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

[Amol S.]

Why is the federal government not implementing a "No buyers agent fee act". Basicaly, the salary that the buyers agent receives from the agents real estate firm, is the salary they should get. Real estate agent fees is like chipping of from profits of the real estate agency. Agents are basically driving customers away by placing fees for themselves. No agent fees means less to pay, and less to pay means more customers/buyers.

 

[MrSquished]

I don't need an agent at all, I just need to get into the house so I can look at it. I've never at any point in my three house purchases felt that a buyer's agent provided any real value, and seller's agents also provide minimal value. It's part of a bloated, outdated industry in need of streamlining and overhauling.

As I said earlier, some people don't need a buyer's agent. Have you met the average person though? A lot of them do.

I know people who discovered new neighborhoods they were not thinking of because of an agent. A lot of cases agents set realistic expectations that can shorten a buyers search time dramatically. A lot of people have zero vision unless the house looks like the perfect home out of a magazine, a guide is often needed. And more. A good agent saved my sister tens of thousands, or really just made it reasonable to get a home they wanted rather than passing on it by not overpaying, by dealing with a For Sale By Owner, who most of the time think their place is worth much more than it is. He went and sat down with the FSBO, showed them the real comps, and said this is what is fair value and he ended up meeting them tens of thousands lower than his own list price.

 

[MrSquished]

Why is the federal government not implementing a "No buyers agent fee act". Basicaly, the salary that the buyers agent receives from the agents real estate firm, is the salary they should get. Real estate agent fees is like chipping of from profits of the real estate agency. Agents are basically driving customers away by placing fees for themselves. No agent fees means less to pay, and less to pay means more customers/buyers.

In the US buyer's agents don't charge a fee to the buyers. Buyers pay absolutely nothing to the agent. The buyer's agent only gets paid by the seller if their buyers close on something. You end up wasting a lot of time with buyers that end up never closing on anything. Lots of hours of work for a gross income of zero dollars.

 

[brycejones]

Why is the federal government not implementing a "No buyers agent fee act". Basicaly, the salary that the buyers agent receives from the agents real estate firm, is the salary they should get. Real estate agent fees is like chipping of from profits of the real estate agency. Agents are basically driving customers away by placing fees for themselves. No agent fees means less to pay, and less to pay means more customers/buyers.

The buyers agent is compensated by the seller for you know bringing them the buyer.

You can also buy a house without an agent.

 

[nakedfrog]

I used RealtyPlus to get a kickback on my last purchase
From what I understand, it essentially came out of my agent's commission as kind of a lead generation tool.

 

[MichaelMay]

Using a realtor that takes over 5% is unheard of here, 5% were the point we stopped using them last time around and so most keep to 3% standard rate for anything but hard sells that can be up to 5% but more than that... LOL... da fuq are you smoking realtor twat?

 

[obidamnkenobi]

As I said earlier, some people don't need a buyer's agent. Have you met the average person though? A lot of them do.

I know people who discovered new neighborhoods they were not thinking of because of an agent. A lot of cases agents set realistic expectations that can shorten a buyers search time dramatically. A lot of people have zero vision unless the house looks like the perfect home out of a magazine, a guide is often needed. And more. A good agent saved my sister tens of thousands, or really just made it reasonable to get a home they wanted rather than passing on it by not overpaying, by dealing with a For Sale By Owner, who most of the time think their place is worth much more than it is. He went and sat down with the FSBO, showed them the real comps, and said this is what is fair value and he ended up meeting them tens of thousands lower than his own list price.

This sounds more like a "first time home buyer life coach consultant" than a realtor job! Picking neighborhood and haggling price is not something I'd expect from a realtor. And could be done for a fixed fee, not based on a percentage of purchase price.

 

[cytg111]

Again, you need to remember that the rest of the world exist. So you're saying that in most of Europe where they only have one agent involved, that home buyers are constantly taken advantage of, fail the process, and make poor decisions? There are thousands/millions, of failing home purchasers throughout Europe?!

Well, Europe is operating more with a fixed price right, so on the other hand, that doesnt give the broker an incentive to sell it for as much as possible, rather just sell it as fast as possible. I sure have seen that.

 

[Fanatical Meat]

That came up because there are so many crooks in the business. Buyers were being taken advantage of by unscrupulous sellers and their agents.

Where I have a problem is that Pat Brown can be a seller's agent on one listing and a buyer's agent on another. Playing both sides of the street like that can lead to some unfairness.

If Pat isn’t representing the buyer on another listing a problem?

Pat being both the selling & buying agent on the same property can be a problem but why would someone who has a problem with it sign a new contract that says “instead of representing you exclusively to the best of my ability I am going to represent both of you to the best of my ability”

If it is not the same home as the seller why is Pat doing something wrong working with a buyer for a totally different property that the seller is not looking to purchase.

 

[MrSquished]

This sounds more like a "first time home buyer life coach consultant" than a realtor job! Picking neighborhood and haggling price is not something I'd expect from a realtor. And could be done for a fixed fee, not based on a percentage of purchase price.

Yes, a good realtor is often a life coach/consultant among other things. People can often be clueless and unreasonable. Then you sometimes get couples, where each wants different things that they just can't get at their budget. Then you become a marriage counselor. If there are home inspection issues, sometimes you and the other agents then become mediators of reason. It's an interesting gig sometimes. My ex-colleague who is very successful and deals primarily with higher end properties, condo that was about a million bucks fell through because both the alpha male buyer and alpha male seller would not budge over a $5k difference in home inspection credits. It took the agents to get them to that point, and then neither would come in another $2.5k and meet in the middle.

You don't expect an agent with local expertise to help guide you through parts of towns that you may know little or nothing about? Or to give you comps and advice on the market so you have a better shot during the negotiation process, potentially saving tens of thousands of dollars?

 

[weblooker2021]

I am license broker but my license is inactive. With that being said there is a difference between an agent that charges you 2%(1% for each side) and say 5%. Lower commission is, less they will do for you. They might not advertisement much, they might not bother holding open house etc. The biggest advantage of more experience agent is how much they can bargain for you in terms of how good of a deal you will get regardless if you are buyer or seller.

 

[nakedfrog]

You don't expect an agent with local expertise to help guide you through parts of towns that you may know little or nothing about? Or to give you comps and advice on the market so you have a better shot during the negotiation process, potentially saving tens of thousands of dollars?

In THIS market?
Just getting a house at asking price felt like winning a prize!

 

[Fanatical Meat]

In THIS market?
Just getting a house at asking price felt like winning a prize!

Dude a house down the street sold for $x which number I forgot or $25k above appraisal. The higher of the two.
Real clever offer provided you have bank buy in for it or cash to cover it.
I had an open house where a couple brought a home inspector with them, then wrote “no inspection required” in their offer. This was a few years ago too.

 

[weblooker2021]

Dude a house down the street sold for $x which number I forgot or $25k above appraisal. The higher of the two.
Real clever offer provided you have bank buy in for it or cash to cover it.
I had an open house where a couple brought a home inspector with them, then wrote “no inspection required” in their offer. This was a few years ago too.

The new thing that many are doing is cash offer above asking price with no inspection required but asking homeowner to purchase home warranty for them.

 

[biostud]

I’ve sold my 2 room apartment here in Denmark for $270k and the fee was around $6k, and the buyer don’t need a real estate agent. If it was a house it would probably have been around 10-12k.

What you typically do as a buyer is pay a lawyer to look through the paperwork 1-2k, buy an insurance for undetected flaws also 1-3k, and when we bought a house we also payed an inspector to go through all the flaws that were listed, and also look for additional flaws, which was also 1k.

so for our house we bought for $430k the total cost woul be 12k for the seller and 5k for the buyer. So that would be around 4%

 

[weblooker2021]

I’ve sold my 2 room apartment here in Denmark for $270k and the fee was around $6k, and the buyer don’t need a real estate agent. If it was a house it would probably have been around 10-12k.

What you typically do as a buyer is pay a lawyer to look through the paperwork 1-2k, buy an insurance for undetected flaws also 1-3k, and when we bought a house we also payed an inspector to go through all the flaws that were listed, and also look for additional flaws, which was also 1k.

so for our house we bought for $430k the total cost woul be 12k for the seller and 5k for the buyer. So that would be around 4%

Sure you can do that here, it's called for sale by owner but no real estate agent will show your house to their client unless you're going to pay them commission. Many buyers just don't want to deal with the hassle of having to find real estate themselves. Pus if anything goes wrong, you got someone to sue.

 

[biostud]

Sure you can do that here, it's called for sale by owner but no real estate agent will show your house to their client unless you're going to pay them commission. Many buyers just don't want to deal with the hassle of having to find real estate themselves. Pus if anything goes wrong, you got someone to sue.

This was the cost for real estate agents including adds, and showing of the house/apartment.

If anything goes wrong with the paper work, that's why you pay a lawyer, if anything is wrong with the house, that's why you buy insurance and an inspector to look it through.

 

[Greenman]

The lead generation cost increases with the average selling price. Lead generation is a huge expense. Lead generation for buyers is an even bigger expense.
Current market buyers are not needed. For example where I live there are 15 buyers to every seller, if you represent buyers that means one out of every fifteen offers will be a success. That is 15x the work vs a one buyer for every seller market where prices would be lower so no the paperwork is not the same for those two markets.
Yes per transaction the paperwork is the same but you have to ignore the mountain of paperwork required to get to that one transaction.

Aren't lead generation costs high because of a saturated market? If there were only 3 agents in your area your services would be actively sought out by the sellers. You wouldn't need to advertise at all. Because it's seen as an "easy money" business, lots of people go into it.
There are two or three company's making inroads around here. They offer steep discounts and a menu service, you pick the things you want them to do. I see that business model becoming the norm in the not to distant future.
I'm planning on selling my home in another year or so, and the one thing I absolutely won't be doing is paying someone fifty thousand dollars for that service. The fact that that fee gets split four ways is the function of a business model that's outdated, not a requirement of law or the market.

My hunch is that as the real estate business changes we'll see the majority give it up and those that are serious about it move into a more sensible model where they can make a good living providing a necessary service without absurd lead costs.

 

[Fanatical Meat]

Aren't lead generation costs high because of a saturated market? If there were only 3 agents in your area your services would be actively sought out by the sellers. You wouldn't need to advertise at all. Because it's seen as an "easy money" business, lots of people go into it.
There are two or three company's making inroads around here. They offer steep discounts and a menu service, you pick the things you want them to do. I see that business model becoming the norm in the not to distant future.
I'm planning on selling my home in another year or so, and the one thing I absolutely won't be doing is paying someone fifty thousand dollars for that service. The fact that that fee gets split four ways is the function of a business model that's outdated, not a requirement of law or the market.

My hunch is that as the real estate business changes we'll see the majority give it up and those that are serious about it move into a more sensible model where they can make a good living providing a necessary service without absurd lead costs.

yeah I am sure that is part of it. The real problem is Zillow totally dominates that market so there is no effective competition. I forgot the exact state but it is crazy something like 90% of all buyers start at Zillow and 75% of sellers start with a Zillow zestimate.
I read about an a’la cart system in England(?) that sounded fair for all involved everything had a cost attached to it. Below numbers could be wrong but they are close
Sell at 2%, seller chooses buyers compensation with recommended number. Low end sales were higher percent wise, high end were lower.
Open houses cost $250, advent kept majority of that figure
Signs $25 per week
What type and how much advertising up to the customer with recommended figures
Weekly ad cost agent got a percentage of
Buyer side of the transaction flat fee which I forgot but was totally reasonable but if listing offered more the difference was subtracted

Problem is this system doesn’t fit well with our broker model, otherwise it was good. Everyone had skin in the game, everything had a cost and I forgot to mention the listing had to fall under a certain market based value so no high balling peeps to waste the agents time. Every week there is a cost, every action there is a cost.

 

[Fanatical Meat]

Really the question for this entire thread is how many transactions buying and/or selling should an agent have to make to earn $60k net after expenses but pre taxes so let’s roll with $75k gross.
How many transactions should that person be required to do on average?

 

[MrSquished]

Really the question for this entire thread is how many transactions buying and/or selling should an agent have to make to earn $60k net after expenses but pre taxes so let’s roll with $75k gross.
How many transactions should that person be required to do on average?

You can base that number on total sales. The average buyers agent commission these days is 2-2.5%, so let's say an average commission of 2.25%.

You'd need to sell about 3.3 million worth of closed deals to gross 75k pre tax

 

[Fanatical Meat]

Really the question for this entire thread is how many transactions buying and/or selling should an agent have to make

You can base that number on total sales. The average buyers agent commission these days is 2-2.5%, so let's say an average commission of 2.25%.

You'd need to sell about 3.3 million worth of closed deals to gross 75k pre tax

Oh I know that well. I am asking the other folks. How many sales should equal $75k?

 

[weblooker2021]

You can base that number on total sales. The average buyers agent commission these days is 2-2.5%, so let's say an average commission of 2.25%.

You'd need to sell about 3.3 million worth of closed deals to gross 75k pre tax

Not really correct. 2-2.5 is between brokers. The split can be anywhere from 10/90 for very experience sale person to 70/30 for new one.

 

[MrSquished]

Not really correct. 2-2.5 is between brokers. The split can be anywhere from 10/90 for very experience sale person to 70/30 for new one.

Well holy fuck duh@me.

Yes, and I'd say the average split is like 70/30 - very few agents get anywhere near 90/10 unless they are working for some super discount brokerage with no resources or a really big producer as you mentioned, at an established broker. Even around here with some online only brokers that have zero office presence and essentially zero support, the split is 80/20.

So yeah, you'd have to sell just over 5 million dollars of real estate to get to 75K gross pay after a 70/30 split.

 

[nakedfrog]

Dude a house down the street sold for $x which number I forgot or $25k above appraisal. The higher of the two.
Real clever offer provided you have bank buy in for it or cash to cover it.
I had an open house where a couple brought a home inspector with them, then wrote “no inspection required” in their offer. This was a few years ago too.

My first house offer I bid $25k over asking, which my agent thought was a strong offer, it went for $55k over asking. Pretty typical around here these days, some of them hit $100k over asking or more. I did "no inspection" as well, also common at the moment, sometimes just the speed at which you close can make a difference here. I had to pick very carefully, in case there's a correction, to make sure I was in a place I'd be comfortable being in for a long time. My original goal was to just quit paying rent and buy a place, but that changed once I discovered the reality of the market here right now.
But yeah, you also have to sign a form (here, at least) stating that you have the funds to make up any difference between your offer and what the house appraises for.