Zillow Plunges After Verdict on Real Estate Brokerage Commissions

[John105]

Maybe, but in the past you had to list the buyer agent fee - and if you listed one low no buyers agent would bring customers to your property. Now its negotiable once the buyers customer has fallen in love with the property. Make bets there will be plenty of under the table deals going on now.

In reality the current system if extremely flawed in that the buyers agent does not work for the buyer - they work for the commission the seller is paying. I don't think that is a particularly good scenario - given how there is usually one or two big brokers in every market that control everything anyway.

Also, this is just one lawsuit settled with the NAR. There is a DOJ probe of the NAR, a class action, and several suits in particular states as well as against specific brokerages that this suit does not affect. If anything this settlement tells all the lawyers there on the right scent.

Reminds me of the mortality risk expense that life insurance cos charge the insured.

On life insurance, it’s in case you die too soon.

On an annuity, it’s in case you live too long (technically die too late).

There are many cases in business where the sellers’ interests are not aligned and they play both sides of the coin….

 

[alarmguy]

Maybe, but in the past you had to list the buyer agent fee - and if you listed one low no buyers agent would bring customers to your property. Now its negotiable once the buyers customer has fallen in love with the property. Make bets there will be plenty of under the table deals going on now.

In reality the current system if extremely flawed in that the buyers agent does not work for the buyer - they work for the commission the seller is paying. I don't think that is a particularly good scenario - given how there is usually one or two big brokers in every market that control everything anyway.

This is a misconception. The problem is real estate is controlled on a state level. There is no national standard of who represents who.
In some states an agent cannot work with the buyer, unless they are representing the buyer and inside of each individual state itself some brokerages will not take a buyer out in a car, unless they have a signed agreement with the buyer that they are being represented by the agent. This is actually very common in South Carolina.

Others agencies may solely represent buyers only.

This therefore turns any national discussion like this almost impossible. But this new agreement will bring the country closer to a set of standards in those last hold out almost backward states that do not have buyer agency on a large scale assuming there are still some of those states left.

After this ruling more than ever buyers will be under contract with that selling agent.
The length of the contract can be one day, one week one year, whatever the parties agree on as long as we acknowledge, some agencies will have their own rules as far as how short they will work with the buyer.

Furthermore a sellers agent and a seller can not tell a buyers agent representing a buyer what their fee is, actually they never could.
Though, true that fee was listed on multiple listing, a buyers agent can just ignore what it is anyway because they get their fee representing the buyer.
But let’s be honest typically those fees mentioned are reasonable but if they are not an offer can presented with any fee that agent wants to present the homeowner with. There are two commission schedules, one for the buyers agent real estate firm, and one for the selling agent real estate firm that get paid at closing.

So no matter what is in that listing as far as any offered selling broker commission means nothing except what the homeowner is stating they will pay.

Buyers agents also bring their buyers to homes that are for sale by owner and in fact sometimes in that buyer agency contract, their fee is higher if they sell a for sale by owner. Some for sale by owners will offer in their advertisement what they will pay a buyer agent but that is just an offer. An agent representing a buyer will get whatever is in that buyer agency contract.

More or less all I’m saying is if you have a contract with the buyer, it is no different than a selling agent has a contract with the seller each one can have their own set of fees and if the homeowner is presented with an offer typically it’s built into the selling price of the home.

However, at the time of an offer, a buyers agent representing a buyer, states the fee that the buyer agent will receive. The homeowner can either take the deal or not, or the buyer themselves can pay the fee or part of the fee themselves.

You see a buyer agent representing a buyer has a contract just as strong as a selling agent representing a seller. They each have their commission rate and presentation of an offer a homeowner can either take it or try to renegotiate it, and either side can walk.

I have extensive experience and training with this in more than one state.

It seems more simple than when we read words, but when a homeowner is trying to sell his house and you have a golden buyer that most homeowners would love to have, which in many cases are a better informed more upscale buyer in some areas, when you present an offer as a buyers agent in many cases you have a stronger conversation protecting your commission than the selling agent.

Every state is different, and some states still are backwards with the selling agent and the buying agent both work for the homeowner, but they have greatly diminished in scope.

Some states require a buyers agent can only work for the buyer. This also helps protect the homeowner because if there’s any deficiencies in the deal or even the house a large amount of liability is removed from the seller of the home if the buyers agent did not do the due diligence for the buyer in purchasing the home.

One thing for sure the water is very muddy as far as buyers being fully informed or maybe better said understand who is representing who. Every single trade in this country including the attorneys we look for in these discussions there are bad actors including attorneys and home inspectors.
Sadly, you only hear about the bad stories like in any thing in life.

Gosh, this is I hope it sounds all OK. I have not had any coffee yet this morning and it’s way too long. It’s just something I have a lot of knowledge on and I’m not in any way meaning this to sound argumentative!

 

[mr_boring]

I was very happy with the selling broker on my hard to sell home 16 months ago. I gladly paid the six percent.

Seems the court ruled that even if homeowners are happy paying like you and me, something is being done that is not appropriate by the brokers and or agencies. What exactly that is I haven't heard.

Older post but after my divorce I used the same agent to sell the old house and buy the new house. I got a bit of a kickback at closing for using the same agent. It was up to him, but I went in asking him if he'd kick me a bit at closing on the new if I used him for both transactions. Wasn't much, but it was cash in my pocket - about enough to pay for the U-hauls lol.

 

[alarmguy]

TO expand on post #61 that I wrote. I wanted to post this news story from a source I dont even like. *LOL*
However I am posting it to show, in a loose way, nothing is going to change. Homes will still be bought and sold with the traditional 4 to 5% commissions and sometimes 6% media loves to use that number but in reality it's not as common.

They then go onto "report" that Real Estate companies Zillow, Redfin etc stocks got hit on the news. They arent real estate companies, they are real estate websites that post listings from the MLS system. But mentioning those names makes it sound like the whole industry is going to crash - NOT
The typical consumer (not talking about people in this forum as no one here is typical ha ha) is going to hire an agent to sell their house. Agent makes his/her money when the house sells. The other agent involved (if there is one) who represents the buyer makes his/her money when the house sells.

So what is different here? In the actual real estate listing itself, it will not be able to offer a commission to the selling agent, the selling agent will have to take care of that him/herself when the offer is presented from their buyer. Honestly it might even help agents out. (dont ask me how I know)

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www.cnn.com

BTW- remember the old days in real estate when the internet and for sale by owner was going to disrupt the real estate industry?
Never happened, why? Because people actually want an agent to handle the buying and selling of their home. The cost is nothing in percentage.
Its no different than most he public no longer wants to bother selling their own cars, they trade them in. It's part of living in the USA where we pay for services to make our lives more easy.

 

[Tharber]

Most of this lawsuite is completre BS to begin with.

The biggest misconception is that as Realtors, we arrive at a price of your hone and then add our commissin on top of that. That is not the case at all.

It also assumes that the standard rate is 6% which it is not. If that is the case, then typically 3% of that would go to listing agent and 3% to buyers agent. Every state is different with their agency and disclosure laws but as Realtors we are required to always keep our clients best interests at hand. When a listing agreement is signed, it includes the compensation amount for a buyers agent, or it can not be entered into MLS (Multiple listing service) MLS is more or less an emplyoment agreement, meaning as a buyers agnet, if I bring you a buyer, I am entitled to X% as cmpensation and that amount can not be lowered just for the hell of it, it is guaranteed. The lawsuit alledged that this model forced sellers into paying higher fee's than they might not have paid if they did not agree to pay the buyers agents commisison. This has been the residentail model forever.

In commercial, we do not offer guaranteed compensation. If you are a buyers agent, you have to ask if there is a co-broke fee, which typically there is not and then negotiate your fee with your buyer. There are many reasons why this occurs but I can tell you from my perspective, after now 37yrs in the buisness, I am not going to gaurantee some house wife a fee when chances are she does not have any clue how to transact commercial real estate. The same can be said for residential real estate, many under educated agents are getting paid a fee just because the listing agent was skilled enough to negotiate it on their behalf.

I see an immediate change to the industry due to a knee jerk reaction by some but in the end, a listing agents fee's will go up because the public will assume that they are saving money by not having a buyers agent invloved. There will be a mass exodus of agents who are not capable of listing homes, so the net effect will be fewer agents to handle the transactions. I have long prefered to be a listing agent versus a buyers agent as I am not going to schmuck any tire kickers around looking at things they can not afford and that will never change.

A recent industry conversation that makes much more sense is the need to purchase title insurance on government gaurantees mortagages. I think Biden even touched on it during his speech. Title policies can cost thousands, if your loan is backed by the government, whats the point?

TH

 

[GON]

Than

Most of this lawsuite is completre BS to begin with.

The biggest misconception is that as Realtors, we arrive at a price of your hone and then add our commissin on top of that. That is not the case at all.

It also assumes that the standard rate is 6% which it is not. If that is the case, then typically 3% of that would go to listing agent and 3% to buyers agent. Every state is different with their agency and disclosure laws but as Realtors we are required to always keep our clients best interests at hand. When a listing agreement is signed, it includes the compensation amount for a buyers agent, or it can not be entered into MLS (Multiple listing service) MLS is more or less an emplyoment agreement, meaning as a buyers agnet, if I bring you a buyer, I am entitled to X% as cmpensation and that amount can not be lowered just for the hell of it, it is guaranteed. The lawsuit alledged that this model forced sellers into paying higher fee's than they might not have paid if they did not agree to pay the buyers agents commisison. This has been the residentail model forever.

In commercial, we do not offer guaranteed compensation. If you are a buyers agent, you have to ask if there is a co-broke fee, which typically there is not and then negotiate your fee with your buyer. There are many reasons why this occurs but I can tell you from my perspective, after now 37yrs in the buisness, I am not going to gaurantee some house wife a fee when chances are she does not have any clue how to transact commercial real estate. The same can be said for residential real estate, many under educated agents are getting paid a fee just because the listing agent was skilled enough to negotiate it on their behalf.

I see an immediate change to the industry due to a knee jerk reaction by some but in the end, a listing agents fee's will go up because the public will assume that they are saving money by not having a buyers agent invloved. There will be a mass exodus of agents who are not capable of listing homes, so the net effect will be fewer agents to handle the transactions. I have long prefered to be a listing agent versus a buyers agent as I am not going to schmuck any tire kickers around looking at things they can not afford and that will never change.

A recent industry conversation that makes much more sense is the need to purchase title insurance on government gaurantees mortagages. I think Biden even touched on it during his speech. Title policies can cost thousands, if your loan is backed by the government, whats the point?

TH

Thanks for the post TH, appreciate you sharing your insight.

Of note, I will only work with the listing agent when buying a home. I know it goes against conventional wisdom, but the listing agent getting six percent provides me as a buyer huge advantage in many scenarios.

And I know the following that I receive from the listing agent when I reach out to them and schedule a viewing:


"So that you do not miss out on an opportunity, it is best to explain agency to you which you may already know. My apologies if I am being offensive to you. AZ law allows an agent to represent both sides of a transaction with written informed consent of the parties. Fiduciary duties owed to the parties include, loyalty, accounting, disclosure, obedience and confidentiality. One of the inherent conflicts is the seller wants to sell for the highest price and the buyer wants to pay the lowest price. If you are interested in the property, I cannot suggest a price under dual agency other than the asking price. Other conflicts could be in repair negotiations. It can be a very slippery slope. With dual agency, it is impossible to be loyal to both opposing parties simultaneously. The other fiduciary duties can be managed properly. In saying all this to you, if you feel that you do not want to participate in a dual agency transaction, let me know and I'll set you up with an agent from another agency prior to your arrival. Time is of the essence for you and I don't want to waste any opportunity you may have if you do not want to engage with me representing both you and Sellers"

 

[Tharber]

That's good agent and a great letter. FL operates in much the same way. Single agent, transaction boker or non representation. What might be missing from all of this is that if buyers agents fee's are more or less not included in the sales price, how is that going to be paid at closing? If a buyers agent requires 2% to represent you, the seller thinks its great that they are saving 2% but on a $750,000 home, its still $15,000. A lender is not going to finance that, so the buyer will have to pay out of pocket which reduces their down payment abilities. You will have offers whcih are reduced or just include that fee.

TH

 

[SC Maintenance]

The lawsuit wasn’t about agents or commissions. It was about MLS using their monopoly power to price fix.

agents who were dictated how much commission they made should be happy with the results?

 

[Tharber]

The MLS and MLS policy has absolutely nothing to do with commissions. MLS again is an employment contract and within the rules of the MLS it is dicatated how the listings are to be presented and syndicated as well as to make buyers agents aware of any potential additional information needed. For example, in FL, if a potential buyer is not given the HOA docs PRIOR to writing a contract, that contract can be voided at anytime. All this legal garbage will just force the elimination of MLS and we will go back to buyer beware.

There is also nothing that has ever prevented a buyers agent from having a buyers broker agreement with their client to pay them X%, so if the co broke was only 1% and your buyers agent was contractually due to receive 3%, the buyer then owes that agent 2%, not the seller.

TH

 

[DwightFrye]

I have been saying for years that the 3%+3% commission structure collusion needs to be crushed in areas where home prices are high and time on market is short.

For example, in the greater San Diego area a single family home in any neighborhood where you would like to live is now around a million dollars. And more like $1.25 to $1.5 million in many areas. Time on market is often less than 30 days. Agents in those cities aren't working any harder than agents in Podunk who are selling houses that average $200k. ost housing

It is sheer greed and definitely longstanding collusion among agents and MLS services that protected their businesses to the detriment of sellers. I'm glad the courts have finally stepped in. It is the property owners who made the investment and sacrifice to buy properties, especially in high average cost those housing markets and for some agent to hitchhike upon the greatly increased value of those homes and make $20-$30K for just a few days of work is just wrong.

I'm sure some with a vested interest in high commissions will come along and tell me how wrong I am but the sentiments of the property owners are against you. And just as a data point, when I sold my home almost 5 years ago I decided to fight back and use one of the so called "discounts broker fee" agents. Well, he absolutely sucked and didn't do much more than take some photos and submit the listing to an MLS service. And do the paperwork when the sale finally happened after several price reductions. Next time I hope to use a better agent who is willing to work hard for their commission and accept a 1 or 2 percent commission as being fair for their labor.

 

[GON]

I have been saying for years that the 3%+3% commission structure collusion needs to be crushed in areas where home prices are high and time on market is short.

For example, in the greater San Diego area a single family home in any neighborhood where you would like to live is now around a million dollars. And more like $1.25 to $1.5 million in many areas. Time on market is often less than 30 days. Agents in those cities aren't working any harder than agents in Podunk who are selling houses that average $200k. ost housing

It is sheer greed and definitely longstanding collusion among agents and MLS services that protected their businesses to the detriment of sellers. I'm glad the courts have finally stepped in. It is the property owners who made the investment and sacrifice to buy properties, especially in high average cost those housing markets and for some agent to hitchhike upon the greatly increased value of those homes and make $20-$30K for just a few days of work is just wrong.

I'm sure some with a vested interest in high commissions will come along and tell me how wrong I am but the sentiments of the property owners are against you. And just as a data point, when I sold my home almost 5 years ago I decided to fight back and use one of the so called "discounts broker fee" agents. Well, he absolutely sucked and didn't do much more than take some photos and submit the listing to an MLS service. And do the paperwork when the sale finally happened after several price reductions. Next time I hope to use a better agent who is willing to work hard for their commission and accept a 1 or 2 percent commission as being fair for their labor.

Good post DF... you bring up a lot of points that I have observed in recent times. The only think I might see differently than you are the sales agents in Podunk, Pennsylvania are working hard to reply to parties interested in the home they have listed.

When I write to listing agents in states (Colorado, Arizona, Utah, Wyoming, etc) where Americans are migrating to, and ask direct but worthy questions in my correspondence, nine out of ten listing brokers never reply, never even acknowledge my correspondence. And of note when I send the request for information to the listing broker, I include my pre-approval letter and my biography. The listing brokers don't reply I suspect because they will effortlessly have an uneducated cash buyer make an offer very quickly-, so why waste time with an educated, seasoned buyer.

 

[alarmguy]

I have been saying for years that the 3%+3% commission structure collusion needs to be crushed in areas where home prices are high and time on market is short.

For example, in the greater San Diego area a single family home in any neighborhood where you would like to live is now around a million dollars. And more like $1.25 to $1.5 million in many areas. Time on market is often less than 30 days. Agents in those cities aren't working any harder than agents in Podunk who are selling houses that average $200k. ost housing

It is sheer greed and definitely longstanding collusion among agents and MLS services that protected their businesses to the detriment of sellers. I'm glad the courts have finally stepped in. It is the property owners who made the investment and sacrifice to buy properties, especially in high average cost those housing markets and for some agent to hitchhike upon the greatly increased value of those homes and make $20-$30K for just a few days of work is just wrong.

I'm sure some with a vested interest in high commissions will come along and tell me how wrong I am but the sentiments of the property owners are against you. And just as a data point, when I sold my home almost 5 years ago I decided to fight back and use one of the so called "discounts broker fee" agents. Well, he absolutely sucked and didn't do much more than take some photos and submit the listing to an MLS service. And do the paperwork when the sale finally happened after several price reductions. Next time I hope to use a better agent who is willing to work hard for their commission and accept a 1 or 2 percent commission as being fair for their labor.

Nothing is any different than before this "settlement" so you will have to keep hunting for a cheap agent and sometimes you get lucky, last time you didnt.
Your not anymore wrong than anyone else in the last 50 years who didnt want to pay a commission or find the cheapest rate they could, this goes for any product or service.
Everyone has their price, you just have to find a cheaper one, the others wont represent you.

 

[Tharber]

DF please do not take this personally or that I am singling you out.

What you are stating is that you do not see a value in a realtors compensation being more than 1 or 2%, correct?

Is there anything forcing you or anyone else to hire a realtor? Why not go FSBO or advertise on Zillow direct? If you are just trying to save 1%, last time I checked, 1% of nothing equals nothing. Is a buyers agent going to show your house at all if they are not guaranteed a pay check? Would a buyers agent show your house if it were 1% less than comparable properties? Probably no on both counts. I do not understand where the resentment towards someones income stems from. What does one need to earn in order to be comforatble living in San Diego? What does that translate to in an hourly rate? Are you opposed to the average real estate agent making less than $30,000 per year before expenses?

Commission rates are market driven, they are not dictated by the MLS, any State or any National Oraganizations. Now granted, if you are a really large nationwide brokerage firm, you can suggest that your fee's are X%. Keller WIlliams has the largest agent count as a franchise group and while I have never worked with them, it is possible that they encourage a specific rate, however, if that rate is not what the market will bare, sellers will find alternatives.

So DF while I understand your frustrations, using your example of 3 and 3, how is that $45,000 buy side commisison going to be processed? Why would a buyer just not offer less to cover it? The next great debate will be that market conditions no longer support top dollar because of this structure because buyers can not cover their buy side fee's and closing costs.

I live in Central Florida where the average home price is about $350,000, so if a seller is willing to pay 6% which most of the time does not happen (its more like 4% or maybe 5%) but at this imaginary rate its a whopping $21,000, divided by buy side and listing side or $10,500 to each side. Who in the world is getting rich off of that?

TH

 

[Tharber]

The average commision rate in California is a total of 5.11% for buyer and seller side and there are discount brokers cheaper than that.

TH

 

[alarmguy]

@Tharber
I agree with your post #73 but if you read my post #72 I managed after all these years to simplify it.
Every service has its price, I never cared what someone thought of my fees. Good for them, let them go someplace else.
This has been an endless debate for endless decades. It goes for any service or client relationship not just real estate agents. If we dont like a fee, we go someplace else. I have found by mentioning commissions and dollars we feed into that persons arguments.
Would an attorney do that to justify his fees? Or any service company? No, my fee was always my fee, dont like it, than find someone else. I was always very busy.

As a listing agent which by far was my practice. A selling agent would be presenting an offer to my homeowner, my homeowner in some cases would turn it down. That agent would then go on to discussing cutting our fee's typically not in front of the homeowner but once in a while my homeowner would be aware. I would swear in a court of law, if I was approached about cutting my listing fee to make a deal work, the first words out of my mouth, automatically would be "that's not going to happen" that ended the discussion, if it was in private with another agent, I might sometimes expand on that and say "I have my own family, Im not contributing my income to someone else's"

Case closed, the weak sales agent would always fold because many of them are part timers or desperate to make a deal. I used to tell some of my clients, they are always willing to give away their income, imagine how fast they would give away your money if they knew they could get it out of your sales price.

 

[Owen Lucas]

The lawsuit alledged that this model forced sellers into paying higher fee's than they might not have paid if they did not agree to pay the buyers agents commisison. This has been the residentail model forever.

Wait till the DOJ finishes their assault on agencies and commissions. The realtor sub on reddit is filled with agents freaking out and worrying commissions will go to 1%.

What you are stating is that you do not see a value in a realtors compensation being more than 1 or 2%, correct?

I do not. Please explain what realtors actually do. Educate me here because to me it looks like all their function are:

• Take some pictures, most likely have someone else do this and get them photoshopped. Can't be expensive, photographing rooms isn't rocket science, everyone a photographer nowadays anyway.
• Upload photos to MLS and write up / cut & paste some descriptions. How long does this take, 1 hour? Let the secretary do the data entry.
• Have an open house and show people around, ooh look the bathroom has a fan!
• Meet someone at the house and show them around? This isn't a high IQ task TBH. "There's the bathroom, oooh look a pool table!"
• Fill out some forms, how hard can that be? It's not like forensic accounting.
• Answer the phone, you mean like any other job?

And then expect to get paid $15k for a few hours of work using low cost resources?

$500k house @ 3% commission = $15k which is 150hrs at $100 an hr. Does a realtor spend 150 hours selling a home???

I do not understand where the resentment towards someones income stems from.

Because it's a racket, 99.9% of people don't know how to FSBO or negotiate their way out of 5 figure fees for basically $500 in MLS advertising and some guy filling out forms and opening a door.

at this imaginary rate its a whopping $21,000, divided by buy side and listing side or $10,500 to each side. Who in the world is getting rich off of that?

I don't care who is getting rich off of what, I don't want to be boxed into a system that has me paying a lot for very little value.

I inherited a property and intend on FSBO soon, maybe I'll even document the journey here on BITOG. I despise that fact that I'll be injecting cash into some agency that basically fills out templates, uploads a few pictures, and shows someone around a house. Basically a few hours of low IQ work. Sorry, that's how I feel, this isn't rocket science. Ridiculous.

 

[Tharber]

I don't even know where to begin with these comments.

First, I agree with Alarmguys comments, my fee's are my fees and if you don't want to pay them, move on.


DF at 1% commision, who do you think is going to take the risk to advertise and market your property? Do you have any clue how much E&O insurance is these days? Oh, you didn't think about that did you?

Your commebts are laughable about what we do. If tyhat's how you feel, why bother? Do it yourself. You won't because you do not have the knowledge to do what we do and as you posted, you hired a bottom of the barrel broker once and they sukked. How do you know they even got you full price? You do not but that's OK because you looked on Zillow and found a price but what you don't know is how large the margin of error is with Zestimates.

I wish you the best off you inherited, no cost property. You will be content getting whatever you get but I [romise you that no agent who is worth anyting is going to show it, bring a buyer and write a contract for 1%. Tats not worth ghetting out of bed for.

What is it that you do for a living and what do you make?

TH

 

[KrisZ]

When the system is skewed to where one is severely disadvantaged when representing yourself, then the claim that “nobody forces you to hire a representative” is very dishonest.

 

[Tharber]

Its not skewed. There are multiple other paths you can take to sell a house on your own. You pay an agent for their experience and expertise. If you or anyone else is so smart and know how to do it, do it on your own and leave Realtors out of it. Most will not because you don't know what you are doing and that comes with a price. If you want to linit what we earn based on that, let me limnit what you earn.

TH

 

[KrisZ]

You’re getting access to the MLS with an agent, that’s probably an 80-90% reason.
But you guys are good at making the exceptions look like a rule.
That’s why all the houses on an area are priced almost identically, must be that expertise at work