Almost no one pays a 6% real-estate commission except Americans

Contracts (which is what I assume you're talking about) are only "boilerplate" in fair-weather deals. But if literally anything goes wrong during the escrow period, then the wording of that contract suddenly becomes critical. When tens of thousands of dollars are at stake, I'd never rely on AI-generated output.

That being said, I also agree with you as for the value of agents, because they're the ones who write these contracts and to be honest, most of them are pretty stupid. We really need real estate lawyers to be drafting these things, not relying on templates. A good contract is worth a hefty fee.

I wouldn't want to use a realtor for land worth more than 50k though. Use the percentage commission to work for you not against you.

The buyer is also paying additional taxes for many years afterward on the higher assessed value (as it includes the commission!).

The seller’s agent collects a listing fee for marketing and selling the home. The buyer’s agent collects the buyer’s agent fee for bringing a qualified buyer to purchase the home.

In my understanding there is costs borne by both the buyer and seller for the services of a real estate agent.

Despite peak earning years just pre-CoVid, essentially just updating circuit panel violations and replacing GFCIs [read: well-paid work without much mental strife], I hung up the towel.

Realtors are nice simple people, the masters of soft skills (which I lack) — but ultimately I realized that "when you're the only person that gives a shit, you're gonna have a bad time." For their efforts, I think total sale comp should be 1-3% (both sides), depending upon their accessibility.

>They are incentivized to move houses as fast as they can.

Being told to "not worry about other sub-contractor craftsmanship, especially don't POINT IT OUT TO CLIENTS" — I just couldn't be part of a team that cared so little as to hand over duds for [typically] seven-figure homes/investments. "We carry professional insurance FOR A REASON."

Neither of these things require an agent, and neither are worth $40K.

As a result you end up losing out on a large surface area of buyers who rely on their buying agent to find properties, which puts you at a disadvantage.

For realtors it's very simple. Why spend time on something they won't get paid for? Why bother arranging a tour of a FSBO house, unless that one says "agents welcome" in its listing which means they will pay the buyer agent fee. But if that contract is standard, what's the disincentive? Just the unpleasantness of actually enforcing it when necessary?

Common here seem to be "flat rate MLS listing" services, where you pay a few hundred dollars and they list it, and you're your own selling agent. You still pay the 2.5% to the buying agent and say so in the listing.

And yeah, the dream customer of every selling agent is a clueless first-time buyer who just calls up the agent on the for-sale sign. Double commission!

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.

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

Do agents provide tens of thousands of dollars of value?

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?

The staying power of the Realtor Association may have something to do with it as well

There are a bunch of these brokers now.

I had an agent get halfway through listing my house for sale and tell me his fee was 7%. Noped out of that one.

When I was looking to buy a house, my agent received no financial compensation from me at any point. Their work was entirely subsidized by the buyer's agent fee - and we looked at a lot of houses trying to find the right one.

The negative effect of that is that they're incentivized to offload us asap.

Suppose the market was hotter when you sold and your property was worth 2x the median. Is the same work worth $24k? What if you sold in a hot market in a hot neighborhood, which should make it somewhat easier to move the property? Does it make sense that this would increase the amount the agent gets paid?

For similar reasons, proportional pricing doesn't work well at the lower end of the market, where listings are often under $100k.

It's only true if you consider your employer to be paying for everything you have in your house, because they gave you the money you used to pay for your stuff.

The offer process can be a little confusing, but ultimately it's a bunch of standardized forms that everyone should be allowed to download from some government agency or whatever.

The negotiation process is in some ways more frustrating when having to go through intermediaries. The only value the realtor provides there is frankly pretty shady: often the two realtors (who usually know each other and have a cordial relationship) will share information about their client that they really shouldn't. I've benefited from that type of information, but have felt dirty about it.

Ultimately all the legal stuff is handled by a title company (and/or a lawyer), and the realtor isn't involved there.

I think the main places where you can get a better outcome with a realtor are due to industry protectionism, not anything inherently difficult about the process that requires a trained, licensed agent with insider information.

But I suppose she got an easy sale. I'm not sure if she actually showed us any houses in person, or just showed us listings. She definitely had to spend a lot of time helping us sign the 150-or-whatever pages of the offer letter, going back and forth with the seller, etc.

But still, it was probably 5 hours of 'visible' work, so I'll be generous and say 20 hours total invested.

Had we spent 6 months showing us houses, she'd have invested a lot more. And, of course, not gotten a dime more out of us. So, you win some, you lose some.

On the buyer side, once we'd toured a few houses and they understood better what we wanted, the number of "No, not a chance" houses dropped to almost zero. Also, when we were just "tire-kicking" and said we had no intent to buy for a year or more, our realtor flat out told us she enjoys seeing new houses and even if we aren't ready it's good leg-work and research for her to do for other clients anyway. Once we found one she was excellent at getting us to the right people for financing, inspections, etc. - in a very small local market. She was also incredibly helpful when we were trying to find a temporary rental from across the ocean remotely, which is what led us to ask her to help find a house to buy eventually.

On the seller side, we left the country, and my realtor sold our house at an amount that covered his commission and then some with almost no effort from us at all. He had the place cleaned, staged, and photographed as part of his fee, and sold it in a day.

Yes, I'm sure like any occupation there are people bad at their job and just collecting cash for doing damn near nothing, but if you find a good one on either side, they can add a lot. Look for referrals from people who've had good experiences, and don't just pick a name from the phone book.

Fixed that for you. I wish when real estate comes up on HN, as it seems to weekly, that more members of this community would reflect upon the 10x programmer conversation. In any given profession, there are going to be skilled people and less skilled people, in the same way that Pareto's principle tells us that 20% of the people are doing 80% of the work. So I appreciate you making this observation.

May I ask - why did you feel like a horrible person? Sounds to me like you had a good sense of what you wanted to accomplish and you found someone who could help you reach your goals.

https://www.sccassessor.org/faq/understanding-proposition-13

Oh wait...

Turns out encouraging illiquidity, high entry costs, and limiting people's options when it comes to selling without paying extortionate amounts of taxes doesn't actually do that.

That's why I started my post with "Wrong" because it is a response of a similar caliber.

"Almost No One is Poor in the United States–Except Lazy People"

Author: Ha! I used the mighty "ALMOST"! Don't you plebs know the rule of the mighty "ALMOST". I win. I am so smart.

It's like opinion articles saying "many people think blabla" where "many" is 3 tweets.

Also - whether MLS members must also be Realtors is a rule of the MLS and not a universal requirement. The NAR, nor MLSs, do not set commissions. In fact, much of the MLS rule changes in recent years that I've observed have been about making sure non-Realtor licensees have market access. It's right there in our paperwork that I show clients where we ask permission so that the seller knows who will be entering their home.

Also it's possible to cut out the estate agent if you really want to save money. There are a bunch of websites that for a minimal flat fee will let you DIY it, but be prepared to make your own for sale sign, photograph your own property, and show prospective buyers around.

Legal fees are more like 2k+ these days (source: buying a house)

In Germany, the net average tax rate on a worker is 37.4%, in America it is 24.8%. That's a dramatic difference in taxation!

No idea why it is always everybody else who should work for free.

It's an expensive, but essential step in Germany.

Because there isn't a default real estate purchase contract, so you need to trust that you'll receive the property. It's like paying a lawyer to mediate an expensive purchase, and they carry some legal risks with it.

They also do the bureaucracy with the government to add your name to the Grundbuch (it's a book from the government about who owns what % of a property), and also clean up the previous debts that it had (they are written there).

They could open this to competition and let lawers do the job as well, but that would go down badly with the notaries who make a fortune.

"Chains" are not 'the system' they are a fact of life. Many people sell one property to buy their next one and need the money from the sale to finance the purchase (and also don't want to end up on the street) so they want contracts on both sides to be entered into at the same time. It adds a level of complication but no additional costs.

This is an issue that exists everywhere though solutions perhaps vary a bit. Usually it is a combination of relay loans (not free) and conditional contracts (tricky and pretty much the same result).

If you are a first time buyer it does not matter much apart from adding delays.

I don't see how reforming (how?) a system that is simple and cheap would help solve the "housing crisis". If there is something that needs reforming, well abolishing really, it is leaseholds.

So as to not talk past each other I'm specifically talking about present and future vanilla residential real estate transactions. For example w2 income with history, deed in your name, <10k sqft lot sfh or condo/townhome in a city.

For these things I struggle to imagine a future where the government does not have a clear view as to who owns and can transfer property (property taxes, IRS filings, Fannie/Freddie, recorded deeds, etc). They are backstopping the mortgage, they should understand what they are lending against.

America confuses me sometimes!

(That accounts for the split. That doesn't account for whomever the agent works for taking whatever cut.)

Why do you need two agents though? Isn't one enough to do all the paperwork and inspections? As for advertisement, I guess today it can be totally automated.

What's surprising is that this competition doesn't reduce the fee rate, that's the part I don't understand.

This would probably increase the interest rate of new mortgages. Right now, lenders have data that these loans average around ~10 years, and thus have a premium over the 10 year treasury. If they get closed less often, because they can be carried around, we'll see the average as maybe ~15 years, which is a higher interest rate treasury (10-20) and will have higher interest rate costs.