They will insist that price fixing of commissions is unethical and evidence of collusion. You will never hear a broker say commissions are not negotiable. Even though they’ll discourage it and sidestep the issue.
I believe it does require that- and my understanding is that if you haven’t signed one, that agent is probably representing the seller. Just because I walk into an office and an agent brings me to see houses , that doesn’t mean they represent me just like the salespeople at a car dealer represent the dealership, not me. Why would a real estate agent look out for my interests if they might not get paid at all , such as if I find a house on my own ?
Well, of course they’ll all be NAR realtors, given that realtor is an NAR trademark. Not every real estate agent is a member of NAR, though.
Yeah - I’ve thought about this a tad since my last post, and unless a buyer signs a representation agreement with an agent, what obligation does that agent have to the buyer?
Instead, the agent is interested in having houses sell, so they can earn their commission. They may not even have an interest in negotiating the lowest price, as that reduces their cut. Although in reality, my understanding is that both sellers’ and “buyers’” agents are more interested in having the sale go through, as any price differential is not terribly significant WRT their 3%. As opposed to the sizable hit they take if a sale does not go through.
Insurance is another such situation. You might think of them as YOUR agent, but they represent the insurance company.
Fees are certainly negotiable in parts of California, land of the pricey home - average commissions were closer to 5%.
Not that I have any problem with this settlement. 5% is still a lot at these prices.
Yes, 5% is a lot at current Silicon Valley home prices. I’m going to try to negotiate a fee lower than 5%, as you’ll see by my thread on this subject in this forum. I don’t know how I’ll do. I’d like them to knock off .5%.
A friend of mine who is a broker posted today about how things will be much different and the recent lawsuit means agencies will have to change the way they do business.
5% is especially a lot in a seller’s market like SV, where any home that is not a total wreck and not embarrassingly overpriced will receive multiple cash offers above list price within days of being listed. Hard to explain what the agent does to support that kind of payout.
For the last 20 years people have been saying that the internet and the information it makes available to the principals (the buyer and seller) will wear down the monopolistic power of the NAR and state boards regulatory captured by the brokers. But this has been happening a a glacial pace.
What the real estate agent does to earn that 5% is mostly give you access to the buyers represented by other agents who will otherwise “disappear” your listing even if the prospective buyers see it by burying it in FUD.
Well, I would say they also can offer some value-added hand-holding which works for the people that want/need it. When I sold my place several years ago the realtor arranged for a painter (cheap and efficient), a wood floor refinisher (remarkably cheap and did a great job), a stager (first two were booked, had to go to a third), a more inexpensive plumber than the ones I usually used, a cheap-ass hauler who also did a bunch of inexpensive lawn and a little handyman work and a top notch inspector.
Now these are all services I certainly could have arranged myself with some research. But I was busy finding a new place to live, packing and moving house prior to the sale and I very likely wouldn’t have been able to find people that did as good of work as cheaply anywhere near as quickly. A good realtor has a network of contacts that make them valuable for the mechanics of prepping a house to sell as well as doing the actual leg-work of selling. The title company pretty much handles the paperwork, which is why ‘For Sale By Owner’ isn’t such a huge deal. But a seller’s realtor can offer useful services beyond just the realty network. Not to mention the advertising, website with photo gallery, etc.
Now is that worth the 2.5-3% (and our total real estate commission fee was 5% rather than 6) for their share of the commission? Well, I dunno if it is in pricier areas like the SF Bay Area. But a good (gotta emphasize that again) realtor is worth something.
(Anecdote)
When we bought our current home, we had a buying agent. We let her know what we were looking for (location, size, price, must have’s, nice to have’s), and she kept an eye out for us. She notified us when a suitable home was coming up (usually before it hit the public MLS site - Realtors get this info before the public). She met us at a few open houses.
When we found a house we wanted, she took the lead in negotiations. This was really worth it for us. She met with the owners and other agents. She advised us on an offer price (way lower than we would have gone). She knew it would not be “insulting”. She got a counter offer just a little higher, which we jumped at.
She split the commission with the selling agent (commission paid by the seller). We got some amazing service, saved quite a bit of money, and paid her… Nothing.
It’s a strange system where the seller pays the whole cost for both sides, but I’d do it again in a heartbeat.
We are three months into the new fee structure where buyers agent fees are negotiated between the buyer and their agent.
At the agency my wife works at the broker has mandated that the fee be at least 2%. Almost no buyer has been willing to pay this. Basically everyone is waiting to see what happens.
Ironically the percentage listing agents are getting is also going down as sellers are more aware that everything is negotiable.
Interesting info. Are agents at other businesses picking up the slack at sub 2%?
A lot of young people are going it alone. Two people in our team at work (twenty somethings) are house hunting and just going to open houses and viewing houses with the listing agents. They have real estate lawyers who will do everything from their end for $1500 (they are using the same lawyer that I referred them to). Ten years ago he handled both the closings on our move for $2500.
Note that 2.5% of the STARTER homes (townhouse condos) prices around here is $16k to $20k.
Nvm. Misunderstood
Edit: The cheapest little box of a condo way in the outskirts in my area can be had for $700k so about the same. The median family home is $1.8M.
I see the confusion. The houses are $650k to $800k, and 2.5% commission on that would be $16,000 to $20,000.
That’s a lot of money to take out of your down payment.
In Silicon Valley today the buyer gets a lot more value from a realtor than the seller. We get inundated with pleas to put our house on the market. If we did, and sold it in days with little pre-work, why should we pay over $100K in fees? The buyer on the the other hand needs a lot of help to be successful winning a house given multiple bids, and probably has a more urgent need to get a place.
It doesn’t take away from your down payment because it’s not paid in cash up front. It’s in the net settlement, so it gets baked into the loan.
Have you actually seen this? In the old days it came out of the sellers proceeds. Now if I’m buying an 800,000 house and put 20% down I get to borrow 680,000 and call it 20% down and don’t pay PMI?
My wife hasn’t seen a closing statement yet under the new system, but she’s imagining it will look like this:
Selling price $800,000
Cash from buyer:
Down payment $160,000 (20%)
Loan origination and other fees $3,500
Buyers Agent Commission $20,000
Total Cash from buyer: $183,500
Cash from lender $640,000 (80%)
Total Cash received: $823,500
Paid to bank/lawyer/appraiser $3,500
Paid to buyers agent $20,000
Paid to sellers agent $20,000
Paid to seller $780,000
Because the bank is expecting to loan 80% of the value of the house. And the seller is expecting to receive 97.5% of the selling price.
It’s even more dire at 5% down. The buyer struggling to come up with a $40,000 down payment now needs to come up with $20,000 more.
One of my coworkers is relocating to another city due to his girlfriend getting a job there (jobs are hard to come by in her profession).
My wife (a real estate agent) gave him a recommendation of $899k as a listing price. Leaving a little room for negotiation from what she believed to be a fair price in this market. Zillow estimate was $880k.
Another realtor swooped in and told him that he could get $1 million, and that he should list at $985k and let the over-asking bidding wars begin.
Contract signed June 20. The realtor has convinced him to reduce the price twice. Once on July 2 and once today. The listing is now at $880k. And somehow this clown still believes this realtor is his best friend. “The market has changed”.
He’s convinced his home value has dropped by more than 10% in less than three weeks. Not that he’s been snookered by a sweet talking scammer.
Of course he can’t get out of the listing for 90 days. And he desperately wants to sell because he needs the equity to buy on the other side and stop paying $5000/month rent on top of his mortgage.