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I have been waiting for a post on the NAR settlement and it has never come. The NAR was forced to pay out a large settlement due to lawsuits and change how buyers agents are compensated.
https://www.nbcnews.com/business/real-estate/national-association-realtors-settlement-changes-rcna143634
The standard way homes are bought and sold in a market is at a 5 or 6% commission which is then split 50-50 between the buyers and sellers agents. I believe the big change now is on the mls websites buyers commissions were expected to be listed. You are no longer required to lists and discriminate buyers concessions and some technical details I am not 100% certain on. But barriers to trade and non-standard arrangements will be easier.
I have had friends buy properties before un represented but it is frowned upon. In those cases they would make their offer and basically say I have no agent so reduce your price 3% and rework your sellers contract so your sellers agent gets 3% like he would if I had an agent. The old system made this harder since most people just like to follow the way. Which I believe led a lot of people to just hirer a buyers agent probably a friend and let them get paid.
Culture war isn’t our general culture war but you can find plenty on twitter saying things like “turn out everyone hated us” realistically though we just didn’t like real estate transactions costing us 6% (plus more in many areas with transfer taxes).
There are a lot of interesting economics to discuss on this issue. Another area is a lot of realtors don’t transact all that much. A couple deals a year. My guess is this deal makes it much harder for the casual real estate agent if commissions fall. You won’t be able to buy/sell for your friends network. Another issue with being oversupplied with realtors is many spend more time finding clients than working with clients. Trades in general with commodity products but high margins for various reasons would tend to a model of a high amount of resources being spent on client acquisition.
Another area if the new world in real estate occurs is the housing market would change significantly if commission fall meaningfully. Lower transaction costs means people can move more frequently. If your home costs $1 million and $60k commissions are happening then you are paying that $60k somehow even if it’s indirectly. It would also seem to help flips significantly. If real estate transaction were saying $0 then I would think nearly every property would be a flip as some people would have true expertise in rehabbing/remodeling. Our current 6-10% transaction costs makes it very expensive for a 6 month guy to do it. They can only step in for properties heavily degraded where no true owner (with no expertise) would be interested. This is one reason I thought the various ibuyer companies would fail because adding more fees makes it uneconomical.
I did make a low-effort comment on it here. The text of the settlement still isn't available, but it should be posted here in the very near future.
I like the comment of a buyers agent telling the customer they were free. I’ve had that happen though for a rental.
Buyers agents especially value can be all over the map. I bought raw space one time and going thru that process needed more help. Buying a standard 2 bed condo you should not need as much help. There is fat in the system if the two agents are being paid the same.
IMO do think this subject is top-level worthy as it opens the door to all kinds of new business models and the economic logic behind them. I know people looking at offering cheap buyers agents but trying to internalize all the other fees. Mortgage brokers also have a 1-3% commission so one avenue is those guys get their real estate license and provide low touch services.
Personally I feel like I would prefer it became more like an accountant and numbers focused versus a good-looking sales people job.
When I was in the market I used a buyer's agent I knew, and he was able to give me discount but it was limited based on how much his agency required him to charge. I guess there could theoretically be independent agents, but it would be tough to do it without marketing support. My guess is commissions won't change that much.
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Appraisals are also a nice little grift. A friend of mine recently shelled out $5,000 for an appraisal of a property she was purchasing. Basically all the appraiser did was look at nearby comps and then produce a 50 page report that was 49 pages of boilerplate. Couldn't have taken more than a day.
$5k? I thought those were in the $1k range for appraisals. Unless we are talking something in the mid-7 figures.
Low 7 figures. Commercial property which I guess makes a difference.
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Must have been commercial. Residential appraisals are not that much.
Yes, it was commercial. Low 7 figures.
Yeah that is normal market rate. More work goes into it than you think. Commercial appraisers often get deposed if things go wrong. You will go walk the comps and talk to other recent buyers and owners, research the industry, decided on appropriate approaches for valuations etc...etc...etc...about 2 weeks and the appraiser is only getting a percentage if they work for someone else.
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$5,000? That's ridiculous. When I had my own law practice I'd hire appraisers occasionally and my guy charged $400 and he actually went inside the place.
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