Jury Finds Realtors Conspired, Awards Nearly $1.8B in Damages

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> KANSAS CITY, Mo.—A federal jury on Tuesday found the National Association of Realtors and large residential brokerages liable for about $1.8 billion in damages after determining they conspired to keep commissions for home sales artificially high.

> The verdict comes in the first of two major antitrust lawsuits that target decades-old industry practices and seek to drive down commissions and change the way agents are compensated. The two-week trial involved claims by home sellers in several Midwestern states. The jury issued its verdict after just hours of deliberations.

> Under antitrust rules, the presiding judge could triple the damages verdict, which would total more than $5 billion. The plaintiffs also have asked the judge to order changes to how the industry operates.

> For several years NAR has been fending off accusations by U.S. antitrust officials and private litigants that it has conspired to keep home-sale costs high in the face of major technological upheavals. This verdict is by far the group’s biggest setback yet.

> An NAR spokesman said, “This matter is not close to being final as we will appeal the jury’s verdict.”

I would love for there to be some sort of competition injected into real estate commissions. I've bought and sold twice now and you get the same rate from everyone (within 1%) regardless of what they end up doing.

I bought a few years back and we didn't really use an agent to find the house at all. Looking into it, I found that a certain percentage of the sale amount goes to pay the agent(s); 6% I think. If there are two agents, they each get half. If one person doesn't use an agent... the other person's agent gets it all. The person without an agent doesn't get to keep their half... it just all goes to the other agent. Wtf...

So anyways, we wound up bringing in an agent to help us out with the last bits, because we had to pay the money anyways, it might as well go to someone that helped us in some way.

The real estate process is fairly broken, as far as I'm concerned.

It's like this throughout the real estate and real estate development industries to be honest. Building my own house I expected plenty of savings over buying (and to be fair, I still did of course), but even beyond permitting (which is also more about who you know than what you know) I encountered things like this (roughly from most mind-boggling to least):

- You can't build a septic system, you have to use sewer because you're in city limits (later rescinded when they realized they would have to pump my sewage up to the city sewer.

- You need to hire an engineer to make sure your lumber is ok (we milled our own lumber)

- You need to hire an architect to make sure your plans are ok

- You didn't finish in 6 months? Buy a new permit please.

I know there were a million more things like this, but it's been over ten years and some things you don't want to remember... Contractors act like I'm taking food out of their kids' mouths by wanting to do the work myself, and the municipality is on their side.

Your list of “mind-boggling” items all seem extremely reasonable to me.

Your city and neighbors don’t want to be responsible for or have to deal with your house falling down because it was improperly constructed. And having lived in neighborhoods with septic systems most of my life, a little neglect can go a long way.

Unless you’re building in the middle of nowhere (far from anything labeled a “city”), there are obligations to those around you.

Signed, someone whose neighbors properties have dilapidated buildings in various states of disrepair.

> Your city and neighbors don’t want to be responsible for or have to deal with your house falling down because it was improperly constructed.

Why on earth would the city or the neighbors be "responsible" for that?

If my neighbor doesn't wire their home to code and it burns down and the fire spreads to my house it doesn't matter who is "responsible", I'd still lose my stuff (or my life).

Hell, if my neighbor's tree falls into my property and causes damages I can't be sure I'd be fully compensated for my losses. You can take someone to court, but they can't give you what they don't have.

People also just don't want to live in slums filled with run down barely standing shacks since it hurts their property value too. Part of living in a community means giving consideration to other people around you. The closer you are to others the more responsibility you have to be considerate of your impacts on those others.

How many lives of man hours are lost from overhead for these costs and compliance? The issue is people enforcing these regulations see the dead bodies from the burned out home but not the dead bodies of the homeless or the kids with less food or the dude with untreated cancer because regulatory costs and materials safety margins sucked away money that could've been spent on other life critical things.

At this point it seems completely plausible more lives would be saved through complete deregulation including setting loose uncle joe the methhead electrician.

RE:

>cities to turn into dangerous shanty towns where anyone who can lean a piece of corrugated sheet metal against a mud pile can call themselves a home builder.

My whole county did this. No inspections or building plans. It turned out fine. I became a legal 'home builder' with nothing more than filing my signature with the county. It's the only way I can even afford a house.

re county: believe the options are unincorporated burrows of Alaska, greenlee or cochise Arizona, Jackson Wayne and several other county in Tennessee, bunch of others.

If kids can't get food that's a problem entirely separate from the costs of an electrical inspector. No one builds a house and then becomes homeless because of how much it cost to make sure it was up to code.

I'd agree that those costs shouldn't be excessive, and they may even be higher than they should be right now, but we've got plenty of examples of what deregulated construction leads to and it's never the utopia you'd imagine. It's much better to have sane standards than to deregulate and allow our cities to turn into dangerous shanty towns where anyone who can lean a piece of corrugated sheet metal against a mud pile can call themselves a home builder.

I'm certain that I can find more evidence that a lack of regulation leads to deaths than you could of code compliance causing untreated cancer. In fact, some regulations prevent building homes using materials that we know have caused cancer. Feel free to try to find a study or evidence that suggests otherwise though.

> The issue is people enforcing these regulations see the dead bodies from the burned out home but not the dead bodies of the homeless or the kids with less food

Right. It's exact same problem as the FDA. If the FDA approves a drug and it kills people, they look bad. If they don't approve a drug and that kills people, no one blames the FDA because the FDA's victims in that case are invisible.

> My whole county did this. No inspections. It turned out fine.

Would you be willing to provide us with the name of the county so that we can determine for ourselves how it turned out?

> People also just don't want to live in slums filled with run down barely standing shacks since it hurts their property value too.

Someone else's property value is their problem, not mine. You're not guaranteed that the value of an investment is going to go up. It's called "risk", dude. Your opinion of what I should do with my property does not trump my opinion of what I should do with my property.

At one time, people claimed that their property values went down when a black family moved into the neighborhood. Guess what? They eventually had to suck it up and live with it.

> Your opinion of what I should do with my property does not trump my opinion of what I should do with my property.

This is true in some ways, and false in multiple other ways.

1. Fire (and similar) codes exist because other people don't want their homes to burn down because you didn't want to spend the money to safely build your electric/gas/whatever system.

2. Certain codes exist related to upkeep because, if your building become derelict and infested with rats, it's going to negatively impact the livability of the ones around you.

3. Some places you can run a business, other places you cannot. Zoning rules are extremely common. In fact, they are widely considered _too_ common, but even most people pushing back against them don't think they should not exist at all; just not be so strict.

4. Some places have rules set up as to what's allowed (length of grass growth being an example); sometimes as an HOA rule, sometimes as a government rule. And these exist both for health and for "this is what we think is nice".

If enough people in your area want _everyone_ in your area to uphold a certain standard, then yes... their opinion _does_ trump yours. Because that's how society works; people decide, as a group, what is allowed and what isn't.

> If enough people in your area want _everyone_ in your area to uphold a certain standard, then yes... their opinion _does_ trump yours.

And yet, weirdly, you're no longer allowed to prevent someone from selling their house to a black family, no matter how many "people in their area" want to forbid it. How do you explain that?

Majority rule isn't the only rule, dude. Individual rights are still a thing.

> Someone else's property value is their problem, not mine.

On an individual level, sure, but if we have a repeat of 1929 or 2001 or 2008 or 2020 (we'll see about 2024), even if you're not personally directly affected, there are going to be ramifications that affect society beyond a couple of unlucky individuals. We don't really need another once-in-a-lifetime economic event.

Because it damages their property values. Would you want to buy a house next to a dilapidated pile of abandoned rubble?

What makes you think you're entitled to an increase in your "property value" at the expense of someone else?

Maybe you should look at your house as a place to live rather than an investment vehicle.

Or maybe you should just accept that investments come with risks.

> What makes you think you're entitled to an increase in your "property value" at the expense of someone else?

The exact same thing that makes me think I can't just walk into your home and take what I want, because I want it and you're not using it. The rules set forth by the society we live in, as decided by the people living in that society. Sure, not all the rules are great; many of them are awful. But the solution to that is to fix the rules, not to say there shouldn't be _any_.

> The exact same thing that makes me think I can't just walk into your home and take what I want

No, it doesn't work that way. My house is not your house. My land is not your land.

If you're going to restrict my use of my property to increase your property value, you should pay me for that privilege.

No, that's not the way it works. When you move into a neighbourhood, a city, a state/province, and a country, you implicitly agree to abide by the rules. If the rules say you're not allowed to build your own house without approval of the design from an architect and an engineer and then you ignore them at your legal peril.

You're talking about "rules" as if they were some immutable dictate sent down from the gods.

The rules in many areas used to forbid selling houses to black people.

Those rules were changed. By force.

If you don’t like the rules then go ahead and change them where you live!

No one's entitled to returns on any investment, of course. But would you expect investors to stand idly by while their investments lose ground? Or would you expect them to take whatever opportunities are available to them to protect their investments?

They usually aren't it's an argument used to scare people into making housing stock replenishment more expensive and lock in property values.

I'm building a house now. I sent the county... A picture of a square on a map. No plans no inspections nothing. Fuck all that. I build based on what seems reasonable after a cool Busch Light and then I just do it without asking permission from anybody.

Half my county did the same. It's not rocket science, and the world here hasn't fallen apart or burned down. But you will be told the opposite to get locked into expensive contractors and corrupt inspectors and the cash extracting nightmare licensing and permitting systems that surround that.

And before anybody gets too excited... this is all 100% legal if you pick the right spot.

Depends on the specific thing, but generally it's because there might be consequences to doing things poorly that would spill onto your neighbors, or which might cost the local government money to fix after it hurts or kills you. It's the same kind of reason that laws requiring motorcycle helmets or seatbelts exist.

The sewer one is obvious, since it could be a public health issue -- if you screw it up you could wind up contaminating local water sources (or just stinking up the area). Issues with the lumber you use, or with your building plans, could potentially result in your house collapsing in such a way that it might damage your neighbor's property. And getting a new permit if you take too long is probably just a way to force you to check in and make sure that you're not deviating from the earlier plans you filed.

When my neighbor's house fails and causes damage to my property, I'm not legally "responsible" but I still have to deal with a whole lot of negatives. Hence the "or deal with it" part of OP's statement. Far better to reduce the risks by making sure the project isn't being half-assed up front.

The municipality is on their side because many people who try to get variances on these things are legitimately cutting terrible corners that compromise both the safety of the inhabitants (present and future) and the neighbors. It's inconvenient, but these regulations save a lot of lives/QoL from bad/naive actors.

The municipality is on their side because they're overworked.

In even the smallest town, if any appreciable percentage of new builds required custom handling... the system would instantly be person-starved and start backing up.

Business-as-usual is the fast/efficient path from a paperwork standpoint. Anything odd is (a) discouraged and (b) looked at with annoyance because it takes more time.

One reason it's almost always cheaper to tear-down fire damaged houses with still viable framing. No one wants to take the time to quantify exactly how much the framing was damaged.

My town solved the guilty until proven innocent issue regarding permits by just giving people carte blanche. Imo this is far more rational: if the county can't/won't verify paperwork they should default towards freedom and let the property owner have at it rather than presuming guilt and saying you haven't the money/people to check it.

Granted people aren't rich where I live so we'd rather them live in potentially a subpar house and maybe have it fall in on them than be homeless and die from the elements.

Re below: USA / Arizona. Pick the right county and no code inspections.

Which country/state? Inquiring minds want to know!

Those examples sound pretty reasonable, what's the issue?

They want to be the reason why the laws are created, they don't want to have to follow them.

I will own this I guess. You are correct to some extent: I don't want to have to follow laws that cause unreasonable expense, when they are created to prevent disaster that I am going to prevent without your oversight. You'll just have to take my word for it: my house is better built than any for-profit house you'll find on the market today. It's for me and my family, of course I would make sure that it is! The wood that I milled is thicker, heavier, stronger than any Yellawood you'll find. Yet I can't be trusted to recognize a board that shouldn't be used as a joist. I have to higher a professional to look at it's fit for use. Which could legitimately be someone that's never worked with lumber before. You have to admit it's insane. By the way they definitely stamp and sell lumber that I would never use in a joist.

> You have to admit it's insane

All of this sounds way more reasonable than "trust me bro, I know better" from some random person building a house. That would be insane.

> You'll just have to take my word for it

Building codes (paid for in blood) are written so we don't have to take your word for it

Why is number one the most boggling? Not dealing with sewage correctly is a public health hazard. In most places if there is a sanitary sewer hookup you must, by law, connect to it. Now in your particular case they don't have a sewage lift, but if one is ever installed it is likely you will have to connect to it if you ever need to do septic maintenance again. I certainly hope your municipality requires regular inspections of your septic so you're not flowing shit water into the local environment.

> - You can't build a septic system, you have to use sewer because you're in city limits (later rescinded when they realized they would have to pump my sewage up to the city sewer.

You got lucky. Houses with lift stations are a thing. Usually a bunch of houses will go to a common lift station, but that's not always the case.

My dad runs a company installing and servicing various sewage treatment solutions and I spent a lot of weekends as a child going to nice houses on service calls because their lift station threw an alarm and it wasn't pumping their sewage.

Your list seems fairly reasonable.

I looked into building where I was (because land was surprisingly cheap compared to houses) and was told to allocate 2 years and $250k for permits. A significant chunk of that was paying an architect to respond to the city and resubmit the plans. This was back when most houses were under $1M, and the lots we were looking at were around $200k, so the permits were literally more valuable than the land, and a pretty large fraction of the value of the improvement.

> I bought a few years back and we didn't really use an agent to find the house at all. Looking into it, I found that a certain percentage of the sale amount goes to pay the agent(s); 6% I think. If there are two agents, they each get half. If one person doesn't use an agent... the other person's agent gets it all. The person without an agent doesn't get to keep their half... it just all goes to the other agent. Wtf...

In hot markets this is a way people often get an advantage as a buyer: tell the selling agent you want to use them as your agent too, so they get the whole 6% if the seller picks your offer. So if the bids end up being close, the agent ends up lobbying for you (or lobbying you to make your offer closer).

Some selling agents refuse to do this because it's pretty shady, but definitely not all.

I've also heard of similar things including negotiating down the selling agent's cut as part of it but haven't seen as much of that firsthand.

> Some selling agents refuse to do this because it's pretty shady, but definitely not all.

This is a blatant conflict of interest. My god.

It's only a conflict of interest if either the seller or the buyer expect their agents to negotiate price for them.

Generally agents steer well clean of that, for legal and time reasons.

A realtor is there to put properties in front of you / put your properties in front of others, and then close the deal when you tell them which property you're interested in.

Volume pays realtors, not price-over/under-replacement.

It’s a conflict regardless of negotiating price.

Your realtor (as the seller) is now going to give preferential treatment to one buyer for their own personal gain.

The realtor doesn't care which side of the party "wins", as long as the deal goes through.

So they're only preferring whoever is bitching the loudest?

>It's only a conflict of interest if either the seller or the buyer expect their agents to negotiate price for them.

There are other details that come up through a transaction that many people wouldn't even think about. Are appliances included? Window treatments? Leftover paint? What year the transaction closes could impact taxes or incentives for either party. Inspections (what types of inspections are permitted, their timeline, what will be repaired prior to sale).

If there are disagreements about any of those, or if the property was materially misrepresented by the selling agent, it's way more messy than if another agent is involved and it's clear who represents who.

It will be presented to both parties. It's not a hidden conflict.

Hidden or not it still is one.

I guess my point was, if it’s transparent the seller can easy take that into consideration when evaluating the offers. I’ve never given much thought to an agents opinion once I’m at that stage. I can evaluate the offers, their job is to bring them to me.

If people are out there just doing what their agents say with no questions asked, well, then yeah probably insist your agent doesn’t represent the other party too. That even gets murky given a large number of agents represent a few brands and they’re completely incentivized to have one of their partner agents on the other side of the transaction.

The entire thing is a bit of a racket.

It doesn't sound like you negotiated well and is a sign you could use an agent :)

But seriously, imagine you and I are both bidding $1,000,000 on a house. You have an agent, so if your bid is accepted, your agent and the sellers agent each get $30,000.

I don't have an agent. In my offer, I write "the sellers agent gets the usual 3%, and I am allocating the 3% that the buyer's agent would get towards the seller instead." That means for the seller's agent there's no difference whether I use an agent or not, but to the seller themselves, my offer looks $30,000 better than yours because I am sweetening the deal using that $ I'd otherwise give my realtor.

All that said, I used a realtor on my house purchase despite being financially savvy and a good negotiator because they actually helped us find the right house, and they were well worth the fee.

The commission is spelled out in the listing contract between the seller and their agent. The buyer is not a party to that contract and can’t dictate changes to it.

FYI, here's what an example seller's contract from northeast FL MLS looks like:

>> Broker will cooperate with and compensate, as stated below, NEFMLS brokers and any broker who reciprocates with NEFMLS. For finding a buyer ready, willing and able to purchase the Property, SELLER will pay BROKER, no later than the date of closing, a broker transaction fee of 5% of the Purchase Price, whether a buyer is secured by BROKER, SELLER, or any other person. BROKER agrees to offer cooperating broker compensation of: 2.5% of the Purchase Price to a single agent for a buyer; or 2.5% of the Purchase Price to a transaction broker for a buyer; or 1% of the Purchase Price to a non-representative broker.

>> If no cooperating broker compensation is offered, the Property cannot be placed in NEFMLS. SELLER hereby directs closing attorney/settlement agent to disburse at closing all compensation to brokers payable hereunder

So in this case, the seller's broker is entitled to 5%, of which 2.5% is required to be shared with a buyer's broker, if existent.

In the event that no buyer's broker exists... it would be a conversation with the seller's broker as to how to dispose of the 2.5% (refund to the deal, etc.).

Yeah agree! Great reference to the contract language. Point being is that there's now a 30K that's freed up for creative use.

Happened to have a recent contract handy. ;)

Well, sorta.

The contract between the seller and their broker/agent definitely reserves (typically) 3% for the buyer side broker/agent. What happens to that 3% is definitely under the influence of the buyer. We negotiated a 50/50 split of the 3% back to us as the buyer in the most recent house that we bought. I guess we could have instead offered it as an incremental incentive to the selling party to sweeten the deal.

Yeah totally it's the same thing. The bottom line is you now have an extra 3% to "play with" between you, the seller's agent, and the seller that would have previously gone to the buyer's agent. How you split up that 3% depends on who's got most of the leverage in the scenario.

Correct, but I can make the offer with that language and the seller can review that w their agent. If the agent is "just as well off" or even ahead of the game they can direct the ~3% I whatever way makes sense to get the deal done.

I used an attorney specializing in real-estate to represent our side of the house during my first home purchase. We subsequently reduced the bid by 3% with an explicit note about why (no buyer's agent commission to pay). The seller's agent was a broker and was apparently motivated because they accepted our deal along with fixing a list of little items uncovered during inspection. We paid our lawyer a $2-3k iirc.

I'll never know if that broker got 6% from the seller or took 3% to close the deal, but our strategy worked: I paid 5 figures less for the home than what was being asked for at a time when houses were selling for over asking price in this area.

It's worth a shot I guess. 2 warnings: Some seller's agents will get very pissed at you (b/c this and other things like Redfin's 1% is disrupting their cash cow and they're not stoked about it). It might be difficult to find an attorney since most RE attorneys focus on commercial deals.

Same, we used a notary public for most of the paperwork and a lawyer for a bit of it. I think I calculated that we saved around $20,000.

Technically, the 6% goes to the Seller agent. They promote on the listing how much they're willing to share with the Buyer's agent; half is customary but not set in stone.

There are agents for your situation. They'll collect the 3% (or whatever it is) and rebate it back to you at or after closing; less some fixed fee ($600 in my experience). They are not going to do much for you, but if you already found the house yourself and are familiar with the buying contracts/process. It's an option that can save you a lot.

This may differ by state of course. My experience is limited to Texas. But I've bought and sold property using these type of agents. When selling, you just do all the work (hire a photographer $200-500, write the description $0+, and they load it to the MLS for you as the listing agent). I'm of the opinion that for most properties, the only value added marketing is the MLS. When they talk about their websites and portals and ads they run in print media I roll my eyes.

In Oregon it is illegal, by statute, to give a refund to a real estate client.

It was 6% when I bought, but I can tell you that my ex put our realtor through hell during the process - same questions over and over, daily phone calls for status updates once under contract, etc. I would have felt bad, but I knew how much she stood to make, so I didn't say anything and just let it all happen. I feel she earned it, lol.

Yea, it’s fucked. As a buyer, I had an agent for a while, thinking that since the same commission is coming out from the seller’s side anyway, it can’t hurt. Wrong. I kept having my offers turned down without any good reasons, getting slow walked on offers that were for the seller’s full asking price, etc, until I dropped the buyer’s agent and just went directly to the seller’s agent and it was amazing how fast the offer was accepted.

Yep, I learned that the hard way when we bought our first house a long time ago. I naively thought I would be a more attractive buyer because they don't have to pay my agent. There ended up being two other offers. Anyway, I remember seeing in the closing documents the amount allotted to their agent, the full 6%. Wtf, indeed.

We used a real estate lawyer instead of an agent and the seller worked it out with their agent to keep the 3%. The seller's agent told us that's what ended up making our bid the most attractive.

Just sell it / or buy it yourself. It isn't hard by any stretch. You can use a $200 listing broker on a MLS site. That is the big secret. Then it gets on zillow,redfin, etc automatically.

In many states that just means the other agent gets all the commission instead of splitting it with your agent. You don't get any of it, and it isn't discounted anywhere.

The agent's commission is irrelevant. That just means the buyer needs to make a higher offer to be competitive with someone who is not using an agent.

This whole thing is about agent commissions. The comment I'm replying to says "just list it yourself" in direct response to "I would love for there to be some sort of competition injected into real estate commissions."

How in the world in that context is "the agent's commission...irrelevant?"

That is really not how it works, and goes to show there is at least some value in agents, as they do know how the process works.

The "standard" in the US is that the sellers pay 6% commission, with 3% going to their listing agent, and 3% going to the buyers agent. If, as a buyer, you show up without a listing agent and don't demand 3%, it is totally reasonable, and quite common, to ask for a 3% price discount since you have no agent. Any sensible seller would take your offer as it means they are getting the same amount of money.

I'm not saying this always "works", but sometimes people act like these are rules that are set in stone, as opposed to things you can negotiate for.

Back in the early 00s I went with a discount listing agent who only charged 1%. They recommended I still give 3% to the buyers agent, but I said fuck that, and only offered 2% (market wasn't crazy strong but also wasn't weak), and the buyer's agent accepted that. So all in I sold my house for 3% instead of 6%, which I thought was totally fair given the amount of work the agents did.

That doesn't help. The seller does not save money unless BOTH buyer and seller have no real estate agent.

If the buyers have a real estate agent and the seller does not, the seller pays the buyer's real estate agent double their usual payment - at least in the 3 states where I've sold properties.

That is not a state law thing. All that matters is the specific contracts you have with your agent and with the buyer. If you're working with an agent they'll nearly always require the standard 6% split between agents, but if you are not then the buyer's agent commission is something that can be negotiated just like any other clause of the contract.

It also just doesn't really matter. What you care about as a seller is that you get the most net money for your house. If one of the buyers wants to have 6% of the money they're paying you go to their agent, that just means their offer needs to be that much higher than a buyer who doesn't have you paying their agent as much.

Buyer's agent can ask for that, sure. It's not like it's automatically that way and the seller has to agree to it.

A buyer's agent should be paid by the buyer, since the agent is working for the buyer. You could agree to do it, or you could reject their offer if they ask you to pay the agent commission.

You might not even need to do that much. I sold a home in a desirable neighborhood (I don't mean high-end, just a nice solid middle-class area with good schools, etc) by just putting a "for sale" sign in the front yard.

Having commission be a percent of sales has some theoretical advantages. For example you might think the agent is motivated to get you the highest selling price. But in reality they are much more interested in making a sale at any price, because that lets them get paid and lets them move on from marketing your property.

Residential real-estate transactions with a mortgage are about as regulated and standardized as it gets. The listing agent actually does very little beyond getting the property listed in the MLS. The difference in the amount of work they do in selling a $100K house vs. a $900K house is small (in fact the $100K house might take a lot more work because at that price it's probably got some serious drawbacks), so why should the higher sale price pay them much more?

MLS puts a lot of eyeballs on it and likely can and will increase the sales price. A sign in the yard is not likely to ignite a bidding war. Although I'm glad this worked out for you, it seems like bad advice in general.

> For example you might think the agent is motivated to get you the highest selling price. But in reality they are much more interested in making a sale at any price, because that lets them get paid and lets them move on from marketing your property

This is true. Although, it's just important to remember your contract with the realtor is to sell it at a Listing Price. You have no obligation or liability to except a lower offer or reduce your list price, ever. They are salespeople and lean into the friendship thing, but remember they work for you and treat it as a big important financial transaction like it probably is (to you)

> You have no obligation or liability to except a lower offer or reduce your list price, ever

That’s true but in my experience they will pressure you to do so.

I agree with this sentiment, and I'm especially in favor of selling where you purchase services "a la carte" (e.g. pay a fee for a real estate attorney, a separate one to the escrow company, photographers if needed, etc.).

However, if you say "it isn't hard by any stretch", I invite you to take a look at listings in your area and compare for-sale-by-owner listings with those listed by an agent. Half the time it looks like the photos on FSBO listings were taken by a flip phone from the early 00s, often times the pictures look like the person didn't even clean or there are garbage cans in curbside pics, the descriptions have glaring typos, etc. My point being that I believe it shouldn't be hard, but I am often dumbfounded about how the average quality of FSBO listings (at least where I live) is abysmal. These people are easily losing out on a lot of money by not putting a minimal amount of effort into selling the biggest asset they own.

We sold our first home with some help of a FSBO service. I think it was $1,500. They wrote the property description (and passed it by me), created the 3d virtual tour which in my experience gives an amazing preview on whether the house would work for a buyer and would be worth visiting, listed it on their site and zillow, and for another $300 would provide an attorney to facilitate the closing.

I agree most FSBO pictures are awful. We were happy to pay for a service to help the listing look polished, and we firmly believe we got more money/closed faster because of it. With 7% interest rates on a 30 year mortgage, it would take about 5 years of payments to accumulate 6% equity to pay the commission to sell the house, before accounting for other fees (and appreciation).

We ended up paying effectively ~0.8% for the FSBO service and 2.5% to the agent representing the buyer. The agent was apprehensive, but the buyer really wanted our house. Everyone acted in good faith after the hail storm a few weeks prior to closing and everyone was happy as far as I could tell.

What if you own the title?

Great idea but I got like 20 spam calls a day from realtors pretending to have an interested buyer and then trying to sell me on their services instead.

Any way around that issue?

Commission based on home value is a joke. Realtors should earn a flat-rate.

I agree - especially for the last few years, when in order to sell a house all you had to do was put in on the market - and then get 10-15-20 offers at or above listing price - no agent deserves a 6% commission for simply getting something listed on zillow or MLS where in recent years, the houses just sold themselves.

> no agent deserves a 6% commission for simply getting something listed on zillow or MLS

Typically 3% is seller agent commission and 3% is buyer agent commission - although in the paperwork it's most likely 6% to the seller's agent and the seller's agent offers 3% to the buyer's agent.

Although 5% total / 2.5% to each realtor is becoming a bit more popular as of recent, based on the listing I browse.

Remember there’s no professional responsibility for realtors, so they do shady shit like shop the house internally to keep the full 6%.

I encourage you to report any behavior you believe to be illegal or unethical to both your local realtor association as well as your state agency. That’s why those organizations exist and we are all better if people are held to professional standards.

Is there a practical way to diligence theoretically unethical behavior?

Parsing the question as:

- a broker with a client who is selling

- to pitch buying to another broker who has a client who is buying

- and for the brokers to work for the same company

I don't think so? It sounds obviously ethical

More like the selling realtor “forgetting” to take a call from a competing buyers agent and keeping it in-house. It happens all of the time and cost the sellers money.

There’s also many scenarios where real estate folks steer certain ethnicities or religious practitioners away from some areas.

As said earlier, any and all discrimination is illegal/unethical and there are checks in place to prevent it from proliferating. Anyone who is a victim can report a HUD fair housing complaint form, contact their local state's office of fair housing, or contact their local Association of REALTORS® to report an ethics violation.

And people do report:

> The most important finding of this report is that the number of housing discrimination complaints increased significantly in 2021, despite the fact there were fewer agencies reporting complaint data. There were 31,216 housing complaints in 2021, an 8.7 percent increase over the number of complaints filed in 2020. At the same time, there were seven fewer agencies that reported data in 2021 than in 2020. Had all fair housing agencies been able to submit their data, undoubtedly the number of reported fair housing complaints would have been even higher.

https://nationalfairhousing.org/wp-content/uploads/2022/11/2...

You choose the buyers agent.

I don't understand why people don't negotiate more on this. I paid 3.5% total commission (1.5% listing and 2% buyer agent) on the last 2 homes I sold. One in 2012 and one earlier this year. In both cases the homes sold quickly and above asking.

My understanding is that in some markets if you try to negotiate anything less that 6% you're just blacklisted. They lock arms and no one will accept it.

Do you know anyone this has actually happened to? Quite honestly it sounds more like fud spread by realtors.

That’s only true if you are in a competitive market. There is a whole swath of land in flyover country and rural America where it can take awhile to sell a house.

Is that still the case? I feel like rural markets have really boomed in the last few years. At least I'm seeing that in the southeast. Maybe "flyover country" is different.

Rural America I mean rural GA, FL, AL, MS.

I mean yes, it's sort of tautological that if you are trying to sell a home in a place very few people want to live, it might be (but isn't by definition!) harder to sell than someplace where a lot of people want to live.

Outside cities, yes, but there also aren't many houses there.

In flyover country, in the cities, it's been "OMG, this house just came on the market four hours ago... quick, send a full offer! Damnit, they already sold it for $20k over asking, again?!?!" for years, only letting up recently.

[EDIT] And I don't just mean like Chicago and Minneapolis, either—any metro area a million or larger, it's probably been like that, and even in some of the smaller ones.

I expect that when it comes time to sell my house, I'll hire a real estate attorney to make sure all the paperwork is in order, and I'll deal with the rest myself. I engaged an attorney when I bought my house, and she was super thorough.

I've sold 4 houses "by owner". I didn't even use an attorney for 3 of them - just a title/escrow service who take care of handling the deposit, filing the deeds after the funds transfer is complete etc.

buying a house, I would want an attorney - selling the house, I agree, no need for a realtor or attorney if you are willing to do a bit of work yourself.

Where I live, the real estate agents association has model home sale contracts and it's not common or necessary for a buyer to have an attorney.

Same. It's all very standardized and the title/escrow company does it 10 times a day and will handle all the paperwork and filings.

Attorneys are so ridiculously cheap compared to the realtors. In my area there are discount real estate attorneys that will do sales/purchases for $200, and the normal price is like $500 which is nothing compared to the real estate agents getting like $10k on an average home in the area.

If you're selling a $2M house, you're willing to pay more for someone to get you a good price.

On the flip side, no one is going to pay $5k to sell a $30k house.

Flat rates don't make sense. Maybe you think the percentage is too high.

Maybe the percentage should be laddered, or there should be a floor.

    min(5000, House.price * 0.03)

The incentive for the agent selling the $2M house is to price it to sell so they can move on to get their cut of the next $2M sale.

> If you're selling a $2M house, you're willing to pay more for someone to get you a good price.

That sounds very last-century... kinda like selling antiques to a pawn shop or consignment store that would take of finding a buyer.

Why does discovery and bidding justify $200k in overhead for the $2MM property? Why does a person need to go out and "find a buyer"?

Without this Realtor conspiracy, surely something like Redfin meets eBay would be more efficient? Posting online is what the cast majority of realtors do anyway, they don't actually "find" buyers... At least until you get to 1%er prices where golf club chats matter

Heck, this racket gates even access to standardized legal forms that states themselves should freely offer.

You can. It's just a bit of a racket (hence, conspiracy judgment) and nobody will work with you if you only offer a flat rate. Since MLS is mostly limited to Realtors in most markets, you're basically locked out from posting there.

There's ways around it, and flat fee brokers that exist, but you hamper your sales ability. Not an issue when its a sellers market, but can be rough in a buyers market.

There are flat rate realtors where I live. However they are only 50%, the still give the same 3.5% to the buyers agent, but they take for themselves a fixed rate to get you on MLS. I'm not sure if it is a good deal - they still charge high prices relative for what they do for you. (it is cheaper than a full agent, but they also do much less)

You just don't sign a contract where you give a buyers agent commission, although again this limits the pool. Frankly, buyers agents are largely a scam in my view. With MLS, Zillow, Redfin, etc, their 'experience' seems mostly worthless. It certainly is not worth 3% of the cost of a house.

If anything, sellers agents are more useful since they actually offer something valuable to the real estate experience (e.g., listing housing, photos, providing buyers access, etc).

Buyers agents know better how to search the MLS system (though only a few do this). They also line up times to see houses, and take time to drive you to each. So a good buyers agent has spent about 8 hours of time to each buyer, plus expenses. I agree they are getting far too much, but they still are valuable.

> but they still are valuable.

All of those things seem to be pretty simple and worth barely of fraction of $2000 per hour (if they actually only spend 8 hours in total? I mean at that point it might make sense to spend 40-80 hours to do the same things yourself instead depending on your income).

So negotiate that with your agent if that's what you prefer.

So why downvote me? We've got this already in our buyer's agency agreements - if you as a buyer want to negotiate compensation with your agent, you have the ability to do that. Similarly, in both states where I work, you as a seller have had the ability to choose what, if any, compensation you want to offer to a buyer's broker. None of this is actually that different from how you negotiate (or not) with any other professional - your lawyer, your accountant, your financial advisor, etc.

Did you forget the context of the article?

Negotiation is not an effective strategy when there is active collusion to fix prices. You are commenting on a story where a jury just found that had been systematically done.

I have always been wondering what kind of work a realtor needs to do for selling/buying a $100M mansion and ended up with $5M commission…

Nepotism, same as every other million-dollar job.

Have connections, have established trust with the elite. Not saying it's worth $5M but it is indeed something.

Agreed. Add to the fact if you're a seller agent the money is easy. A buyer's agent struggle. AFAIK usually you start out as a buyer's agent and build up a network/reputation before people trust you to sell.

In a seller's market, seems like a buyer's agent should be compensated more because it's more difficult to win bids now.

Not every inch of America is in such a competitive market.

Sure, but then the logical step is to compensate for the realtors time as opposed to some national average.

"Stock options are a joke. Developers should just get a flat fee."

There are people worth their commission and there are people who are not worth it.

The bigger reason house prices are so high isnt the real estate agent cartel, it is the banking cartel and the capital chasing homes to rent them out.

I think a better analogy would be "stock sales are a joke, you should be able to sell them for a flat fee"

Brokers do, 1.5% from seller and buyer.

Don’t use realtors.

Realtors are brokers too

Commissions for the seller's relator are fine, but they shouldn't be based on the full price of the house. This setup encourages quick sales rather than getting the best price. Instead of the realtor earning 3% on a $1,000,000 house, set a base amount at, say, $700,000 and calculate the commission only on the remainder - 10% on $300,000. The same principle should apply to the buyer's agent but in reverse or there should be a flat fee. Their current incentive structure is totally screwed up.

I’d be willing to pay a percentage above some predetermined price (e.g. if the realtor produces some sort of above market outcome) - but agree, that the value provided does not equal 3-6% of home value

Should it be the same for income tax too? Let's think through why exactly it be based on income? (Genuinely saying.)

The problem isn't just realtors, it is that the whole system is designed to maximize transaction costs. Who cares how much the attorney and loan paperwork cost when they are only 1-2%, you are already paying 5-6% to realtors, ~.5-1% in repair costs, and often a part of the buyer's closing costs too?

But if you think about that wholistically, that means sellers are paying 8-10% of the cost of a house every time they sell!

Surely that means someone could cut the cost in half and make a much more attractive platform, right? Opendoor comes kind of close, but they end up shouldering a lot of the risk of the transaction and therefore tend to lowball.

Dumb, uninformed question here, but are there not some sort of For Sale By Owner systems that cut into the huge percents in closing costs? Or is the issue that you have to pay the buyers' realtor fees too and that's unavoidable?

I'm trying to figure out why nobody's figured out "DIY MLS listing as a service without having to pay for a realtor". Maybe everyone who does this just gets a realtor's license or something.

I’m not a realtor but I considered selling my home myself once. Two issues I hit immediately:

1. I could not list the home in MLS as That system requires annual fees to use and you need to have a realtor license.

2. You still need to pay the purchasing side’s realtor otherwise they will simply not consider your home for their clients. That’s 3% that’s hard to get any lower.

I ended up negotiating my realtor’s selling fee down to 1.5% with the promise of using them for my purchase as well.

> 1. I could not list the home in MLS as That system requires annual fees to use and you need to have a realtor license.

Additionally, if you were to decide to list "For Sale by Owner" and market it yourself, you can submit it to the major aggregators (Zillow et al), but their contracts with the MLS systems often disallow them from mixing MLS and FSBO listings in the same search result set, so the FSBO listings are hidden behind a toggle or something and go unseen by the great majority of people browsing.

Further blatant abuse of their monopoly.

Hmmm, sounds like a cartel that could be ripe for a bit of legal action. ;)

That seems like something the government should stop

aha, so THIS must be the real reason people like Redfin can make money off of giving you a "digital realtor" rather than FSBO uploads alongside the MLS listings. Makes sense, monopoly / oligopoly working as intended. I knew there had to be a reason :/

Thanks for your reply

I sold a townhouse in DC using a company that listed in the MLS for a flat fee (I think it was about $200). I held my own open house and got my target price from a buyer I met there. He did have an agent but I told them I wasn’t paying any commission. The agent thought I didn’t know what I was doing and tried to sneak a commission onto the sales contract. Typical real estate agent behavior. (I had sold and bought a few houses before, using agents, so I was familiar with the process, and aware that the agents added no value.)

By what method did he try to sneak a commission in? What it something obscure that you have to know to look for or?

She just put it right there in the contract, despite our verbal agreement that it would not be there. When I objected she made a show of having made a “mistake”. Quite crude, in fact.

It’s surprising to me that the buyer’s agent would even consent to produce a contract that doesn’t pay them any fee.

A lot of buyer's agents fastidiously avoid FSBO properties.

The first home I bought was FSBO—but I only found it because it was across the street from an agent-listed house!

It's true that there's scope for an alternate MLS that's just for sale by owner listings. But as someone else mentioned, the buyer often uses an agent (I refuse to use the made-up word "realtor") and you'll have to pay that fee anyway. Unless, that is, your listings site provided handholding to do away with the buying agent. To handle the paperwork, a notary and/or a lawyer is necessary but the site could either provide those services for cheap or detailed instructions on how to proceed if you want to use your own notary/lawyer. It's simple enough. It turns out that the main function of a real estate agent is to simply ferry paperwork back and forth between the clients and the lawyers. You can just as easily do this yourself (we did and saved a lot).

> It's true that there's scope for an alternate MLS that's just for sale by owner listings. But as someone else mentioned, the buyer often uses an agent (I refuse to use the made-up word "realtor") and you'll have to pay that fee anyway.

Maybe I'm misunderstanding how this works.

With (often) the seller holding a lot of the cards, they could simply insist that any buyer pay their own agent, or buy elsewhere.

If the demand is even minimally high it wouldn't take a lot of sellers to cause people looking to buy to avoid signing on with an agent just to find a house.

It's almost entirely because entrenched interests (realtors, NAR) sabotage those efforts. The market has never had a chance to support any other approaches.

Yep. And a lot of it is of dubious value; I think for many (most?) properties, title insurance is a scam. Most houses, especially those built (or at least having changed hands) in the last, oh, 50 years (or more?) should be fine.

It also just seems kinda dumb that realtors get paid a percentage rather than a flat fee. On the buyer side, it's essentially the same amount of work to help someone find and buy a $200k house as it is for a $1M house. For the two properties I've purchased, things moved so quickly that I don't think the realtors had to do all that much. Conservatively, the first one made at least $2k/hr, and the second at least $1k/hr (and I'm probably underestimating there). I'm not saying their services weren't valuable -- they certainly were -- but I can't see most people agreeing to pay that rate if it were presented to them that way.

And I'm not convinced there's all that much of a difference on the seller side, either. The staging is going to cost more for a larger/nicer house, but the sellers are paying separately for the staging anyway. I was also reading somewhere recently that orgs that control access to the MLS will not even allow you to list if there's no buyer's realtor's commission, and there's a floor, like it has to be at least 2% or something.

From the buyer's perspective, I really liked Redfin's pre-pandemic model, where they'd give you part of the buyer's commission as a "refund", because their realtors are salaried. I assume they figure out from the traditional commission how much they need in order to pay their own operating costs (plus whatever profit margin they've decided to take), and then give you the rest. Of course, they stopped doing that during the pandemic, and now pocket the entire buyer's commission.

Granted, the realtors we've worked with through Redfin were hit-or-miss. One we worked with was fantastic and knowledgeable, and helped a ton, but another (in a different region) let us put an offer on a home that we wouldn't have been able to rent out legally in the way we wanted to, which is something she absolutely should have known (a non-realtor friend alerted us to the issue; fortunately we were able to rescind the offer before it was acted upon). I haven't listed anything on Redfin as a seller, but they charge 1% of the sale price, which is a lot better than the 2.5%-3% traditional realtors take. Still, the percentage model seems unnecessary there too; the amount of work needed to sell houses of different values shouldn't necessarily be directly linked to the eventual sale price.

> But if you think about that wholistically, that means sellers are paying 8-10% of the cost of a house every time they sell!

I can only assume this also is part of our housing affordability issues. Sellers need to see some minimum amount of appreciation (and a fairly large amount at that) in order to break even (without even taking inflation into account), so homes sell for higher than they would otherwise, especially in markets where sellers have the upper hand.

Title insurance is often required by the lender. If I loan you a boatload of money, I want to make sure there isn't any funny business about who owns what when you buy that the borrowed money. If there is funny business, that why I want you to have bought the insurance. Seems as reasonable as home owners insurance on a mortgaged property.

Lenders could internalize this risk, which is miniscule. But mortgages in the United States are a subsidized product. The real problem is that the lender wants to sell the note to Fannie/Freddie, who require title insurance.

Title insurance is a total scam. Title insurers pay 3-6% of their premiums in claims [0]. Compare to auto insurance, which is ~80% [1], or home insurance (~50-70%) [2].

[0] https://www.ceicdata.com/en/united-states/title-insurance-in... [1] https://www.insurancejournal.com/news/national/2023/05/12/72... [2] https://www.spglobal.com/marketintelligence/en/news-insights...

You really haven’t added anything. You’ve just restated that people that own the mortgage want title insurance to protect them. It isn’t for the home owners protection. It’s the same with PMI. That’s another insurance the lender requires a buyer to purchase to protect them.

Title insurance is relatively cheap compared to home or auto insurance. It’s a one time purchase cheaper than the 6 month premium of either of the others.

> You really haven’t added anything.

Are you intentionally glossing over that it could/should cost less than 1 month of premiums of either of the other types of insurance?

They aren't saying it's priced a little too high, they're saying it's a scam. Compared to those other insurances, it's very cheap. Over a 30 year mortgage you'll pay tens of thousands of dollars in home owners insurance. For title insurance you'll pay a few hundred dollars for the average house. For my house, which is close enough to the national average, it was about 2 months worth of home owners premiums.

Title insurance is part of a weird subsidy that is US-unique. The fact that it's part of a weird subsidy means the terms are subject to politics. Fannie/Freddie can easily self-insure against title risk but the political winds are against it, though maybe recent developments will allow them to finally do this [0].

I don't think you've quite understood the idea of looking at loss ratio. On the aggregate, title insurance is incredibly expensive compared to home or auto insurance. These bits of friction add up over an entire market, especially in states where title insurance is fixed by regulation at an extraordinarily high price.

The weirdest thing I've found about title insurance is that people who have purchased it come out of the woodwork to try to convince themselves they weren't scammed. It's not just title insurance salesmen astroturfing; people honestly just never want to admit they were scammed and will somehow fight tooth and nail against cold hard mathematical facts.

On that note, I can also offer you rapture insurance for $10/lifetime! That's cheaper than even a day of your homeowner's insurance and it's a one time purchase! By your logic, this insurance is therefore a good deal and totally not a scam!

[0] https://subscriber.politicopro.com/article/2023/03/fannie-mo...

My problem has always been with the percentages used on certain things; like commissions. Just make it a flat fee. Things that require agent's time like open houses; bill for that. It's the essentially the same effort on a $100K house and a $500K house and a $1M house. Maybe once you get to $5M+ houses the fees need to increase since this is a different class of RE with much smaller pool of buyers. But still should be fixed amount and not percentages.

In my area, since I bought my first house 10 years ago house prices have 4X'd. I don't think the wages of most professions have, the demand for housing makes it easier to sell, so why should agents be making 4X more?

Is there anything else in real estate that’s normally priced in terms of percentages other than the realtor cut? I’m not aware of any.

Property tax.

Everything is negotiable, but sellers often get asked to pay some portion of closing costs.

This was the business model for PurpleBricks that exited the US market after failing to disrupt the Realtor mafia in control.

Yeah it also causes the problem of making it a real pain in the ass to buy cheaper plots of land. Realtor often don't give a flying fuck about the sale of stuff under 50k, not worth it for them. Can be hard to get representation.

Maybe we should all learn from real estate agents and price our labor at a % of the median home price within 1 hour commute to our offices?

While I do think RE agents are overpaid in expensive markets, I also kind of think...good for them. Pegging your wages to your most expensive living cost is a supremely intelligent move.

The problem is 'buying agents'. Looks totally bonkers from over here (UK, I think it's foreign to at least most of Europe too).

Yes, this is where the collusion comes in. Many seller agents will simply ignore buyers without a buying agent.

In the U.S., at least, I've never known a seller's agent to do that (having done a good number of real estate transactions). In fact, in my experience I find it to be the exact opposite. Seller's agents are incentivized to not work with buyer's agents, if the situation arises where they're approached directly by a buyer.

If the seller's agent is comfortable acting as the intermediary, and recognizing the limits of conflict of interest, then it's in their best interest to keep all of the 6% commission instead of giving half of it to the buyer's agent.

When looking for a place in New York, we were straight up ignored by most sellers until we signed a contract with a buyer's agent. Apparently, people without an agent are perceived as window shoppers / tire kickers who are not serious about buying and whose presence wastes everyone's time. A buyer's agent signals that you have serious intentions.

Your area might be different, of course.

Interesting. Yeah, in Los Angeles, Denver, and Atlanta, it’s always worked to my advantage as the buyer. ¯\_(ツ)_/¯

Correct, and this is something I've used to my advantage before. It's not a huge one, but when all othet things are equal...

A huge hurdle with trying to cut costs is because of NAR themselves, and local Realtor Associations. Any Realtor is with NAR and a local Association, which heavily restricts what they can do. Not being in a local Association can remove your access to the MLS, reducing your visibility to other agents, and remove your access to the state-specific legal forms.

Add in closing attorneys and home inspectors being brought in-house to reduce costs, it can be a very expensive start-up cost that would require lots of capital to achieve. Zillow/Opendoor got REALLY close, but they stopped (Zillow) or, like you said, lowball offers because they're fronting all of the backend costs that used to be spread across 4 or 5 different services.

Not only everything you mentioned above -- the associations control access to the homes themselves

Yup! Forgot to mention that. In my area, you have to be a member of the local Association & NAR to access the lockboxes.

Good points. I totally forgot about the whole home inspection process and how ridiculous it tends to be. Even when they aren't in house, you know it will be someone that the realtor has worked with before. It will certainly catch things because it has to demonstrate its value, and those things will be worth at least hundreds of $$s. Unfortunately, it will also offer no real guarantee that those things were worth catching or that other things weren't missed.

You are right, a party trying to fix this will need great funding, large scale, and they can't be someone that will just sell out (ala zillow). With the NAR's ability to block out parties that they don't like, it might not even be practically possible.

Paying a percentage to realtors is just theft. They add so little value in my experience. The fact that a fee can be split between two brokers or kept by one just shows they are extracting rents for ambiguous value.

Not really related to the article but something I've been wondering...

In recent years the housing market has been so competitive that escalation clauses are often written into offers. They typically include a base offer of $X and then an agreement to escalate that value by increments (maybe $1-5k at a time) up to some cap. All the offers are collected by a certain date and then an auction is run behind the scenes by the realtors involved.

What's to stop a seller from having one of their friends enter into one of these escalations? Submit a non-serious offer with a high escalation and include a minimal deposit which would be forfeited if that fake offer happens to win but otherwise hope it comes in 2nd to push everyone else's escalation up.

sadly the answer is honor code.

There are also a lot of shenanigans realtors could be pulling.

Example: Few years ago, we wanted to buy a house, we made a bid for 2.6, the realtor said they would not accept anything less than 2.8 as this was their competing offer. We said no, the house sold for 2.4. I suspected the realtor might have been double dipping, or bluffing, i don't know. But what I do know is they did not present the offer to the seller.

(numbers are not exactly precise, but directionally and somewhat magnitude wise, it should be similar).

Maybe there was something else unattractive about your offer and the 2.8 fell through? Happens all the time.

When I sold a house recently I took the second highest offer, because the highest offer came from someone out of state who had never set foot in the house

I don't understand, why was that a motivation for not taking the highest offer?

Is that associated with some kind of risk of the sale not closing, or other risk?

(Sorry if it's a dumb question with an obvious answer -- this is not my area of expertise.)

Yes, the issue was increased risk of the buyer backing out. In which case I would get a few grand in earnest money and have to relist (or hope the other potential buyers haven’t found something else in the meantime and still want to go through with their offer).

The house had some warts, and the second highest bidders were locals who had toured the house and had it inspected. Closing was pretty much a lock.

Realtor definitely didn't mention anything, but mentioned a higher offer, which definitely didn't end up happening.

It was a standard bay area offer - 20% down preapproval, no contingency, 4 weeks close, and could have been shorter.

> But what I do know is they did not present the offer to the buyer.

I believe in most states a real estate agent (I despise 'Realtor(TM)') is obliged to present an offer (at least by the Realtor's Code of Conduct/Membership Agreement).

Edited to add: I'm not sure if this refers to seller agents (who cannot hold back an offer from their client), or to buyer agents, presenting that to the seller side, or both. I think at least the first.

> I believe in most states a real estate agent (I despise 'Realtor(TM)') is obliged to present an offer

Sure. But enforcement is the soul of the law.

And it's pretty tough to catch stuff like that. Most people who put in offers and don't "win" aren't sitting around monitoring how much the winning bid ended up being.

Exactly. In my case, I thought of finding the seller after sale was final, and ask if their agent presented my offer. He'd then maybe sue their agent.

I didn't care enough to pursue that route.

I had a similar issue. A put a full price cash offer on a place for 1.9. The seller said they had a competing offer that was higher and asked me to submit a new offer at 2.1. I declined, and said they are welcome to provide a written counter offer at 2.1. The reason they won't counter is that a new higher offer from any buyer (me) will trigger escalation clauses for other buyers offers. Dirty trick that screws over buyers, because sellers can see all offer details.

You can ask to see the other offer if the escalation clause is triggered. It technically has to be "bona fide"

This happened to me in 2019. I went into escrow and they didn't give me the offer for about 5 days. When I finally got it, it was lower than it should have been. It rubbed me the wrong way and I bailed out of the deal.

How did you bail without losing your deposit? I would have thought if you were the highest bidder you'd either be on the hook for the full purchase or lose your deposit.

If the escalation was fraudulent then you can bail.

Do you see the deposit amount and all the details of the escalation from the triggering offer in that case?

Say I saw that the triggering offer had a measly deposit and I suspected it of being fake. Would I be on the hook to prove it? Technically if I rescind my offer at this point I lose my own deposit, right?

Yes but they can drag their feet in giving it to you, since they can just sign your offer immediately. However, you can just cancel your offer after with a follow up document.

This is just my understanding, but here goes:

1) If your bid wins then you're on the hook to buy the house. Part of the offer your make includes "earnest money" which is that deposit you're talking about (which you forfeit if you don't actually buy the house). The seller sees all the offers so presumably you putting down $500 earnest money on a $300K house would look suspicious enough to get you ignored by the buyer.

2) However, you've got a bigger issue: it's a secret auction. You put in your bid/offer, and so does everyone else, but _nobody_knows_about_anyone_else's_bid_. Heck, you don't even know how many other people are bidding. You _may_ be able to ask your realtor to nicely ask the seller's realtor for a general description of how hot the listing is (which works in the realtors' favor - the hotter the listing, the more you'll anticipate needing to bid), but beyond that you don't know about the other bids. And you for sure don't know about the specific, bogus bid that the realtor's friend put in to influence all the people that don't know about the bogus bid :)

I might be wrong (realtor's friend puts in a bogus bid so the seller's realtor can lie and say the listing is hot, after your realtor asks them about it), but I don't think this is a strategy that will work in general.

Legal context: United States

> putting down $500 earnest money on a $300K house would look suspicious enough to get you ignored by the buyer

Assuming you mean the seller here? If I were the seller I too would ignore that kind of offer but first I'd let it push all the other escalation clauses up ;)

Very little. When I was younger growing up in Australia, auctions were very common, and it was very much the "traditional" model, everyone stands around in front of the property and puts up their hand to bid.

Regularly auctioneers would get caught taking bids from trees or vehicles to push prices up. They'd get caught when their fake bid was the highest. It became so common it was almost expected, and reforms to the process had to be introduced.

This is called "chandelier bidding" in industry parlance.

I think a lot of the escalations involve more than just one other person bidding, so you'd really need to be running a good game to get three or four people involved to run up a price in something like this.

Additionally, in a competitive market, with multiple offers, people aren't doing a bare minimum deposit. More like 30 - 50K is involved based on my experience, but it varies dependending on state.... I'm currently looking in a new market, and we were told our offers should have about 10 to 30K on them between Due Dilligence and Ernest money....

Besides, it's just easier for the seller/buyer agent to have a conversation on which buyer wants it the most.

It doesn't seem unethical, just weird. The seller can just require a higher starting bid, the result would be equivalent. Of course the risk would be that no one would buy the property if the price is too high.

I had an escalation clause in my offer, but I adjusted it so it said something to the effect that the clause would only be in effect for comparable offers. Then I defined comparable offers to be offers that were for the same type of loan with a minimum down payment and deposit amount. I wanted to protect against the buyers getting a higher offer that they were likely to reject on some other basis, but using that higher offer to make me pay more for the house. The downside was that I could be beat out by other legitimate buyers whose escalation clause didn't consider the quality of the offer they were beating. I cared more about not feeling like I was being swindled though. I got the house after about a $10k escalation, and the seller's agent presented the competing offer so I could verify it met the conditions of my escalation clause.

Here's the brief response I offered earlier today when asked what this actual does:

I don’t really expect significant changes. We are in a more balanced market today than when these lawsuits were first filed. Many sellers will find it advantageous to offer buyer agent compensation. If/when we return to a seller-advantaged market, some buyers may need to pay their agents directly, which could involve rolling those costs into their financing. Lenders are more of an expert than myself on any issues in doing that, but it appears to happen in other states already. One of the problems of these lawsuits is the conflation of agency with payment. States - both WA and OR, for example - are working to fix the agency problem that wasn’t made explicit to buyers post-subagency. But, I don’t think there’s any question that buyer’s having to directly pay buyer’s agent compensation will be a higher cost to buyers.

> Many sellers will find it advantageous to offer buyer agent compensation

so, now conspired realtors charge seller and not buyer. Still looks broken.

I guess you aren't familiar with this having been the system in most markets for decades?

your guess is incorrect

> I guess you aren't familiar with this having been the system in most markets for decades?

Definitely not in most markets. This is very unique to the US.

Also, what's the advantage of paying someone whose goals don't quite align with yours? And isn't it a massive conflict of interest?

Broken systems linger despite themselves all the damn time, are you really suggesting otherwise?

The system as described is nearly unique to North America. It takes a particularly distorted and unregulated market to allow this kind of anti-competitive structures to arise.

Honestly just going to do a FSBO if i ever sell. The fact that I pay out 5% of my house price for what is essentially a few hours of data entry work is beyond stupid.

So go for it! If you believe you have the ability to market your house successfully, then by all means do so. As a realtor, if I had a house in a market where I don't do business, there is absolutely no bloody way I would try to sell my own home.

The concern is perhaps less one’s ability to “market” a house better than a realtor than it is whether the realtor’s services, both individually and as a combined effort between buyer and seller agents, is worth anything remotely like the fees charged. The answer is clearly no to the latter.

With prices where they are today and the combination of effort and skill demonstrated by the realtors I have worked with—each of whom was highly regarded—I would give them perhaps a 1% commission split between them. In all but the most unusual cases, even that would be an overpayment at a reasonable hourly rate for their education and skill level.

When we bought, the seller's agent apparently spent a good chunk of her fee on little scent dispensers. We were finding those things tucked behind cabinets for months.

You will likely still need to offer a buying agent commission if you want buying agents to show the house. Still, that cuts the fee roughly in half.

At least some selling agents do a lot more than data entry. They generally pay for photos, staging, and landscaping while the house is on the market. They also research similar houses to position the property in the market and talk to buying agents. A lot of the negotiation can happen before the offer.

You can do most if not all of that yourself and you may do a better job than the real estate agent you would have hired. Doing a good job is a fair amount of work. Most real estate agents cost the same amount, so there generally isn't a price different between a good and a bad agent (unless you count the commission on a higher sale price). If you can find a good one, it is likely worth the cost. A bad one might even decrease your sale price though.

Do you think you can do a better job selling your own house than you can do at hiring a real estate agent?

This seems like a very disingenuous interpretation of the verdict by avoiding "what it said" and then telling us what will actually happen (as though you can predict) or what's wrong with it. If I were a realtor what is wrong with it is it could threaten my fat commissions.

What the jury said was that the national association of realtors colludes to keep agent fees high in a way that violates anti-trust rules.

(edited for grammar)

Dude - any realtor paying attention has been watching this (and other) cases now for years. You think we haven't been monitoring this along with state legislation, Congressional action, MLS rule changes, and all the other things that have potential legal impact to our business and our clients? NWMLS (for those of you in WA) made rule changes over a year ago that were good changes regardless of the outcome of this case, plus the legislature made clarifying agency changes that go into effect in January. We're not the trolls you all think we are.

I think this is unimaginative. More than likely, eventually the US will join most of the world in having no buyer's agents and low seller's agent commissions.

at 6% of the median 500k for a house, they have about 30k reasons to fight that tooth and nail..

I’ve never been involved with residential real estate in the US, so forgive me if I’m missing something obvious.

Why will it be a higher cost to buyers? At the macro level, aren’t the transaction costs effectively priced in? Is the idea that the home has some absolute value that exists independently of the cost structure of the market it trades in (so the buyer paying commission directly is doing so “on top of” this amount as it’s valued under the status quo)?

Is it mainly a question of categorizing the commission as “a cost” rather than “hidden in the seller’s asking price therefore part of the value of the home”?

Otherwise, why wouldn’t the buyer who now says “I have $100,000, so I’ll buy a $100,000 house” instead say “I have $100,000, and I know my agent is going to charge me around $3,000, so I’ve got to buy a $97,000 house instead”? If that becomes the new norm, wouldn’t all sellers find that people who could buy at $100,000 before can only buy at $97,000 now, and have to price their homes accordingly, making it a wash?

If it were me, I feel like I’d want to hire my agent at a flat rate if I could, to reward them for finding me a better deal rather than incentivize them to make more by selling me more. But then again maybe that’s part of the higher cost to buyers that you mention: maybe there’s no question that buyers’ agents will be able to squeeze the buyers for more commission directly than they presently get out of the sellers?

In the US the seller pays for both the listing agent as well as the buyer’s agent. When you list your house, you agree to a commission for your listing agent and you advertise a commission to co-broke on the MLS listing, which entices buyers agents to show your house (or steer buyers away from it if the commission is low).

I think the biggest impediment to driving down costs to the consumer is the momentum of social convention.

Even for agents at fixed-cost brokerages, they know they can charge 2-3% so they do, and most people don’t know that it’s negotiable.

A bit part of the lawsuit, was that the buyers agent compensation was ONLY visible on MLS to other registered agents.

So, when you were looking online, you had no idea if the houses you found where offering 3% or 1.5% buyers agent commission, but your agent was, and could steer you to the higher paying homes.

Does anyone know what this actually means for real estate brokerage fees?

There are few markets which have supported 3-5% brokerage fees (even i-banking is <100bps at scale now) so I'm curious where the fees will settle.

This could change the process to this: 1) Seller gives a portion of their home price to their Agent as a commission (let's say 3%). The seller only paid 3% in commissions. 2) The Buyer negotiated a commission with their Agent (let's say $10,000). Which the buyer pays out-of-pocket, or has paid out of their financing for the home.

This allows the Seller's Agent to maintain their duty to maximizing the value of their client's home by reducing the commission the seller pays. While also ensuring the Seller's Agent doesn't bend to the Buyer's Agent's wishes for a higher commission to secure a deal. This also allows the Buyer's Agent to maintain their duty to their client by negotiating their commission up-front, regardless of the price of the property. They could negotiate a percentage with their client, but that percentage is the Buyer's responsibility, not the seller. It gives the Buyer more power in the commission paid to their Agent.

TLDR: Seller's had more power in pricing and commission payments to Agent's on both sides of the transaction, skewing home values higher to offset their (commonly) 6% commission payments. This segments the Seller's commission to just their Agent, and the Buyer's commission to just the buyer.

> maximizing the value of their client's home by reducing the commission the seller pays.

Selling a house quickly (convincing the seller to take a qualified and likely-to-close offer) still dominates as a strategy over eeking out a few extra points of contract price. As an agent, taking 1.25% or 1.5% of a $950K sale quickly is way better than holding out for a $1M offer.

The difference in commission at 1.5% on a $50K delta in sales price is $750. Freeing up your time to work on the next listing is more valuable.

The main issue with that possibility is many brokerages (at least ones in my area) do not allow a Seller's Agent to reduce their commission without prior Broker authorization. Regardless of what the Seller themselves wants. So while that deal may be advantageous for the Seller (sell quickly) and the Agent (get the deal over with and move on to the next), the Broker is the one getting paid a lower sum and will not allow that contract to be ratified.

Nothing in my comment is about changing the percentage of the commission. (The 1.25% or 1.5% is simply the listing agent's personal split of a 5% or 6% total commission [whichever is customary in the local area]).

Sorry, I didn't explain enough. The total commission remains 6%, but if the Seller's Agent split is only 1.25%, the Seller Agent's Broker (most likely) will deny that as the Broker would receive a reduced cut of the commission.

The Seller and the Seller's Agent may be cool with the reduction, but the Broker would ultimately have the final say since it's, legally, their contract.

Ah. I’ve never seen a percentage-based commission divided unequally into the four parts: agent and brokerage crossed with listing and buying.

I have seen 6% (1.5% x 4) and 5% (1.25% x 4).

Yeah, it's usually unequal in the area I used to work in. The Agent's have their own agreements with their Brokers that are independent of any sale/purchase they work on. I've seen everything from 50/50 all the way to 90/10 (10% to Broker).

I always thought the right strategy would be to have a sellers agent contract that was tiered, eg agent gets 1-2% of selling price up to average comps, and then 20% of excess selling price over that. Maybe a bonus or penalty for timing, to prevent waiting forever for a good offer.

These US fees always seem astonishingly high to me. Here, something more like 1.5% would be typical.

Yeah, it is very high. Although, the real estate industry in the US is vastly different.

- Agents do not receive salary, benefits, etc. Their only payment is when they close a deal. - Real Estate Agents are a dime a dozen since the licensing and training is pretty minimal. So lots of competition fighting over small supply, so it can be difficult to consistently get clients. - Agents can pay around $100/month to their Brokerage for E&O insurance, maybe access to legal forms, and a Broker for questions/insight. So they start spending money from the get-go. - Agents, typically, pay all expenses related to the job (advertising, signage, listing fees, etc).

Yeah, it's tough on both sides. Competition is fierce for leads, but the rates have to be sky high to support the enormous mass of realtors. If the fees drop a lot of people are going to need to find new jobs.

If competition is fierce for leads because there is a glut of workers due to nearly zero requirements to become one, one would expect rates to plummet. Which, I suppose, is why we have a collusion situation here.

This reads like the reason why one shouldn't become an agent in the US. It's honestly hard to feel sympathy for people who are basically gambling their professional careers on the real estate market.

For what definition of "Here"?

We don't really have buyer's agents in New Zealand (the idea exists but used extremely rarely in my experience).

I'm rather suspicious of the US system that creates a place for two agents getting 3% each for little gain (and a lot of scope for collusion against the buyer and/or seller!)

The New Zealand system has its flaws. The major problem is that vendor real estate agents are financially incentivised to turn over sales as quickly as possible and so smart agents do not represent their vendors properly. I've seen lots of house sales where an offer is made and the agent recommends the seller take it. An early sale costs the agent much less time and they make way more money per year. New Zealanders are generally too trusting, so we get screwed over by people that take advantage of that.

Nothing yet. I'd imagine it will go through appeals for a few years before anything actually happens, and U.S. antitrust enforcement has not exactly been a powerful force for the last few decades.

Nothing over 1.5%.

Ever.

I know people will knock on realtors, but I've had nothing but good experiences with them. There's so much stuff I don't know that I don't know, and the ones I've had have been very helpful. Worth every penny, in my opinion.

not sure why you're getting downvoted. If realtors add more value than their commission, then great.

Consider normies who don't understand why all this "tech stuff" costs so much money.

The average home sale price around here is around $1M. Realtors simply do not provide $60K worth of value to the sale of one.

To me the question is what actual price I would've gotten.

Or conversely, how much more you’ve paid. Even your own buyer’s agent has the financial incentive to get you to pay the most they can talk you into.

My buyer's agent worked with us for probably 5 months. Saves us from visiting dozens of houses that looked good on listing but wouldn't work for us, brought us to properties that were good that we wouldn't have thought about, saved our ass a few times with local knowledge (eg: this street seems quiet now but this is where school busses queue up in the morning) and finally helped us structure the right offer on the right house (we ended up bidding way higher than we would have, but it was just enough to beat the next best offer - we would have missed it w/o her.)

As first time home buyers, she also held our hand through the psychology of the process which in retrospect was helpful. I think she got $40K commission out of that, which seems totally fair given the amount of effort and at the end of the day, she made a 1M+ transaction successful for us. Yeah maybe if we ended up bidding and buying the 1st house we ever saw, I'd feel differently, but this woman really worked her ass off and was well worth the fee.

I think the real problem is the fact that you can’t buy or rent in some markets without an agent.

As a buyer, I should be able to make an offer and work with the lender to schedule all the due diligence required. Some people need more help and they should be willing to pay for it.

However, the way it is structured today, I can’t make an offer without a realtor and have to pay some percentage of the value.

I was lucky in that I had an agent in the family and they charged a nominal fee.

I’ve heard about realtors being blacklisted for offering flat fee services.

Good for them. On the list pointless middlemen, they’re definitely at the top.

One of the dumbest parts of the real estate commission scam is purporting the lie that “the seller pays the commission”. Anyone with half a brain knows that if money is coming out of a transaction, it’s a transaction cost being eventually passed onto the buyer.

Anyone with microeconomics knowledge would tell you that it depends on the elasticity on each side of the transaction.

Someone took econ!

See: Doordash, Amazon, Apple, Visa, ... for seller side elasticity.

See: Ticketmaster for buyer side elasticity.

I think this assumes that the price of real estate is set by the post-fees price that sellers receive. I don't think that is true.

I think the strongest factor in real estate pricing is what buyers are willing to pay. In some cases that is influenced by how much the buyer was able to keep after selling a previous property, but I don't think that is the most significant factor.

Another factor that influences the sale price is the psychology surrounding the pre-fee sale price. Many sellers become fixated on a particular sale price. A common strategy for getting a lower effective sale price is getting sellers to include more in the sale price. One particularly notable example is seller financing.

Why not just link your house to an NFT and transfer that? Easy, no intermediary needed

I can't tell if this is a legitimate suggestion, or a satirical comment poking fun at crypto-folk.

Crypto is decentralized so it eliminates the middleman

why not use Postgres in append only mode?

Sounds great! Let us know when you do that!

Real Estate in the US is like a bunch of little MLS fiefdoms still angry you have access to the internet.

Eventually the Real Estate market will adopt like the music industry and others had to. Welcome to the 21st century.

Brokers and agents are mostly sales people that drive around showing places. Its the lawyers, inspectors, insurance underwriters, loan originators, and title companies that do the real and/or legal work.

It's time for broker/agents to take a more fitting role instead of charging 6% for posting cell phone pictures of your house on their regional MLS.

I don't even understand the idea of "showing places". Every time I purchased a home, I scoured Zillow, drove myself to open houses, and when I was ready to make an offer, called my Agent. Sure occasionally there is a property that doesn't have open houses and it on lockbox and you have to have your agent let you in, but honestly the last thing I want it them following me around the house (that's not even their own listing). They were always there just b/c they could open the door.

Inspectors maybe since they go on site and climb around etc... but every other profession you listed uses the same documents/software for every single deal so I don't know what you mean by "real" work.

The music industry didn't have a patch work of local laws protecting it's thiefdom, unwinding Real Estate is a much more difficult challenge. If it was not I think we would have seen some real inroads by now, it's obviously a massive market.

> Its the lawyers, inspectors, insurance underwriters, loan originators, and title companies that do the real/legal work.

And they get paid a flat rate to do that work (hourly or per contract). There should be no reason for commission based compensation for brokers and RE agents in the residential market. I could see an argument in the commercial market for it though.

my beef with the commissioned agents is that paying them a commission does not actually influence them to work on your behalf; they still work on their own behalf. For example, keeping your house for sale on the market longer (by rejecting offers) tends to eventually bring a higher price. A study or two has shown that real estate agents keep their own houses on the market for longer than average.

But longer on the market is more work for the agent, while the small percentage increase in a higher price doesn't enhance their commission by nearly as much as it does the homeowner's, especially considering there is frequently a substantial mortgage on the house (meaning, the homeowner gets to collect the "bank's share" of any additional sale price)

but what will your realtor recommend? "list it at a low price to generate interest and start a bidding war", pretty much the opposite of what you should do.

In the grand scheme of things, a commission for making a large, complex selling process go smoothly is not a ridiculous notion, but when your agent is participating in plucking your feathers it's pretty annoying.

You’re not forced into taking any deal you don’t want to; your real estate agent can’t accept deals without your consent. I agree, agents are usually more focused on deal flow than particular outcomes, but it’s sort of a fundamental issue with agency in general.

A software consultant is more focused on you signing off on the work than your bottom line, it’s hard to get people to not act in their best interest, and for the average person the home buying/ selling process is probably too complicated for them to navigate without going through some training.

I think the biggest reform that could be passed is to disentangle NAR and MLS.

when I am paying somebody handsomely for their domain expertise, I don't want to become as educated as they are in order to evaluate what they throw in front of me. I want advice that I can trust from a fiduciary.

The incentive is to close the deal asap the extra 100k for the seller isn’t much for the realtor

I've had very good experiences with realtors.

I’ve had success a few times with flat fee agents. $1000 to sell plus the buying agents 2.5-3%. Their argument was compelling, it’s not as much work to sell a house in the Internet age.

Also known as Sitzer/Burnett. Docket at https://www.courtlistener.com/docket/15018641/sitzer-v-natio...

I'm just as worried about the conspiracy among landlords to ratchet up rents and home sale prices.

https://www.propublica.org/article/yieldstar-rent-increase-r...

If you think about the problems to solve in a real estate transaction are roughly as follows:

Seller problems: 1) Maximize selling price 2) Minimize damage to property / theft 3) Minimize cleaning / preparation for showings

Buyer problems: 1) Minimize purchase price 2) Minimize number of hidden problems with house

One would think that realtors might help to maximize selling price but their incentives are much more aligned with selling a property quickly as it is less work that way. For the most part, they solve seller problem #2 by acting as a kind of well dressed (and likely not very tough) security guard.

The pricing problem could arguably be solved by having something along the lines of a Dutch auction. Many of the uncertainties (largely not addressed with the current system) could be solved via insurance.

Buying or selling a home involves paying numerous middlemen thousands of dollars without having a clear idea what value they are providing in the process, except that if you don't pay them, you can't pay the next person in the line. Burn that whole industry to the ground as far as I'm concerned.

A side note: archive.ph didn't overcome the wsj paywall on this article...

US fees seem very high; Australia & New Zealand have a selling agent fee in the 2-3% range (+ variable vendor paid advertising on top) and buyers agents are uncommon so not a fee most pay at all.

https://archive.ph/Ahzio

Realtors are a scam.

Use brokers, fixed 1.5% from both sides to the same person.

https://archive.ph/Ahzio

> by making it difficult for buyers and sellers to negotiate for lower rates.

I've negotiated lower commissions with real estate agents. They always say it's non-negotiable, and always cave.

They are also doing the same thing with apartment rents by all using the same rent pricing company that keeps raising rents across the city. It's all collusion to raise prices.

The opinion:

https://ecf.ca8.uscourts.gov/opndir/23/08/222664P.pdf