Zillow Plunges After Verdict on Real Estate Brokerage Commissions

[DwightFrye]

The statement by NARs makes for a good press release. But the fact remains that for decades, realtors have with few exceptions kept commissions very high and done everything they can to stifle negotiations below the traditional 6% rates.

I predict that a few large realtor groups will soon announce that they will accept contracts to sell and/or represent buyers for discounted commission rates. And consumers will flock to them and they will dominate the market. Realtors who cling to the old rates are going to be sitting around waiting for the phone to ring like the Maytag Man.

Being a realtor does not require many years of college, huge student loan debt or years of apprenticeship. The concept that realtors in areas where homes typically sell for $1.5 million dollars and do so within a few weeks deserve a "living wage" so they too can afford to live there is preposterous. It is not the responsibility of every citizen who is doing better than another to raise the standard of living for those who aren't doing as well through some soft of income redistribution structure. If they aren't making enough money under lower commission rates they can find another career. Just like everyone else.

 

[alarmguy]

The statement by NARs makes for a good press release. But the fact remains that for decades, realtors have with few exceptions kept commissions very high and done everything they can to stifle negotiations below the traditional 6% rates.

I predict that a few large realtor groups will soon announce that they will accept contracts to sell and/or represent buyers for discounted commission rates. And consumers will flock to them and they will dominate the market. Realtors who cling to the old rates are going to be sitting around waiting for the phone to ring like the Maytag Man.

Being a realtor does not require many years of college, huge student loan debt or years of apprenticeship. The concept that realtors in areas where homes typically sell for $1.5 million dollars and do so within a few weeks deserve a "living wage" so they too can afford to live there is preposterous. It is not the responsibility of every citizen who is doing better than another to raise the standard of living for those who aren't doing as well through some soft of income redistribution structure. If they aren't making enough money under lower commission rates they can find another career. Just like everyone else.

Realtors are self employed individuals and those that work hard will continue to make money for their services. Nothing is going to change, they can charge whatever they want and you can hire them or not. It’s always been your choice.
Your post and those in here not familiar with the industry, agents have always had buyers who wanted representation signed up under contract, homeowner or the homeowners agent has no say in their commission.

Real estate practice law as far as agency is an individual state controlled not Federal

 

[Tharber]

LOL I have an MBA in Finance and hold the CCIM designation which is like a PhD in commercial real estate.

Many of the people I have talked with on a national level will be raising their rates to cover both sides of the transaction. MLS will be effectively rendered useless and the tools that replace them will be realtor ran and only for those sellers willing to pay a fair price. The bottom dwellers can stick to FSBO and try to save a buck. Do you think any agent worth his/her weight is going to show a FSBO knowing that the seller is just trying to stiff them on commisions? LOL! Why do we use good oil and not the cheapest oil? Its all lubricants, right?

There is an old saying that I have used forever, never step over a dollar to pick up a dime. Flat fee brokers barely make it as it is. I don't do this to just get by just like many of you don't work a 9 to 5 job to just get by.

TH

 

[Owen Lucas]

The bottom dwellers can stick to FSBO and try to save a buck. Do you think any agent worth his/her weight is going to show a FSBO knowing that the seller is just trying to stiff them on commisions? LOL! Why do we use good oil and not the cheapest oil? Its all lubricants, right?

So don't show a customer a prospective home?

So it is about the money after all not what the customer wants?

Can't an experienced realtor work out a deal with their massive amounts of experience and "education" or is making a quick $30k commission for a house that sells in a week what everyone is after?

What if the buyer is really interested in the property? "Sorry ma'am, we can't make a buck." (We're incapable of negotiating something with the seller, because well, it's, uh, hard."

I've been calling multiple agents to see if I can negotiate this magical negotiable rate and everyone is sticking to their guns saying 6% or maaaybe 5.5%. It's a monopoly and you guys know it.

 

[SC Maintenance]

Most people, who buy or sell a house every 10 years, have no clue they could negotiate this fee, or even how to do it. Possibly different for high income individuals or those buying rental or commercial, but not the average Joe

I understand Monopoly's really well. When I needed to buy or sell a house, I went to the largest agency in the area - the one that controlled most sales. I paid their fee. If you want to build a casino in Vegas best to buy in to the mob early. When buying, I got "sneak peaks" prior to being on the market. When I was selling, I got a steady stream of prospective buyers marched through my property by captive buyers agents. No, it wasn't collusion - because you actually have to be in a free market to collude.

It was a pure monopoly. A federal Jury agreed to the tune of $1.8 Billion. They settled for what - $400M rather than appeal. They got off cheap.

I have no idea what this ruling will do, but if it educates consumers on their rights, and makes the market more free, then its always a positive outcome IMHO.

 

[Owen Lucas]

So this is an honest ask. What is the tangible value add besides the listing in the MLS? I doubt that Joe realtor has a proprietary valuation algorithm, and I also assume that MLS and other databases will give current listings and recent closed sales for the purpose of “comps”. Maybe I’m wrong?

So if you can’t do the legal part (which is a colluded racket in its own right, worse than realtors and MLS), and can’t give most advice, can’t inspect or deal with property faults. Then what? Run more ads and open houses? Make better ties with other realtors to steer buyers to your properties and negotiate reciprocity?

And it seems that the claim that the agent in a $1.5MM neighborhood and the agent in a $250k neighborhood do about the same work, for the same size home. But what are we missing then?

Exactly this.

The secret sauce and value add is that, there is no sauce, the secret is massive profit for little work and you are the product.

Despite being advocates for the buyer there seems to be an unwritten rule not to work with FSBOs because it's "hard" or "annoying". Well boo-hoo!

The National Association of REALTORS® (NAR) does not set commissions – they are negotiable.

Good luck negotiating them, I've called multiple agents and no one want's to touch anything below 5.5%.

The work is worth 3% tops due to automation and I'd wager a flat fee or a tiered fee based on effort needed. The days of 6% fees without automation and insane amounts of advertising are gone.

Excerpt from Handbook on Multiple Listing Policy – MLS Antitrust Compliance Policy

Excerpt from Handbook on Multiple Listing Policy – Notice to Association Members

All this handbook talk is mumbo jumbo CYA legalese to fake an aura of "we're flexible, see it's right here, our rules and regs" but at the end of the day it's not encouraging negotiations, find me a company that will take 5 or 4%.

 

[SC Maintenance]

Why do we use good oil and not the cheapest oil? Its all lubricants, right?

You must be new here?

Product Rebates, Sales and Promotions

Current product rebates, sales and promotions of OTC products

bobistheoilguy.com

 

[GON]

Realtors are self employed individuals and those that work hard will continue to make money for their services. Nothing is going to change, they can charge whatever they want and you can hire them or not. It’s always been your choice.
Your post and those in here not familiar with the industry, agents have always had buyers who wanted representation signed up under contract, homeowner or the homeowners agent has no say in their commission.

Real estate practice law as far as agency is an individual state controlled not Federal

You mention Buyer's will always want a professional agent/ broker. I could.not agree more.

On a side note, I wrote five listing agents last weekend on five single family homes. I asked very specific but easy to answer questions. Included with my correspondence to the listing agent I sent my pre approval letter, and my biography so they would know who was reaching out to them. My correspondence was professionally written.

Only one of the five listing agents responded to my correspondence. I suspect the listing agents are doing so well in Arizona, they will wait for a uneducated buyer from California with money, than take a few minutes to answer questions from a likely seasoned buyer. I will say, if I had sent five listing agents in Ohio, Iowa, Pennsylvania, etc.... I would have received five replies back.

 

[ArrestMeRedZ]

I believe my number is 6 properties sold by myself and 4 with the assistance of a realtor. I can see the value of a realtor, but if any of them expressed some of the views I see here they would have been fired in a nanosecond.
On all of the FSBOs I've done, I've got full value, in some cases actually above appraisal price. I do see the value of realtors with specific properties and don't mind paying for value received, but for a standard house in a good neighborhood that shows well with lots of comps, I see no reason to leave 6% on the table for little value added.

Don't get me started on escrow and title companies. I an happy with the value provided in Florida with closing attorneys or title companies, but the charges in California by the vultures in the closing industry are ridiculous. And for those who try to justify title insurance rates, be advised their payouts are the lowest in the entire insurance industry - on the order of 3-4% of the premiums they collect.

 

[andrew_j]

In all my years of buying three homes I never felt real estate agents were ever useful. They pushed to overpay, underlist for quick sale. The only one who did amazing job sweet talked appraiser and we oversold home price of tough sell. Tiny nice home amazing land.

If they make less so be it. The best ones will remain. Gravy train is over especially with homes selling $700k median around here.

 

[SC Maintenance]

You mention Buyer's will always want a professional agent/ broker.

My extremely limited experience is the opposite. My buyers agents were idiots. They weren't "allowed" to say anything about anything, and when they did it was mostly wrong. One told me a large piece of vacant land behind a house I was looking at was owned by the county and a preserve. I looked it up my self and it was zoned commercial, ended up being a strip mall years later. Another liked to run her mouth and told me that she wouldn't submit any low offers on my behalf because she didn't want to embarrass herself. A great house with a great lot in the only neighborhood we were looking came up. I called to ask why she hadn't called - it had been listed for a few days (this was in the crazy 2006 phase). She said it didn't show well? She was right, it was a mess - I bought it cheap and fixed most stuff myself.

On the other hand, my selling agent did add at least some value. She had a "pro" photographer do the pics. She knew some contractors to take care of some of the things that needed done - I had already moved out of town. Worth what I paid? - probably not, but at least more than the buyers agents - who were negative value other than unlocking the door.

 

[alarmguy]

You mention Buyer's will always want a professional agent/ broker. I could.not agree more.

On a side note, I wrote five listing agents last weekend on five single family homes. I asked very specific but easy to answer questions. Included with my correspondence to the listing agent I sent my pre approval letter, and my biography so they would know who was reaching out to them. My correspondence was professionally written.

Only one of the five listing agents responded to my correspondence. I suspect the listing agents are doing so well in Arizona, they will wait for an uneducated buyer from California with money, than take a few minutes to answer questions from a likely seasoned buyer. I will say, if I had sent five listing agents in Ohio, Iowa, Pennsylvania, etc.... I would have received five replies back.

Yeah, we experienced something similar 16 years ago when we moved south.
Not as much as you but contacted a well known agent who advertised over locally and internet.
Even more so it was with one of two companies that rolled out the red carpet for me to bring my RE practice to their office, both offered private offices to me in their buildings. Actually a nationally well known RE company offered me any private office in a new office building they were constructing, was a cool feeling at the time.

Anyway this well known agent (whom may not have known) can’t remember would never return our house inquiries so I shrugged it off and moved on, anyway just saying this cause I know that feeling.
I do know agents get overwhelmed at times but I personally always made it a point to reply, sometimes it was hard, at times I would have a 4 inch stack of inquiries left on my desk by my admin staff on homes I had listed and many of them already in some form of in or entering contract. Yet I would find a way for me or someone else to contact them.

I was known as a listing agent which I enjoyed more but work with motivated buyers only. Though I always made sure everyone would get a return call

 

[alarmguy]

I’m bowing out of this now
Too much whining in here.
Real estate is a service, can’t afford it do it yourself.
Every profession including attorneys, doctors, home inspectors, plumbers, corporations and products in public forums you hear the same type of whining. Sure there are bad apples in every basket. So take charge of your life and get it done.

Many posted successful stories them doing it themselves, your choice in everything you do.

You gotta stop believing you are entitled (for some crazy uninformed reason) to dictate how much others should get paid for performing a service, its servitude …LOL scary stuff man!!!
I mean, in today’s society wanting the power to force people to work for what you are willing to pay is … well, I don’t even know if they do that in N Korea and im sure even in China can work as individuals providing services at thier own rates.

I can understand some frustrations in here with agency but it’s born out of ignorance when you want someone to provide a service to you and force what you are willing to pay on them. That was ended a long time ago back in the dark ages my friends!

Being free to operate and own a business as well as set your price for your labor or expertise as an individual is not going away anytime soon whether you like it or not.
Though throughout the ages, there’s always those that will complain, and that ain’t just real estate.

 

[alarmguy]

After reading the article, I could not make sense of what was happening and why. But the takeaway seems that a court found real estate brokers colluded to keep real estate commissions artificially high, and a expectation that real estate commissions may be reduced across the board. The article mentioned other countries pay measurably less in real estate commissions.

Zillow Plunges After Verdict on Real Estate Brokerage Commissions

(Bloomberg) -- Zillow Group Inc. and other real estate stocks plunged after a Missouri jury struck a fresh blow against the battered industry, finding that the National Association of Realtors colluded to maintain high brokerage commissions. Most Read from BloombergImmigrants Are Leaving Canada...

finance.yahoo.com

The stock isnt even down on the week.
In addition, this stock is just as crazy as any for a company that never makes any money and has a negative P/E ratio = speculative trading.
I do suspect that may money will flow out of the real estate group as part of the natural rotation that takes place in the stock market between groups.

 

[alarmguy]

Did Zillow ever get out of the house flipping game? I remember for a while there was some controversy because Zillow was buying up a large number of houses.

At least in NY, you can view homes on the MLS Matrix and avoid 3rd parties like Zillow, trulia, redfin.

Yes, they are out, they took a bath and lost billions of dollars.

I do believe it’s gonna be the future for some, in this thread homeowners, no a select few homeowners complain about commission rates.
Well, I got news for them. There are a couple big names out there who are on a national level but not all states yet buying homes from a homeowner cash, close at the homeowners convenience and then resell them on the retail market.

If you think paying afford 5% commission is a lot wait till you see the house they buy from you at a 15 to 20% discount and sold on the market for 15 to 20% more

Just like consumers, went to trading in cars with car dealers. This will eventually be the model you will be going to a corporation instead of a real estate agent to get rid of your house however, people many will go to the real estate agent because they will get way more money in their pocket.

We are in affluent country, and people will pay for convenience, no matter what the services and I stress that over and over again. The only ones that complain of the only ones that want services at a discount that they think they should get.

Why Zillow Should Pay $11 Billion To Acquire Opendoor

Zillow and Opendoor would be better off combining to tap the $1 trillion real estate iBuying market.

www.forbes.com

 

[Tharber]

I am saying this about FSBO: As a license holder, aka professional, we carry the risk for the information that the seller provides to our buyer. One would hope that they are honest but we know how that goes. A proper listing agreement includes disclosures from a seller concerning all aspects of their home, these are typically State mandated forms and are admissable in courts. We must disclose to you the FSBO that we are a license holder and as you have not employed us, we will not offer you any advice or opinion on anything. So what happens if you have under[priced your home? We can't advice you any differently. The people who think we love to sell cheap must not understnd that the higher the sales price, the more we make. FSBO is a risk for all parties involved. I am again not a residential agent although at one time I owned a large franchise with 3 offices and over 90 agents. We can talk all day about some of the crap I came across.

In the end, its our jobs to serve our clients, as long as it is in a legal and ethical manner. There is a value and peace of moind for most knowing that someone else is handling the transaction on their behalf. There is also great value in using an agent who has a few thousand contacts to send your property out to and that his/her reputation puts the buyer side at ease. I sell 90% of my commercial listings myself to my network. I will not take an offer of any kind from a residential agent for any reason. I will somewhat reduce my compensation if I have both sides based on the complexity of the transacation but that is an exception not a rule. I just finsihed my 2023 taxes and I start every month in the hole approx $3300.00 per month in fee's that pay's for my marketing and professional memberships, so please forgive me if I am entitled to make a living and do more than break even.

TH

 

[SC Maintenance]

I will not take an offer of any kind from a residential agent for any reason.

 

[zzyzzx]

I could see a reduction in the number of realtors. They will have to get real jobs. The people who previously got a license to buy their own house won't do that any more, etc. Plus a lot of the part timers will quit.

 

[Tharber]

That would be a positive thing for the industry. There is nothing worse than an arrogant brand new agent thinking that all they have to do is stick a sign and the ground and get paid. I can agree with that sentiment 100%.

 

[SC Maintenance]

I could see a reduction in the number of realtors. They will have to get real jobs. The people who previously got a license to buy their own house won't do that any more, etc. Plus a lot of the part timers will quit.

The buying side at minimum will become highly automated. Instead of an antiquated MLS listing that someone fat fingered in, you will get an AI generated up to date info not just on the house, but any building permits or planned expansion of nearby properties or roads, insurance estimates, up to date school info, etc. pulled directly in real time from updated city, county, or insurance databases. It will lead to a much better experience overall, IMHO.