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Realtor Payment -- Why is it a percentage of the home?
Posted on 6/28/17 at 10:08 am
Posted on 6/28/17 at 10:08 am
Is there any solid explanation as to why a realtor's payment is a percentage of the sale? It seems like the same process for virtually every home, with the exception of high end homes, which most realtors do not sell.
They sign a standard listing agreement, take photos, list on MLS, and are available for showings. Once it moves to the closing, the title company and closing attorney handle the work.
Typically, if competitors get together and set a standard price for a service that is known as price fixing, and it is illegal.
You can list it as for sale by owner; however, realtors steer clients away from these homes unless they get their pound of flesh. Which raises yet another antitrust issue- the group boycott.
They sign a standard listing agreement, take photos, list on MLS, and are available for showings. Once it moves to the closing, the title company and closing attorney handle the work.
Typically, if competitors get together and set a standard price for a service that is known as price fixing, and it is illegal.
You can list it as for sale by owner; however, realtors steer clients away from these homes unless they get their pound of flesh. Which raises yet another antitrust issue- the group boycott.
22
Posted on 6/28/17 at 10:09 am to BabyCakes
quote:
Why is it a percentage of the home?
Because it's a scam
Posted on 6/28/17 at 10:11 am to BabyCakes
quote:
Is there any solid explanation as to why a realtor's payment is a percentage of the sale?
no and they use crushing, irrational regulations via state power to restrict competition (using licensing, rules to becoming a broker, etc)
the real estate industry is one of the scummiest industries in terms of its cozy relationship with state power and widespread existence
JT used to have a great idea for realtors where there is a set, expected amount for a house (what you'd normally expect the house to go for). if the realtor gets anything over that amount (as in, they did their job well), they get a large chunk of that increase. in this system, everyone wins
Posted on 6/28/17 at 10:11 am to BabyCakes
(no message)
This post was edited on 6/28/17 at 10:14 am
Posted on 6/28/17 at 10:13 am to BabyCakes
quote:
Is there any solid explanation as to why a realtor's payment is a percentage of the sale?
No, it's a now normal industry standard that in my opinion is a scam to the consumer. Selling a $150,000 house instead of a $100,000 house is not worth $3,000. Both are relatively low value homes, but the realtor makes a lot more money on one.
Posted on 6/28/17 at 10:21 am to Mingo Was His NameO
Does it perhaps have anything to do with the notion that the seller pays all the fees?
This encourages a buyer to enlist their help and not worry about the realtor fees.
I've also seen realtors state they are not allowed to discuss fees between realtors. This is their way of avoiding anti-trust issues.
Lastly, it seems lately the market has started to adjust to this. I've seen many reduced fees from the prior standard 6%, and even some flat rate listing fees (although this doesn't seem beneficial).
This encourages a buyer to enlist their help and not worry about the realtor fees.
I've also seen realtors state they are not allowed to discuss fees between realtors. This is their way of avoiding anti-trust issues.
Lastly, it seems lately the market has started to adjust to this. I've seen many reduced fees from the prior standard 6%, and even some flat rate listing fees (although this doesn't seem beneficial).
Posted on 6/28/17 at 10:21 am to BabyCakes
If it were a flat fee as opposed to a percentage, then all the realtors would be chasing the cheaper properties since those are usually easier to sell quickly. And its more incentive for your listing agent to try to make sure you get the most for the sale of your house as opposed to just wanting to get you to accept the first offer.
Posted on 6/28/17 at 10:22 am to Mingo Was His NameO
Whenever I sell my house, I may opt for the FSBO route b/c realtor fees will likely be over $25,000 if I go the conventional route. I'm in a desirable neighborhood with good schools and very low crime here in Mandeville. The house will pretty much sell itself whenever I decide to place it on the market. There's no need for me to fork over $25k to a realtor for them to push around some paperwork that I am fully capable of doing myself.
Posted on 6/28/17 at 10:24 am to Hammond Tiger Fan
quote:
Whenever I sell my house, I may opt for the FSBO route b/c realtor fees will likely be over $25,000 if I go the conventional route. I'm in a desirable neighborhood with good schools and very low crime here in Mandeville. The house will pretty much sell itself whenever I decide to place it on the market. There's no need for me to fork over $25k to a realtor for them to push around some paperwork that I am fully capable of doing myself.
a year or so ago i spent a lot of time trying to work out a much more efficient way to do FSBO, linking buyers and sellers like an Uber for real estate. i may start investing more time into that
Posted on 6/28/17 at 10:26 am to LSUtigerME
quote:
I've also seen realtors state they are not allowed to discuss fees between realtors. This is their way of avoiding anti-trust issues.
If I was the FTC, I'd be happy to challenge this defense. You do not discuss fees, but you end up at the same fee 95% of the time? Case closed.
quote:
it seems lately the market has started to adjust to this. I've seen many reduced fees from the prior standard 6%, and even some flat rate listing fees (although this doesn't seem beneficial).
I hope this is the case. I wish a national player would make a move to undercut the rest of them, encouraging some actual competition.
Posted on 6/28/17 at 10:27 am to SlowFlowPro
quote:
a year or so ago i spent a lot of time trying to work out a much more efficient way to do FSBO, linking buyers and sellers like an Uber for real estate. i may start investing more time into that
You could very well be on to something with this idea.
Posted on 6/28/17 at 10:27 am to BabyCakes
quote:
I wish a national player would make a move to undercut the rest of them, encouraging some actual competition.
the problem is the realtors have set up their stupid, irrational system to prevent this
like in LA. you can't just get your license and go sell. you have to work for a broker. you have to give a chunk of you commissions to that broker. you can't even become a broker until you wait a few years.
if you buck the system, they collude and restrict access to your clients
etc
Posted on 6/28/17 at 10:29 am to Tiger Prawn
quote:
If it were a flat fee as opposed to a percentage, then all the realtors would be chasing the cheaper properties since those are usually easier to sell quickly. And its more incentive for your listing agent to try to make sure you get the most for the sale of your house as opposed to just wanting to get you to accept the first offer
I understand the theory, but the problem is that's not how it works in practice. The biggest problem I guess is most realtors are a step above door to door vacuum salesman. Half of them are stay at home moms that think they can just learn how to be a realtor from some blog in a day.
If you find a good realtor that actually works for you and gets the best price they can, then yeah I get it, but I would say maybe 10% of realtors fit that bill.
Posted on 6/28/17 at 10:31 am to SlowFlowPro
quote:
if you buck the system, they collude and restrict access to your clients
You are exactly right. Classic group boycott.
Posted on 6/28/17 at 10:32 am to Hammond Tiger Fan
quote:
Whenever I sell my house, I may opt for the FSBO route b/c realtor fees will likely be over $25,000 if I go the conventional route. I'm in a desirable neighborhood with good schools and very low crime here in Mandeville. The house will pretty much sell itself whenever I decide to place it on the market. There's no need for me to fork over $25k to a realtor for them to push around some paperwork that I am fully capable of doing myself.
$25k isn't much for a realtor portion
Posted on 6/28/17 at 10:33 am to SlowFlowPro
quote:
the real estate industry is one of the scummiest industries in terms of its cozy relationship with state power and widespread existence
As is the LA state contractor board.
Posted on 6/28/17 at 10:33 am to BabyCakes
I hate it too, butcome up with a better rate of pay? The issue is that you have no idea as a realtor how long a sale will take. I call BS on anyone that says 'my house will sell itself', for everyone that says that there are probably 3 that don't.
You can have 2 couples looking for a home, one makes an offer on their 2nd house in 1 day of looking and the other takes 90 days and looks at 35 different properties. If a realtor goes and looks at 35 properties over the course of 3 months and spends 50 hours how much is that worth?
Furthermore, like all other business higher end sales usually weed out the bad realtors. Usually the best realtors sell the best homes, the best usually are the best for a reason and deserve better pay.
Let's take a $1 mil home with realtor fees of $60,000. It's really not that hard for a really good realtor to get you $20k more on that same house. Maybe even $50k more. So it's really not that hard for a really good realtor to make up the cost of a large portion of their income.
Again, that's the business. You are a lot better off learning how to play the game then whining about the rules from the bench.
As far as FSBO, sure you can save your 2-3%. But you are being an idiot thinking you will save the whole 6%, if you refuse to pay the buyers realtor you are losing money while being a jerk one way or another. The buyer will either off less for the house or you could easily be limiting a portion of buyers that may offer more.
Something personal like a home sale needs someone there to represent the home for things like open houses and negotiations. I don't want to negotiate with a seller directly on a business property because they are emotionally tied to it and I'm not. I don't want to hear sue Ann cry because her hand painted wall mural reduces the price of her ugly home.
You can have 2 couples looking for a home, one makes an offer on their 2nd house in 1 day of looking and the other takes 90 days and looks at 35 different properties. If a realtor goes and looks at 35 properties over the course of 3 months and spends 50 hours how much is that worth?
Furthermore, like all other business higher end sales usually weed out the bad realtors. Usually the best realtors sell the best homes, the best usually are the best for a reason and deserve better pay.
Let's take a $1 mil home with realtor fees of $60,000. It's really not that hard for a really good realtor to get you $20k more on that same house. Maybe even $50k more. So it's really not that hard for a really good realtor to make up the cost of a large portion of their income.
Again, that's the business. You are a lot better off learning how to play the game then whining about the rules from the bench.
As far as FSBO, sure you can save your 2-3%. But you are being an idiot thinking you will save the whole 6%, if you refuse to pay the buyers realtor you are losing money while being a jerk one way or another. The buyer will either off less for the house or you could easily be limiting a portion of buyers that may offer more.
Something personal like a home sale needs someone there to represent the home for things like open houses and negotiations. I don't want to negotiate with a seller directly on a business property because they are emotionally tied to it and I'm not. I don't want to hear sue Ann cry because her hand painted wall mural reduces the price of her ugly home.
This post was edited on 6/28/17 at 10:39 am
Posted on 6/28/17 at 10:34 am to BabyCakes
and that's why i want to create something that breaks their back
i now have a lot of free time again and i'm focusing on thinking of ways to attack state-backed industries with efficiencies
Uber/Lyft did that to the state-cab collusion
Airbnb is doing that to the hotel-state collusion
just need to find new areas (like real estate) and frick shite up
i now have a lot of free time again and i'm focusing on thinking of ways to attack state-backed industries with efficiencies
Uber/Lyft did that to the state-cab collusion
Airbnb is doing that to the hotel-state collusion
just need to find new areas (like real estate) and frick shite up
Posted on 6/28/17 at 10:34 am to Upperdecker
quote:
$25k isn't much for a realtor portion
It is when you consider the amount of work they do to get it. If his home is priced properly in a desirable area, then they realtor may do less than 25 hours of work to sell the home. That's $1,000 an hour or more.
Posted on 6/28/17 at 10:35 am to stout
quote:
As is the LA state contractor board.
yes, just like that
see my later comments in this thread. i bet you there is a way to break them, too
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