Real Estate Crash thread

[J. Barron DeJong]

Every time I visit this thread I get dumber.

Only this one?

[Mazderati]

The 'harm' is this likely shakes out as a shift instead of a savings.

[J. Barron DeJong]

The 'harm' is this likely shakes out as a shift instead of a savings.

A shift from the agent to the buyer or seller, right?

I get that as an agent you’d (not you specifically) be pissed about that, but from the buyer or sellers perspective what does that look like? Does it mean the agents all suck now because no one competent wants to do the job anymore?

[BmillsSkier]

Every time I visit this thread I get dumber.

I liked it when Benny was here to keep things spicy.

[dunfree]

A shift from the agent to the buyer or seller, right?

I get that as an agent you’d (not you specifically) be pissed about that, but from the buyer or sellers perspective what does that look like? Does it mean the agents all suck now because no one competent wants to do the job anymore?

The harm is dependent on how vital you believe agents are to market making. In niche auctions you can see a 20% buyer premium and a 20% seller commission (that’s rack rate, actual may very) and the auction houses are fairly central to making a market

i didn’t think it possible for timbah to get dumber

[Mazderati]

A shift from the seller to the buyer. Nothing I've read precludes buyers agents from restructuring their fees to charge buyers the cost of making up fees typically paid by sellers. It's possible the total transaction dollars are the same. I agree with downward pressure on total transaction commissions but I question if this settlement is the cause vs discount brokerages, etc.

[Mazderati]

Do you think a seller and their agent is going to take 3% out of their listing price because of this settlement? No way.

[PNWbrit]

It's possible the total transaction dollars are the same.

25% to 50% reduction is the prevailing analysis.

[4matic]

Buyer and seller agents should sign compensation agreements with their client that resides outside the purchase contract. Makes it more difficult to collect I suppose

[Ted Striker]

Do you think a seller and their agent is going to take 3% out of their listing price because of this settlement? No way.

Bingo

The property will always sell for market, regardless of the ask, but the split has been moved in favor of the sellers (which is exactly what the original lawsuit contended).

[Danno]

I have spent about 5 minutes educating myself on this issue so I am now an expert, but it seems like this is going to royally fuck buyer's agents, as they no longer have a direct compensation model. They will have to negotiate that with a buyer when they sign an engagement letter? Buyer's aren't going to want to pay their agent on top of the purchase price. So now I suspect many buyers will proceed without one. Or am I not understanding this (my being an expert notwithstanding)?

[liv2ski]

6% commission on the seller's side may cease to be the norm. I would guess terms and burdens will be rearranged with total transaction costs largely the same.

Disagree, people like myself that want value will grind agents once it is obvious commissions are negotiable. My town of $3M+ average homes will be impacted greatly IMO. Listing office/agent getting 1% and for sure the buyers agents will get ground down from the common 2%-2.5% showing on the listings now once the buyers pay their own comp.

[PNWbrit]

Disagree, people like myself that want value will grind agents once it is obvious commissions are negotiable. My town of $3M+ average homes will be impacted greatly IMO. Listing office/agent getting 1% and for sure the buyers agents will get ground down from the common 2%-2.5% showing on the listings now once the buyers pay their own comp.

This ^

[liv2ski]

I have spent about 5 minutes educating myself on this issue so I am now an expert, but it seems like this is going to royally fuck buyer's agents, as they no longer have a direct compensation model. They will have to negotiate that with a buyer when they sign an engagement letter? Buyer's aren't going to want to pay their agent on top of the purchase price. So now I suspect many buyers will proceed without one. Or am I not understanding this (my being an expert notwithstanding)?

Danno, mortgage companies allow X amount of closing costs concessions from seller to buyer depending on LTV. That said, this is better for the buyers agents as they will now have a contract with the buyer that they get paid regardless of who the buyer uses for representation. If a FTHB is really tight on cash, they will offer the seller a higher price and ask for a closing cost concession that covers their agents comp.

[Ted Striker]

Disagree, people like myself that want value will grind agents once it is obvious commissions are negotiable. My town of $3M+ average homes will be impacted greatly IMO. Listing office/agent getting 1% and for sure the buyers agents will get ground down from the common 2%-2.5% showing on the listings now once the buyers pay their own comp.

Let's say your house is worth 3 mil today. You want to sell it, so you grind the listing agent down to 1%, and offer selling agent zero. House sells for asking, and you pocket that minus your costs + liabilities. Buyer on the hook for whatever they negotiated.

Total transaction cost is higher. You just got a better split.

[Ted Striker]

I have spent about 5 minutes educating myself on this issue so I am now an expert, but it seems like this is going to royally fuck buyer's agents, as they no longer have a direct compensation model. They will have to negotiate that with a buyer when they sign an engagement letter? Buyer's aren't going to want to pay their agent on top of the purchase price. So now I suspect many buyers will proceed without one.

Yes.

[Danno]

Danno, mortgage companies allow X amount of closing costs concessions from seller to buyer depending on LTV. That said, this is better for the buyers agents as they will now have a contract with the buyer that they get paid regardless of who the buyer uses for representation. If a FTHB is really tight on cash, they will offer the seller a higher price and ask for a closing cost concession that covers their agents comp.

I understand that, but if we're talking what agents are going to get ground, it certainly seems like the buyer's agents will. Because it's one thing when you sign a contract with an agent saying (effectively) "you will get paid out of the seller's agent commission, so what I pay for the house is what I pay", but if a buyer's agent is going to have to say to a prospective buyer "hey, you will have to pay me 2% of the sale price over and above the purchase price, but don't worry, we can ask for a closing cost concession from the seller", that's a much harder sell. Especially in a seller's market where seller's can tell that buyer to pound sand if they don't want to offer the concession. I think just having to tell a prospective buyer that THEY have to pay you upon purchase will lead many buyers to go unrepresented.

That's just my speculation based on my 5 minutes of expertise.

[Ted Striker]

What’s the harm there? Is it worse for the money to be in the sellers hands rather than an agents? Keeping in mind that at some point virtually all buyers will end up being sellers later on?

The harm for me? None. Actually, this will benefit me. The harm for first time buyers? They either just lost their representation, or will pay for it on top of whatever the market is on the property. And all costs borne by the buyer is just money down the drain.

Are we thinking that the real estate agents suffer so much that it actually ends up hurting the home buyers or sellers somehow?

I'm married to an agent, and even I couldn't give even the smallest shit for that industry (frankly, neither does she), but this the beginning of the end for buyers agents.

This thing has legs because people hate RE agents, and love schadenfreude. The irony of buyers also being harmed is lost on them.

[old goat]

Theoretically having buyers' agents paid a flat fee trying to get the lowest possible price for the buyer will bring down the cost of houses. As it is buyers' agents are actually working for the seller--both because the seller is paying them and because the more the house costs the more the agent makes. The question is whether there will actually be agents who do this and do it well and whether there will be any way to identify them. My guess is that most buyers will do without agents except for the priciest houses, sellers' agents will make about what they've always made, and with half of the work gone a lot of agents will leave the business.

Our son bought a house under construction in a small development. His agent, who found the house for him as my son lived elsewhere at the time, got I believe 1.5%. He could have steered our son to houses where he would have gotten the 3% but they were fraternity brothers so he didn't. Maybe that's why he's not a real estate agent any more.

[Hopeless Sinner]

The buyer's agent is really a fallacy. They're just another middleman out for themselves(w rare exceptions.) I have no doubt they conspire w selling agents, particularly when both the buying and selling agents work for the same RE brokerage.

[neufox47]

Let's say your house is worth 3 mil today. You want to sell it, so you grind the listing agent down to 1%, and offer selling agent zero. House sells for asking, and you pocket that minus your costs + liabilities. Buyer on the hook for whatever they negotiated.

Total transaction cost is higher. You just got a better split.

The buyer will easily adjust to the total transaction cost, just like they do for other costs like a high insurance cost house vs low, and will decide for themselves if they want to self represent or pay 1 or 2 %. By any measure that is a vastly better mechanism for the buyer and seller than the current system.

You also neglect to acknowledge that a decrease in transaction costs for the seller will make it easier to move and increase supply.

[4matic]

My agent was hated by the Realtor mafia and his listings, mine included, were not steered because we “only” offered 2% on top of his 1% listing fee. With 30 years in the business he knew this was coming. He started 6-7 years ago and was just ahead of his time.

It would be a good time for agents to step up and start a new business being truly a buyer agent. It’s still worth it for the legal representation of your local NAR and market knowledge.

[liv2ski]

It would be a good time for agents to step up and start a new business being truly a buyer agent. It’s still worth it for the legal representation of your local NAR and market knowledge.

Agreed, I always disclosed my compensation to borrowers as that conversation was easy as they were getting a great deal. It is the guy that is hosing you that doesn't want to talk about their comp. As a consumer I would happily sign a contract with an agent paying them $250 an hour for their time (showings) with a flat fee for writing the contract, getting the offer accepted and escrow opened. Like 15 hours work. If the agent only spent 25 hours showing you homes total comp 40 X $250 = $10k of which most agents get 90%+ from unless they have a shitty agreement with their broker. That seems fair to me.

[dan_pdx]

I have to say that I've never had a buyer's agent that seemed like they were really acting as a fiduciary. I'd be interested in the idea of a fee-based buyer's agent to whom I pay an agreed amount regardless of whether or not I make a purchase. (I admit I would expect that to be less than 3%...)

[Ted Striker]

The buyer will easily adjust to the total transaction cost, just like they do for other costs like a high insurance cost house vs low, and will decide for themselves if they want to self represent or pay 1 or 2 %. By any measure that is a vastly better mechanism for the buyer and seller than the current system.

For smart buyers, yeah totally. Others are gonna get fleeced. Which I admit is what happens now as well. My only real point here is that this isn't the gift to buyers people think it is.

You also neglect to acknowledge that a decrease in transaction costs for the seller will make it easier to move and increase supply.

Because that's churn. The population is still outpacing building starts.


edit: agree with Dan, that fee based at the transactional level could be of some benefit to buyers. The current system only really rewards agents that list. Agents representing buyers often waste hours/days/weeks and end up with nothing. So basically incentivizing them to pressure buyers into making offers.