnt competition drive the costs down, especially with skyrocketing housing prices?

Why is still the norm?!
Why isnt it down to 1% (up to $10k max) for each side as the norm?
 
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SmCaudata

Senior member
Oct 8, 2006
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It's effectively price fixing that no one seems to want to do anything about.

Financial fees like account management and fund fees are all a big crock.

The wealthiest group of people don't actually add value. They simply help two other people exchange money while they take a cut.
 
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Feb 4, 2009
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Simply because in at least my State there are four people involved in every deal that need to be compensated.
Sellers agent and their broker
Buyers agent and their broker
Each needs pay, doing more than 20 transactions per year is a task only a few percent of realators are capable of doing with having an assistant.
Do the math, there needs to be enough money in this scenario that everyone earns enough to live, feed themselves, pay various licensing, advertising and educational fees. Plus the basics like signs, print material, wireless phone and likely a laptop or tablet, they also need to travel a lot.
They all need to buy healthcare, save for retirement, ideally take a week or two off per year.
Let’s run with a minimum of $75k for all that for each party.
$300k/20 transaction = $15k per transaction.
I know the above is a huge simplification. The point is there are more than one person involved in a real estate transaction. Those people are licensed professionals. They are carrying 95% of the liability, they deserve compensation.
 
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JEDI

Lifer
Sep 25, 2001
27,422
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Do the math, there needs to be enough money in this scenario that everyone earns enough to live, feed themselves, pay various licensing, advertising and educational fees. Plus the basics like signs, print material, wireless phone and likely a laptop or tablet, they also need to travel a lot.
They all need to buy healthcare, save for retirement, ideally take a week or two off per year.
Let’s run with a minimum of $75k for all that for each party.
$300k/20 transaction = $15k per transaction.
I know the above is a huge simplification. The point is there are more than one person involved in a real estate transaction. Those people are licensed professionals. They are carrying 95% of the liability, they deserve compensation.
in big cities like the DC area where i am, house prices are like $300k avg!
300k x 20 = $6M!
6% of $6M = $360k or $180k for each agent.

yeah no in my book.

and you sound like a shill for the real estate business.
you in the real estate business?
 
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skull

Platinum Member
Jun 5, 2000
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Simply because in at least my State there are four people involved in every deal that need to be compensated.
Sellers agent and their broker
Buyers agent and their broker
Each needs pay, doing more than 20 transactions per year is a task only a few percent of realators are capable of doing with having an assistant.
Do the math, there needs to be enough money in this scenario that everyone earns enough to live, feed themselves, pay various licensing, advertising and educational fees. Plus the basics like signs, print material, wireless phone and likely a laptop or tablet, they also need to travel a lot.
They all need to buy healthcare, save for retirement, ideally take a week or two off per year.
Let’s run with a minimum of $75k for all that for each party.
$300k/20 transaction = $15k per transaction.
I know the above is a huge simplification. The point is there are more than one person involved in a real estate transaction. Those people are licensed professionals. They are carrying 95% of the liability, they deserve compensation.
This.

Most of those realtors are inactive or do a sale or two a year as a hobby. Good active agents work their asses off, spend a lot of time and money on deals that may never close.

Next why don't you ask why a doctor needs $85 for a 15 min exam, the mechanic needs $120/hr or the service guy needs $95 just to show up to the door.
 

skull

Platinum Member
Jun 5, 2000
2,198
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in big cities like the DC area where i am, house prices are like $300k avg!
300k x 20 = $6M!
6% of $6M = $360k or $180k for each agent.

yeah no in my book.

and you sound like a shill for the real estate business.
you in the real estate business?
You missed the part where the agent splits that commission with their broker and they pay for their own gas and vehicle out of that.
 
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Feb 4, 2009
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in big cities like the DC area where i am, house prices are like $300k avg!
300k x 20 = $6M!
6% of $6M = $360k or $180k for each agent.

yeah no in my book.

and you sound like a shill for the real estate business.
you in the real estate business?
They also have exponentially more expensive marketing and customer acquisition costs, plus more expensive cost of living.
 
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Homerboy

Lifer
Mar 1, 2000
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I bought FSBO 20 years ago. And when I sell, I will sell FSBO.
My neighborhood is in such high demand then and still now, if I put a "For Sale" sign in the front yard, I could have it sold over the weekend for 10%+ over asking price.
 
Feb 4, 2009
31,492
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I bought FSBO 20 years ago. And when I sell, I will sell FSBO.
My neighborhood is in such high demand then and still now, if I put a "For Sale" sign in the front yard, I could have it sold over the weekend for 10%+ over asking price.
This is a totally respectable answer.
If you find the fees excessive the simple answer is to sell yourself.
This entails doing the research to understand what needs to be done, ethical portion of not turning away a potential buyer due to assumptions like age or race or kids/no kids and accepting the risk of selling on your own.
 
Feb 4, 2009
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You missed the part where the agent splits that commission with their broker and they pay for their own gas and vehicle out of that.
Plus electronic documents this shit isn’t free
Plus document storage
Plus legal fees
Plus insurance for potential lawsuits
Plus a secure transaction platform like dotloop
and so on
 

JEDI

Lifer
Sep 25, 2001
27,422
1,402
126
Next why don't you ask why a doctor needs $85 for a 15 min exam, the mechanic needs $120/hr or the service guy needs $95 just to show up to the door.
real estate is a low bar for entry, unlike a doctor or mechanic.
 

Homerboy

Lifer
Mar 1, 2000
29,753
3,475
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This is a totally respectable answer.
If you find the fees excessive the simple answer is to sell yourself.
This entails doing the research to understand what needs to be done, ethical portion of not turning away a potential buyer due to assumptions like age or race or kids/no kids and accepting the risk of selling on your own.
I have several friends that at attorneys as well to help with paperwork etc. But honestly, it doesn't seem like rocket science. There's ZERO need to "advertise" or even show a home in my neighborhood.
 
Feb 4, 2009
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I have several friends that at attorneys as well to help with paperwork etc. But honestly, it doesn't seem like rocket science. There's ZERO need to "advertise" or even show a home in my neighborhood.
Not sure where you are at so it may not apply.
As of three years ago in my area sale by owner properties took 20-something days longer to close and sold for 7. something less on average. This figure is a little tough to judge because it includes family transactions which typically sell for under marker value but much quicker.
Again just an average, if you do your research and don't do something stupid it works.
 
Nov 8, 2012
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It's actually not difficult to understand - at the end of the day consumers are just scared of something that they don't believe they can do themselves.

It's a lot like tax returns - the overwhelming majority of Americans simply just need to list their W2 income one 1 line, take the standard deduction, and pencil in the rest. But for some reason they see a tax form and run off scared to unqualified morons at H&R Block.


I think real estate is similar - people look at the forms, filings, and requirements needed for selling their home and they just immediately say it's too complicated and get a RE Agent.

Though there is supposedly some progress with reduced rates with the likes of Redfin.
 
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Homerboy

Lifer
Mar 1, 2000
29,753
3,475
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If its so easy go be one and pull down 180k a year in no time doing nothing like you think they do.
I think he's saying getting the license is the easy part compare to a doctor/mechanic.
being successful is hard (in any profession)
 

IronWing

No Lifer
Jul 20, 2001
63,005
16,473
136
Regulatory capture is the main issue. Localities could streamline and simplify the process for property transfers but heavy lobbying by the real estate agents has made damn sure that that doesn't happen.
 

Pohemi420

Diamond Member
Oct 2, 2004
4,456
1,897
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Why a percentage? Is there 10x more work in selling 10m house vs selling a 1m house?
If you were the agent working for sellers, would you want to settle for the same amount (ie flat fee) for selling a $10m house, as you would for selling a $1m home? I wouldn't, tbh...

Using a flat fee system also penalizes lower income people more. Should they pay the same fees when selling a $500k home as someone a few miles away in another area, selling a $5m home?

I just don't see a better way than % fees, tbh.
 

compcons

Golden Member
Oct 22, 2004
1,910
671
136
I am not saying it will be easy or that Realtors are not valuable, but I would expect to see some sort of on-line companies emerge to start helping average consumers through the buying/selling process. Kind of like Legal Zoom but focusing on how to do the back-end part of the transaction. With Zillow and Redfin, the front end of marketing and valuing (although not perfect), the selling part is pretty well handled already. It will undergo improvements over time, but it works. Its the paperwork that people struggle with. Imagine an online service where someone can look at and process dozens of transactions a day from an office in India. Plenty of people will be happy to pay a few thousand to the service versus tens of thousands to Realtors.

The online listing services have already taken the first shot across the bow, now someone just needs how to figure out how to make the processing part efficient while meeting local codes/rules and we will start to see a real erosion for Realtors. It won't be across the board as some people still want a human to handle it, but like TurboTax, the writing is on the wall.
 

Thump553

Lifer
Jun 2, 2000
11,968
1,306
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Rates are highly competitive, at least here in CT. Just negotiate it when you list your home. I do closings and I don't think I seen a 6% rate in a long time. Outside of one or two special situations (hard to sell property, low expected price) it certainly has been years.

What really bugs me is some of the bigger realtors here charge a $150-200 fee for record retention-because the state mandates they keep certain records. Nearly every professional needs to retain certain records-certainly attorneys, doctors, dentists, etc have to-and NONE of us take that as a surcharge to our clients. I guess that's the difference between a true profession and a wannabe.
 

IronWing

No Lifer
Jul 20, 2001
63,005
16,473
136
I am not saying it will be easy or that Realtors are not valuable, but I would expect to see some sort of on-line companies emerge to start helping average consumers through the buying/selling process. Kind of like Legal Zoom but focusing on how to do the back-end part of the transaction. With Zillow and Redfin, the front end of marketing and valuing (although not perfect), the selling part is pretty well handled already. It will undergo improvements over time, but it works. Its the paperwork that people struggle with. Imagine an online service where someone can look at and process dozens of transactions a day from an office in India. Plenty of people will be happy to pay a few thousand to the service versus tens of thousands to Realtors.

The online listing services have already taken the first shot across the bow, now someone just needs how to figure out how to make the processing part efficient while meeting local codes/rules and we will start to see a real erosion for Realtors. It won't be across the board as some people still want a human to handle it, but like TurboTax, the writing is on the wall.
The title companies do most of the legal lifting already and most of what they do is automated so I could see a front end company contracting with title companies to streamline the system. In my mind, the real estate agents are about as useful as…

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Feb 4, 2009
31,492
11,883
136
I am not saying it will be easy or that Realtors are not valuable, but I would expect to see some sort of on-line companies emerge to start helping average consumers through the buying/selling process. Kind of like Legal Zoom but focusing on how to do the back-end part of the transaction. With Zillow and Redfin, the front end of marketing and valuing (although not perfect), the selling part is pretty well handled already. It will undergo improvements over time, but it works. Its the paperwork that people struggle with. Imagine an online service where someone can look at and process dozens of transactions a day from an office in India. Plenty of people will be happy to pay a few thousand to the service versus tens of thousands to Realtors.

The online listing services have already taken the first shot across the bow, now someone just needs how to figure out how to make the processing part efficient while meeting local codes/rules and we will start to see a real erosion for Realtors. It won't be across the board as some people still want a human to handle it, but like TurboTax, the writing is on the wall.
yes and no.
There absolutely will be a lawsuit over asbestos or lead paint. All sellers will claim they had a Home Depot test (ie: a non professional test done on the cheap) and they inevitably will make the claim a House is de-leaded or contains no lead pain or that duct insulation or snowman furnace doesn’t have lead or asbestos because someone I know said it doesn’t.......until it does, after the home sale and now there is a $25k bill to de-lead and remove asbestos. This will go to court, there will be a documented case where a home owner says nope that is not lead or asbestos and it is. The seller will be held liable. In my State seller is liable for 4x damages and I do not want to guess what damages would be for a lead poisoned 3 year old.
As said by @s0me0nesmind1 if you want to sell cheap, learn how to sell or buy a shit load of legal protection.
This won’t happen often but imagine the fear of hearing or seeing in the news someone sold their house for $600k, then had a legal judgement imposed on them for 3 million.
Probably make you think twice about going the low cost selling route.
 
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compuwiz1

Admin Emeritus Elite Member
Oct 9, 1999
27,065
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While I've never paid attention, to the number of realtors, I've always had a sense they are a dime a dozen, as though everyone and their mother is an agent. I've met very few that have actual sales prowess, who are great enthusiastic presenters and closers. So while, the market is flooded with agents, very few are actually good at it and make money. I've met some who are very good and make a ton of money, but most have treated it almost like a hobby they dabble in and don't put much into it.
 

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