Comments ( 12 )

• I disagree that home buyers are uninterested in this debate. I read this site because I’m trying to decide whether to buy a home or to keep renting. While I think you do a decent job covering the market from different perspectives, some of the stories and interviews you post do need to be understood in the context of a Realtor’s best interests as opposed to (say) mine. Reading the back-and-forth spurred on by skeptical commenters adds context and value. In my humble opinion, you’d do well to respond with a little less name-calling, even if you are tired of hearing the same things over and over.

• tom,

  Thanks.

  My perception – rightly or wrongly – is that these are not people who are open to discussing the topic. I also assume – again rightly or wrongly – that every intelligent person is aware of the biases a Realtor might have.

  I have a more practical problem. We get on-camera access to people who aren’t always comfortable with being on camera but take a risk in a genuine attempt to be helpful and to communicate a point of view. Coddling a few idiots will result in shutting off access to many people in the industry, something that’s detrimental to far more people, in my view. In many respects this is no different than an offline forum: indulge the hecklers and lose your speakers. Forcibly remove the hecklers and civil discourse becomes possible.

  And yeah, you’re right that years of reading the same repetitive garbage has led to my being impatient with and having no tolerance for it.

  When a Realtor’s a guest here they ought to be treated with respect and cordiality, and disagreed with intelligently. Anyone who doesn’t buy into that doesn’t belong here.

• While I’m sure most realtors are honest folk that are just trying to feed their families like everyone else, there can be no doubt about the realty profession’s part in spurring on the housing bubble and subsequent crash. Just like the finance and mortgage broker professions, they have a great collective guilt to work off.

  Their own association (NAR) does them no favors by consistently talking up the market, even in the worst of times, as has almost every realtor I have interacted with. As a result, it has become increasingly clear to everyone that the only financial interest considered by a so-called “buyer’s agent” is the agent’s own. The fact that a buyer’s agent’s commission is an increasing function of volume and the home prices explains a lot about their motivations as well.

  The occasional great realtor aside, the profession as a whole, and particularly on the buyer’s side, has squandered much of its past credibility and deserves a good bashing, if not a complete revamping.

• Jakob,

  While agreeing with much of what you have to say, I would argue forcibly that collective guilt shouldn’t reflexively attach to an individual That’s my point here. We do our best to shield our audience from the genuinely guilty. We bar some brokers from advertising here and deny coverage to others.

• I’ve always been uncomfortable with realtors because of their fee structure. It’s not exactly clear that a realtor’s commission should increase proportionately with price. Although there needs to be some incentive to ensure the realtor doesn’t convince you low-ball offers are good, does a realtor selling a $2M home really do $108,000 more work than a realtor selling a $200,000 home?

• John D,

  Sometimes. Not always. Bear in mind that the fee is usually split 4 (often unequal) ways: seller agent and broker / buyer agent and broker.

  One argument is that the higher-priced homes subsidize the services provided to the lower-priced ones.

• re the cross-subsidy argument:

  The implication of this argument is that realtors selling low-value homes price their services under cost and make up their loss on these homes by over-charging for their services on high value homes. That is to say, it’s a classic case of price discrimination (which isn’t necessarily a bad thing like racial discrimination is).

  Price discrimination can’t exist in a competitive market. And, that’s ultimately my point. There is something artificially locking real estate commissions to the level where they’re at. But, regardless, sellers of high-price homes are involuntarily made to over pay.

  Of course, the thing locking real estate commissions to the present level is the NAR and its various monopolies (particularly the MLS). I understand that realtors pay basically whatever the NAR wants to charge for it services, and the NAR’s antitrust problems are well publicized, but realtors will continue to take the heat for it because they are the face of the transaction.

• I find a lot of the Realtor bashing is actually pretty informative. Realtor is a job, they are biased. A car salesman is never going to tell you it’s a bad time to buy a car, and it just gets more and more biased as you move on to more expensive things. That is not to say these people don’t have valuable information, but I appreciate the healthy skepticism in the comments.

  Please stop calling these people stupid remedial idiots that are off their medication….

• I disagree.

  Real estate agents play a critical part in the housing market – but only because the system is setup in a way that the services are required.

  I’ve used realtors, I’ve tried to source good ones – and I’ve gotten frustrated at every step, always asking what in gods name these people think they can offer that’s as valuable as the premium they’re charging. Always, I come back to the same answer: Access to the listing services.

  I am thouroughly pleased when I hear the MLS nut is cracked open bit by bit. I’m thrilled by the prospects of the anti-competitive investigations going on across the country and in Canada. I love the growth in the low-cost end of the market. It’s about time!

  I value the advice of real estate professionals – and will gladly pay for it (and do!) that’s why I read this blog. But there’s nothing more frustrating than people build a system that requires steep commissions go their way. Talk about self-serving!

• ChicagoAndy,

  Commissions are fully negotiable.

  The “standard 6%” stopped being the standard long ago and almost never was the standard in the higher price ranges. A number of agents also offer their services on a negotiated fee basis divorced from commissions. And, there are a variety of “discount broker” services available, although that category has yet to achieve much market share.

  Many people share your frustration in identifying and finding the most qualified agents. Watching how agents handle themselves and communicate in a video interview, I think, helps. Agents won’t do that, however, if they expose themselves to being assaulted as “morons” by commenters who don’t even bother to listen to them first. We’ve seen exactly that happen here and elsewhere all too often.

  Legal fees are fully negotiable too. Ever try to get a good lawyer to negotiate his or her hourly rate?

  Note that I’m not disputing the proposition that the MLS helps keep rates artificially high. It does. But it’s no different than any other proprietary database that’s been built over time and has a store of valuable information.

• Please note I am talking about residential real estate not commercial.

  My two cents on dealing with sell side Realtors, is that I see their value; they show my home, market my home, give advice on how to stage it, qualify potential buyers and in general spend a good amount of time which deserves compensation.

  It is the buy side of the real estate equation that I find needs fixing. I have yet to find a buy side Realtor who doesn’t inform me that they are working at no cost to me. I always have to remind them that since the commission they will receive is built into the price of the home it is actually me, the buyer, who is paying the commission. Regardless of what the final selling price turns out to be, it could be 2% – 3% lower if there wasn’t a built in percentage for the buy side commission.

  So are the buy side agent’s services useless? Not entirely. If someone is new to an area, then there are some great established agents that can show you around, turn you on to good established neighborhoods and assist you in closing the real estate transaction. Also, if you are a buyer who is not interested in getting educated on neighborhood at the street level (something Joe does a good job of pointing out) or don’t have the time to look for a home yourself, then again a buyer’s agent comes in handy.

  With that being said, the information available on the web through mapping services, public records and online discount brokers does provide a buying option to those who want to be more involved. Services like Redfin.com even offer to reimburse the buyer a percentage of the buy side commission.

  I am not sure where the profession of a Realtor will end up, but I do think that the industry will change as information continues to be more accessible.

• I agree the National Association of Realtors can send a rah rah message out there and lobby for their own interests in ways at times I disagree with. But, at a local level, you can find leadership (like in our Chicago Association of Realtors) that provides the true data of what’s going on in markets and there isn’t much spin to be spun.

  As for what will become of Realtors… as a Realtor, I react to and anticipate the needs of the consumers, my clients, the availble technology etc… What’s less than amazing is my business has grown with the explosion of technology and the access to information, the declining market in both closed sales volume and number of units sold. This is because I seem to have to help people figure out all this noise more than in past years. I’m also all for the most open information… as limited infomation for my clients makes my job harder. I have to verify and and dig deeper when they find bits and pieces of information on various real estate sites.

  As a buyer’s agent and lisitng agent, I meet the needs of the client. That’s it. What isn’t discussed here is are examples of Realtors moving furniture out of homes to storage units, long phone conversations with clients needing assurance and advice, basically taking ownership of vacant units owners have moved out of while trying to sell them etc… all things I’ve done this week to get the job done. Some people just need an educated opinion during their search… and if you’ve been working hard in the market for some time, they appreciate your opinions and service provider referals in making sure they are making a good decision.

  As for compensation, at the end of the day I’m doing well… as long as I sell homes and find people homes and get a deal together however I need to get it together. But it’s not guaranteed I’ll do one single transaction this year and I have no “price lock” on anybody. I have to present services, ask for certain compensation, preform and get paid. If I do not get a deal together, I’m out a ton of time and money. As for the percentage compensation over fees… I think expectations and service must suffer when trying to do a limited menu of services and fees rather than being “all in” on a percentage commission. There must be some disatisfaction. If the model worked well, I think it would be much more popular than working with a traditional, full service Realtor.

  When working with a buyer, I also despise the line about “the seller pays me”. However, I disagree my commission is built into the sales price. The sales price is whatever someone is willing to pay. That’s it. There also has to be some premium for an efficient, regulated and licensed data base that is still the best source of real estate data in my opinion… our local MRED Data LLC (MLS). Realtors/Brokers pay for this powerful tool, manage and police the information and live and die by it’s ethical rules.

  The real estate industry is bashed, the personal injury lawyer is trashed, the car salesman industry is bashed. I think there is good reason to roll your eyes to an NAR advertisement and Car dealer advertisement boasting “never been a better time to buy”. I hate those ads. But, like any industry, a good Realtor is many, many things to many, many different people and the consumer/client decides if they’ll hire me. I like a good insurance agent…I like a good car dealer to search like I do for good product… I like a good attorney. And I like a good Realtor when looking for vacation homes or rentals in other parts of the country or world.

  Collective guilt for the market crash? A ridiculous notion to pin on any Industry. Now Congress… there’s some overdue collective guilt.