The problem is that people use these agents because the individual lacks the expertise to know what they should pay for a house.
Or, in the case of the seller, what the house should sell for.
The information asymmetry piece – despite the interwebs – is still 'uge.
It’s more fraught when the interests aren’t aligned.
'Nother interesting take on the subagency/conflict bit:
Are real estate prices in the UK rising or declining?
This is a bizarre line of reasoning. The fact that a buyer’s agent gets zero if the transaction falls through is the greatest conflict of interest. The buyer’s agent has a massive financial incentive to conceal or minimize any potential problems with a property that might delay the transaction or might make the buyer pull out.
There’s probably some truth to this, but I’ve worked with good agents who don’t do this sort of thing because they know their job is a reputation-based business. Realtors work in markets; the inventory of property and sellers/buyers isn’t infinite. They can also be taken to a real estate commission and pay fines. They can be sued. There are consequences for being shady. That said, some are willing to take those risks.
The reason I bring up the question of price is that realtors may be willing to pay less in commission in part because real estate prices are rising. That’s the case in the US and I suspect that’s true in the UK as well. So if property values are rising by 20, 30, or 75% over the course of a few years, realtors can accept going from 6% to 4.9% commissions over that same period. That also means more competition among agents for volume, which may or may not work to the advantage of the consumer.
You might think so but this is not a paper exercise, this the reality of how the industry works.
You want to talk about scams…Title Insurance. That’s a fucking racket.
This is the reality of the cartel under which the industry works to rip people off, yes.
UK house prices: https://managecasa.com/articles/uk-property-report/
Mixed bag but trending towards slower appreciation the last 10 years.
Again, read the thread, we’re just going over the same ground again and again. There are certainly decent ethical brokers, I’m not attacking individuals, I’m attacking the system. You don’t want a compensation system that gives agents a massive financial incentive to act against the interests of their clients. That’s like giving your attorney an incentive fee to lose your case and hoping he still does the right thing because he’s an honorable guy.
Title insurance is kind of a fucking racket… But, if there’s a problem (if you, the insurer, miss one iota) the consequences can be immense. I’d be interested to know how many properties the title insurance industry has to buy per year.
Biased for sure, but: https://sandygadow.com/how-your-title-insurance-dollar-is-divided-up/
Somebody make have covered this. If so, I missed it.
Posters here keep referring to seller’s agents and buyer’s agents like these people each represent and advocate for their “client," or for one party as a buyer as opposed to the other as the seller’s rep.
In essence there is only one "agent’ in a normal transaction because all the agents represent the seller. End of story. If you go into an agent to help you find a property, he or she represents the seller of the house he or she finds. If your mindset is to think of the agent you approached as your agent, you could be in for a surprise. There are a lot of ways agents can toy with the presentation of offers to a seller, or ways a buyer can be worked.
And you have no idea what that agent tells the seller about you, or about how much you are willing to spend or what you are willing to overlook.
All agents must represent the seller, unless you have a signed buyers broker agreement with a real estate professional.
This has been the reality I have faced in two states, and I have done a lot of buying and selling of homes and small residential investment properties.
If you want to know how it works in your state, discuss with an agent you approach, before starting a house search, who he or she ultimately represents, and to whom the agent owes a greater fiduciary responsibility, if any.
It must be different by state. When I found a house I wanted to buy in California, the seller’s agent said they could not represent me, and I needed my own agent. But she made a recommendation, and it probably worked in my favor that the 2 agents knew each other. But for all I know, the mild conflict of interest might have caused the price to be higher than if I had my own experienced agent from the start.
In a time of rapidly escalating house prices, a fixed percentage of the sale going to a realtor is just not defensible, IMHO.
Three years ago, an average house in my neigborhood would have sold for around $550,000, giving 6% to the realtor, $33,000 fee. Split between buying and selling realtor, this gives $16,500 to each to cover their costs, and give them an income.
Fast forward to today. That same average house will go for at least $900,000, if not more. The houses are selling very quickly now - time on market is less, and many houses are selling in under a week. Houses don’t need to be staged or even cleaned up - just put it on the market and wait for competing offers. Costs to advertise and sell have decreased due to this. And the same 6% fee now gives $54,000. Realtors make a ton more money, for decreased time to sell, and less upfront costs.
It makes no sense whatsoever. I don’t even think it should be legal.
If houses are selling within a week without needing to be staged, why bother hiring an agent to sell? Just hire an attorney to prepare the documents.
This not the case, at least not in Maryland or Virginia where I have bought and sold houses. If you write a Buyer’s Agent agreement with an agent then the agent has a fiduciary responsibility to the buyer, even though the buyer’s agent’s commission is paid out of the sale proceeds. The arrangement you describe is a more conventional arrangement but not as common once buyer’s agents became more the norm.
Why shouldn’t it be legal? No one is required to use a Realtor if it doesn’t fit their needs.
Yes, I know. I don’t really think that. Just disgusted by it.
6%!? I’m selling a property here in the Tel Aviv area, and I’ve been griping about having to pay my guy 1.5% of the value of the apartment.
Just saw this article. Not a good time to be a real estate agent.
There are about 22,000 real estate agents in Colorado, and only 2000 homes for sale on the front range. The vast majority of the state’s population is along the front range, so there probably aren’t very many houses for sale in the rest of the state.