Who thinks home prices will fall? (Hunter: attorneys, buying a home, buying)

[house-hunter]

can anyone tell me why realtors won't get paid by the buyers? in my area I think the commission is split 3% to the sellers agent and 3% to the buyers agent at the time of close from the seller. So why can't buyers pay this commission for the proper representation? and I don't mean at the time of close either. that would defeat the purpose... is there any other buyer out there with me on this?

[JoshNHR]

house-hunter,

There are buyer's agents out there who do work on a flat fee basis and you pay them for their services as you need them. I honestly wouldn't mind this type of service but imagine telling a buyer that they now have to pay you to give them tours of the area and represent them in the transacation rather than it being a free service. Usually they won't have anything to do with it and go with a realtor who won't charge them anything because the seller pays the commission to the buyer's agent. One of the reasons commissions can be so large (and in upstate the norm is 4% total, not 6%) on the buyer's agent side is the fact that each commission pays for all the people who window shopped the area but never bought in addition to those who do buy. No matter what the buyer ultimately chooses to do the buyer's agent still has to pay for living expenses and business expenses on a per sale basis. The idea behind a flat fee basis is that it would lower the cost of being a buyer's agent because you get paid no matter what the buyer does so the commission doesn't have to blanket the expenses. The ideal thing in the minds of some would be to not have the commission given to the agent and have a flat fee service and then rebate the commission to the buyers but this is illegal in many states including NY if I remember correctly.

Sorry, I went off on a rant about commission vs. flat fee service. To answer your main question the reason buyers don't pay their agent instead is that the agent doesn't ask because they know they will receive a commission from the sale and buyers are used to not having to pay for the services of their agent.

[OvertaxedOnLI]

house-hunter, I'm truly sorry to hear the horror story you recently went through. And I wholeheartedly agree with you that there are plenty of "ethically challenged" and/or downright incompetent realtors out there (both career and part-timers). At the same time, one can say the same about attorneys, accountants, and other professions whose business it is to represent the interests of other people.

To tar career professionals in any field with the brush of being unethical bloodsucking money-grubbers, is bit extreme. I grant you, though, that realtors as a profession seem to enjoy the same reputation as (meaning no offense to!) the stereotypical used-car salesman.

IMHO it is far too easy in most states (including NY) for someone to become, and remain, a realtor. Ihateny is quite correct in saying that "it's not brain surgery" to get into the business; I believe it should be made much more challenging, and have far more oversight once people are actually in it. As he points out, buying or selling a house is a major event in someone's life, and all the professional people involved in that event should be well-qualified and at the top of their game. That's in an ideal world; we know things are, regrettably, different.

I agree with you that ideally, buyer agents should be paid directly by the buyer. However, we both know that in this region, such an arrangement isn't likely to ever gain acceptance. The whole "Seller pays commission/Buyer doesn't" concept has been around for far too long. However, I don't agree with the notion that an agent now (under the new setup) acting on behalf of a buyer is receiving money directly from the Seller. The Seller is not actively paying the buyer's agent; the seller has signed a contract with his/her listing agent that (let's say) 6% of the selling price will be paid over to that agent's firm at closing. How that 6% slice of the pie is divided up at closing, isn't under the Seller's control and frankly, isn't any of the Seller's business. The Seller's only obligation is to pay his listing broker the 6%. Under the old system, with no buyer agency involved, that 6% would get divided up between the listing agent's broker, the listing agent, and a subagent if that's who ended up bringing the buyer. The only difference now is that the 2.5% that previously would have gone to a Seller's sub-agent, will now go to a buyer's agent instead. It's the same size piece of the same pie, coming from the same bakery.

Suppose the agency laws were to change, and say that from now on, listing brokers can receive up to a 3.5% commission from the Seller, and buyer agents can receive up to a 2.5% commission from the Buyer (assuming a total 6% commission per sale). If that happened, then both realtors would be actively paid by the person they are legally obligated to represent. And yes that would make sense. But is that ever likely to happen? Not really, because under the present system the buyer's agent is already assured of receiving his 2.5% from the 6% slice of pie. So what's the incentive to change? There is none.

What the recent changes have done is to effectively eliminate sub-agency without actually legislating against it (by making it as dis-advantageous for sellers and listing brokers as it has always been for buyers). IMHO it' was a very good move. It also brings the concept of buyer agency much more into the marketplace than it has been before (at least in our area). I think that as time goes on and more buyers and realtors become comfortable with the concept, buyer agency has a chance to evolve into the ideal Seller-pays-listing-agent, Buyer-pays-buyers-agent scenario. It's not going to happen overnight, or even in all markets. But there's hope!

[JoshNHR]

The NYS education guidelines for obtaining a real estate license are a joke. As it would happen to be they are increasing the salesperson course from 45 hours to 75 hours and the broker's course from 90 to I think 120 hours. Here is the site: http://www.dos.state.ny.us/lcns/legamd.htm#educationreq

[OvertaxedOnLI]

Originally Posted by JoshNHR

.... (and in upstate the norm is 4% total, not 6%)

Only 4% total commission for a full-service broker... really?? That is amazingly low, compared to this region. I can remember when, and not all that long ago either, the usual going rate here was 7%!

In recent years it's dropped to 6% although as recently as 2000-2001 it wasn't unusual for listing brokers to offer a "discount rate" of 5% to sellers who agreed to list their home as an Office Exclusive rather than on MLS. The advantage to the listing broker was, naturally, that the commission pie would not then end up being split with anyone outside the firm.

With the boom in buyers utilizing Internet-based MLS sites, though, Office Exclusives pretty much withered into disuse from lack of interest. And now with the recent agency changes, it's dead and buried for sure.

[JoshNHR]

Unfortunately the listing agents up here weren't able to explain why they were worth 6% so it started getting chopped down and eventually leveled out at 4%. Foxtons brought in the 2% listing thing but wasn't doing so hot so they upped it to 3% so that they could have 1% more commission. Interestingly enough I recently saw a Foxtons listing now offering 2% to the buyer's agent rather than the norm which is 1% for them. I guess they just can't rely on the overflow of buyers in the market anymore. The agents up here kept undercutting each other just to get listings regardless of whatever ridiculous number the seller created to sell the place and now they have to live with what they've done wrong. Buyer's agents have stood strong and so our commissions continue to rise because we, or at least I do, continue to prove my value. I helped a client find a home that wasn't in real estate a few months back and picked up a 3,200 sqft home for $460,000 when it's normally priced in the low to mid 500s because the builder was unrepresented. If the listing agents want to just lay down and let us steam roll over them for the full commission by direct negotiation with the builders who are inexperienced at negotiating and market pricing then I'll gladly do it. My clients are the ones benefiting!

[house-hunter]

OvertaxedOnLI
How can I insure that information that is supposed to get to a future buyer is disclosed? As you read about my last condo experience, it is breaking news and most buyers will not realize this until perhaps its too late... can I e-mail the sellers agent and request that they disclose such information to any and all future buyers? Is this a legal request? Are they then obligated to disclose this information? This is recent and public info which if interested you can see below:

http://www.acorn-online.com/news/publish/article_12708.shtml (broken link)
http://www.acorn-online.com/news/publish/printer_13380.shtml (broken link)

I feel that some responsibility is on my shoulders to get the information to future buyers so they too can make an informed decision...

Also, I believe that the realtor that I was working with was not forthright with information. What can be done? Thank you!

[berryjuice4life]

House it depends on what the information is, realtors are not obligated to disclose anything that isnt structual that they know to the property, If you have information that she was unethical, or didnt disclose something she was supposed to you can report her to the real estate commission of NY located in Albany NY...however good luck wit that one too, its rare that realtors are brought up on charges unless its good cause, however if I may make a recomendation you should CALL this persons Broker and do it that way and explain what happened because it has to go through her agency anyway (complaint that is) make sure you have documentation of anything she mislead to you or about something. she didnt disclose...Good Luck

[ihateny]

The requirements to become an agent are ridiculously easy. The real problem is that when you goto a real estate school to take the class, they only teach you how to pass the test, you basically memorize a bunch of stuff for either a week for 8 hours a day or a month for about 3 hours a day, then you just go pay a few fees and take the state test, you pass and bam.. you're a licensed real estate agent with absolutely no clue about the reality of the business or any real knowledge.

If you are doing this part time, it makes it even harder, especially if your broker doesn't really bother or care to teach you anything. You basically go out there and try to get your way through selling your first house learning as you go, often barely knowing much more than your customers. The crazy thing is, most people looking for a home have absolutely no clue about who you work for, even if you tell them and have them sign the disclosure forms, they forget a few hours later and think you work for them. This is extremely common in a ridiculous amount of processes in the American system, the public's ignorance really hurts them. From my observations, this is most common in the legal system, criminal system, worker's compensation etc..

People really need to get on the internet, get on forums like this one, and really really put in a good amount of hours researching, you will be MUCH better off.

Real estate agents, lawyers, and accountants all profit off the ignorance of the general public. It seems the system has been set up for this type of thing. I can imagine that the people who set these systems up in the past, set things up to their benefit, ultimately benefiting from the ignorance of the average person. Like the setting up of the federal reserve system and the income tax which was never legally passed and cannot be proven without a better answer from the irs other than "we don't have to tell you why". Check out the documentary "From Freedom to Fascism" to get an understanding of how things work. The book "Freakonomics" points out in detail the idea of incentives and how the average real estate agent doesn't really care about making you as much money as possible or getting you the best deal on that house, which to many of us is quite obvious.

Anyway, I got a little off topic there, but the whole system is set up to confuse you, which it has to be to create jobs for all these people such as us agents. Trust me, I haven't been in real estate more than about 2 years now and the "top selling", "top listing" agents that I have spoken to, worked alongside of and with, have always been real slimeballs. It's kind of shocking to me how they speak about their clients and customers. This is not something I can with good conscience create a career out of, especially since in its very nature, we basically profit off of ignorance, so to maximize our profits we have to deceive you if we want to compete with others willing to act the way they do. I understand how they become the way they are though, because the public generally is too stupid to even appreciate your honesty with them, as most have no frame of reference. So basically, the system is the way it is, but it won't change because it just really can't. The average person is just too stupid. Honest agents like myself either will go broke and quit or will luckily in my case have something better lined up, and just gave real estate a shot to make some money on the side.

[OvertaxedOnLI]

ihateny, I first have to say that I'm impressed by the quality of your last post. To be honest, the way you wrote your "Why LI Sucks" post and several other replies, definitely gave the impression that you're some whiney 20-something college student with a serious attitude problem and only a fair grasp of how to express yourself in writing. But in this last post you come across as an entirely different type of person and have made some very valid points, so my hat's off to you for the change!

The only point I'd question is whether by "profiting from" the ignorance of the public (i.e., clients), you meant "make a living by" or "take deliberate advantage of". I don't question the first interpretation but I do have doubts about the assertion that most realtors, lawyers, and yes doctors too, take advantage of the ignorance of the public. The ironic thing is that I've dealt with more attorneys and realtors during my working life than 90% of the population, and as a result I'll agree that the unethical/incompetent/slimeballs (choose any or all terms from that list!) make up at least 75% of the total. IMHO the "marginally incompetent" are the largest segment. The worst are those who (as you pointed out) have no respect for the people who they're supposed to protect the interests of, or even for their own peers in the profession.

There are realtors, attorneys, doctors, etc. who are highly skilled, financially successful, and straight-up honest and ethical at all times even when all the other people around them aren't. I consider myself lucky and privileged to know several of them in each category. Yes, overall they are in the minority but they do exist.