Virtually all the economists disagree with you.
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Virtually all the economists disagree with you.
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I think it’s at least somewhat likely that the US model evolves to match what I understand to be the norm in most of the rest of the world where buyers generally do not have agent representation. Showings are thru sellers agent and buyers are likely to rely on attorneys for contact documentation, diligence and closing services.
Will be lower transaction costs but buyers generally at an informational disadvantage.
The same ones who predicted a major downturn for 2023, and/or failed to predict the 2008 financial crisis? Yeah, I'm ok with that.Quote:
Originally Posted by neufox47
As pointed out above: Going to a sellers agent only scenario goes against what MANY states have had a law banning for years: Dual Agency.
Here in MT dual agency is still legal and is in practice, but many agents/brokerages are strongly against it. There is no real way to be 100% ethical and represent both parties. If it were brought to a vote at the state level myself and pretty much every other good agent I know would vote to ban it as many other states already have.
On the other side, assume the buyer's agent industry does go to a flat-rate model paid for by the buyer. I'm not sure how well this model would work in many higher end / non-urban markets. The volume of transactions is relatively low. Will a flat rate only buyers agent ever really be ethically/morally invested in their clients when their whole livelihood will be quantified by "I need to do X transactions per month to make it work."
Whatever changes are coming I think top end agents will adapt. The high rates and low buyer activity post covid boom has already spurred on quite a bit of "quiet quitting" in the industry.......for many this will be the final straw and they will hang up their licenses for good.
Commissions are a cost of the transaction. These costs are born by the market and lead to reduces mobility sales. Good Realtors should support increased barriers to entry for their profession to weed out their competition.Quote:
Dual agency is not allowed in Colorado, meaning you cannot have an agency agreement with the buyer and seller. If you have a previous agency relationship with either a buyer or seller, that party can either choose to have you become a transaction broker as allowed, or you can treat the other party as a customer. A customer is someone with no agency relationship. Still, as a broker, your obligations to a customer in a transaction include honesty and fair dealing, reasonable care and skill, and disclosure as needed.
Snippet from the NYT.
Quote:
Free-market economic theory suggests that the American real estate market should not have been able to exist as it has for decades.
Americans have long paid unusually high commissions to real estate agents. The typical commission in the U.S. has been almost 6 percent, compared with 4.5 percent in Germany, 2.5 percent in Australia and 1.3 percent in Britain. As a recent headline in The Wall Street Journal put it, “Almost no one pays a 6 percent real-estate commission — except Americans.”
If housing operated as an efficient economic market should, competition would have solved this problem. Some real estate brokers, recognizing the chance to win business by charging lower commissions, would have done so. Other brokers would have had to reduce their own commissions or lose customers. Eventually, commissions would have settled in a reasonable place, high enough for agents to make a profit but in line with the rest of the world.
That didn’t happen. Instead, an average home sale in the U.S. has cost between $5,000 and $15,000 more than it would have without the inflated commissions. This money has been akin to a tax, collected by real estate agents instead of the government.
The situation finally seems to be ending, though. On Friday, the National Association of Realtors, the industry group that has enforced the rules that led to the 6 percent commission, agreed to change its behavior as part of an agreement to settle several lawsuits.
The settlement is important in its own right. Americans now spend about $100 billion a year on commissions. That number will probably decline by between $20 billion and $50 billion, Steve Brobeck, the former head of the Consumer Federation of America, told my colleague Debra Kamin.
There is also a broader significance to the settlement. It’s a case study of a central flaw in free-market economic theory. That theory suggests that capitalist competition can almost always protect consumers from businesses that charge too much.
With how much NAR spends on lobbying, I'm absolutely shocked they agreed to this settlement. I was guessing they would appeal until they found a friendly court. Maybe they crunched the numbers and the pyramid scheme pulling in $50 billion still keeps those at the top flush? Or too distracted by the sex scandal? Or existing 6% system was so egregious, they feared much harsher judgement? Will be interesting to see how it plays out.
In a seller's market, as we have now in most places, buyers will have to decide if they want to hire and pay for a realtor representative. I would guess this will evolve into a flat-fee based system, maybe even a cottage industry of buyer "specialists." A lot of buyers won't hire anybody and will proceed at their own peril.
In a buyer's market, if we ever have one of those again, the buyer will be able to hire a representative and dictate that the seller pay the cost as part of the deal.
We've been planning to list in April, but the settlement takes effect in July. I expect a very interesting spring as everyone tries to figure out the optimal approach to maximize returns both before and after the settlement takes effect. Personally, wondering if I can save one or two percent if we wait to list until July, but we're probably going to take the hit just to have our life figured out a little quicker.
^^^if you are in a major metro and don't have an odd house, just use Redfin.
That's what I tell anyone who will listen.Quote:
Originally Posted by 406
Spokane... So arguably not a major metro, and a house that requires a fairly specific buyer. (Detached ADU, large lot, 100 year old house.) We're working with the sharkiest of all the sharky agents we talked to, she has sold a good amount of homes in our neighborhood. I'd love to keep the 5% or so that we wind up giving to agents, but in this case, I kind of believe that we're going to get better results than we would on our own.Quote:
Originally Posted by liv2ski
Quote:
Originally Posted by old goat
This is what "steering" actually is.
That article linked a page or two ago that said "steering buyers to more expensive homes" got it completely wrong.
The most problematic steering is when a agent pushes a buyer towards a listing where their own commission rate is higher (or avoids showing them any results where it is lower). It isn't about the price--better to earn 3% on a 500k home than 1% on a 750k home. It is like "financial advisors" steering you into mutual funds that charge a 5% load because they get paid rather than a more appropriate fund that doesn't pay them kickbacks.
Any time a buyer's agent earns a % commission, they will still have an incentive to get you to buy a more expensive home (or get you to bid more), but that's not "steering". And at least then you know what is happening and you know whether or not something is in your budget. With commission rate steering, the buyer often doesn't even know it is happening because the % is hidden in the MLS and not obviously visible on Zillow and the like.
And honestly, I think the % commission/high price effect only has a mild effect on buyers (slightly more on sellers). Agents only get paid when they close a deal. If there's a $800k house they know their client will love, would they really hold out on that listing in order to try and convince the client to find a $850k house? That would only increase a 3% commission from 24k to 25.5k. Are you really going to risk 24k now on the hope that you find more expensive house they will buy? No, you're going to throw every possible good fit house at them...24k now is better than 25.5k 3 months and 15 showings later.
But they probably would be willing to avoid showing you a house that only has a 1% commission...8k vs 24k is a much bigger deal. That's why steering is problematic and bad for both buyers and sellers.
Why does this house require a specific buyer? ADU and a large lot seem generally desirable, and assuming the 100 year old house is normal for the neighborhood not unique.Quote:
Originally Posted by dan_pdx
This. The notion that a buyers agent's goal is to get you the most expensive home possible (or convince you to not try to negotiate the price down) is silly, because the difference is not that much money and having a happy buyer is always the first priority for any agent that wants to stay in business. But steering you from a lower commissioned house to a higher commissioned is a LOT bigger monetary difference, and one your client will likely never see.Quote:
Originally Posted by singlesline
This article touches on how that steering worked in practice:
https://prospect.org/justice/2024-03...estate-cartel/
Feedback from a few pre-listing viewings was basically "that's a lot to look after." Most of the houses in the neighborhood are 1990s or later, so the old house fans are probably looking elsewhere. Cost of DIYing unsuccessfully and not being able to sell this summer is much higher than four or five percent to agents, so [shrug].Quote:
Originally Posted by AdironRider
I'm not even sure how that would work in 99% of the cases nowadays since everyone's looking up listings on Zillow or Redfin. I think if an agent refuses to show their client houses they'd like to see they aren't going to be their client for very long.Quote:
Originally Posted by singlesline
The agreement releases NAR from the verdict in the case from home sellers in Missouri, which the court could have tripled under the antitrust laws to $5.4 billion, along with claims in proposed nationwide class actions targeting the rules that could have reached $200 billion in damages.Quote:
Originally Posted by 406
On what grounds? They've been saying they were going to since the verdict but none were ever mentioned.Quote:
I was guessing they would appeal
That's not how it works.Quote:
until they found a friendly court.
Much like Danno's newfound expertise on the situation, I'm going to rely on my anecdotal evidence of my social feeds this morning to infer that that the realtors in my networks are going into full court press mode and trying to either shore up market share from departing buyer's agents or remind people that they still intend on being paid.
Maybe getting the messaging out early that buyers will have to pay them pursuant to their own separate agreement? We'll see.
I agree that it is less and less of an issue, especially in smaller markets with less listings. I've seen and clicked through every single new listing anywhere near my budget in my town in the past couple years...my agent isn't hiding anything from me.Quote:
Originally Posted by The AD
But there are still places where it can happen. Easiest example is someone moving to a large metro. They don't know the area and likely can't comb through the volume of listings (and may have limited time to do showings), so they depend on an agent to sift through the trash and only show them acceptable homes. Trivial to just not suggest homes that pay a bad commission.
Seeing all these agent stories online today got me thinking. I recall sort of an opposite steering experience we had with a selling agent back during the market crash. She was the big swinging dick agent in town where we were selling a house in a desirable neighborhood that we were lucky to have a lot of equity in. We all understood that sales were tough and it might take more time than in a non-recession market, so she pushed very, very hard for us to price it well under what we wanted to (3%-4% of a lower sale price is way better for her than X% of no sale), and presented what she insisted were comps from 5 miles away bordering a shitty part of town.
We insisted on our price noting sales in the neighborhood from the prior year. She said no and we all agreed to part ways. We engaged the next realtor we met with who agreed with our listing price and hosted one open house. It went under contract in 7 days (wild back then) for $10k over what we were asking thanks to 3 very interested buyers.
When we got our mail forwarded to our new house, there was one of those "your neighbor just sold!" color postcards of our old house with the price. My wife, in a very rare moment of pure pettiness, took that postcard and dropped it in the mail to the first realtor with a simple note, "looks like our price was right!"
Does any of this mean anything? Not really, other than to point out that in some cases even your selling agent may not be looking out for your best interest above theirs. I get it, I pass on clients all the time that aren't worth my time or effort, but rarely is it because the economics of the relationship aren't supported. YMMV.
In some cases? You sir have way more faith in that there f-eye-douche-ee-yary relationship than I do.Quote:
Originally Posted by BmillsSkier
Probably true. Are realtors fiduciaries? I honestly don't know, but given the half-page long fiduciary provisions I jam into agreements for managing members of companies, I'm not sure that would fit on the NAR purchase agreement form.Quote:
Originally Posted by Danno
The whole "agent's steeting buyers only to properties with higher commissions" thing is kinda funny. It's a low inventory environment. Any agents not putting a home in front of their buyer over 0.5% or 1% difference is insane. If there are agents out their doing that they don't stay agents very long anyway.