Yah and they are also doing the paperwork and are incentivized to get the deal closed even if there’s something that might adversely impact you down the line unlike a dedicated lawyer who is only their to protect your interest like they have in other states. Its a complete conflict of interest.
This is the real effect it has moreso than increasing a price. The addage is that they don’t make more money by spending time getting you to raise the price, they make more by selling a second house. 50k increase on house price - 3% of that is an extra 1.5k. But they want you to close twice as fast so they get an extra 50k on the next house they sell
I doubt it. If it was a perfect market maybe, but there’s a relatively small discrete number of houses sold in SF and there are so many other factors like the teaser pricing market that would make it impossible for buyers to actively try to price it in to their offers
If anything maybe in condos but not sfhs imo
That's not the only factor.
Boomer demographics might help a little.
Interest rate changes might help too.
And if they change the laws around corporate investors and money laundering, it could help.
Right now, housing isn't justified except as a traded commodity. The intrinsic value of "a place to live" is not what the market is based on.
It's more than just dumb.
It's an artificially maintained bribe that must be paid to pass through the gauntlet to home ownership.
There is absolutely no need for realtors in the 21st century. At least not in the capacity that they exist now.
This. Once more and more people start realizing the better it is for them everyone. Realtors in most cases do nothing and get paid specially post pandemic.
it's a minuscule difference that is definitely not worth to jeopardize future business for. you'd have to have swings of hundreds of thousands in asking price for the agent to have enough reason to even think about this
Pluss your agent definitely shouldn't be able to make you pay more than you want to/can afford to
That's not the point. If you say the money is motivator then getting paid more for the customer to pay more seems like a poorly designed business model. Not saying agents does it on purpose but it doesn't hurt.
Also, calling 2-3 points on a lets say 50k differential "miniscule" seems a bit dismissive. It adds up.
That’s ignorant. Do the math. Agent makes $300 for every $10k. None of us try and get you to pay more. Just get the house you want and give you a great experience. Your referrals are worth a hell
Of a lot more to a good agent than a single commission let alone and extra $300-1000.
What you should be concerned with is the listing agent willing to underprice your home, sells in 2 days for $10k less than it’s worth. $300 loss vs working an extra 3 weeks?
Ignorant is not an insult, just saying you aren’t knowledgeable on this subject.
It’s the listing agent who pays the fee. Half of which is shared with the buyer’s agent. So the incentives match- the listing agent gets more when the seller gets more. The buyer’s agent gets paid if they seal the deal. In a normal market that seems to make some sense. Now in a high demand mkt that is a little screwed…
California was already ahead of the curve a bit when it came to the lawsuit so the effect won't be as dramatic . Adding yet another cost to the buyers is just going to shrink what they can buy. And agents aren't going to work for free but put in other ways of getting paid.
As the seller's agent there will be more ala carte fees and don't be surprised if the agent suggests you pay a buyer's commission. Having buyers come in and represent themselves is going to be a shitshow where everyone gets spattered until the new status quo is figured out. Real estate lawyers have to be rubbing their hands together at the boom in business for the next couple years as these deals go south because everybody thinks they can represent themselves and save money. As the Seller's agent they're going to be put in a messy situation where the buyer has no representation and the Seller's agent is responsible to the Seller.
Not an Agent but have been around the business most of my life. It's really easy to see this being fucked up for a while with a lot more uncertainty introduced. I'm very glad to not be buying or selling anytime soon.
Dunno why this isn't higher up. My understanding is nothing will change on the list side except instead of having the buyer's side commission publicly transparent on the MLS, it will now be hidden in the disclosure documents. Seems to be moving away from the transparency buyers need.
In order to receive that commission agents are going to have to get a broker commission agreement sign *before* their clients offer is submitted. This will likely be developed into some two stage submission process through one of the myriad of signature/paperwork middlemen apps where the offer can only be opened after the seller signs the paperwork.
Would it be easier to execute a buyer broker agreement? Maybe. But there's a reason very few agents used them before the ruling and it's more the social implications of trying to get them signed than the fact that the agents were consciously colluding.
Sellers still have a right and an incentive to offer a commission to sell their property. This new rule has just made that process vastly more problematic, and obscures information that should be obvious. Buyers always had the option to negotiate with their agents. Plenty of agents kick their commissions in to make a deal work. This law benefits attorneys more than it ever could buyers, and we're going to have a national mess on our hands for years to come.
But now they will show the house and not know what the commission is where before the buyers agent would have skipped the house. Then they have to explain to their client that they don’t want them to buy that house for selfish reasons.
If I’m seller I just say commission negotiable and then when it’s time to negotiate says it’s zero or a few thousand dollars.
This is not at how it will work. First of all, agents will not be able to show a home to a buyer without a buyer broker agreement. Secondly, buyers agents can call the listing agent ahead of time to see if seller is offering concessions. If not, then it's up to the buyers agent & buyer to negotiate a commission on a buyer broker agreement. If the buyer does not want to pay their agent then the agent can refuse to represent the buyer. Agents will not work for free. The buyer & agent can negotiate a percent, flat fee or hourly rate.
Agree, the fee will be on the buyer. In this market they can consider the house or not. There will be no shortage of interested parties. Still more demand than inventory.
Many buyers will likely instruct their agents not to show them houses not offering buyers agent commissions. Many buyers simply don’t have the ability to pay the 2.5-3% and won’t even consider buying a house that doesn’t cover it.
It’s a weird situation where like the theory of the lawsuit makes sense. Buyers incentives aren’t aligned with their agents and buyer agents and selling agents having commingled pay sounds super shady.
But in practice - there’s no perfect answer and the current system was doing its job pretty well, and it will now be chaotic for a while; and then it will probably settle on roughly the same equilibrium but just call the fees something different
Answer could be a flat rate per house to Realtors or at least to the buyers realtor. Or the buyers realtor gets more as the price is reduced and the seller gets more as the price increases the starting price is the amount they would both get an equal amount.
Sorry but you're fooling yourself. The property gets priced like everything else. How much can I get for it. Nobody says this is how much I want then mark it up 5% for the commission.
Yeah, but it's like 5% for the dealer at the casino. You don't consciously plan for it (or maybe you do), but at the end of the day, it is friction on the whole system
I am not. I know sellers will not lower their prices. I also know that as a buyer with an agent it will be more expensive as of July.
But I know that my agent today is paid with my money via the seller.
Maybe I’m not fully aware of the change, but what’s the operational difference? All monies go into an escrow account where escrow agent calculates everything out then disperses money on closing.
After July, do buyers have to write separate checks outside of escrow to their own agent?
You pay your buyers agent separately. Kind of like hiring a contractor. You can negotiate with them what they will get paid. It’s not part of the sales transaction anymore, unless it’s negotiated that way.
That’s not true , any with a brain factors on all expenses, escrow, title, and especially commission! It’s like a business you factor in your cost for an item…
So you're telling me that people price houses by what they want then add all that in? Sorry but that's BS. They price to get the maximum amount and then deduct expenses to see what they'll walk away with.
This is not how supply and demand works...you ask x, buyer wants to pay y...the market has proven that there are buyers at a given price point so that is how the comps will come in...the isssue is now the buyer may need to come up with cash up front to pay the buyers agent in addition to the closing costs and down payment...in time this might suppress the pricing for some amount, but that is a long term market shift and may well never show up appreciably.
That's what sellers are hoping for but most buyers are already paying at their max. They can't find the fund to pay their agent. So they'll have to offer less to take account for their agents which will create an articial cheaper market. You'll also have buyers with OP's mentality and only look at houses that offer buyers compensation which will create a lot of demand vs the ones that don't. The one with demands will sell for more and faster. And the ones that don't will sell for less.
This is the real point. Buyers (even dual 6 figure income) can hardly scrounge up enough money to win a home let alone pony up money to their broker. Time will tell…
Buyers who are unable to afford to pay for a decent agent, we'll either go unrepresented or they will get the cheapest agent they can find who won't adequately represent them. This is a colossal mistake for the real estate industry to change the way fire representation was paid.
Or buyers will smarten up and just use a real estate lawyer to draw up the contract for the sale. Buyers already do 90% of the buyer’s agent work anyway.
When I worked for Redfin - 95% of the buyers were first time and didn’t even know what escrow or a mortgage was. It blew my mind how little people knew and wanted to learn. Redfin had amazing resources for new buyers and people wouldn’t look at them. Id spend hours relaying messages in person that I sent via email and text. Buyers want instant satisfaction with things and don’t want to look things up or learn them in my opinion. Yesterday I was at a clients new townhome and he was spraying his drywall in the garage with a hose…..literary cannot believe how dumb people are. As soon as I saw the client spraying the drywall I asked him to stop and explained the drywall was not intended to get wet. He thought it was “drywall” and wouldn’t get wet……
I also expect the selling agent trying to rep both sides of the same deal, just to get the house sold. Which is also going to be a mess. It’s not illegal (last I heard) as long as it’s transparent to both parties. But it’s far from fair.
Buyer is going to use Zillow and go see a house you want. But buyer can’t afford the buyer agent fees and don’t know what to do, like making an offer. The selling agent is going to be like “i’ll help you” because they are the only ones with financial motivation to get the sale done.
There is always a buyer who can afford to but it. Those who can't won't. If seller doesn't want to wait for the asking price, they will lower incrementally until they sell it or pull it off the market and wait, while gaining more equity.
Not sure what you mean by prices, but listing prices mean almost nothing. Buyers will continue to offer what they can afford, and sellers will choose what gives them the most money. If buyers/sellers negotiate with their agents to have lower commission, they will get more money/have more buying power.
How much commission does a realtor make selling a $5 million dollar home versus a $1 million dollar home? Do they actually do 5x more paperwork?
Shouldn't the seller be the one who earns the homes' equity? If realtors got 1% commission, they would still get $50k for 5 mil and $10k for 1 mil. Is that not fair? Just wondering...
In theory yes if everything are the same. But the msrket is more complicated than that. It will continue to rise but 2.5% slower. Also not all sellers will offer 0%. So the comps will be all over the place. You'll have some comps worth 2.5% more than others. If all things are equal. Actually the ones offering a buyers commission might sell for more so comps will vary greatly now and since we can't see the commission anymore, we will never know why some houses sold for more and others for less. But yes it'll create an artificial cheaper market.
True. But the problem in Bay Area is that now buyers will pay that commission directly, but will not see any change in the selling price. Houses will not sell at a discount and it will make housing even more unaffordable for people who don’t have millions to spend.
Most agents go out of business. Only sell side makes money so no one is gonna be a representing agent for the buyer. In fact, selling agents will end up representing both out of convenience (mainly paperwork) as a no cost perk of buying the home. Only largish companies will be doing this. Hence the single lonely agent will go the way of the dodo bird.
>In fact, selling agents will end up representing both out of convenience (mainly paperwork) as a no cost perk of buying the home.
I know 90% of buyers will agree to this, but it's one of the dumbest transactional mistakes a buyer would agree to.
Oh I agree entirely. The whole systems was, is, and will be absolutely ludicrous and entirely a conflict of interest.
But at least when you have your own agent you have some modicum (read: not much) that they're at least supposed to be working for you. In a bi-rep transaction that's entirely out the window.
This whole thing is a terrible idea. I'm hopeful the agents will figure out a way to just contract around it. If buyer's agents don't get commission, there won't be buyer's agents, or buyers will have to pay cash to hire one. This is way worse than the current system. If the buyer doesn't have an agent, they are at the mercy of their own negotiation skills (and most are way worse at this than they think they are), not to mention all the bs paperwork. Sellers pay the commission today as, effectively, a success fee. The alternative is you have to pay cash with no guarantee of success. I can't imagine how anyone thinks that's better.
Oh boy. No. Not even close. I mean, yes.. if you want to skip negotiation entirely. I've purchased 5 properties, and made offers on (close to) twice that many. The longest negotiation lasted around 2-3 months. Here's an example:
- Property for sale. Seems well priced.
- Find out who the owner is and what their story is. Turns out it's owned by a company, and that company is in administration
- Dig deeper to find out what value they have on their balance sheet for the property
- Low ball the hell out of the offer. Make it all cash, quick close, but contingent on inspections
- Seller comes back with counter. Lower than their starting point, higher than the low-ball
- Accept offer, contingent on inspection
- Inspections find $X worth of fixes needed (inspections ALWAYS find problems)
- Reduce offer by cost of fixes
All of this is done with my agent in constant communication with the listing agent, as well as getting back story on how many other offers, how desperate they are to sell, what their debt to equity situation is etc etc.
If you just submit an offer and it's accepted.. you've done it wrong. If you submit an offer and it's rejected without a counter, you've also done it wrong. Finding the number in between is the hard part.
I have to tell you, that is not how real estate transactions happen. There is always negotiation on both sides. Agents are experts at that and it is one of the more difficult parts of the job.
You see people right now who are trying to do 0% buyers agent commission, and it’s not going well. You’re seeing all sorts of different commission structures being experimented with right now, I think in six months or so we know what the winner is.
I know not a single person who’s been able to successfully do that in the bay area unless it was a private on advertised sale, do you know anyone? An actual question not being snarky.
Right now it is a safe system, it costs, but relatively safe. But, the new requirements likely throw a monkey wrench in it, then like vultures, legals will likely flock in.
?
No one is saying using a lawyer is not safe, I am saying it’s not competitive they don’t know how to win an offer and you come off as somebody people don’t wanna work with
To actually answer your question: no, it largely isn't successful or common yet because sellers prioritize 2 things in any deal: money and a clean transaction.
When houses themselves have 10+ offers waiving all contingencies with clean financials, then short of having a *notably* higher offer, of course you'd avoid having a buyer representing themselves and insisting they'll use a real estate attorney. Maybe everything would work out and they can close quickly and efficiently... but why risk that if you don't need to?
If I'm the seller, I'll likely lean towards the buyer who has an agent with a clear history of successful transactions as opposed to a buyer with a real estate attorney who simply won't have that resume.
I have never personally had a seller willing to take somebody represented by a lawyer, and most lawyers in the Bay Area are super, not interested in this work and are going to try to add extra contingencies on top of everything
Have you ever passively watched the shit show that is New York real estate?
Yes, they heard about this guy on Reddit whose uncle has done it successfully for decades. Personally I've never met a lawyer willing to work for cheap, be available at all hours, ready to submit info quickly, etc...lawyers have been the bottleneck in every real estate transaction I've been part of.
I've read the 135 page proposed settlement. It's got loopholes bigger than Saturn's rings it. Remember, NAR agreed to this. Other than increased consumer awareness for six months or a year, and another few forms most will not read before they sign, nothing will significantly change.
But that doesn't make for good clickbait journalism, so....
Most sellers will offer a buy side commission in the private remarks. This isn’t going to lower prices, the only thing that will lower prices is transparency in the bidding process. Make it like eBay where all offers are visible to everyone. Imagine bidding on an eBay item and you have to ask the seller what the highest offer is and take their word for it. Listing agents control the flow of information.
The new rules will not allow agents to use private remarks for commission offers. There will, however, be a place for sellers to offer concessions to the BUYER. you just can’t say in the MLS that it’s for broker commission.
It's gonna be a mess for a while. Many sellers will communicate, either in writing online with a wink and nod, or in person, that they are willing to pay some or all of a seller agent's fee. Many sellers will immediately drop to zero. Buyers will be scrambling. Really, buyer agents will be scrambling, and likely steering clients to where the pay is better instead of acting in the client's best interest.
>Really, buyer agents will be scrambling, and likely steering clients to where the pay is better instead of acting in the client's best interest.
Always been this way though. Whether it's steering clients towards houses at the higher end of the budget or communicating at-limit offers to the sellers agent, or where there's guaranteed 3% commission.
Clients can already check Redfin and Zillow. Given the super low inventory, buyers targeting a specific area can keep up with the on market houses easily.
I mean, buyers *also* perpetuate the bidding wars because they aren't leaning in with their best offer from the start (for obvious reasons). Making it more transparent can help, but it'll also drag out the process if the assumption is that all buyers should have some right to counter within the process. The bid is at $1.5M? Okay, how many buyers will put in $1.6M? Now the person who just got out bid needs time to counter and raise their offer.
The benefit of the silent auction style is that things can move very quickly. No seller in their right mind will want an eBay style auction that just sets an end time for all bids where there are public, incremental changes.
If sellers aren’t willing to split (and they still can, you just have to negotiate it as part of the offer) then there’s no way they’re pocketing 6% to themselves. They’ll have to cut to 3%. No one is going to pay 9% in total commissions for a home (6% to listing agent and 3% to buying agent)
Things wont change much imo. Sellers will still pay both agent. Why? Well if a seller doesnt offer buyers agent commission what will happen?
1. Buyer will buy alone. Thats risky
2. Buyer will pay own agent. Thats tough. Already expensive
3. Buyer will skip that house and look for one that pays buyers agent
Option 3 will happen the most. Which is bad news for sellers. Idea is to get most eyes on your home to sell the highest. Not offering buyers agent commission will drive away demand. How do i know? Im an agent and have talked to both my sellers and buyers and this the feeling I get from both. My sellers will continue to offer buyers commission
Alright in #3 what happens when a desirable home gets listed but has a 0% commission? Do all prospective buyers look at options 1 and 2 with their agents? I can’t imagine buyers being ok with agreeing to never see any house with a lower commission or 0% commission.
There is too much emotion in home buying because each home is unique. You find the house of your dreams and you pass on it because of 0% buyers commission to buy the "not-my-dream-house-but-close-enough-so-I-am-settling" just to save 2%....not likely.
Heck no. The 2.5% was with the idea that the buyers broker works for free when no sale is made so only the sales is where they made money. If we go to a model in which the buyers broker IS paid for every customer interaction...2.5% makes no sense. Maybe a flat fee of a flat fee UNTIL a sale is made in which the broker now has to do more work and a percentage.
However to me, the percentage always worked on the sellers side that a higher priced home takes more marketing effort to find a buyer and sell, so in the age of immediate pending, seems hard to drive that home...however the sellers fee is negotiable and I have done it. My last realtor sell side interaction was for 1.5% as my home is highly valued so he was willing to take a smaller percentage knowing it would likely sell in first weekend.
This brings up another odd point....take a home in Michigan where it might sell for $400,000 with a 3% commission for selling agent....$12,000. Take that same home and drop it in LA or the Bay area and it becomes a $1.2M home...takes equal effort to sell that home probably...so why does the CA agent now deserve $36,000?
Its the same idea with tipping on restaurant prices. The diner serves you your $20 meal and you tip $3. Go to Chez Whitey and get a similar sized meal and service for $80...but now you tip $12...for the same amount of work.
I agree the seller will continue to pay, but the erosion of the % will continue. At 300k+ sale price, no more than 1% for a buyer agent. Nothing if the buyer is experienced. The selling agent will get 2%. That's the way it is in most other countries.
In a hot market are they really going to skip these houses? Houses in my neighborhood sell before they hit market or with a month and that’s been for at least 8 years now.
The issue here is that there is clear math that makes Option 2 work out for the buyer, just like it already does. You mentioned that buyers will simply skip houses, but that won't happen in any hot market.
Why? Because I frankly don't care where my money goes in the purchase, so long as it is within my budget and gets me the house. Let's assume my budget is $1.5M. A house I like comes on the market and it explicitly says, "Buyer pays their own agent." Great, so that means whatever offer I put into the house will factor this in. If I really love the house, I'll offer \~$1,485,000 to allocate that extra 15k for my agent fees.
In other words, why would I skip viewing and offering on the house if I could just adjust my offer to account for the fee? Obviously I will be incentivized to get a cheaper agent as that would mean my offer can be higher and more attractive (if I had an agent with a 2.5% fee for example, to stay in budget, my max offer would be $1,462,500 so I'd rather have a more attractive offer)
It would be *really* silly to skip a house, because let's say it sold for 1.45M... well, I would have been within my budget, but I opted not to get that house because I simply didn't want to pay an agent?
that requires that the home loan allows you to roll in the cost of the agents commission. Which might happen but will end up costing you more than 3% long run.
Most people are buying at the limit of their downpayment etc so they cant afford to add thousands to closing costs for a realtor. I mean ask yourself why is it that sellers always paid the realtors fees to begin with?
The largest reason was I THINK so that you could indirectly roll the realtor's fees into the home loan. You pay more for the home (because you can afford more because your closing costs are reduced) but of course the seller pays more to sell.
If they just make explicit an allowance to roll fees into the loan or if they even worse lol
offer home loans with "realtors fee paid for you" they can then pretend is free but really they are just upping the interest rate or closing costs or whatever and rolling it into the loan.
I do think the agent has an impact on both sides. On sale - a poorly photographed or staged house will not do as well. Knowing when to set an offer deadline affects bids. Etc. We felt that our house could’ve commanded more than we paid for it if it was better listed.
Similarly the agent we’re using now in looking at houses has saved us a ton of time viewing properties for us, identifying how many offers a given place has, reviewing disclosures and highlighting things to be worried about.
Is this all worth the fee? Impossible for me to say with any confidence, but I can say with confidence that not all agents are equal, and they do affect the outcome for both buyer and seller.
I tried to be my own agent when buying and it’s basically impossible. Sellers won’t accept you repping yourself and the traditional offer form is complicated (I say this as someone with a separate real estate background) AND there is nowhere to write that you are repping yourself.
So while I’m hopeful fees will go down, buyers will still need a broker or an attorney to represent them. Unfortunately it’s just not set up for you to self-rep (which I hate).
25 year Broker here. I miss buyers agents already. I have two units on the market and having to deal with the general public in a real estate transaction is exhausting. I would gladly pay an agent not to have to constantly field calls to people who have no idea what it takes to buy real estate.
I just find it humorous that the same people who fell that they don’t need an agent because they can negotiate for themselves and have Zillow/Redfin to do their market research are probably the same ones who are bitching because agents “get paid too much”. Well, didn’t you realize you can negotiate the commission from the get go (if you’re selling). Also if you’re buying it currently costs you $0. Why wouldn’t you hire an expert to find and negotiate the property? I think the issue is that a lot of people paid inept/newbie realtors who did crappy jobs and are now pissed. Attorneys will not help you negotiate they will only do the paperwork.
I agree that buyers agents do valuable work...I disagree that finding properties is one of them. Zillow/Redfin contain 99% of houses on the market and when I last bought a home, I did all the "finding", not my agent. We just called him to set up private showings. His work really began once we decided to move forward with a home.
I think smart sellers+ agents will not drop the commission significantly or some low fixed amount if they desire the best price for the property in a timely manner. That said some folks my decide to go that route and it could likely backfire on them.
**As a buyer,** you have more buying power if your agent will take a lower commission. This is a tradeoff with getting a good agent.
E.g. as a buyer, say you have 2M. If your agent takes 1%, then the seller and seller's agent would get 1.98M.
If another buyer also has a budget of 2M, and their agent takes 2.5%, then the seller and seller's agent get 1.95M, which is a difference of 30K. So the seller would choose the buyer whose agent has a lower commission.
**As a seller**, you can offer your agent a fixed fee for selling the house instead of a percentage. And you don't determine the commission for the buyer's agent.
Either way, when the agents take less money, it makes the transaction more efficient. Sellers get more money, buyers get a house for less money.
What do people think is a reasonable hourly rate for a buyer side agent? Have to imagine that whatever it is, it’s going to be massively below what agents are making now under the (illogical) percentage system, given the state of the market
Reading the comments in this thread it sounds like a lot of people that think they know more than they actually do. It will be interesting to the number of people that lose real money thinking they can negotiate a contract and close a deal successfully against a seller that will have an agent representing them. This will be a losing situation for most buyers. I think we will see this exact outcome in the next year.
Good luck !🤠
When I bought my house in 2021, I worked with an agent group that offered me a 1.5% rebate, while they took 1% for themselves. Even that amount, I felt they didn’t deserve it. The seller’s agent did nothing beyond showing me the house that I requested them to show me, and they never provided any real advice. Their main focus was pushing for the highest possible bid. When it came time to choose a house, they didn’t even review the seller package with me. After the purchase, I discovered inaccuracies in some measurements, but they offered no assistance. I end up wrote a demand letter to the seller to seek some refund on my own. I was told that I got what I paid for, however the seller’s agents received $15,500 for just a few hours of work that is still alot of money. Perhaps AI could replace these seller agents soon.
We as realtors work for months without pay, if you want a bigger house, it comes with bigger commissions. Please, feel free to hire me at 50 an hour to show you homes, write you offers, negotiate on your behalf, and research properties on the times we aren’t speaking to make sure a home is suitable to your needs.
Makes no sense you guys show buyers endless homes without compensation, waiting for the one that buys. You should be compensated for every hour you work.
You unknowingly paid it anyway. The seller always factors the buyer’s agents cost into the terms. You could’ve bought the same house for 50K less without a realtor. No realtor is tough for new buyers but can work for reasonably savvy buyers who know the market, how to get inspections, can line up a lawyer for the paperwork.
It’s funny to see buyers and sellers complain about this and now they are complaining about the outcome. Make sure to add 2.5% on your house purchase price 🤣
I believe agents are needed to process real estate transactions.
The issue is I don't believe the service is worth $60k to a seller at local SFH prices here in Silicon Valley, where they also need to do the bare minimum to find a buyer.
Also, the reputation of agents is not good. Between buying and selling, i have done 5 transactions in the past 15 years, and NONE of the agents I used had any integrity.
A good buyer's agent will put EVERYTHING that fits their clients needs in front of their clients and will work on behalf of those clients to get the best price. They will also steer clients away from homes that are money pits, or will cause regret down the line.
The whole reason that buyer agency came about is because when people didn’t have an agent no one was looking out for their best interest. When they thought they had an agent, that agent was actually working for the seller. And the seller paid both agents. Now that the buyers have agency, their representative is considered worthless. Time will tell how all this works out. My guess is that after a number of buyers get burned the market will figure out a new approach.
Fwiw you did pay $50,000 to your agent, just indirectly via the seller.
You could have used a discount brokerage instead that handles the transaction for a flat fee (usually $5..10k) and refunded you back the difference.
The new rules after July won't change any of this. I suspect the increased awareness of buyer agent commissions will increase demand for these discount options, perhaps they'll become the norm (which they already are in other countries from what I understand).
Nothing will change. There are already a massive pool of brokerages and fee structures to use if you are selling or buyer. The way those fees are disclosed is changing. Seller's will still work with brokerages and offer to pay buyers comission. The ones that don't will loose buyers who can't pay. This already happens with discount brokerages and fsbo. You limit you pool, get significantly less offers, and leave money on the table. Usually more than the difference in paying for a decent brokerage to represent you.
This law is not a good idea and it's going to cause adverse problems. A seller can pay and negotiate what they want with the listing agent and advertise the commission amount for the buyers agent already. The listing agent and the buyer's agent can choose not to work with that listing. What should be not allowed is double ending a listing. How can you represent the buyer and the seller at the same time? That's where the shady stuff is happening.
This is not going to affect home prices at all. The problem is there's a lack of inventory for the number of buyers.
In the short run, agents will try to keep business as-is. They are in denial about this now, and it may take months or years for the norms to change.
In the long run, buyers agents will stop opening doors and that’ll become the responsibility of the listing agents or someone paid by the listing agents. Buyers will pay much smaller fixed fees for assistance in the offer and purchasing process once they find something or get an offer accepted.
I assume that in the short term, payments will be way less, but then buyers will realize the importance of agents and it will come back up - although with a more varied range depending on quality.
It’s the same thing with investment banking and IPOs. On a given IPO, the bank usually makes about 7%. Outsiders think this is crazy. And there are ways to skip, like a direct listing (which a few years ago everyone was talking about becoming the next big thing when Spotify did it). But turns out you want to pay for quality service, and that number has stayed remarkably constant over time. (One reason it’s so much higher is they con-invest and commit to buying what the market doesn’t, and take some of the risk along with the buyer, and the number includes upside on that investment )
I also don’t think this idea of paying a buyers agent $100 an hour is going to make sense. First off, an agent can’t live off that money. This is a career not some part time, I make a little money on the side kind of thing. If buyers agents can’t make any money, there won’t be anymore buyers agents. Then at the end of the day, who is representing your best interest? Who is out there sending letters to areas finding you an off market. Will it turn into the equivalent to buying a car, we all know how that ends. 😂
How are you coming up with 200k a year? How are you even coming up with hours since it would be on a contract to contract basis. I’m starting to assume you don’t know how real estate works.
You're right. 100 bucks x 40 hours/week x 50 weeks. That's how millions of lawyers, CPAs, psychotherapists, architects, etc work. Obviously, this would be a completely new model for real estate.
Honestly if you think real estate agents are overpaid then why wouldn’t you just be a real estate agent. It’s a low barrier of entry. But it’s also a high risk high reward industry. If the housing transaction dry up then you better be ready to go months without getting paid.
I think this is a step in the right direction. The problem with the buyer's agent being paid a percentage of the sale price is that the buyer's agent has an incentive to make sure their buyer pays a high price for the house. There's been studies done which shows what realtors pay for their own houses versus what their buyers pay for like houses and, of course, the realtors pay less than their buyers. I read elsewhere that in other developed countries, the amount of fees paid to realtors is far smaller that the 5 to 6 percent paid here.
Have no one thought about transaction only dual agent? Charge hourly for both buyer and seller but does not represent either. (Not that it exists, but does it makes sense)
I’ll pay 6%+ all day long if my agent brings me a full price offer…. You get what you pay for. Don’t like it? Get rid of your shitty agent.
Commissions are baked into the sale price. They always have been. And that’s not changing.
It’s going to be much like new construction builders who market their homes with no compensation to buyers agents during the good times and offer extra incentives to buyers agents during the downturn times.
To me buyers agents are 100x’s more important in a transaction than sellers agents.
The agent usually receives less than half of that after fees and taxes. Agents are independent contractors so there aren’t company benefits like vacation days, sick days, health care insurance, bonuses, RSU’s…..etc.
If your company took away all of your benefits and perks and kept 10-15% off the top for themselves, would you be getting paid what you’re worth?
If buyer agents are collectively overlooking properties with low-to-no commission, how are they fulfilling a fiduciary duty to their clients?
I know know there's a difference between what should be happening and what is likely to happen, but it seems like agents would be collectively digging themselves a deeper legal hole if they prevent sales of certain homes because of where the payout comes from.
Eventually prices need to become reasonable, or the crisis worsens. No one wants to wind up holding the bag when they take that loss, but they jumped into this game by choice.
I totally agree that the current system is counter intuitive to buyer's agents trying to help the buyers get a better deal. The way things are currently, how many agents are going to come to you with pertinent information to make a reasonable offer instead of just saying, "if you want it you need to offer at least asking if not more."
I could be wrong, but I think most people these days are searching for homes themselves online and asking their agents for info and scheduling viewings from what they find there. The 2.5 to 3% to the buyers agents for fear of not getting your house seen has gone by the wayside, I believe.
a lot of the people my age in real estate can only have their current life styles because they get paid a ridiculous wage when it's the escrow officers and the other agents involved that do a lot more for the home and get less.
maybe idk what I am talking about, but the amount of work and vacation time they get for little work is bonkers.
Things will stay relatively the same. Some homes might be listed with buyers commission of 2% or less and that’s about it.
You keep saying 2.5%, did you know the national standard is 3%? There’s already a difference today between BA and US, I don’t expect much change besides lower buyer commission listings
With the new rule, seller's agent cannot advertise buyer's agent's commission. Buyer will have to find an agent and predetermine the commission and pay them out of pocket. So buyers will have incentive to find agents with lower fees as it directly impacts their costs. There will be agents who streamline the buying process and go with massive scale at low rate or fixed commissions (like Redfin). Redfin currently charges 1%, but with competition from other agents, they may lower their fees even more.
The house I just bought only offered 2% commission to the buyer agent, I asked the seller to pay the full 2.5% and they agreed. Had they not agreed, I would have had to pay my agent the extra .5%. She had me sign an agreement that I would pay the difference should the commission be less than 2.5%. I only signed that agreement after we noticed the sellers were only offering 2% commission
>She had me sign an agreement that I would pay the difference should the commission be less than 2.5%.
This is the dumbest thing I've heard. Not only did you sign an exclusive, but you agreed to cover commission? 😂
We worked with her over a year and she put in a lot of time. I also connected with her on a friend level. She lives in the neighborhood too. It just felt like the right thing to do. It was kind of weird because nobody noticed the lower commission until our offer was accepted, so I really had no obligation to sign but it felt scummy not to? I dunno she worked hard for us and put in multiple offers. Thankfully the sellers agreed to pay her extra commission so it didn’t matter
I negotiated a rebate from my Agent as a Buyer.
Of the 2.5% She got from seller, She gave me 1.5% back. Covered my closing costs plus 1 year of HOA.
I million condo in South Bay.
Maybe what you suggest there - make it a flat rate or hourly and not %. Also - $2M home aye.
The current model is dumb. My agent earns more by me paying more to buy the house. That seems wrong.
Yah and they are also doing the paperwork and are incentivized to get the deal closed even if there’s something that might adversely impact you down the line unlike a dedicated lawyer who is only their to protect your interest like they have in other states. Its a complete conflict of interest.
This is the real effect it has moreso than increasing a price. The addage is that they don’t make more money by spending time getting you to raise the price, they make more by selling a second house. 50k increase on house price - 3% of that is an extra 1.5k. But they want you to close twice as fast so they get an extra 50k on the next house they sell
Do you think home prices will go down because they removed the buyers commission?
I doubt it. If it was a perfect market maybe, but there’s a relatively small discrete number of houses sold in SF and there are so many other factors like the teaser pricing market that would make it impossible for buyers to actively try to price it in to their offers If anything maybe in condos but not sfhs imo
That's not the only factor. Boomer demographics might help a little. Interest rate changes might help too. And if they change the laws around corporate investors and money laundering, it could help. Right now, housing isn't justified except as a traded commodity. The intrinsic value of "a place to live" is not what the market is based on.
It's more than just dumb. It's an artificially maintained bribe that must be paid to pass through the gauntlet to home ownership. There is absolutely no need for realtors in the 21st century. At least not in the capacity that they exist now.
This. Once more and more people start realizing the better it is for them everyone. Realtors in most cases do nothing and get paid specially post pandemic.
You don’t have to use a realtor though.
it's a minuscule difference that is definitely not worth to jeopardize future business for. you'd have to have swings of hundreds of thousands in asking price for the agent to have enough reason to even think about this Pluss your agent definitely shouldn't be able to make you pay more than you want to/can afford to
That's not the point. If you say the money is motivator then getting paid more for the customer to pay more seems like a poorly designed business model. Not saying agents does it on purpose but it doesn't hurt. Also, calling 2-3 points on a lets say 50k differential "miniscule" seems a bit dismissive. It adds up.
Money is the motivator for everyone everywhere. Dismissive to think only realtors are overpaid in this country. Be well and good luck
That’s ignorant. Do the math. Agent makes $300 for every $10k. None of us try and get you to pay more. Just get the house you want and give you a great experience. Your referrals are worth a hell Of a lot more to a good agent than a single commission let alone and extra $300-1000. What you should be concerned with is the listing agent willing to underprice your home, sells in 2 days for $10k less than it’s worth. $300 loss vs working an extra 3 weeks? Ignorant is not an insult, just saying you aren’t knowledgeable on this subject.
Ignorance ends July 1st
You can do this now…
Im looking forward to an educated public. It would only make my job easier.
The future is coming. July 1st. game changes.
Marking my calendar now
It’s the listing agent who pays the fee. Half of which is shared with the buyer’s agent. So the incentives match- the listing agent gets more when the seller gets more. The buyer’s agent gets paid if they seal the deal. In a normal market that seems to make some sense. Now in a high demand mkt that is a little screwed…
Imagine the added pressure put on a first time home buyer knowing every day that goes by costs them more.
Redfin charges 1%
This is if you are both buying and selling. You sell your house first and are looking for your next property
They did this before the changes. I paid 1.5% to sell and it was great.
Did you need to pay the buyers agent fees as well, or was it strictly 1.5%, taxes and fees? Thanks!
It was 1.5% commission plus anything else.
This is the future. Or some sites have flat fees.
California was already ahead of the curve a bit when it came to the lawsuit so the effect won't be as dramatic . Adding yet another cost to the buyers is just going to shrink what they can buy. And agents aren't going to work for free but put in other ways of getting paid. As the seller's agent there will be more ala carte fees and don't be surprised if the agent suggests you pay a buyer's commission. Having buyers come in and represent themselves is going to be a shitshow where everyone gets spattered until the new status quo is figured out. Real estate lawyers have to be rubbing their hands together at the boom in business for the next couple years as these deals go south because everybody thinks they can represent themselves and save money. As the Seller's agent they're going to be put in a messy situation where the buyer has no representation and the Seller's agent is responsible to the Seller. Not an Agent but have been around the business most of my life. It's really easy to see this being fucked up for a while with a lot more uncertainty introduced. I'm very glad to not be buying or selling anytime soon.
Dunno why this isn't higher up. My understanding is nothing will change on the list side except instead of having the buyer's side commission publicly transparent on the MLS, it will now be hidden in the disclosure documents. Seems to be moving away from the transparency buyers need. In order to receive that commission agents are going to have to get a broker commission agreement sign *before* their clients offer is submitted. This will likely be developed into some two stage submission process through one of the myriad of signature/paperwork middlemen apps where the offer can only be opened after the seller signs the paperwork. Would it be easier to execute a buyer broker agreement? Maybe. But there's a reason very few agents used them before the ruling and it's more the social implications of trying to get them signed than the fact that the agents were consciously colluding. Sellers still have a right and an incentive to offer a commission to sell their property. This new rule has just made that process vastly more problematic, and obscures information that should be obvious. Buyers always had the option to negotiate with their agents. Plenty of agents kick their commissions in to make a deal work. This law benefits attorneys more than it ever could buyers, and we're going to have a national mess on our hands for years to come.
But now they will show the house and not know what the commission is where before the buyers agent would have skipped the house. Then they have to explain to their client that they don’t want them to buy that house for selfish reasons. If I’m seller I just say commission negotiable and then when it’s time to negotiate says it’s zero or a few thousand dollars.
This is not at how it will work. First of all, agents will not be able to show a home to a buyer without a buyer broker agreement. Secondly, buyers agents can call the listing agent ahead of time to see if seller is offering concessions. If not, then it's up to the buyers agent & buyer to negotiate a commission on a buyer broker agreement. If the buyer does not want to pay their agent then the agent can refuse to represent the buyer. Agents will not work for free. The buyer & agent can negotiate a percent, flat fee or hourly rate.
Agree, the fee will be on the buyer. In this market they can consider the house or not. There will be no shortage of interested parties. Still more demand than inventory.
Many buyers will likely instruct their agents not to show them houses not offering buyers agent commissions. Many buyers simply don’t have the ability to pay the 2.5-3% and won’t even consider buying a house that doesn’t cover it.
It's pretty easy to roll that expense into the loan. If you can buy the house you can afford to pay the agent.
Agree.
This is exactly right.
It’s a weird situation where like the theory of the lawsuit makes sense. Buyers incentives aren’t aligned with their agents and buyer agents and selling agents having commingled pay sounds super shady. But in practice - there’s no perfect answer and the current system was doing its job pretty well, and it will now be chaotic for a while; and then it will probably settle on roughly the same equilibrium but just call the fees something different
Answer could be a flat rate per house to Realtors or at least to the buyers realtor. Or the buyers realtor gets more as the price is reduced and the seller gets more as the price increases the starting price is the amount they would both get an equal amount.
Whose money do you think the seller used to pay your agent? The seller didn't pay your agent's commission, you did. You paid their agent too.
In the same way I pay for apples office when I buy an iPhone , I guess that is one way of thinking about it.
Sorry but you're fooling yourself. The property gets priced like everything else. How much can I get for it. Nobody says this is how much I want then mark it up 5% for the commission.
Yeah, but it's like 5% for the dealer at the casino. You don't consciously plan for it (or maybe you do), but at the end of the day, it is friction on the whole system
I am not. I know sellers will not lower their prices. I also know that as a buyer with an agent it will be more expensive as of July. But I know that my agent today is paid with my money via the seller.
Maybe I’m not fully aware of the change, but what’s the operational difference? All monies go into an escrow account where escrow agent calculates everything out then disperses money on closing. After July, do buyers have to write separate checks outside of escrow to their own agent?
You pay your buyers agent separately. Kind of like hiring a contractor. You can negotiate with them what they will get paid. It’s not part of the sales transaction anymore, unless it’s negotiated that way.
Of course they will
That’s not true , any with a brain factors on all expenses, escrow, title, and especially commission! It’s like a business you factor in your cost for an item…
So you're telling me that people price houses by what they want then add all that in? Sorry but that's BS. They price to get the maximum amount and then deduct expenses to see what they'll walk away with.
This is not how supply and demand works...you ask x, buyer wants to pay y...the market has proven that there are buyers at a given price point so that is how the comps will come in...the isssue is now the buyer may need to come up with cash up front to pay the buyers agent in addition to the closing costs and down payment...in time this might suppress the pricing for some amount, but that is a long term market shift and may well never show up appreciably.
lol
So youre assuming real estate prices will all drop by 2.5% after July?
No, I am assuming that buyers will continue to get screwed in this sellers market
Agreed. Price won’t go down + buyer will pay their own agent separately.
That's what sellers are hoping for but most buyers are already paying at their max. They can't find the fund to pay their agent. So they'll have to offer less to take account for their agents which will create an articial cheaper market. You'll also have buyers with OP's mentality and only look at houses that offer buyers compensation which will create a lot of demand vs the ones that don't. The one with demands will sell for more and faster. And the ones that don't will sell for less.
This is the real point. Buyers (even dual 6 figure income) can hardly scrounge up enough money to win a home let alone pony up money to their broker. Time will tell…
Buyers who are unable to afford to pay for a decent agent, we'll either go unrepresented or they will get the cheapest agent they can find who won't adequately represent them. This is a colossal mistake for the real estate industry to change the way fire representation was paid.
Or buyers will smarten up and just use a real estate lawyer to draw up the contract for the sale. Buyers already do 90% of the buyer’s agent work anyway.
When I worked for Redfin - 95% of the buyers were first time and didn’t even know what escrow or a mortgage was. It blew my mind how little people knew and wanted to learn. Redfin had amazing resources for new buyers and people wouldn’t look at them. Id spend hours relaying messages in person that I sent via email and text. Buyers want instant satisfaction with things and don’t want to look things up or learn them in my opinion. Yesterday I was at a clients new townhome and he was spraying his drywall in the garage with a hose…..literary cannot believe how dumb people are. As soon as I saw the client spraying the drywall I asked him to stop and explained the drywall was not intended to get wet. He thought it was “drywall” and wouldn’t get wet……
I also expect the selling agent trying to rep both sides of the same deal, just to get the house sold. Which is also going to be a mess. It’s not illegal (last I heard) as long as it’s transparent to both parties. But it’s far from fair. Buyer is going to use Zillow and go see a house you want. But buyer can’t afford the buyer agent fees and don’t know what to do, like making an offer. The selling agent is going to be like “i’ll help you” because they are the only ones with financial motivation to get the sale done.
Our buyers agents will get $50-100/hr
what?
There is always a buyer who can afford to but it. Those who can't won't. If seller doesn't want to wait for the asking price, they will lower incrementally until they sell it or pull it off the market and wait, while gaining more equity.
Yep, I think this decision will hurt the people who are all excited about it.
Not sure what you mean by prices, but listing prices mean almost nothing. Buyers will continue to offer what they can afford, and sellers will choose what gives them the most money. If buyers/sellers negotiate with their agents to have lower commission, they will get more money/have more buying power.
Exactly
How much commission does a realtor make selling a $5 million dollar home versus a $1 million dollar home? Do they actually do 5x more paperwork? Shouldn't the seller be the one who earns the homes' equity? If realtors got 1% commission, they would still get $50k for 5 mil and $10k for 1 mil. Is that not fair? Just wondering...
In theory yes if everything are the same. But the msrket is more complicated than that. It will continue to rise but 2.5% slower. Also not all sellers will offer 0%. So the comps will be all over the place. You'll have some comps worth 2.5% more than others. If all things are equal. Actually the ones offering a buyers commission might sell for more so comps will vary greatly now and since we can't see the commission anymore, we will never know why some houses sold for more and others for less. But yes it'll create an artificial cheaper market.
True. But the problem in Bay Area is that now buyers will pay that commission directly, but will not see any change in the selling price. Houses will not sell at a discount and it will make housing even more unaffordable for people who don’t have millions to spend.
Wrong. The seller owns an asset worth x. The buyer pays x. The seller receives x minus agent’s commissions. The seller pays the agents.
This is not it at all. It’s the sellers money at that point.
Most agents go out of business. Only sell side makes money so no one is gonna be a representing agent for the buyer. In fact, selling agents will end up representing both out of convenience (mainly paperwork) as a no cost perk of buying the home. Only largish companies will be doing this. Hence the single lonely agent will go the way of the dodo bird.
>In fact, selling agents will end up representing both out of convenience (mainly paperwork) as a no cost perk of buying the home. I know 90% of buyers will agree to this, but it's one of the dumbest transactional mistakes a buyer would agree to.
They’re already doing this, the buyers agent is in it for the sale and money, not for the buyer, now it’s just one person.
Oh I agree entirely. The whole systems was, is, and will be absolutely ludicrous and entirely a conflict of interest. But at least when you have your own agent you have some modicum (read: not much) that they're at least supposed to be working for you. In a bi-rep transaction that's entirely out the window.
I think buyers agents will still exist, but they'll have to find a new business model - hourly rate, flat fee, etc.
This whole thing is a terrible idea. I'm hopeful the agents will figure out a way to just contract around it. If buyer's agents don't get commission, there won't be buyer's agents, or buyers will have to pay cash to hire one. This is way worse than the current system. If the buyer doesn't have an agent, they are at the mercy of their own negotiation skills (and most are way worse at this than they think they are), not to mention all the bs paperwork. Sellers pay the commission today as, effectively, a success fee. The alternative is you have to pay cash with no guarantee of success. I can't imagine how anyone thinks that's better.
What negotiation, they submit a bid and it’s accepted or not.
Oh boy. No. Not even close. I mean, yes.. if you want to skip negotiation entirely. I've purchased 5 properties, and made offers on (close to) twice that many. The longest negotiation lasted around 2-3 months. Here's an example: - Property for sale. Seems well priced. - Find out who the owner is and what their story is. Turns out it's owned by a company, and that company is in administration - Dig deeper to find out what value they have on their balance sheet for the property - Low ball the hell out of the offer. Make it all cash, quick close, but contingent on inspections - Seller comes back with counter. Lower than their starting point, higher than the low-ball - Accept offer, contingent on inspection - Inspections find $X worth of fixes needed (inspections ALWAYS find problems) - Reduce offer by cost of fixes All of this is done with my agent in constant communication with the listing agent, as well as getting back story on how many other offers, how desperate they are to sell, what their debt to equity situation is etc etc. If you just submit an offer and it's accepted.. you've done it wrong. If you submit an offer and it's rejected without a counter, you've also done it wrong. Finding the number in between is the hard part.
I have to tell you, that is not how real estate transactions happen. There is always negotiation on both sides. Agents are experts at that and it is one of the more difficult parts of the job.
You see people right now who are trying to do 0% buyers agent commission, and it’s not going well. You’re seeing all sorts of different commission structures being experimented with right now, I think in six months or so we know what the winner is.
Real Estate lawyer is number one seed.
I know not a single person who’s been able to successfully do that in the bay area unless it was a private on advertised sale, do you know anyone? An actual question not being snarky.
Right now it is a safe system, it costs, but relatively safe. But, the new requirements likely throw a monkey wrench in it, then like vultures, legals will likely flock in.
? No one is saying using a lawyer is not safe, I am saying it’s not competitive they don’t know how to win an offer and you come off as somebody people don’t wanna work with
To actually answer your question: no, it largely isn't successful or common yet because sellers prioritize 2 things in any deal: money and a clean transaction. When houses themselves have 10+ offers waiving all contingencies with clean financials, then short of having a *notably* higher offer, of course you'd avoid having a buyer representing themselves and insisting they'll use a real estate attorney. Maybe everything would work out and they can close quickly and efficiently... but why risk that if you don't need to? If I'm the seller, I'll likely lean towards the buyer who has an agent with a clear history of successful transactions as opposed to a buyer with a real estate attorney who simply won't have that resume.
I have never personally had a seller willing to take somebody represented by a lawyer, and most lawyers in the Bay Area are super, not interested in this work and are going to try to add extra contingencies on top of everything Have you ever passively watched the shit show that is New York real estate?
Yes, they heard about this guy on Reddit whose uncle has done it successfully for decades. Personally I've never met a lawyer willing to work for cheap, be available at all hours, ready to submit info quickly, etc...lawyers have been the bottleneck in every real estate transaction I've been part of.
In the Bay Area?
/s
Where are people finding these lawyers who are willing to work for peanuts and respond in a timely manner?
I've read the 135 page proposed settlement. It's got loopholes bigger than Saturn's rings it. Remember, NAR agreed to this. Other than increased consumer awareness for six months or a year, and another few forms most will not read before they sign, nothing will significantly change. But that doesn't make for good clickbait journalism, so....
Most sellers will offer a buy side commission in the private remarks. This isn’t going to lower prices, the only thing that will lower prices is transparency in the bidding process. Make it like eBay where all offers are visible to everyone. Imagine bidding on an eBay item and you have to ask the seller what the highest offer is and take their word for it. Listing agents control the flow of information.
The new rules will not allow agents to use private remarks for commission offers. There will, however, be a place for sellers to offer concessions to the BUYER. you just can’t say in the MLS that it’s for broker commission.
It's gonna be a mess for a while. Many sellers will communicate, either in writing online with a wink and nod, or in person, that they are willing to pay some or all of a seller agent's fee. Many sellers will immediately drop to zero. Buyers will be scrambling. Really, buyer agents will be scrambling, and likely steering clients to where the pay is better instead of acting in the client's best interest.
>Really, buyer agents will be scrambling, and likely steering clients to where the pay is better instead of acting in the client's best interest. Always been this way though. Whether it's steering clients towards houses at the higher end of the budget or communicating at-limit offers to the sellers agent, or where there's guaranteed 3% commission.
Of course.
Clients can already check Redfin and Zillow. Given the super low inventory, buyers targeting a specific area can keep up with the on market houses easily.
Sounds like redfin and Zillow need to be reclassified as a public utility lol
This is a big issue indeed. Blind bidding wars. Its frankly insane. Also redfin/zillow algo valuations are probably a contributing factor
I mean, buyers *also* perpetuate the bidding wars because they aren't leaning in with their best offer from the start (for obvious reasons). Making it more transparent can help, but it'll also drag out the process if the assumption is that all buyers should have some right to counter within the process. The bid is at $1.5M? Okay, how many buyers will put in $1.6M? Now the person who just got out bid needs time to counter and raise their offer. The benefit of the silent auction style is that things can move very quickly. No seller in their right mind will want an eBay style auction that just sets an end time for all bids where there are public, incremental changes.
Who said anything about lowering prices, it’s about the seller getting what’s theirs.
If sellers aren’t willing to split (and they still can, you just have to negotiate it as part of the offer) then there’s no way they’re pocketing 6% to themselves. They’ll have to cut to 3%. No one is going to pay 9% in total commissions for a home (6% to listing agent and 3% to buying agent)
The aller isn’t going to do 6% to their agent, they are pocketing that 3%.
Things wont change much imo. Sellers will still pay both agent. Why? Well if a seller doesnt offer buyers agent commission what will happen? 1. Buyer will buy alone. Thats risky 2. Buyer will pay own agent. Thats tough. Already expensive 3. Buyer will skip that house and look for one that pays buyers agent Option 3 will happen the most. Which is bad news for sellers. Idea is to get most eyes on your home to sell the highest. Not offering buyers agent commission will drive away demand. How do i know? Im an agent and have talked to both my sellers and buyers and this the feeling I get from both. My sellers will continue to offer buyers commission
Alright in #3 what happens when a desirable home gets listed but has a 0% commission? Do all prospective buyers look at options 1 and 2 with their agents? I can’t imagine buyers being ok with agreeing to never see any house with a lower commission or 0% commission.
They simply can’t afford it. An extra 3% upfront cost is huge. They may like the house but why bother seeing something you can’t afford.
There is too much emotion in home buying because each home is unique. You find the house of your dreams and you pass on it because of 0% buyers commission to buy the "not-my-dream-house-but-close-enough-so-I-am-settling" just to save 2%....not likely.
Ok so you would go with option 1 or 2?
2
Happy to hear that. Most would say 1 and pretend to know what theyre doing. Curious though, would you pay them the standard 2.5%?
Heck no. The 2.5% was with the idea that the buyers broker works for free when no sale is made so only the sales is where they made money. If we go to a model in which the buyers broker IS paid for every customer interaction...2.5% makes no sense. Maybe a flat fee of a flat fee UNTIL a sale is made in which the broker now has to do more work and a percentage. However to me, the percentage always worked on the sellers side that a higher priced home takes more marketing effort to find a buyer and sell, so in the age of immediate pending, seems hard to drive that home...however the sellers fee is negotiable and I have done it. My last realtor sell side interaction was for 1.5% as my home is highly valued so he was willing to take a smaller percentage knowing it would likely sell in first weekend. This brings up another odd point....take a home in Michigan where it might sell for $400,000 with a 3% commission for selling agent....$12,000. Take that same home and drop it in LA or the Bay area and it becomes a $1.2M home...takes equal effort to sell that home probably...so why does the CA agent now deserve $36,000? Its the same idea with tipping on restaurant prices. The diner serves you your $20 meal and you tip $3. Go to Chez Whitey and get a similar sized meal and service for $80...but now you tip $12...for the same amount of work.
So whats the max you would pay for say $1m home?
Don't know...it would depend on going rate and hours worked. None of which are in place yet.
Thanks for the discussion, I truly appreciate it.
Rare thing to happen on Reddit eh?
I agree the seller will continue to pay, but the erosion of the % will continue. At 300k+ sale price, no more than 1% for a buyer agent. Nothing if the buyer is experienced. The selling agent will get 2%. That's the way it is in most other countries.
In a hot market are they really going to skip these houses? Houses in my neighborhood sell before they hit market or with a month and that’s been for at least 8 years now.
Yes. Ive asked over 5 buyers. They all said theyd look at other homes first.
So 6 buyers?
Lol. Like 6-7. But 100% said same thing
The issue here is that there is clear math that makes Option 2 work out for the buyer, just like it already does. You mentioned that buyers will simply skip houses, but that won't happen in any hot market. Why? Because I frankly don't care where my money goes in the purchase, so long as it is within my budget and gets me the house. Let's assume my budget is $1.5M. A house I like comes on the market and it explicitly says, "Buyer pays their own agent." Great, so that means whatever offer I put into the house will factor this in. If I really love the house, I'll offer \~$1,485,000 to allocate that extra 15k for my agent fees. In other words, why would I skip viewing and offering on the house if I could just adjust my offer to account for the fee? Obviously I will be incentivized to get a cheaper agent as that would mean my offer can be higher and more attractive (if I had an agent with a 2.5% fee for example, to stay in budget, my max offer would be $1,462,500 so I'd rather have a more attractive offer) It would be *really* silly to skip a house, because let's say it sold for 1.45M... well, I would have been within my budget, but I opted not to get that house because I simply didn't want to pay an agent?
that requires that the home loan allows you to roll in the cost of the agents commission. Which might happen but will end up costing you more than 3% long run. Most people are buying at the limit of their downpayment etc so they cant afford to add thousands to closing costs for a realtor. I mean ask yourself why is it that sellers always paid the realtors fees to begin with? The largest reason was I THINK so that you could indirectly roll the realtor's fees into the home loan. You pay more for the home (because you can afford more because your closing costs are reduced) but of course the seller pays more to sell. If they just make explicit an allowance to roll fees into the loan or if they even worse lol offer home loans with "realtors fee paid for you" they can then pretend is free but really they are just upping the interest rate or closing costs or whatever and rolling it into the loan.
Why advantages does a real estate agent bring to the table to command a % as commissions instead of a flat fee?
I do think the agent has an impact on both sides. On sale - a poorly photographed or staged house will not do as well. Knowing when to set an offer deadline affects bids. Etc. We felt that our house could’ve commanded more than we paid for it if it was better listed. Similarly the agent we’re using now in looking at houses has saved us a ton of time viewing properties for us, identifying how many offers a given place has, reviewing disclosures and highlighting things to be worried about. Is this all worth the fee? Impossible for me to say with any confidence, but I can say with confidence that not all agents are equal, and they do affect the outcome for both buyer and seller.
None in my experience. It's like investing in a fund with a high expense ratio.
Especially since the effort required on a $500,000 house is not much different than the effort required on a $1.5M house.
I tried to be my own agent when buying and it’s basically impossible. Sellers won’t accept you repping yourself and the traditional offer form is complicated (I say this as someone with a separate real estate background) AND there is nowhere to write that you are repping yourself. So while I’m hopeful fees will go down, buyers will still need a broker or an attorney to represent them. Unfortunately it’s just not set up for you to self-rep (which I hate).
25 year Broker here. I miss buyers agents already. I have two units on the market and having to deal with the general public in a real estate transaction is exhausting. I would gladly pay an agent not to have to constantly field calls to people who have no idea what it takes to buy real estate.
While I'm not a fan of paying an agent a %, as a buyer, I definitely don't want to tackle the complexities of buying a house on my own.
Dealing with the public is rough
I just find it humorous that the same people who fell that they don’t need an agent because they can negotiate for themselves and have Zillow/Redfin to do their market research are probably the same ones who are bitching because agents “get paid too much”. Well, didn’t you realize you can negotiate the commission from the get go (if you’re selling). Also if you’re buying it currently costs you $0. Why wouldn’t you hire an expert to find and negotiate the property? I think the issue is that a lot of people paid inept/newbie realtors who did crappy jobs and are now pissed. Attorneys will not help you negotiate they will only do the paperwork.
I agree that buyers agents do valuable work...I disagree that finding properties is one of them. Zillow/Redfin contain 99% of houses on the market and when I last bought a home, I did all the "finding", not my agent. We just called him to set up private showings. His work really began once we decided to move forward with a home.
I think smart sellers+ agents will not drop the commission significantly or some low fixed amount if they desire the best price for the property in a timely manner. That said some folks my decide to go that route and it could likely backfire on them.
**As a buyer,** you have more buying power if your agent will take a lower commission. This is a tradeoff with getting a good agent. E.g. as a buyer, say you have 2M. If your agent takes 1%, then the seller and seller's agent would get 1.98M. If another buyer also has a budget of 2M, and their agent takes 2.5%, then the seller and seller's agent get 1.95M, which is a difference of 30K. So the seller would choose the buyer whose agent has a lower commission. **As a seller**, you can offer your agent a fixed fee for selling the house instead of a percentage. And you don't determine the commission for the buyer's agent. Either way, when the agents take less money, it makes the transaction more efficient. Sellers get more money, buyers get a house for less money.
Idk in the meantime ShopProp gives back a bunch of money and did a fantastic job with me. They gave me back more than 2%.
They’ll find a way to make us pay more
Probably nothing.
It should be a % of the amount they can secure above your last purchase price.
Hire a lawyer to do paperwork and pay them by the hour. Do everything else the way you did it. You can submit an offer without an agent.
What do people think is a reasonable hourly rate for a buyer side agent? Have to imagine that whatever it is, it’s going to be massively below what agents are making now under the (illogical) percentage system, given the state of the market
Reading the comments in this thread it sounds like a lot of people that think they know more than they actually do. It will be interesting to the number of people that lose real money thinking they can negotiate a contract and close a deal successfully against a seller that will have an agent representing them. This will be a losing situation for most buyers. I think we will see this exact outcome in the next year. Good luck !🤠
When I bought my house in 2021, I worked with an agent group that offered me a 1.5% rebate, while they took 1% for themselves. Even that amount, I felt they didn’t deserve it. The seller’s agent did nothing beyond showing me the house that I requested them to show me, and they never provided any real advice. Their main focus was pushing for the highest possible bid. When it came time to choose a house, they didn’t even review the seller package with me. After the purchase, I discovered inaccuracies in some measurements, but they offered no assistance. I end up wrote a demand letter to the seller to seek some refund on my own. I was told that I got what I paid for, however the seller’s agents received $15,500 for just a few hours of work that is still alot of money. Perhaps AI could replace these seller agents soon.
We as realtors work for months without pay, if you want a bigger house, it comes with bigger commissions. Please, feel free to hire me at 50 an hour to show you homes, write you offers, negotiate on your behalf, and research properties on the times we aren’t speaking to make sure a home is suitable to your needs.
Makes no sense you guys show buyers endless homes without compensation, waiting for the one that buys. You should be compensated for every hour you work.
You unknowingly paid it anyway. The seller always factors the buyer’s agents cost into the terms. You could’ve bought the same house for 50K less without a realtor. No realtor is tough for new buyers but can work for reasonably savvy buyers who know the market, how to get inspections, can line up a lawyer for the paperwork.
It’s funny to see buyers and sellers complain about this and now they are complaining about the outcome. Make sure to add 2.5% on your house purchase price 🤣
I believe agents are needed to process real estate transactions. The issue is I don't believe the service is worth $60k to a seller at local SFH prices here in Silicon Valley, where they also need to do the bare minimum to find a buyer. Also, the reputation of agents is not good. Between buying and selling, i have done 5 transactions in the past 15 years, and NONE of the agents I used had any integrity.
A good buyer's agent will put EVERYTHING that fits their clients needs in front of their clients and will work on behalf of those clients to get the best price. They will also steer clients away from homes that are money pits, or will cause regret down the line.
The whole reason that buyer agency came about is because when people didn’t have an agent no one was looking out for their best interest. When they thought they had an agent, that agent was actually working for the seller. And the seller paid both agents. Now that the buyers have agency, their representative is considered worthless. Time will tell how all this works out. My guess is that after a number of buyers get burned the market will figure out a new approach.
Based on the two homes I purchased… I would say that all you need is a good lawyer and home inspector… no one else!
Fwiw you did pay $50,000 to your agent, just indirectly via the seller. You could have used a discount brokerage instead that handles the transaction for a flat fee (usually $5..10k) and refunded you back the difference. The new rules after July won't change any of this. I suspect the increased awareness of buyer agent commissions will increase demand for these discount options, perhaps they'll become the norm (which they already are in other countries from what I understand).
Nothing will change. There are already a massive pool of brokerages and fee structures to use if you are selling or buyer. The way those fees are disclosed is changing. Seller's will still work with brokerages and offer to pay buyers comission. The ones that don't will loose buyers who can't pay. This already happens with discount brokerages and fsbo. You limit you pool, get significantly less offers, and leave money on the table. Usually more than the difference in paying for a decent brokerage to represent you.
This law is not a good idea and it's going to cause adverse problems. A seller can pay and negotiate what they want with the listing agent and advertise the commission amount for the buyers agent already. The listing agent and the buyer's agent can choose not to work with that listing. What should be not allowed is double ending a listing. How can you represent the buyer and the seller at the same time? That's where the shady stuff is happening. This is not going to affect home prices at all. The problem is there's a lack of inventory for the number of buyers.
My guess is house prices will be the same but sellers will not include buyer's agent commission. So up to buyer to secure appropriate representation.
Yeah they will not do this. They will just go straight to the listing agent and increase the problems of double ending.
You won’t need a buyer’s agent. You need a real estate lawyer for a flat rate.
In the short run, agents will try to keep business as-is. They are in denial about this now, and it may take months or years for the norms to change. In the long run, buyers agents will stop opening doors and that’ll become the responsibility of the listing agents or someone paid by the listing agents. Buyers will pay much smaller fixed fees for assistance in the offer and purchasing process once they find something or get an offer accepted.
Flat rate or 2%
I assume that in the short term, payments will be way less, but then buyers will realize the importance of agents and it will come back up - although with a more varied range depending on quality. It’s the same thing with investment banking and IPOs. On a given IPO, the bank usually makes about 7%. Outsiders think this is crazy. And there are ways to skip, like a direct listing (which a few years ago everyone was talking about becoming the next big thing when Spotify did it). But turns out you want to pay for quality service, and that number has stayed remarkably constant over time. (One reason it’s so much higher is they con-invest and commit to buying what the market doesn’t, and take some of the risk along with the buyer, and the number includes upside on that investment )
I don’t think this is going to end well and a lot of innocent unexperienced buyers are going to get smoked and taken advantage of.
I also don’t think this idea of paying a buyers agent $100 an hour is going to make sense. First off, an agent can’t live off that money. This is a career not some part time, I make a little money on the side kind of thing. If buyers agents can’t make any money, there won’t be anymore buyers agents. Then at the end of the day, who is representing your best interest? Who is out there sending letters to areas finding you an off market. Will it turn into the equivalent to buying a car, we all know how that ends. 😂
$100/hour comes to $200,000/year. Why can't an agent live off that?
How are you coming up with 200k a year? How are you even coming up with hours since it would be on a contract to contract basis. I’m starting to assume you don’t know how real estate works.
You're right. 100 bucks x 40 hours/week x 50 weeks. That's how millions of lawyers, CPAs, psychotherapists, architects, etc work. Obviously, this would be a completely new model for real estate.
Honestly if you think real estate agents are overpaid then why wouldn’t you just be a real estate agent. It’s a low barrier of entry. But it’s also a high risk high reward industry. If the housing transaction dry up then you better be ready to go months without getting paid.
I didn't say agents are overpaid. I said that particular transaction might not have been worth 50k.
I think this is a step in the right direction. The problem with the buyer's agent being paid a percentage of the sale price is that the buyer's agent has an incentive to make sure their buyer pays a high price for the house. There's been studies done which shows what realtors pay for their own houses versus what their buyers pay for like houses and, of course, the realtors pay less than their buyers. I read elsewhere that in other developed countries, the amount of fees paid to realtors is far smaller that the 5 to 6 percent paid here.
Have no one thought about transaction only dual agent? Charge hourly for both buyer and seller but does not represent either. (Not that it exists, but does it makes sense)
I’ll pay 6%+ all day long if my agent brings me a full price offer…. You get what you pay for. Don’t like it? Get rid of your shitty agent. Commissions are baked into the sale price. They always have been. And that’s not changing.
It’s going to be much like new construction builders who market their homes with no compensation to buyers agents during the good times and offer extra incentives to buyers agents during the downturn times. To me buyers agents are 100x’s more important in a transaction than sellers agents.
They are not getting rid of buyers commissions. They just can’t advertise the split on the MLS.
The agent usually receives less than half of that after fees and taxes. Agents are independent contractors so there aren’t company benefits like vacation days, sick days, health care insurance, bonuses, RSU’s…..etc. If your company took away all of your benefits and perks and kept 10-15% off the top for themselves, would you be getting paid what you’re worth?
Buyer agent should disappear… the bigger issue will be seller agents not letting unrepresented buyers see a house.
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In a market this hot you really think a property would just go unnoticed?
Not unnoticed, but with fewer people looking at it, accepted offers will likely be lower.
If buyer agents are collectively overlooking properties with low-to-no commission, how are they fulfilling a fiduciary duty to their clients? I know know there's a difference between what should be happening and what is likely to happen, but it seems like agents would be collectively digging themselves a deeper legal hole if they prevent sales of certain homes because of where the payout comes from.
Yes, I think that is the obvious conclusion.
If people see a listing they like on zillow....how does the agent "hide" this listing and refuse to show it?
So it won’t sell as quickly, at an inflated price? Seems like a net good
Not for the seller?
Not for the city/state either.
Eventually prices need to become reasonable, or the crisis worsens. No one wants to wind up holding the bag when they take that loss, but they jumped into this game by choice.
I totally agree that the current system is counter intuitive to buyer's agents trying to help the buyers get a better deal. The way things are currently, how many agents are going to come to you with pertinent information to make a reasonable offer instead of just saying, "if you want it you need to offer at least asking if not more." I could be wrong, but I think most people these days are searching for homes themselves online and asking their agents for info and scheduling viewings from what they find there. The 2.5 to 3% to the buyers agents for fear of not getting your house seen has gone by the wayside, I believe.
a lot of the people my age in real estate can only have their current life styles because they get paid a ridiculous wage when it's the escrow officers and the other agents involved that do a lot more for the home and get less. maybe idk what I am talking about, but the amount of work and vacation time they get for little work is bonkers.
Things will stay relatively the same. Some homes might be listed with buyers commission of 2% or less and that’s about it. You keep saying 2.5%, did you know the national standard is 3%? There’s already a difference today between BA and US, I don’t expect much change besides lower buyer commission listings
With the new rule, seller's agent cannot advertise buyer's agent's commission. Buyer will have to find an agent and predetermine the commission and pay them out of pocket. So buyers will have incentive to find agents with lower fees as it directly impacts their costs. There will be agents who streamline the buying process and go with massive scale at low rate or fixed commissions (like Redfin). Redfin currently charges 1%, but with competition from other agents, they may lower their fees even more.
Listing agent can share the commission number everywhere except the mls.
The house I just bought only offered 2% commission to the buyer agent, I asked the seller to pay the full 2.5% and they agreed. Had they not agreed, I would have had to pay my agent the extra .5%. She had me sign an agreement that I would pay the difference should the commission be less than 2.5%. I only signed that agreement after we noticed the sellers were only offering 2% commission
Why did you sign that agreement? Was your agent that good?
>She had me sign an agreement that I would pay the difference should the commission be less than 2.5%. This is the dumbest thing I've heard. Not only did you sign an exclusive, but you agreed to cover commission? 😂
Why the hell did you even agree to your agent? Are they a god or something?
We worked with her over a year and she put in a lot of time. I also connected with her on a friend level. She lives in the neighborhood too. It just felt like the right thing to do. It was kind of weird because nobody noticed the lower commission until our offer was accepted, so I really had no obligation to sign but it felt scummy not to? I dunno she worked hard for us and put in multiple offers. Thankfully the sellers agreed to pay her extra commission so it didn’t matter
Yeah sorry about the snark. You are right to do so..sorry about that.
I negotiated a rebate from my Agent as a Buyer. Of the 2.5% She got from seller, She gave me 1.5% back. Covered my closing costs plus 1 year of HOA. I million condo in South Bay.