Economist : The great realtor rip-off (Why is it so expensive to buy or sell a house in America?) (lawsuits, lawyers)
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The reality is this. Selling a house hasn't become much easier so its still suited to a 2 to 3% commission to sell your house. Its the buying that is the baloney. Nobody needs a buying agent to find them a house, people can find their own online and should be able to make arrangements to see them. You need some advice and bargaining skill, but more often than not, the buyers agent pushes their client to overlook problems with a property anyway. If I had my way, we would make buying agents optional and save everyone money.
and again, statements like this are just ridiculous..
The great realtor rip-off | The Economist basically argues that the reason realtors get paid thousands of dollars per hour is because the whole thing is a cartel (duh!).
Opinions?
Especially today, given the tools buyers and sellers have online, realtors do half the work they used to and still expecting 3%. Every time I've bought a home, I've done most of the work and consider realtors basically leeches. The entire 'industry' needs to be rearranged to benefit consumers, not a class of crooked salespeople.
Especially today, given the tools buyers and sellers have online, realtors do half the work they used to and still expecting 3%. Every time I've bought a home, I've done most of the work and consider realtors basically leeches. The entire 'industry' needs to be rearranged to benefit consumers, not a class of crooked salespeople.
It's a shame all the agents you've encountered/worked with require that set 3%, as it's not a requirement or a set in stone amount, as that would be price fixing (if every agent in the area you are in decided 3% was the minimum they all were going to work for)
um..... its called an inspector + Lawyer and its 1/100th of the price...
the median home price in the US is $189K. If we accept 3%, that's $5,670 gross. 1/100 of that is $56.70.
the median home price where I work is $267K. That's $8,010 gross, and 1/100 of that is $80.10.
I can't speak to the US median and I can't speak to your median. But where I operate, the cost of the inspections and attorney for writing offers, negotiating, and then closing the deal is going to be $2,500 easily (it's about $1700 before attorneys get involved in preparing and eventually ratifying a contract).
I suppose if a real estate agent gave actual legal advice (per your description above) and something went bad, there is a legal course of action against the real estate agent for practicing law without a license.
the median home price in the US is $189K. If we accept 3%, that's $5,670 gross. 1/100 of that is $56.70.
the median home price where I work is $267K. That's $8,010 gross, and 1/100 of that is $80.10.
I can't speak to the US median and I can't speak to your median. But where I operate, the cost of the inspections and attorney for writing offers, negotiating, and then closing the deal is going to be $2,500 easily (it's about $1700 before attorneys get involved in preparing and eventually ratifying a contract).
The specific dollar amount of a commission is mostly about the specific dollar amount of a house.
Want to pay less in commission? Fair enough; all you have to do is sell (or buy) at a lower price.
The specific dollar amount of a commission is equally about the specific dollar amount of the house and the commission rate. Want to pay less in commission? Fair enough; all you have to do is sell (or buy) at a lower price and/or a lower commission rate.
OK, I was using agent synonymous with agency and my language should have been more precise to avoid this distraction. Individual agents are heavily commission based but yes, they usually draw a basic salary and are employees. However, this does not support your point. In fact it supports the exact opposite of what you're trying to argue. Why?
Agencies set their commission rates. Having employees increases an agency's cost base and therefore the overall level of risk in the business is greater in this regard than it is in the US where you just bring on a bunch of contractors who pay their own expenses, hope some of them sell something, and nobody gets paid until something is sold. As discussed, commission rates in England have reduced dramatically due to competition (including online only models) and lack of consumer appetite to pay high commissions. House prices have also risen dramatically over the last two decades.
So an argument that individual agents carrying less personal income risk in the UK pushes down commission rates is not logical. I would argue that the greater overhead of having employees (higher employment fixed costs) would create more risk within the business and put upward pressure on commission rates. If I'm missing something here, please explain why you think that a model where the employee model (basic salary plus commission) explains or partly explains why commission rates are lower in England.
Before you were arguing that the client takes more risk in England (i.e. they pay ahead whether house is sold or not) and that's incorrect. This part of your argument is that individual employees have less risk but, in fact, the risk is the same within the agency as it is in the US, it's only a difference in how the risk is split between individual agents and the agency. I don't see how the agency taking more share of that overall risk would suggest lower commission rates in England. Doesn't make sense.
Quote:
Originally Posted by Brandon Hoffman
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Very interesting on England's system. I can see it being better for quality control. However, didn't you argue repeatedly that the agents carry the same risks in US and England? Clearly not the case if they partially salaried, which goes back the agents pointing out high commissions are the result of the no guaranteed pay for the agent?
Quote:
Originally Posted by kww
ding ding ding
Sorry but this is not a ding ding ding moment and you're confusing things. In fact earlier, Silverfall already accused me of not knowing how to read so I already responded to your exact same charge in post 112 on this thread. Included above for your convenience. I've patiently and politely responded to the charge that I can't read but haven't heard any apology or disagreement with what I said.
Nice try but please retract your 'ding ding dings' or explain your logic. I'm still waiting for someone to say approximately what % of US commission is attributable to the risk of no guaranteed pay (i.e. no pay until/unless a home is bought or sold). If that's such a big issue as everyone keeps saying, you should be able to give at least a very rough idea of what commissions would be without that risk.
I'm also still waiting for someone to explain how they think that in England where the client also doesn't pay anything unless/until the home is sold explains the far lower commission rates (about 1%) when, in fact, the agency carries more risk (risk of paying overheads with salaries that need to be paid whether houses sell or not). See above.
if you do not have an agent, and anything goes wrong, who gets all the responsibility and risk? You do.
If you have an agent, there are definitely responsibilities and with that, risks that we take on.
Let's go with a simple example .... filling out documents. If you don't fill out a contract correctly, and suffer consequences because of it - you're liable and responsible.
If I fill out that contract for you, and make a mistake that eventually harms you - I have taken on your risk and the liability.
No, I cannot take on the risk for CHOOSING the home. I cannot take on the risk that you LOSE your job.
You still miss the point. Your liability and your liability insurance is for your risk, not mine as a client. You assume no risk of mine. If I hire you and you perform your duties with negligence, I sue you and you need E&O insurance to protect yourself.
This is not assumption of a client's risk as you represented it as. These words have a specific meaning and are not assuming risk of your clients. Yes you have risks running your business but it's dishonest to represent that as part of your services you assume some or all of your clients' risks. Unless you are offering insurance type services and indemnifying their risks, this is simply misrepresentation.
This is a good example of how things get heated here. I simply and politely pointed something out and clearly explained my reasoning. Nobody wants to hear they are wrong so they dig in and come back with all kinds of illogical arguments and talk around it like a good salesperson. There are times to talk around things and be cute but misrepresentation of risk assumption is not one of them. I'm not the enemy here. I was simply pointing out a statement that could potentially get you into all kinds of trouble.
If YOU make a mistake filling in a contract, YOU have put YOURSELF at risk. Your e&O insurance protects you against that risk of YOURS. If I make a mistake or omission disclosing defects in my home, does your E&O insurance cover me? No, it doesn't and the statements that you are making can lead to misunderstandings of that and other important points of risk for the client.
If you hire a caterer for a wedding at your home they will normally have liability insurance to protect themselves from negligence and other claims. A smart homeowner will buy wedding insurance or make sure that their current policy provides sufficient protection for a big event at their home. The caterer is misrepresenting themselves if they say that they 'assume the risks' of the homeowner. They are not doing any such thing and they would be fraudulently claiming to provide a service that they are not providing in any way. And the customer can suffer if they think they are protected from risks that they are not.
Insurance is highly regulated as is real estate sales. Therefore, if I were you, i would correct your language and avoid saying that you assume your clients' risks which starts to sound like you are providing some kind of insurance or indemnification of their risk. You do not and this is not part of your service. this is misrepresentation at best and a fraudulent statement at worst. Happy to be corrected if you can show that you do assume, underwrite, indemnify risks of your client.
I don't believe I said that we assume ALL the risks for the client.
I'm certainly open to acknowledging that I may have made a mistake somehow. No, we do not specifically insure a client during or after a transaction.
What I am trying to convey is that when you go it alone, ALL of the risks are yours, and yours alone.
When you hire a licensed agent to professionally represent you, then the agent undertakes some risk.
To address your disclosure example - in NC a Seller is allowed to check "No Representation", even if for example any human being can see a gaping hole in the roof. If you're represented, however, the agent must disclose that gaping hole, which would be reasonable to identify.
One important point that I've discovered recently, that may be of interest to you, and where I suspect our opinions would match ... in NC, there is NO requirement for E&O insurance. There's also no requirement for higher automobile insurance coverage. So, it might be worthwhile as a consumer to ask your agent what their insurance coverage is on both counts. Would you agree or disagree that there is an economic benefit to consumers to use agents that have insurance? Or would you rather rely on suing someone in court and hoping they have enough money to pay the damages?
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