COMMENT OF THE DAY: UP OR DOWN “On the agent side of HAR, you can see the different listing amounts. So while you might avoid the big red arrow showing a decrease, any agent can still see the pricing history. What a lot of agents do is lower their places by a few bucks a day, that way people with searches setup for a given location will keep being notified of their listing (since a price change will kick in a notice to be sent out). I know it works as I just RAISED the price of a rental on HAR and got a ton of calls. Likely because anyone that has an alert setup for my rental type just got ‘re-alerted’ about the apartment.” [Cody, commenting on Back, Slashed: Ken and Linda Lay’s Huntingdon Penthouse]
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Remind me again why residential realtors still exist? No snark, I really am baffled.
My guess is a strong lobbying presence in D.C. and state capitols and the monopoly on the MLS.
Matt: I wonder that all the time (and I have my re license :)
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Mainly it’s because some real estate transactions can be complicated and having someone that knows what they’re doing can add some value. Advice on contracts, pricing, marketing, negotiations, dealing with the other party, walking a buyer/seller through close, etc. However the traditional value provided by showing and finding places has decreased due to how much info is online (public MLS like HAR.com).
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I think the idea of a quasi guaranteed 3% on a transaction is for sure on it’s way out, even though most agents get pissed when you don’t offer it. Many think 3% is a rule, when in fact it’s very illegal TO have a set %. And the fact is, a lot of agents simply don’t provide enough value to warrant that type of commission on a deal.
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I think the future of RE agents will be more like other pay-per-hour type professions. They can be hired at will to help advise on the items listed above (so long as they offer no legal advice. I recall from my books/tests that offering legal advice was no-no #1). What would help is if buyers realized that they *DO* pay that 3% to their agent as commission paid by the seller to the buyers agent is a cost that could otherwise come off of the sales price (unless their listing agent requires 6%, which is split if the buyer has an agent but actually kept if they don’t). Ditto apartment locators. Renters pay them by paying higher rent than they might otherwise (which is why apts listed on HAR are often more than the same ones on craigslist)
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How do I always start my posts here thinking they’ll be short and to the point only to look up and see a long ramble. Sorry :(
Cody, I like your informative posts. Also, your rants about toilet paper roll placement and city code enforcement are enjoyable. Keep up the good work, I say. :)
On my last real estate transaction, the seller’s agent couldn’t seem to comprehend, or didn’t wish to comprehend that I was representing myself in the deal. He kept trying to foist another agent on me and even had another agent sign the contract as my representative until I saw it and forced him to remove it. I told him they were welcome to try and negotiate a better % with the seller, but to leave me the fuck out of it. Vultures.
Kilray- How people perceive realtors is of of high interest to me. (because I am one) What did you think the “vulture” was trying to get out of it by trying to get you to accept representation?
Not a rhetorical question, I am really asking.
Kilray, since you didn’t have an agent, the broken who the sellers agent works for tried to be the intermediary and get another agent in the office to represent you. That way they (the brokers company) get the full 6%. Nothing *wrong* with that as you likely wouldn’t have gotten a better price anyway due to the way the sellers representation agreement was written.
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When you list a place with a broker, it’s almost always done at 6% commission to that brokers office, with the buyers agent typically getting 1/2 of that (so 3% each way). Since you didn’t have an agent, I’m sure they were happy to keep that full 6%.
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Next time, just hire an agent or even any lawyer to be your rep. Work a deal where they’ll give you x% of their 3%. There are tax implications to this (seeing as they’ll get, or can get, a 1099 for the 3% they were paid), but at least you’ll get something at close. That’s frowned upon, and there are other things you can do but they’re considered more of a no-no by the realtor commission so they really shouldn’t be suggested here (at least by me, I don’t need more of a trouble-maker rep :)
#Cody, a lawyer can’t get a commission unless he/she has a RE license.
We’ve been able to get our commission on sale reduced by using the same agent to buy a new house. We’ve also had success in reducing commission when the buyer’s agent is from the same firm as our agent.
Thanks for the response Cody. I woul be all in favor of a change to a more ‘professional services’ type relationship, but you bring up another good point. If someone can’t understand the very basic contracts that go along with the purchase of a home, they probably don’t need to buy a house.
Matt: To be fair, someone buying a home shouldn’t need to know all the details of all the contracts. That’s one of the things an agent (or lawyer) can help with. In addition to the contracts, there is so much that has to happen to get the deal done that having someone to walk you through it can be a help. At least on your first buy.
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The contracts over time have gotten more and more ridiculous. The RENTAL LEASE, is 14 pages. 14 pages! Just to RENT an apartment. And that’s without all the addendums people pile on. Any normal person trying to type out the terms of a lease in English (if they were to lease their own home) would come up with maybe one page? 2 or 3 if they tried?
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So anyway, point being there is a lot to explain to someone that doesn’t really care to be an expert and just wants to buy a house to live in. Most people don’t know anything about how their car works (under the hood) but they still need to drive around :)
Realtors are the most overpaid of all services. Unless you are in need of an out of town relocation service and you need someone with intimate knowledge of a new city – a realtor does almost nothing at all.
Houses priced correctly in highly sought after areas sell within a day or two of listing and a realtor ends up getting 3 or 6% of $1,000,000+ for taking 21 or so photos and posting a description with publicly available information.
It really is sickening. If HAR allowed non-realtors to post ads the entire profession of realtors would be obsolete.
Ross: You’re right in that a agent might give you a break on commissions later on by using them again, or when as the seller you have a buyer using an agent from the same office.
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I was talking about the other guy being a buyer and what pros/cons there might be in going it alone vs. being ‘stuck’ with an agent from the sellers office (i.e, if you’re not going to see any of that ~6% the seller is paying anyway…)
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And as far as I know, lawyers can help with the contracts just as a RE can (with the advantage of giving legal advice), and also are able to be paid by the other broker or seller (maybe it’s considered a ‘fee’ and not a ‘commission’, but I’m pretty sure it’s legal).
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Anyway. This is why I went ahead and just got my RE licences. If you plan to buy more than just the occasional property for yourself to live in, it’s worth it. Getting my licences saved my company many 10’s of thousands from our 2011 transactions.
Marksmu: I’m not going to disagree with you, but all HAR is is a website FOR Realtors to post (Houston Association of Realtors) so as big of a beef as I have with HAR at times, that isn’t and even shouldn’t happen.
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However people are free to list/post their homes themselves on a number of other sites (I’ve bought and sold property on Craigslist if you can believe it). You don’t need a licence to buy or sell, and can post anywhere other than HAR. Yet that fact hasn’t killed the Realtor profession as people still want to use Realtors in a transaction. And that’s why people go to HAR.
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And you bring up ‘priced correctly in sought after markets’. That’s not all homes. And not all homes are $1m. And not all listings get 6%, and the broker on one side normally gets half. And the agent split might be 1/2 of that half. So there are $100k homes that sell where the agent could get $1,500. Even if they sell one a month, that’s ~$20k/year.
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(Look what you’ve done! You’ve made me defend Realtors! :)
While we’re on the subject of realtors and commissions, does anyone know what the typical split is between the realtor him or herself and the agency they work for? On a $300k home, 3% to say the buyers agent means $9k. Of that $9,000, how much does the agent have to fork over to their bosses at the agency they work for to keep the lights on and the receptionist paid?
Harold: My vulture comment was limited to these particular realtors. As in all industries, I’m sure there are honorable types and less-than-honorable types. When you specifically tell an agent that you have no representation and want no representation and they go behind your back and fill out the contract as if someone is representing you, it seems pretty vulture-like to me. As for what they were trying to get out of it, you tell me? I would assume it could be advantageous depending on how they negotiated the commission with the seller, I also assume one agent might have been trying to help another get his deal count up, etc… The bottom line is it uses me without my permission for their gain.
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Cody: Thanks for the input, but if I wanted a discount for representing myself, I would just negotiate for one. In this case, I was fine with them having the full 6%. They looked like they needed it. But back to the spirit of Matt’s question, I don’t wish to or have to play the realtor game. Some people want representation and some don’t. In this case, the realtors strayed outside the confines of what they were hired to do ,thereby potentially putting me in a vulnerable position, and I’m not okay with it.
shadyheightster: depends on the broker. The more fancy well known places charge a high split to their agents as you benefit from their name, advertising, and lead generation capabilities.
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however, there are also a lot a discount brokers who will just try to sign up as many agents as they can, charge them a small monthly or annual fee, and take very little from each transaction.
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When I got my license, it was almost exclusively for my own use of buying, selling, and renting property. So I went with a discount broker. I give him a very small fee per per transaction so depending on the size of the deal my share might be 99+ percent. The downside is I’m provided no services from him, but then again I really don’t want any so the relationship is perfect :-)
Kilray “In this case, I was fine with them having the full 6%. They looked like they needed it.”
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Hahah. I lol’d for real at that :)
The value of realtors was addressed in Freakonomics. It’s worth the read if you haven’t read it already. Basic premise was that your interests are not aligned with your realtor’s.
For example: A reduction of $10,000 is a lot to the seller but not to the realtor. This amount corresponds to about $150 to $300, depending on where they are in payments to their broker for the year. Thus the realtor is incentivized to make the deal and move on to the next listing rather than haggle over a couple hundred.
I sold one house(tear down)in the city of Bellaire, in 1997. Just put a sign in the yard for sale by owner. A Real estate ageny, was looking for lots for a builder, she said all I need is 1%. I agreed. Timeing is everthing, so is location.
The builder build a new house, on the lot, which the agent sold.
Realtors are only good at one thing: getting their commission.
Realtor commissions are akin to plaintiff lawyer’s contingency fees. Sometimes plaintiff lawyers get a case that settles with a demand letter. Sometimes they work night and day and get nothing. Same goes for realtors. Sometimes the house sells before it is listed. Sometimes they spend hours and hours showing, negotiating, watching deals fall through and then get nothing.
My personal experience was that my realtor put in about 15 hours of work for me when I bought my home, most of which I could have done myself. On an hourly basis, I could have hired a real estate partner at BakerBotts. But my realtor got wind of my house before it listed, and I was able to snatch it up before anyone else. Without that, I might still be looking or would have bought something inferior. So, I guess there is value there, compensated in the same haphazard way plaintiff’s attorneys are compensated.
I am a
Discount Buyer’s Agent. When a resale Buyer calls me looking for a reduction in the cost of my services, commonly called a Rebate, I simply interview them and based on the work that they are willing to do I tell them how much I will give back to them. I usually start at 40% and often go up to 66% if they have really done their homework and are ready to pull the trigger. Sometimes I will pass them up and let them find someone else. I’m kind of like a strict tutor….I don’t want to work with them if they are not motivated and not willing to do their part.
Stuart:
I’m confused. What part do you play in the real estate transaction? It sounds like you’re some sort of gatekeeper or middle man.
I am a Buyer’s Agent for very informed Buyers.
Right, but why the hell does a ‘highly informed’ buyer need you. As far as I can tell, the buy’s agent is the most unnecessary party to the transaction. At least a seller’a agent creates the MLS listing that otherwise wouldnt be available.
After following this entire conversation, I’m going to jump in. (deep breath)
@Matt – A buyer’s agent may seem unnecessary to you, but the listing agent does NOT represent the interests of the buyer, only the seller. They are required to be ethical and honest, but they treat the buyer as a customer, not a client.
A client receives the full knowledge/ expert/ advice and opinion of their representative (buyer’s agent). How do determine what the fair market value of the property is? How do you research past sales and determine the history of the property? Who advises you on the neighborhood and area pros and cons? Who has negotiation techniques that can help you save thousands of dollars? These, and more, are all things that a qualified buyer’s agent can help you with.
Admitedly, not all are qualified, and there are some real bad ones out there, but that is what a good one can do for you, and far, far more.
@curious minds:
It seems that “Stuart” is not interested in performing any of those services you mentioned as he is a “discount” buyer’s agent. He only works with motivated, informed buyers who are willing to do his work for him, and they get a “discount”.
So, is he really needed? I don’t honestly know as I have not had a real estate transaction in probably as many years as “Stuart” has been alive.
I’m so glad I will not have to worry about such things. I’ll let the younger generation deal with it.
Hey Matt….what do you think? Is a Licensed Loan Officer obligated to take care of your best interests?
Pye,
My clients look for me to hire me for specific services. If I can do the work and they are willing to pay, then that’s between us. If I choose to enter into an Agency Relationship with them then they become my bosses. I am also legally bound to protect their interests whether it makes me money or loses me money, whether it makes other parties upset or makes them happy, whether it closes a deal or kills the deal. So what’s wrong with that? This profession and the housing industry is just like any other…if you are going to jump in you had better know what you are doing. Yes, you are right leave it to someone else. Because you are not ready. Anyone can look me up on HAR.com and see how my clients feel about my performance. I think I am a fair man and I don’t look to anyone to carry my load.