Current Events > No topics on this? Real estate rules may change significantly.

(+) Yeah! (+)

In the US, the seller typically pays 6% in commission, which gets split to both the sellers and buyers agent. Starting this summer, unless the courts reject the settlement, the buyers are now directly responsible to pay for their own agent.

Thats a huge change, and for first time homeowners, the barrier to owning your own home is raised even higher because you need even more cash upfront.

I saw an article on this

People here either already are into buying their own home or will likely never own their own home so doesnt really change much thus no topics

I took a negotiations class in college and we did real estate one day and the current system has a really blatant flaw, at least in terms of agent incentives. I feel like in the grand scheme of things the buyer agent's pay is not a top 5 issue for housing prices

Doe posted...

I took a negotiations class in college and we did real estate one day and the current system has a really blatant flaw, at least in terms of agent incentives. I feel like in the grand scheme of things the buyer agent's pay is not a top 5 issue for housing prices

Freakonomics talk about how on a surface level, its in the best interest for both agents to make the price of the house as high as possible; however, when looking beyond the surface level, that 3% commission, which agents have to give up half or more to their brokers (so each agent only ends up with ~1.5% in their pocket), is so small and it doesnt incentivize any of the agent to negotiate harder on your behalf (e.g., why spent a week or more negotiating and working harder to earn just $150 more by raising the sale price by $10k, or reduce your own pay by lowering the sale price).

Doe posted...

I took a negotiations class in college and we did real estate one day and the current system has a really blatant flaw, at least in terms of agent incentives. I feel like in the grand scheme of things the buyer agent's pay is not a top 5 issue for housing prices

Freakonomics talk about how on a surface level, its in the best interest for both agents to make the price of the house as high as possible; however, when looking beyond the surface level, that 3% commission, which agents have to give up half or more to their brokers (so each agent only ends up with ~1.5% in their pocket), is so small and it does not incentivize any of the agent to negotiate harder on your behalf (e.g., why spent a week or more negotiating and working harder to earn just $150 more by raising the sale price by $10k, or reduce your own pay by lowering the sale price).

IdiotMachine posted...

Thats a huge change, and for first time homeowners, the barrier to owning your own home is raised even higher because you need even more cash upfront.

Isnt it more likely that costs go down, as people wont be willing to pay 6%? I feel like this would open the door to budget realtors, online services, etc

Why are real estate agents still a thing?

I've resigned to the thought of buying a home. Now I'm looking into buying a trawler and paying a slip fee.

Harpie posted...

Isnt it more likely that costs go down, as people wont be willing to pay 6%? I feel like this would open the door to budget realtors, online services, etc

I dont see a reason why the seller would reduce the housing price by 3%.

6%? Bloody hell, that's high.

[LFAQs-redacted-quote]

Thats exactly what happened. A coalition of sellers sold the realtor group to make this change.

IdiotMachine posted...

I dont see a reason why the seller would reduce the housing price by 3%.

As far as I understand, sellers were already paying the full 6%: their share and the buyers share.
Now that the realtor fee is on the buyers shoulders, and the commission rate isnt hard set on 3% for each party, the buyer can either negotiate with the seller for them to pay the fee, or the buyer can go through an inevitable budget option at a much lower percentage.
It seems more likely that the seller would still pick up the fee for both parties as a negotiation tool, but now they wont be paying 6%. Itll be likely to be much less.

This new rule benefits literally everyone but realtors lol

Harpie posted...

As far as I understand, sellers were already paying the full 6%: their share and the buyers share.
Now that the realtor fee is on the buyers shoulders, and the commission rate isnt hard set on 3% for each party, the buyer can either negotiate with the seller for them to pay the fee, or the buyer can go through an inevitable budget option at a much lower percentage.
It seems more likely that the seller would still pick up the fee for both parties as a negotiation tool, but now they wont be paying 6%. Itll be likely to be much less.

This new rule benefits literally everyone but realtors lol

As a seller in todays market, I wouldnt budge at all and laugh at the buyer asking me for sellers assist in paying for the buyers agent fees. Besides, sellers assist applies to the mortgage that the buyer is going to get and doesnt equate to direct cash to them. This wouldnt work, unless its an under the table deal.

Finally, the 3% is never a hard set; its just the typical rate. As a seller, the seller can dictate 2.5% for buyer and 3.5% for seller (as an example).

1337toothbrush posted...

Why are real estate agents still a thing?

Property would be one of those things where I'd personally rather involve someone who knows what they're doing.

Serious_Cat posted...

Property would be one of those things where I'd personally rather involve someone who knows what they're doing.

Then you wouldn't want to involve a real estate agent.

1337toothbrush posted...

Why are real estate agents still a thing?

Because they are glorified used cars men.

[LFAQs-redacted-quote]

Exactly. I feel like this will hurt new homebuyers significantly by adding yet another thing you need to have in full cash before being able to buy a house.

[LFAQs-redacted-quote]

Having worked with them, no, I have a very informed view of what real estate agents do. Perhaps it is you who is misinformed.