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Most homeowners/buyers aren't going to see much savings from the new 'open market' pricing. There's a minimum amount of work an agent has to do, regardless of how much the home sells for. Even using Redfin as an agent (which results in virtually no service) only saves you 1%. If you've got a $10m home, perhaps your agent might be willing to knock off a little. But most buyers and sellers will see no reduction in fees, and might even see an increase.
But because every agent's fee will be negotiated separately, the seller no longer knows what commission a buyer might have agreed to. So the seller is no longer likely to cover the buyer's agent fee; the buyer will have to pay their own agent. That means buyers will have to come up with even more cash, which will be especially hard for first-time buyers.
I think this is one of those 'be careful what you wish for' scenarios. The fixed pricing setup took one of the variables out of a very complicated and stressful situation. And for many buyers and sellers, was probably the best rate they could have ever gotten.
What is being obscured is that the buyer paid the agent fee as a percentage of the home price -- with home prices increasing dramatically this has inflated the agent fee with no extra services being performed. This fee was made "affordable" since it was part of the mortgage and the buyer was effectively financing the agent fee via larger monthly payments. Also, property taxes increase based on this home price that includes agent fees. So over the life of the mortgage, what did the buyer really pay for the agent fee?
If buyers cannot afford a home inclusive of fees, other parties to the transaction need to make adjustments.
What is being obscured is that the buyer paid the agent fee as a percentage of the home price -- with home prices increasing dramatically this has inflated the agent fee with no extra services being performed. This fee was made "affordable" since it was part of the mortgage and the buyer was effectively financing the agent fee via larger monthly payments. Also, property taxes increase based on this home price that includes agent fees. So over the life of the mortgage, what did the buyer really pay for the agent fee?
If buyers cannot afford a home inclusive of fees, other parties to the transaction need to make adjustments.
Of course!
But, this fact is popularly ignored, reflecting poorly on the populace's grasp of obvious financial truths.
Last edited by MikeJaquish; 03-25-2024 at 05:49 AM..
My prediction is that a sliding scale of commissions will emerge, where you can pay 1-2% for "bottom of barrel" service level, and up to 8% or so for "concierge" services. So those with houses to sell in really hot areas may do just fine with the low service level, but those who have difficult-to-sell houses will end up paying MORE than current.
Just my prediction. I've never known real estate agents to voluntarily take a financial haircut. They'll figure out ways to keep their income.
What is being obscured is that the buyer paid the agent fee as a percentage of the home price --with home prices increasing dramatically this has inflated the agent fee with no extra services being performed. This fee was made "affordable" since it was part of the mortgage and the buyer was effectively financing the agent fee via larger monthly payments. Also, property taxes increase based on this home price that includes agent fees. So over the life of the mortgage, what did the buyer really pay for the agent fee?
If buyers cannot afford a home inclusive of fees, other parties to the transaction need to make adjustments.
The only flaw in that observation is that it fails to acknowledge that ALL wages have increased dramatically over the years--with no increase in production or services. I am amazed at the outlandish salaries that many people make nowadays--all due to the overall inflationary pressures. (In many respects, it's simply that the dollar is worth less.) Yes, agent compensation has escalated over the years for some agents, but so has it for all workers--some more than others. If all people on CD shared their salaries, I'd probably think that most were over-paid.
Your ignorance about this subject is really showing. Until you have actually done the work yourself, you don't have any idea what is involved in the process. There is a lot of time, education, monthly fees involved that is not paid directly by a seller or buyer. Do you feel that it would be fair for a realtor to merely earn minimum wage? Do you have any clue where many of those commissions are actually being paid to? Kind of like saying that you want attorneys to drop their fees as well because they earn too much from their clients.
I was a realtor for about 4 years and did not know a single local realtor that drove a Porsche or carried a LV bag. That is just a stereotype that applies to a very small percentage of realtors nationwide. For the record, realtors do care about market value. You can't force a seller to take 50% of the value and many sellers have highly unrealistic values of their home. Realtors can only recommend selling prices for owners or offer values for buyers. Experience is where a realtor can show their worth. I wasn't fortunate enough to earn an income sufficient to stay in the business, but neither are the majority of potential realtors. This is not an easy job and there is a distinct reason that turnover in this business is so high. Not everyone gets independently wealthy doing it.
So opening a lockbox and entering name/last name and $$$ in a draft offer is not an easy job? I did all my job online by looking at properties and telling my agent which ones I'd like to visit. If there was open house I didn't even bother my agent. I found my house on my own and the only thing my agent did was entered my name/last name in the draft offer + the amount of $$$.
This is not the first agent I use and most of them are absolutely the same. The system is rigged and I'm happy that lawsuit is in place. Now people like buying mentors will appear which will help you for $1000 which is absolutely reasonable.
Where you work would you voluntarily be willing to take a pay cut to satisfy a grumpy customer? When is it justified to expect someone else to do so?
I won't argue that real estate agents do real good when it comes to home sales.
However, forcing sellers to pay a 6% commission on sales of expensive homes even in areas where real estate is hot and fast moving is an abuse that many in the real estate field will not acknowledge. A good profession would have made rules on its own limiting such commissions, but it did not do so. Probably because the membership wanted things left the way they were. Abuses inevitably lead to things like what happened.
It would have been much better if the profession had acted on its own to regulate excess commissions in some manner. However, it chose not to do so.
I fear many good people will probably be hurt now because of this vacuum or void.
notghinsaw, I tried to post a list of common activities that a realtor does for buyers and sellers and this internet forum wouldn't let me post the entire list, so I didn't bother. There is a lot more involved than opening a lock box and writing up a contract that you are ignoring. Let me give you a hint, there were about 90 specific tasks that realtors typically provide in a transaction that few, if any buyers or sellers ever see.
The biggest factor is that you are paying for the experience of the realtor, no different than hiring an attorney. In my limited experience as a realtor, I know that I was able to negotiate many items for my clients that some agents would not have been able to resolve. I am not pretending that I was agent of the year, but I know that I accomplished some difficult tasks in my job.
I know in my MLS (I am no longer a realtor) it is a major violation to offer a lockbox code to a potential client to view on their own and I would imagine this is the same in most, if not all markets.
My prediction is that a sliding scale of commissions will emerge, where you can pay 1-2% for "bottom of barrel" service level, and up to 8% or so for "concierge" services. So those with houses to sell in really hot areas may do just fine with the low service level, but those who have difficult-to-sell houses will end up paying MORE than current.
Just my prediction. I've never known real estate agents to voluntarily take a financial haircut. They'll figure out ways to keep their income.
This is precisely how we plan on doing business going forward. Offering the seller a sliding scale in return for services rendered. That way we are letting the client make their decision without compelling them on a set rate.
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