Well, like any profession, there is a wide spectrum. I have several friends who are long time RE agents and they are ethical and have been in the business 20 or more years. The problem is that it's a lemming-like industry. LOTS of people jump into RE when the market is hot, find enough friends and family to hire them and make a few bucks and then are gone with the next downturn. We've been in our house 33 years so no personal experience but the friend who helped my son and his wife find a house actually did a great job talking them out of getting too stupid with crazy offers and went to bat for them and talked the sellers into covering a minor foundation repair on a house they bought in 2021. They literally looked at over 30 houses in 2 months. He earned his commission.
This is very true. We had a few bad experiences with them. The one we used when we actually found a house to buy was a co-worker that did it on the side. He was very patient, honest, and upfront.
The friend who helped our son had been a police officer for ~20 years. His wife died of cancer and so he quit and got into RE to be able to be there for his kids. His take is that earning a commission is a hallow victory if it destroys a relationship. My son and his wife had the 'house fever' and would have done something stupid if they had one of those commission grabber RE agents.
Jennifer, I'm afraid I have to disagree with your assessments. A home seller has choices. They can sell "by owner," and many companies get a home listed in the local MLS for a fee, but they offer no service beyond that. A home seller is free to negotiate with a realtor for the total commission. The commission is not fixed. The listing agent decides how much of the commission to share with a buyer's agent. Rarely does a listing agent have enough contacts to bring the buyer to a home they have listed, so an incentivized buyer's agent is necessary. A buyer's agent will likely not take buyers to a property that offers no or low commission. Why would they? Buyers can make an offer on a home without a buyer's agent, but most buyers want representation. A listing agent cannot represent the seller and the buyer simultaneously, as most realty companies have eliminated "dual agency" because it is legally precarious. On paper, the seller pays the commission for the buyer's agent, but in reality, the buyer pays for it. Home prices reflect the existing business model, and therefore, listing prices are higher to compensate for the buyer's agent commission. So, the buyer pays for it in the end.
No one forces a person to sign a listing contract with a realtor. Despite the competitive challenges to the traditional business model, a 6% commission for conventional real estate companies is still the norm, with people negotiating this amount depending on the market conditions. In most states, the listing contract has a blank for the commission. Even though there are perhaps too many poor/sleazy realtors out there, and this bothers many people, the verdict you celebrate will not likely survive appeal. It certainly shouldn't if justice is the goal because there is no evidence of collusion, and abundant competitive options exist for home sellers.
This article deviates from the logical, rational and informative articles I have come to know you for.
It is disappointing to see no responses to what Patricia Russell and I wrote. Irrational thinking, anger and hostility are driving the problems in the world. The original article and most of the replies to it seem to be driven by the same negative qualities.
Real Estate Agents are people. There are good, bad, and mediocre ones. They are not the problem. The problem is monopolies. In an actual free market (not what we experience now) monopolies may pop up, but they eventually fail when others enter the market. Monopolies exist now because the government establishes them through laws. The tax code exists to give an unfair advantage to whomever has paid the highest bribe to their representative. The only time the government steps in to bust up a monopoly is when there is more money to be had by shifting the monopoly to someone else. This lawsuit will break a lot of rice bowls.
Yes, the days of 3% buyer commissions are over. That will be like $1,000. You cannot enter an MLS listed home without a realtor, so they were able to collude with the selling realtor to jack up the commission. Despite the selling realtor doing all the work. Now you will contract with Zillow to get into homes you like and at the end of the process you as the buyer, will pay a grand or something. This will all be above the table, because it will not be built into the transaction. You will be paying whatever the fee is moving forward. It will save the buyer and especially the seller, in some cases, hundreds of thousands. And those scumbag realtors will be driven out.
Zillow's information on a property comes from the Listing Agent and their RE Company. All the consumer sites, Zillow, Realtor.com, etc. download the information from the MLS where the Listing Agent has listed the property. Without the Listing Agent entering their listing into the MLS, Zillow and the other consumer sites would not have any houses on their sites. They get that information from the Listing Agents. The Listing Agent negotiates the listing commission with the Seller upfront before the property is listed in the MLS and then lists the amount of the commission they will share with a Buyer's Agent who brings a Buyer. This is called a co-op sale. So the gross commission that can be shared is already set by a legal contract negotiated between the Listing Agent and the Seller before any Buyer's Agent is involved. So there is no collusion re: commission between the Listing Agent and the Buyer's Agent. By the time a Buyer's Agent is involved the property has a signed listing contract which states the negotiated gross commission between the Seller & the RE Company representing them. If the Buyer's Agent does not like the co-op commission being offered by the Listing Agent they can choose not to show the property. Most RE transactions in today's market involve 2 agents - a Buyer's Agent and a Listing Agent if the property is a listed property by a Real Estate Company. However, a Buyer does not have to use a Buyer's Agent and is free to pursue a home by going directly to the Listing Agent. However, the Listing Agent cannot represent the Buyer (advise on offer price, advise on legal and other key issues). They can only do ministerial duties (fill out an offer with the Buyer's desired offer price and terms, etc.) as the Listing Agent already has a signed contract and an "agency" relationship that involves representation of the Seller. Most Buyer's approach a Listing Agent without a Buyer's Agent with the hope of reducing the commission and therefore reducing the sales price. But the big misunderstanding in the public and in the comment section of this Substack is that the gross commission has already been negotiated between the Seller and the Listing Agent before the property was put on the market. The Seller is obligated to pay that commission they have agreed by contract to pay whether there is one or two Agents involved in the sale. It is the Listing Agent's choice as to what percentage of that commission they will pay to an Agent who brings the Buyer. If a Buyer comes without a Buyer's Agent there is no requirement of the Listing Agent to reduce the gross commission already negotiated with the Seller. They can choose to reduce the commission but they don't have to unless they have agreed to do so by a written Special Stipulation in their listing contract with the Seller.
A Seller is not required to list their property with a RE Company. They can sell their property "For Sale by Owner" or any way they choose. There are many "no service" listings companies where the Seller pays a fee and their property is listed in the MLS but they don't get any other help and zero representation. They handle the whole transaction themselves. Many "For Sale by Owners" use this strategy - pay a fee to be listed on the MLS so as many people as possible see the property and then pay a Buyer's Agent who brings a Buyer. But $1000 is not realistic except for cheap publicly funded MLS sites. The big MLS sites - seen and used by most RE agents - charge a fee that is a percentage of the sales price (not the commission). Since commissions are negotiable between the Seller and the Listing Agent the MLS has no control over that. So the MLS takes a percentage of the sale price. And it is costly. Usually in the $1000's (depending on the price of the house). Because of this most of the "fee only" Listing Companies also charge a separate fee for use of the MLS.
So, IMO, the days of 3% commissions are not over. Only the really bottom of the barrel Agents would be willing to take on the responsibility of selling a property for $1000. The fiduciary responsibilities to your clients are high, the legal ramifications are significant, the cost of the Errors and Omissions Insurance is high and the real estate market can be extremely difficult to navigate. Most of the consumers (unless knowledgeable about real estate) who use extremely discounted real estate services end up selling their properties for less than they could have and many transactions do not make it across the finish line. Opportunists are always trolling for unrepresented Sellers and move in to "get a deal." Unfortunately, there are some bad Agents out there (like any career) but the attrition rate is high in real estate so they usually don't last. Real Estate transactions are sophisticated with a lot of moving parts. These transactions often evoke strong emotions between the party's involved because there is so much money at stake. Some people don't handle the stress well. Most people need competent representation in a real estate transaction. I don't think that is changing.
Having been involved in real estate from all angles for over 25 years I don't see collusion in this case. Keller Williams Realty and the NAR don't collude on commission. But there is a real cost in running a real estate business - just like all businesses. There are limits to how much commission can be reduced and still keep a business viable. If a consumer doesn't want to pay a commission they don't have to. They can manage their own transaction and represent themselves And some are successful at doing so. What most people fail to grasp - a real estate company has a fiduciary responsibility to a signed client (like a lawyer) with significant legal ramifications for misrepresentation or mishandling of money. Real Estate is an expensive asset. That's why people have 30-year mortgages. I think this case was all emotion, hype, misdirection and misunderstanding.
Thanks for the informative reply, Patricia. Most of the responses (and the original Substack article) seem to be coming from a place of angry emotions and a misunderstanding of how real estate sales work.
"builder who owns numerous subdivisions in the metro area " Summit Homes? Fred Delibero is a slimeball who sold Summit Homes to Clayton Properties (a Berkshire Hathaway company) in 2016. He still is involved with Summit Homes but also started Griffin Riley. Due to non-competes, Griffin Riley cannot build single family homes to OWN but is developing SF home developments that are FOR RENT only. (you will own nothing and be happy). He threatened me when I ran for City Council in 2018 saying if I crossed him I would never get elected to anything. (well, I did lose...) He 'owns' a lot of our City Council people and they keep tossing him incentives. The latest just a couple of weeks ago is one of those dreadful PMIX developments with more apartments. 13 apartment complexes approved (not just GR, plenty of others) in our city in the last 3 years despite lots of hand-wringing over the lack of 'affordable' SF homes to buy.
Wow, what an important story, and as usual I like your spin. The last buyer's agent working for us apparently also had zero interest in our best interest. His spin was that it is a seller's market (isnt it always?), and we buyers just need to go along. When I said it is against my values to plead with anyone to allow me to buy something they want to sell to me he laughed and said, I am not the person that will ever buy a house in this market. He was right.
We did not buy the property because we refused to masturbate the seller and instead we had high expectations (like fixing broken things).
I agree that realtors are scum. If you even just barely think a house is nice, but not what you want, they try to force you to buy it. No morals.
Well, like any profession, there is a wide spectrum. I have several friends who are long time RE agents and they are ethical and have been in the business 20 or more years. The problem is that it's a lemming-like industry. LOTS of people jump into RE when the market is hot, find enough friends and family to hire them and make a few bucks and then are gone with the next downturn. We've been in our house 33 years so no personal experience but the friend who helped my son and his wife find a house actually did a great job talking them out of getting too stupid with crazy offers and went to bat for them and talked the sellers into covering a minor foundation repair on a house they bought in 2021. They literally looked at over 30 houses in 2 months. He earned his commission.
This is very true. We had a few bad experiences with them. The one we used when we actually found a house to buy was a co-worker that did it on the side. He was very patient, honest, and upfront.
The friend who helped our son had been a police officer for ~20 years. His wife died of cancer and so he quit and got into RE to be able to be there for his kids. His take is that earning a commission is a hallow victory if it destroys a relationship. My son and his wife had the 'house fever' and would have done something stupid if they had one of those commission grabber RE agents.
I'm happy for them that they got a good guy for an agent.
Jennifer, I'm afraid I have to disagree with your assessments. A home seller has choices. They can sell "by owner," and many companies get a home listed in the local MLS for a fee, but they offer no service beyond that. A home seller is free to negotiate with a realtor for the total commission. The commission is not fixed. The listing agent decides how much of the commission to share with a buyer's agent. Rarely does a listing agent have enough contacts to bring the buyer to a home they have listed, so an incentivized buyer's agent is necessary. A buyer's agent will likely not take buyers to a property that offers no or low commission. Why would they? Buyers can make an offer on a home without a buyer's agent, but most buyers want representation. A listing agent cannot represent the seller and the buyer simultaneously, as most realty companies have eliminated "dual agency" because it is legally precarious. On paper, the seller pays the commission for the buyer's agent, but in reality, the buyer pays for it. Home prices reflect the existing business model, and therefore, listing prices are higher to compensate for the buyer's agent commission. So, the buyer pays for it in the end.
No one forces a person to sign a listing contract with a realtor. Despite the competitive challenges to the traditional business model, a 6% commission for conventional real estate companies is still the norm, with people negotiating this amount depending on the market conditions. In most states, the listing contract has a blank for the commission. Even though there are perhaps too many poor/sleazy realtors out there, and this bothers many people, the verdict you celebrate will not likely survive appeal. It certainly shouldn't if justice is the goal because there is no evidence of collusion, and abundant competitive options exist for home sellers.
This article deviates from the logical, rational and informative articles I have come to know you for.
It is disappointing to see no responses to what Patricia Russell and I wrote. Irrational thinking, anger and hostility are driving the problems in the world. The original article and most of the replies to it seem to be driven by the same negative qualities.
Real Estate Agents are people. There are good, bad, and mediocre ones. They are not the problem. The problem is monopolies. In an actual free market (not what we experience now) monopolies may pop up, but they eventually fail when others enter the market. Monopolies exist now because the government establishes them through laws. The tax code exists to give an unfair advantage to whomever has paid the highest bribe to their representative. The only time the government steps in to bust up a monopoly is when there is more money to be had by shifting the monopoly to someone else. This lawsuit will break a lot of rice bowls.
Yes, the days of 3% buyer commissions are over. That will be like $1,000. You cannot enter an MLS listed home without a realtor, so they were able to collude with the selling realtor to jack up the commission. Despite the selling realtor doing all the work. Now you will contract with Zillow to get into homes you like and at the end of the process you as the buyer, will pay a grand or something. This will all be above the table, because it will not be built into the transaction. You will be paying whatever the fee is moving forward. It will save the buyer and especially the seller, in some cases, hundreds of thousands. And those scumbag realtors will be driven out.
Zillow's information on a property comes from the Listing Agent and their RE Company. All the consumer sites, Zillow, Realtor.com, etc. download the information from the MLS where the Listing Agent has listed the property. Without the Listing Agent entering their listing into the MLS, Zillow and the other consumer sites would not have any houses on their sites. They get that information from the Listing Agents. The Listing Agent negotiates the listing commission with the Seller upfront before the property is listed in the MLS and then lists the amount of the commission they will share with a Buyer's Agent who brings a Buyer. This is called a co-op sale. So the gross commission that can be shared is already set by a legal contract negotiated between the Listing Agent and the Seller before any Buyer's Agent is involved. So there is no collusion re: commission between the Listing Agent and the Buyer's Agent. By the time a Buyer's Agent is involved the property has a signed listing contract which states the negotiated gross commission between the Seller & the RE Company representing them. If the Buyer's Agent does not like the co-op commission being offered by the Listing Agent they can choose not to show the property. Most RE transactions in today's market involve 2 agents - a Buyer's Agent and a Listing Agent if the property is a listed property by a Real Estate Company. However, a Buyer does not have to use a Buyer's Agent and is free to pursue a home by going directly to the Listing Agent. However, the Listing Agent cannot represent the Buyer (advise on offer price, advise on legal and other key issues). They can only do ministerial duties (fill out an offer with the Buyer's desired offer price and terms, etc.) as the Listing Agent already has a signed contract and an "agency" relationship that involves representation of the Seller. Most Buyer's approach a Listing Agent without a Buyer's Agent with the hope of reducing the commission and therefore reducing the sales price. But the big misunderstanding in the public and in the comment section of this Substack is that the gross commission has already been negotiated between the Seller and the Listing Agent before the property was put on the market. The Seller is obligated to pay that commission they have agreed by contract to pay whether there is one or two Agents involved in the sale. It is the Listing Agent's choice as to what percentage of that commission they will pay to an Agent who brings the Buyer. If a Buyer comes without a Buyer's Agent there is no requirement of the Listing Agent to reduce the gross commission already negotiated with the Seller. They can choose to reduce the commission but they don't have to unless they have agreed to do so by a written Special Stipulation in their listing contract with the Seller.
A Seller is not required to list their property with a RE Company. They can sell their property "For Sale by Owner" or any way they choose. There are many "no service" listings companies where the Seller pays a fee and their property is listed in the MLS but they don't get any other help and zero representation. They handle the whole transaction themselves. Many "For Sale by Owners" use this strategy - pay a fee to be listed on the MLS so as many people as possible see the property and then pay a Buyer's Agent who brings a Buyer. But $1000 is not realistic except for cheap publicly funded MLS sites. The big MLS sites - seen and used by most RE agents - charge a fee that is a percentage of the sales price (not the commission). Since commissions are negotiable between the Seller and the Listing Agent the MLS has no control over that. So the MLS takes a percentage of the sale price. And it is costly. Usually in the $1000's (depending on the price of the house). Because of this most of the "fee only" Listing Companies also charge a separate fee for use of the MLS.
So, IMO, the days of 3% commissions are not over. Only the really bottom of the barrel Agents would be willing to take on the responsibility of selling a property for $1000. The fiduciary responsibilities to your clients are high, the legal ramifications are significant, the cost of the Errors and Omissions Insurance is high and the real estate market can be extremely difficult to navigate. Most of the consumers (unless knowledgeable about real estate) who use extremely discounted real estate services end up selling their properties for less than they could have and many transactions do not make it across the finish line. Opportunists are always trolling for unrepresented Sellers and move in to "get a deal." Unfortunately, there are some bad Agents out there (like any career) but the attrition rate is high in real estate so they usually don't last. Real Estate transactions are sophisticated with a lot of moving parts. These transactions often evoke strong emotions between the party's involved because there is so much money at stake. Some people don't handle the stress well. Most people need competent representation in a real estate transaction. I don't think that is changing.
Having been involved in real estate from all angles for over 25 years I don't see collusion in this case. Keller Williams Realty and the NAR don't collude on commission. But there is a real cost in running a real estate business - just like all businesses. There are limits to how much commission can be reduced and still keep a business viable. If a consumer doesn't want to pay a commission they don't have to. They can manage their own transaction and represent themselves And some are successful at doing so. What most people fail to grasp - a real estate company has a fiduciary responsibility to a signed client (like a lawyer) with significant legal ramifications for misrepresentation or mishandling of money. Real Estate is an expensive asset. That's why people have 30-year mortgages. I think this case was all emotion, hype, misdirection and misunderstanding.
Thanks for the informative reply, Patricia. Most of the responses (and the original Substack article) seem to be coming from a place of angry emotions and a misunderstanding of how real estate sales work.
"builder who owns numerous subdivisions in the metro area " Summit Homes? Fred Delibero is a slimeball who sold Summit Homes to Clayton Properties (a Berkshire Hathaway company) in 2016. He still is involved with Summit Homes but also started Griffin Riley. Due to non-competes, Griffin Riley cannot build single family homes to OWN but is developing SF home developments that are FOR RENT only. (you will own nothing and be happy). He threatened me when I ran for City Council in 2018 saying if I crossed him I would never get elected to anything. (well, I did lose...) He 'owns' a lot of our City Council people and they keep tossing him incentives. The latest just a couple of weeks ago is one of those dreadful PMIX developments with more apartments. 13 apartment complexes approved (not just GR, plenty of others) in our city in the last 3 years despite lots of hand-wringing over the lack of 'affordable' SF homes to buy.
Wow, what an important story, and as usual I like your spin. The last buyer's agent working for us apparently also had zero interest in our best interest. His spin was that it is a seller's market (isnt it always?), and we buyers just need to go along. When I said it is against my values to plead with anyone to allow me to buy something they want to sell to me he laughed and said, I am not the person that will ever buy a house in this market. He was right.
We did not buy the property because we refused to masturbate the seller and instead we had high expectations (like fixing broken things).