Economist : The great realtor rip-off (Why is it so expensive to buy or sell a house in America?) (documents, 7%)
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Those realtors have a strong financial incentive not to have any detailed knowledge about the house.
Yep. All realtors do the Hogan's Heroes Sargent Schultz "I see nothing. I hear nothing" thing. If they know anything bad about a property and don't disclose it, they risk getting sued into oblivion.
A bit of hyperbole but you'd think the RICO act would apply to realtors.
there's some interesting stories in here, but tell me again - what stops individuals from sticking a For Sale by Owner sign in the yard (hey, you can even list on Zillow, or FSBO.com)?
Not one thing, not one rule, not one single law.
That I know of. If you do - please share.
you are confused.
at no point did i even suggest one can't sell a home independently. But doing so massively limits your buyer pool and thus on average your closing price. That is just basic math.
If a market has 100 buyers currently seeking a home the vast majority of those will be tied to a buyers agent who gets paid regardless of the home being listed on the MLS or not. they are entitled to their fee, it is in the contract signed. even if the agent does nothing at all they get paid, look it up.
Thus the seller either forks over the monies or the buyer does. plus many agents will not even bring their clients to FSBO, and many will bad mouth the FSBO.
go look at 100 FSBO listings online and notice the message to agents in many of the listings.
"agents welcome" that means they will pay the agent a fee. or you might see "no agents" or "seller pays 2.5%" etc...
but there is a bigger point here bobromhal, You appear to have misunderstood how monopolies work so let's pick an easy and famous one. MSFT had a monopoly on the PC OS. there were other OSs available, but Windows dominated the market so much that they could control it. There was no "law" stopping you from writing your own OS or using a different one. but choosing to do so put you under a real and demonstrable burden. thus the gov intervened to reduce MSFT's power. the result is Android and iphone. otherwise MSFT would have strangled both at birth.
the key here is barrier to entry and by entry we mean successful entry to market. To successfully launch a true MLS competitor on a national or state level you would need scale and a bankroll that exists in few industries. there are 2 million real estate agents in the 800 plus MLSs in the USA. When the banking sector tried to get into retail residential RE NAR spent millions lobbying to block them. the tech industry has the money but does not have the incentive. the only way to break this monopoly is to end or greatly limit the lobby industry. Lobbying in the US is the underlying evil that has been increasing costs on consumers like no other thing.
at no point did i even suggest one can't sell a home independently. But doing so massively limits your buyer pool and thus on average your closing price. That is just basic math.
If a market has 100 buyers currently seeking a home the vast majority of those will be tied to a buyers agent who gets paid regardless of the home being listed on the MLS or not. they are entitled to their fee, it is in the contract signed. even if the agent does nothing at all they get paid, look it up.
Thus the seller either forks over the monies or the buyer does. plus many agents will not even bring their clients to FSBO, and many will bad mouth the FSBO.
go look at 100 FSBO listings online and notice the message to agents in many of the listings.
"agents welcome" that means they will pay the agent a fee. or you might see "no agents" or "seller pays 2.5%" etc...
but there is a bigger point here bobromhal, You appear to have misunderstood how monopolies work so let's pick an easy and famous one. MSFT had a monopoly on the PC OS. there were other OSs available, but Windows dominated the market so much that they could control it. There was no "law" stopping you from writing your own OS or using a different one. but choosing to do so put you under a real and demonstrable burden. thus the gov intervened to reduce MSFT's power. the result is Android and iphone. otherwise MSFT would have strangled both at birth.
the key here is barrier to entry and by entry we mean successful entry to market. To successfully launch a true MLS competitor on a national or state level you would need scale and a bankroll that exists in few industries. there are 2 million real estate agents in the 800 plus MLSs in the USA. When the banking sector tried to get into retail residential RE NAR spent millions lobbying to block them. the tech industry has the money but does not have the incentive. the only way to break this monopoly is to end or greatly limit the lobby industry. Lobbying in the US is the underlying evil that has been increasing costs on consumers like no other thing.
To compete with Ford or GM, you would need a bankroll in the billions.
The need for capital does not qualify an endeavor as a monopoly.
After all, should a newbie compete for free?
Not in a capitalist society.
IF there is a demand, there will be capital.
Zillow raised funds, and they don't even have a credible or honest value proposition.
To compete with Ford or GM, you would need a bankroll in the billions. The need for capital does not qualify an endeavor as a monopoly.
After all, should a newbie compete for free?
Not in a capitalist society.
IF there is a demand, there will be capital.
Zillow raised funds, and they don't even have a credible or honest value proposition.
'monopoly' is a market condition that is independent from the underlying cause of that condition. Dominating the market (to put it simply) qualifies an endeavor as a monopoly. Your incorrect understanding of the concept you are trying to discuss has cut your argument off at the knees.
To compete with Ford or GM, you would need a bankroll in the billions.
The need for capital does not qualify an endeavor as a monopoly.
After all, should a newbie compete for free?
Not in a capitalist society.
IF there is a demand, there will be capital.
Zillow raised funds, and they don't even have a credible or honest value proposition.
i was not trying to give a complete a full set of examples ref barriers to entry, they take many forms. but cost is a major one.
in the case of RE the moat is very wide. and i think you know this. many have tried to breach it over the last few decades and 100% have failed. That alone should be the proof you need.
Look at Redfin they had to join with Sauron to survive. they did not want to be part of the clubs they planned to overthrow, but they had no choice. they simple could not breach the walls...
Frankly i believe NAR and the MLS have made the same mistake others have they have overplayed their hand. to win this long term they should have already reduced the fee to a total 3 to 4% that was and is the smart move. instead they have left so much meat on the bone they may be disrupted badly just like dozens of other industries that thought they had an impenetrable moat. the structure of MLS means they cannot just switch up pricing overnight, thus they need to be ahead of curve, proactive, not reactive.
I have made a lot of money being right about this stuff. i have yet to see a model i think can beat the beautiful model you guys have built. It is very admirable. although i am not sure it was fully intentional.
i am in awe of the beauty. it hides an uncompetitive marketplace in plain site. the internal competition provides the appearance of a fully competitive marketplace for retail RE sales, but in fact it the competition is for clients within a captive market. it is cracking stuff one could build a solid career out of dismantling this beast.
'monopoly' is a market condition that is independent from the underlying cause of that condition. Dominating the market (to put it simply) qualifies an endeavor as a monopoly. Your incorrect understanding of the concept you are trying to discuss has cut your argument off at the knees.
you beat me, you were succinct and put vastly better...
The economy works on supply and demand. The American consumer, at this point demands that agents carry all of the risk. This is the only reason that it hasn't changed. As soon as consumers decide to pay as they go, you will see if change very quickly.
Quote:
Originally Posted by Silverfall
...
The American consumer is very susceptible to spin and "use now pay later" is very popular. Paying nothing up front, but paying a higher amount later is their chosen model. Consumers do indeed choose to pay more money for the privilege of not paying anything. In England, that is not how it works. There is an upfront fee that is paid to initiate services, like a retainer. Since the brokerage won't lose money, they can charge less later.
...
Quote:
Originally Posted by Silverfall
No. The original assertion was that they were employees that get paid every month so they have fewer agents since brokerages run their businesses like a traditional business. You just took one part of what I said and appear to have made that the one sole piece for the fee difference.
My clients told me it was to pay for marketing costs. So they disagree with what you think it is. Unless you are stating that you have interviewed every single real estate brokerage in England on how they do business?
No, you said that paying nothing up front goes along with higher market commission rates. See above. You also said that the American consumer demands that agents carry all risk. Well that's exactly how it works in England when you use traditional agencies. Not paying until closing and agent taking the risk is therefore not any part of an explanation for much lower fees in England vs the USA.
i was not trying to give a complete a full set of examples ref barriers to entry, they take many forms. but cost is a major one.
in the case of RE the moat is very wide. and i think you know this. many have tried to breach it over the last few decades and 100% have failed. That alone should be the proof you need.
Look at Redfin they had to join with Sauron to survive. they did not want to be part of the clubs they planned to overthrow, but they had no choice. they simple could not breach the walls...
Frankly i believe NAR and the MLS have made the same mistake others have they have overplayed their hand. to win this long term they should have already reduced the fee to a total 3 to 4% that was and is the smart move. instead they have left so much meat on the bone they may be disrupted badly just like dozens of other industries that thought they had an impenetrable moat. the structure of MLS means they cannot just switch up pricing overnight, thus they need to be ahead of curve, proactive, not reactive.
I have made a lot of money being right about this stuff. i have yet to see a model i think can beat the beautiful model you guys have built. It is very admirable. although i am not sure it was fully intentional.
i am in awe of the beauty. it hides an uncompetitive marketplace in plain site. the internal competition provides the appearance of a fully competitive marketplace for retail RE sales, but in fact it the competition is for clients within a captive market. it is cracking stuff one could build a solid career out of dismantling this beast.
Of course, Redfin could have prospered.
They just took the easy route, rather than raise and dedicate the capital.
What Redfin wants from the market is to bend pricing to the benefit of large companies, so they can squash small companies.
What could be more abusive?
Of course, Redfin could have prospered.
They just took the easy route, rather than raise and dedicate the capital.
What Redfin wants from the market is to bend pricing to the benefit of large companies, so they can squash small companies.
What could be more abusive?
ref "easy way out"
Redfin had to join the MLS everywhere to in order to gain access to markets, they had zero choice.
NAR got Sued by the DOJ for their attempts to kill Redfin by allowing members to deny listing to some members but not others. This was because REDFIN was NOT following the pricing model. NAR settled with the DOJ in order to avoid a ruling and with our super weak monopolies enforcement (thank you EU) the DOJ took the deal (which runs out in Nov)
the deal required equal sharing information and Redfin quitely raised its "Fees" to keep them closer to the model required to support so many mouths.
This is exactly what happens is cartels. the cartel (in this case the top tier cartel NAR) punishes those who fail to stick to whatever deal they have constructed. And remember ilegal price control is not documented unless those involved are very dumb indeed. (one famous cartel accidently gave out the exact same bid price to all members but one, thus getting caught red handed and fully documented)
The idea that Redfin "took the easy way" just noise. What other way is there? they had to be part of MLSs or they would not have access to clients. much like Google required access to consumers through Microsofts browser.
IF not for the DOJ and competition authorities in Japan, korea and more than anything the EU, you would not have an android or apple phone today. You would have a WINDOWS phone.
NAR/MLS controls the residential retail RE market in the USA. there is no doubt it has a wide spread monopoly on RE. Of course keep in mind it is not at all illegal or wrong to have a monopoly in many or even most cases. it is abuse of monopolies that leads to trouble.
at 5 and 6% i see consumer harm across a pop of 320 million.
here is even more proof.
in the UK one out of every 1,200 people are RE agents.
In the USA one out of every 160 people are RE agents.
What is shows is that there is SO MUCH MEAT on the US RE bone that it supports seven times many agents...
and we could cut that in half to make sure there is not other issue juicing that '7'. lets call it 4 times as many people.
that is still insane.
it amounts to a mobility tax on american homeowners. the cost to move is huge because you have to give up so much money to agents. in fact more money goes to the agents and the agencies than all the taxes and closing costs combined!!!! that is the inverse of most other nations.
It's the banks. It has nothing to do with the Real Estate agents.
Have we learned nothing since 2008?
"Those who do not learn history are doomed to repeat it.' - unknown
And we are about to repeat it.
"“Go back to bed, America. Your government has figured out how it all transpired. Go back to bed, America. Your government is in control again" -- Bill Hicks
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
