***Official Real Estate Thread***

[GromsDad]

I wonder what this settlement means for the Real Estate world. Anybody in the Real Estate business out there that can explain what this means for the way they work moving forward???? I actually had a real estate client a couple of months ago mention that they were considering closing one or two of their offices and they were waiting on the outcome of this matter. The traditional brick and mortar real estate office seems to be going the way of the dinosaur perhaps.

https://www.cnn.com/2024/03/15/economy/nar-realtor-commissions-settlement/index.html

 

[Bob Dobbalina]

I wonder what this settlement means for the Real Estate world. Anybody in the Real Estate business out there that can explain what this means for the way they work moving forward???? I actually had a real estate client a couple of months ago mention that they were considering closing one or two of their offices and they were waiting on the outcome of this matter. The traditional brick and mortar real estate office seems to be going the way of the dinosaur perhaps.

https://www.cnn.com/2024/03/15/economy/nar-realtor-commissions-settlement/index.html

Wait. As an uneducated renter...

Buyers paid 6% to agents?
Holy fucking sh!t.

What does that pencil out to for the agent themselves?

 

[hammies]

Wait. As an uneducated renter...

Buyers paid 6% to agents?
Holy fucking sh!t.

What does that pencil out to for the agent themselves?

The sellers paid (usually) 6%. 3% to the buyer's broker and 3% to the seller's broker. The broker usually splits the 3% fifty-fifty with the agent. So if you sell a $1M house you pay $60K in brokerage fees. So what happens is the buyer's agent is really working for the seller, an odd setup to say the least. IDK what kind of a system they will come up with now.

 

[Bob Dobbalina]

The sellers paid (usually) 6%. 3% to the buyer's broker and 3% to the seller's broker. The broker usually splits the 3% fifty-fifty with the agent. So if you sell a $1M house you pay $60K in brokerage fees. So what happens is the buyer's agent is really working for the seller, an odd setup to say the least. IDK what kind of a system they will come up with now.

Either way, the sh!t never made sense to me.
But that explains the lifestyle of the mortgage brokers and real estate agents I know.
And why every former C level pro surfer is hawking real estate now.

 

[npsp]

Wait. As an uneducated renter...

Buyers paid 6% to agents?
Holy fucking sh!t.

What does that pencil out to for the agent themselves?

The Seller's agent/broker and buyer's agent/broker split the commission which is paid by the seller. Commission is is part of the listing agreement and is negotiated between the listing agent and seller. 5% is more the norm these days, at least in the market my wife concentrates in. From what I've observed over the years is that she earns every cent of her commissions. There's a lot more going on behind the scenes than just showing people houses and writing/negotiating offers.

In my opinion, this will set a bad precedent and may backfire and resulting in either higher commissions and/or lawsuits.
As it stands, most buyers agents will not show houses if the listing has a low overall commission or low buyers agent split.
To get buyer's agents to bring buyers to see their listings, companies like Redfin, that advertise to list your home for 1% had to tweak their model early on and started offering non-Discount Company buyer's agents the standard commission for that market.

 

[bird.LA]

Why didn't anyone warn me that owning a home fkn sucks? I want my money back

 

[StuAzole]

The Seller's agent/broker and buyer's agent/broker split the commission which is paid by the seller. Commission is is part of the listing agreement and is negotiated between the listing agent and seller. 5% is more the norm these days, at least in the market my wife concentrates in. From what I've observed over the years is that she earns every cent of her commissions. There's a lot more going on behind the scenes than just showing people houses and writing/negotiating offers.

In my opinion, this will set a bad precedent and may backfire and resulting in either higher commissions and/or lawsuits.
As it stands, most buyers agents will not show houses if the listing has a low overall commission or low buyers agent split.
To get buyer's agents to bring buyers to see their listings, companies like Redfin, that advertise to list your home for 1% had to tweak their model early on and started offering non-Discount Company buyer's agents the standard commission for that market.

I’ve worked in a related field for years. Buyers will end up paying brokers to handle all the paperwork etc, but that number will fall significantly - probably down to 1% or even a flat fee. Sellers will still need a broker to sell, but again, that fee will become more competitive. It won’t surprise me if total commissions in a transaction drop to 2%. That makes the business harder unless you focus on high end markets or can generate high volume. The small brokerage houses will feel this the most.

The Redfin thing didn’t work because there was more incentive to take a buyer to a home paying a bigger commission. If sellers are no longer paying a buyer commission at all, that dynamic is out the window. Then, a buyer agent will be incentivized to show as many houses as possible as quickly as possible so they get paid by their buyer at close.

 

[npsp]

The sellers paid (usually) 6%. 3% to the buyer's broker and 3% to the seller's broker. The broker usually splits the 3% fifty-fifty with the agent. So if you sell a $1M house you pay $60K in brokerage fees. So what happens is the buyer's agent is really working for the seller, an odd setup to say the least. IDK what kind of a system they will come up with now.

Actually, the buyer's agent is working for the buyer. It is the buyer's agents responsibility to negotiate the best deal for the buyer. This includes credits for needed repairs called out in the inspection, $$$ for rent back, closing costs, etc... It's the buyer's agents job to squeeze every bit of juice out of the lemon and the seller's agents job to keep as much juice in as possible.

 

[bird.LA]

Actually, the buyer's agent is working for the buyer. It is the buyer's agents responsibility to negotiate the best deal for the buyer. This includes credits for needed repairs called out in the inspection, $$$ for rent back, closing costs, etc... It's the buyer's agents job to squeeze every bit of juice out of the lemon and the seller's agents job to keep as much juice in as possible.

Except that they're not financially incentivized to negotiate a lower price, hence all the credit BS.

 

[npsp]

I’ve worked in a related field for years. Buyers will end up paying brokers to handle all the paperwork etc, but that number will fall significantly - probably down to 1% or even a flat fee. Sellers will still need a broker to sell, but again, that fee will become more competitive. It won’t surprise me if total commissions in a transaction drop to 2%. That makes the business harder unless you focus on high end markets or can generate high volume. The small brokerage houses will feel this the most.

Disagree. The sale of real estate is a negotiated transaction between two parties. There are a lot of moving pieces and most buyers are too uneducated to represent themselves in this negotiation. In your example, the buyer will be vulnerable to any shenanigans that the selling agent will pull to close the deal. The buyer needs representation by a professional to make sure they are not being taken advantage of. There are a lot of horror stories out there from non-represented buyers getting screwed by a double ending seller's agent.

 

[npsp]

Except that they're not financially incentivized to negotiate a lower price, hence all the credit BS.

Not necessarily the case. As I noted above, it is the buyer's agents responsibility to get the best deal possible for their customer.
For example, my wife is currently negotiating a sale representing the buyer. The buyer does not want credits to fix a couple major issues called out in the inspection report, so my wife is negotiating a lower price in lieu of the credits.
She is also savvy enough to know when a house is overpriced and how to use her knowledge to negotiate a lower price. This is key when there is as loan in play as many deals fall out of escrow due to the house appraising low. Negotiating a lower price upfront prevents this from happening.
In the end, both agents want to close the deal but, ultimately, it is up the the seller to accept the offer they feel is in their best interest and it is up to the buyer to step up to the plate if they want the place bad enough.

 

[Subway]

i paid my broker 4% to sell my house. 6% was the "industry standard" that nobody in their right mind would actually pay.

 

[Muscles]

As it stands, most buyers agents will not show houses if the listing has a low overall commission or low buyers agent split.

Which is why the current model is a joke.

Buyer's agents are supposed to be looking out for their buyer. Not showing them a house because it doesn't pay them enough just proves that they aren't looking out for the buyer.

 

[StuAzole]

Disagree. The sale of real estate is a negotiated transaction between two parties. There are a lot of moving pieces and most buyers are too uneducated to represent themselves in this negotiation. In your example, the buyer will be vulnerable to any shenanigans that the selling agent will pull to close the deal. The buyer needs representation by a professional to make sure they are not being taken advantage of. There are a lot of horror stories out there from non-represented buyers getting screwed by a double ending seller's agent.

False.

The buyer will still retain an agent but they will pay the agent a negotiated fee. That fee will be much smaller than the current 2-3% co-op fee now paid by the seller because any dope can scroll Zillow and find homes that fit their needs. All a buyer agent needs to do is help offer and get through the inspection/escrow period.

Seller will still pay seller’s agent. Agents will cut rates to get business. This is where high volume brokerages will kill the smaller firms.

 

[npsp]

Which is why the current model is a joke.

Buyer's agents are supposed to be looking out for their buyer. Not showing them a house because it doesn't pay them enough just proves that they aren't looking out for the buyer.

Not going to argue on that one. My wife has a listing coming up that she is only taking 1% of a 3.5% total commission. That is what the seller can afford at the max price the house could be listed for. Nice older lady moving to North Carolina to be closer to her kids so she needs as much $$$ as she can get out of the house.

 

[Muscles]

False.

The buyer will still retain an agent but they will pay the agent a negotiated fee. That fee will be much smaller than the current 2-3% co-op fee now paid by the seller because any dope can scroll Zillow and find homes that fit their needs. All a buyer agent needs to do is help offer and get through the inspection/escrow period.

Seller will still pay seller’s agent. Agents will cut rates to get business. This is where high volume brokerages will kill the smaller firms.

How much does a Lawyer cost?

I've used a lawyer in the past for a few thousand bucks. A RE agent better have some serious skills to bring to the table if I can pay a lawyer to review my RE contract.

 

[npsp]

False.

The buyer will still retain an agent but they will pay the agent a negotiated fee. That fee will be much smaller than the current 2-3% co-op fee now paid by the seller because any dope can scroll Zillow and find homes that fit their needs. All a buyer agent needs to do is help offer and get through the inspection/escrow period.

Seller will still pay seller’s agent. Agents will cut rates to get business. This is where high volume brokerages will kill the smaller firms.

Zillow is only good for identifying a house that may fit a buyers need and is only as good as the information that has been loaded to the platform (same for the MLS). Any house can look good on paper or screen. You don't know what you're getting into until you really kick the tires. When you are making the biggest financial decision of your life, you may want a pro to help you avoid making a huge mistake. The good ones are worth every penny.
I'm not sure how much time your related field had you in the field with agents closing transactions on either side. There are a lot steps on the buy (and sell) side of the transaction to get an offer accepted and then through the inspection/escrow period to close.
YMMV on how this will shake out. Based on your negotiate fee comment, if it comes to that, a smart buyers agent will implement an ala carte fee structure and still do all right and maybe better.
If it does come to this, it will most likely split the industry into two classes: high quality high performing broker/agents and Redfin model internet mass marketing corporations. Have a good time when you are buying a house in Scripps Ranch and your "agent" is in Hemet and can't make the inspection, etc.... because some meth head stole their catalytic converter.

 

[npsp]

How much does a Lawyer cost?

I've used a lawyer in the past for a few thousand bucks. A RE agent better have some serious skills to bring to the table if I can pay a lawyer to review my RE contract.

Never a bad idea to have a lawyer review any contract. However, there is more to it than just a contract.
Will your lawyer be present for inspections? If so, what is their hourly rate for this 4-8 hour event? How much will they charge you to read and interpret the inspection report? How much will they charge you to negotiate price or credits based on said inspection report. Will your lawyer know that the house down the street is a crack den or the park across the street fills up every weekend with soccer games all day long? There is so much more to the transaction that making and getting an offer accepted.

 

[StuAzole]

How much does a Lawyer cost?

I've used a lawyer in the past for a few thousand bucks. A RE agent better have some serious skills to bring to the table if I can pay a lawyer to review my RE contract.

RE lawyers in CA don’t tend to work with CAR forms etc. It honestly takes 5 minutes to fill out the paperwork for a transaction, but agents tend to have a better handle on real time market data than lawyers would So there is some value. They also have pocket listings available and know whats about to hit the market. A lawyer can easily do the work but probably can’t help with the related issues (inspections etc.)

But your point is a good one - if I can pay a lawyer $5k for a transaction why bother with a buyer agent And his 1-3% commission.

I remember when the MLS was a printed book that came out every week or two - there was really no way to know what was out there without access to it.

When I buy a home I offer to split the buyer commission with an agent. I locate the house and decide on what to offer and they do the paperwork. Its easy money for them and I can use my half for closing costs or to buy down my rate a bit. The last homeI sold I paid 4% total commission.

 

[StuAzole]

Zillow is only good for identifying a house that may fit a buyers need and is only as good as the information that has been loaded to the platform (same for the MLS). Any house can look good on paper or screen. You don't know what you're getting into until you really kick the tires. When you are making the biggest financial decision of your life, you may want a pro to help you avoid making a huge mistake. The good ones are worth every penny.
I'm not sure how much time your related field had you in the field with agents closing transactions on either side. There are a lot steps on the buy (and sell) side of the transaction to get an offer accepted and then through the inspection/escrow period to close.
YMMV on how this will shake out. Based on your negotiate fee comment, if it comes to that, a smart buyers agent will implement an ala carte fee structure and still do all right and maybe better.
If it does come to this, it will most likely split the industry into two classes: high quality high performing broker/agents and Redfin model internet mass marketing corporations. Have a good time when you are buying a house in Scripps Ranch and your "agent" is in Hemet and can't make the inspection, etc.... because some meth head stole their catalytic converter.

You’re overstating the difficulty of a transaction. Locate, offer, counter, agree, inspect, finance and close.

I wouldn’t expect anyone to offer on a house sight unseen. I see 10 homes I like on Zillow, I spend a weekend walking them during the open houses and I make a call. Maybe I offer, maybe I keep looking. It’s not rocket science. An agent need not play any part in that process until it’s time to offer.

And why would my buyer agent need to be a random person in a different city? Buyers agents will still exist and I can meet with as many as I like before I choose one. And then I’ll negotiate a fee with them.

And how does a mass marketing firm even handle a buy side transaction? The whole point of mass marketing is selling lol.

The real value of an agent is on the sell side. They’re great at prepping the property for sale, have great contacts for repairs, painting etc. and can really presenting the property in a good light.