Are Realtors/real estate agents REALLY worth 6% of the sale price of my home?

We’re about to sell our house, and in the age of Zillow, Trulia, etc., I really question how much value agents provide me as a seller. ISTM that in the pre-Internet days, agents did a lot more to bring buyers and sellers together, but now that buyers can see pictures, details, and even virtual tours of dozens of houses that meet their criteria, the amount of work agents do has been greatly reduced, but their fees have not. It just seems like it has become a scam.

I know there’s lots of technical legal/bureaucratic stuff that still needs doing, and that’s why I probably won’t do a full FSBO. I also know there are fixed-fee brokers, and I’ve started looking for some that serve my area (Atlanta, GA).

From a practical point of view, I will very likely end up using an agent and paying about $24K to sell my house. But it rankles.

So the point of this thread is to ask if anyone has any experience (positive or negative) with alternatives, including, but not limited to, FSBO, fixed-fee brokers, discount brokers (if there are such), etc., or other ways I can keep more of the proceeds from the sale.


Of course not. It’s an outrageous cartel. It’s astonishing that it has held up for so long, and I really don’t know why the FTC doesn’t take action. The U.K. is down to an average of 1.4%.

It depends on how hot your market is and whether a agent would increase your sale price by 6%. I sold my last condo in a crazy hot market in basically a week. There were other units for sale nearby that helped increase potential suitors so it wasn’t much work and I paid a real estate lawyer to do the paperwork.

On the other hand, if I had waited a few days before accepting the offer I might have been the benefactor of a bidding war between buyers. An agent might have helped me with that.

With the 6 houses/property transfers I have done, none were with a Realtor (notice the capital “R”) but through my lawyer. My wife’s first house was through the bank as a foreclosure so they handled everything.

My wife’s sister and her husband recently bought a FSBO and the owner paid a real estate agent a set amount just to handle the paperwork, he did all the showings, etc… His agent didn’t allow my SIL’s lawyer to do the paperwork on their end but required another agent to do the same thing as her, a set fee for processing the paperwork.

Did they save money, yes. But after moving in they noticed some things that weren’t obvious to them but I am sure an agent working on their behalf would have seen. Nothing major, stuff like wall damage that was conveniently hidden by furniture.

When they went to sell their old house he thought of doing the FSBO but decided against it and went with a traditional agent.

That’s for the building inspection to pick up, not the agent.

The whole idea of having a buyer’s agent who only get paid if the sale closes is fundamentally flawed and against the interests of the buyer. The model should be scrapped entirely. The buyer’s agent has a massive financial incentive to hide problems that might undermine the sale going through.

The people you should trust to actually highlight problems are the building inspector and your attorney, who you pay a fee explicitly to look for potential problems and to protect your interests.

Yeah–when we bought our house, we took the advice of everyone we knew and got a buyer’s agent. Our first agent was a prickly old dude who pushed back against sellers; but he was called off for some sort of FEMA work, and replaced by a friendly, cheerful agent who persuaded us to go along with some unpleasant stuff offered by the seller. We ended up under a huge amount of stress, when the sellers hadn’t done the stuff they should have done in preparation for selling the house (one example: there was a giant pile of garbage left in our front yard, and the renters that were supposed to have moved out three weeks earlier only moved out the morning of the sale). I think they were much more motivated by closing the deal than by protecting our interests.

I agree – the entrenched system of 6% commissions and of real estate agents in general needs disrupting.

I’m planning to sell a fixer-upper and have been reading up on that process on the Web. To my chagrin, almost all the available information I’ve come across has been put out by real estate companies – and their “guidance” is slanted toward helping their own bottom line, not that of the seller. I’m surprised there’s so little independent advice on the subject.

Dunno. But I recently sold a house and bought a house both for the first time in my life. Selling story: the realtor advised what to do and not to do to prep our house (get rid of everything personal, do every last little repair, and then paint everything. It was staged by the realtor, there was an open house, we got seven offers that weekend, the realtor orchestrated a bidding war, and we ended up with almost $75K over our asking price, in cash. Yes, a very hot market.

Buying story: my realtor knew everyone and everything about the place I was trying to move to (and I knew nothing). He could tell me exactly what issues I would have down the road with any given property, almost all of which was totally news to me, since the problems were all things not found in the place I had come from – everything from difficulties passing septic tests to bizarro zoning restrictions. He found me an amazing property, and got me a great deal on it.

Both of them, I’d say, were totally worth the money. They worked hard for it, they both contributed an expertise I could never have accessed otherwise. However, I know there are plenty of agents (particularly women) who are in the business because it’s something you can do with minimal smarts or education, in your spare time. I read somewhere that like 10% of realtors make 90% of sales. The rest are driving around in their late model sedans with perfect manicures, blathering nonsense.

I’ve bought and sold many properties in both California and Montana, one of them was a FSBO where I paid someone $500 to do al of the paperwork, and I have always been able to negotiate the percentage down to 5%, and in one case (it was a $2M house) down to 4%. Unless you are locked into a particular realtor or real estate company there are usually dozens of agencies who would love to sell your home for easy money. I look at 6% as the starting point of the negotiation, not a fixed percentage.

And $80,000 was a bargain?

I had once contacted an agent. She was trying to do a seminar for retirees and I was interested. Unfortunately, I was the only one and it didn’t happened. But she kept contact and knew the sort of thing we were looking for. So when she emailed me a portfolio of the condo I am sitting in and typing this, I saw that it was exactly the kind of thing we were looking for. 2 BR, large kitchen/LR/DR combo, two baths. We looked it over, talked it over, made an offer, got a counter-offer, compromised, closed. I paid her nothing for that. But then came the selling of our house. For that she charged 4%. But there was a short bidding war and we took the second best offer because the buyer waived inspection.

We did not paint, we did no minor repairs or any of that stuff and it would have been a complete waste of effort if we had. The last thing we saw of the house, they had taken down the interior walls, removed the porch on which we had spent nearly 40 glorious summer years and were really almost rebuilding it.

A friend of mine worked without an agent. He used a company that, for a fixed fee, provided a For Sale sign, various legal papers, etc. I think he was happy with the final result and certainly saved money, but I didn’t want the headache.

Of course you paid her. The fee is hidden from your perspective, it’s included in what you pay the seller and then paid to her by the seller, but that doesn’t mean you’re not paying. If the seller didn’t have to pay your agent the $25,000 or whatever she got from the transaction, they could have sold you the house $25,000 cheaper.

I think the answer is that it depends very much on the agent you get, the particular housing market, and how much time and risk you’re willing to take. The last house I sold was through an agent who knew the area inside out and was the same agent who had acted for me when I bought it (and got it for me in a very hot area with constant bidding wars by arranging for the sale before the house was actually listed). It was a wonderful place and the value appreciated enormously during the time I lived there. Her work as a selling agent was worth every cent, and it was significantly less than the 6% going rate. As a long-time agent, she had contacts for excellent workmen for semi-major renovations, and she even paid herself for a thorough cleaning. I remember her walking in the front door one sunny afternoon when the renovations were just finished and the cleaning crew were madly at work, and the place was just gleaming like a diamond. It sold in two days for full asking price. And she was the prime architect of everything involved in getting the place prepped for sale and in bringing in the right clients.

Sure, but how much of a factor that is depends a lot on the ethics of the agent. I must admit that the ethical record of real estate agents is generally pretty dismal. I don’t want to sound particularly pro-agent (I have no vested interests here) but I guess I’ve had good luck on that score. An agent I’ve used a lot (both buying and selling) is probably as money-grubbing as the worst of them, but she’s at least smart enough to understand that reputation and ethics is good for long-term business, and acts accordingly, and has benefited accordingly. She now owns her own firm and is established in a leadership position in the area because of those factors. Unfortunately the industry is full of crooked slimeballs.

Don’t forget the commission is paid to the listing broker who shares half with the buyers agent broker. Then the brokers usually take a cut first then pay their agents. So a 24k commission becomes 12k per broker who may take 30% then pay the remainder to the agent. It’s not all that much really.

Of course there are some agents who are decent ethical people. I’m not criticizing individual people - I’m criticizing the financial model. We should not structure compensation in a manner that gives people a massive financial incentive to act against the interests of the client.

A far better model for a buyer’s agent would be a fixed hourly rate. Of course, the reason the agents would fight tooth and nail against that is because the hourly rate would have to be about $1000 per hour for them to make the same egregious fees that they make now, and people wouldn’t waste their money.

My wife is a real estate agent and former Realtor. She has changed agencies a couple of times because the broker was pressuring her to encourage the client to take a bad deal so that they could close quickly or push a buyer to increase their budget beyond what they are comfortable with. She will not do that, even if the deal falls through. In her experience there is zero ethical difference between Realtors and agents who aren’t. The reward system is perverse.

The problem with the compensation model is that agents spend a LOT of time looking for clients. I would bet that the time spent marketing and networking is 4-5 times what is spent on actually working for clients.

So when the client shells out $20,000 in commission (they gets split 4 ways) they think the agent got a huge payout for 10-20 hours of client-visible work. But it takes an average of 100 hours to land the client in the first place and there are two agents and two brokers.

Seems kinda weird way to allocate costs/compensation. Are most salespersons’ quoted prices reflective of their unsuccessful sales calls? If a door-to-door salesman makes sales at 5 consecutive houses, does the 6th house get quoted a cheaper price?

My impression is that the standard rate of compensation for realtors greatly exceeds the services they provide.

Well yes, but that is compensated for by the over-supply of agents, which doesn’t bring the price down but results in a bunch of underemployed agents.

What’s the process in the US? Does the seller pay the whole 6% to the agent, or does the buyer pay anything? Does the agent do anything for the sale above and beyond the sale itself (ie do any of the land search, conveyancing work that a lawyer might do?). Why would you appoint a buying agent and what would you pay them?

We have a less than perfect system in the UK - estate agents are basically unqualified sales people, but then we only pay them about 1-2%, by negotiation. All the legal conveyancing is done by your appointed lawyer, surveys are done by indepedent surveyors (often appointed by the mortgage company). And it’s very rare to appoint a buying agent unless you’re a very rich person who can’t be bothered to look yourself.

I bought in Italy once, and there the agent gets 3% from both the buyer and the seller, but then they do the vast majority of the conveyancing work.

That may not always have been the case, but it certainly becomes so when real estate prices explode. The first house we bought in this area was something like $160,000 and the owner was motivated to sell because of how much the price had increased since he bought it. The standard commission rate then: 6%.

The average price now, about 25 years later, in the same area for the same sort of house: around $1.5 million. The standard commission rate: 6%. The workload involved in selling: exactly the same.