I am purchasing a property for $900k. I contacted the realtor and said "This is the property and this is how much I want to pay." The realtor spent an hour at a virtual walkthrough, provided some comps, and wrote up an offer all before noon that same day. I just don't understand what justifies the 3%. I am not asking to be a jerk, but you cant tell me these agents are putting in that much time to justify making $30K. Even at $100 an hour, that would be over 300 hours of work. It just doesn't make sense to me.
How do realtors justify their fees?
byu/karateclassdropout inRealEstate
Posted by karateclassdropout
44 Comments
Many of them can’t. That’s the point.
You’re paying for the 100 tire kickers who came before you.
You hired the realtor. Thats how.
It’s half a scam. 30 years ago they drove you around all weekend looking at homes, nowadays the internet does all of the work and we know what we want before we even contact them. It’s a shakedown.
Did you know BestBuy charges you more for your tv because some of them break when they unload them, and some of them get stolen?
It can’t possibly be justified. All-in, even accounting for brokerage splits, they’re likely making upwards of 5K/hour in your scenario.
But that’s a harsh way to look at it. This could be the realtor’s only deal all year. If so, they could wind up making under minimum wage.
Additionally, they can get away with it because you’re likely not paying it. Sellers are still paying both sides commission in ~95% of deals. A seller selling a 900K home they bought for 400K ten years ago isn’t concerned with 3%, which is why the model is still around.
Buy it eithout a realtor then
The work is not over at that point, and he probably splits with his broker. Are you paying the fee or is it from the seller?
For us, the value came when we got the home inspection back and she suggested we ask for a bunch of money off the sale price. It wasn’t even a terrible inspection but they did mention broken seals on a few windows and an issue with the furnace. She documented everything, negotiated with the sellers, and in the end she got us $20k off at closing which was slightly more than we paid her.
Many realtors drive clients all over the place and might even write up several offers before something sticks.
So for them it evens out over time.
Unfortunately, if you are one of the easy transactions you end up paying in effect for the ones that were difficult.
I had a similar feeling when I found the condo I ended up purchasing on Zillow. However, the realtor does all the paperwork and connects you with a lender and title co. if you don’t have them. When I moved recently for a separate purchase, we were spamming the realtor with MLS links left and right and he did do a lot of work to set up private showings and set up 3 weekends in a row of appointments. He also screened all the disclosure packets for us and called out any red flags. He also guided us on how much to offer and counter. Yes, it’s still a ton of money they get paid in a very short period of time. But I’m certainly not gonna try and get licensed so I can save the 2.5-3%. 😂
I bought my last house without a realtor and I have zero regrets. I used a well respected real estate lawyer to run title and do a few other things for me. Didn’t come close to the 3%
The fun is only beginning. Now is when your agent proves their worth. You don’t know what you don’t know. Finding the house is only the start.
When you pay a plumber $400 to change a toilet, you’re not paying for the 20 minutes it takes him/her to do the job, which you could absolutely do yourself after watching a Youtube video and spending maybe an hour, tops.
Don’t want to pay 3%? Then don’t. No one is forcing you. When you handle everything on your own (without depending on your loan officer to do all the realtor stuff for you), you’ll start appreciating the value a good agent brings.
Me? I’m not paying 3%. But I’ll pay 2.5%.
Realtor fees are negotiable, so you could have asked the realtor to lower it.
In most cases, you’re not paying for the time, you’re paying for the knowledge.
Most home buyers spend weeks or months looking at homes, learning and analyzing the market, making multiple offers, negotiating with sellers and their agents, coordinating and attending inspections, negotiating concessions, and sometimes buyers don’t get approved for a loan or back out at the last minute. Many sellers make getting to closing extremely difficult on the buyer and their, whether negotiating repairs, not meeting timelines for repairs, not moving out, leaving junk behind, or even changing their minds.
So, just writing and presenting an offer is usually just the beginning of getting to the closing table. You have a long ways to go between now and getting the keys.
If your situation truly was one virtual showing and writing an offer, you could have negotiated what the agent said they charged.
> I contacted the realtor …
You contacted the listing agent? Why do you care what they are paid?
If you contacted a *buyer’s agent*, the question is, why do you *have* a buyer’s agent, because it sounds like you’re capable of handling a bid on your own.
So who did you contact?
You skipped a lot of the repurchase prep, walking a buyer through the process, discussing budgets, local expenses and lenders, and house hunting.
But as part of this escrow you don’t do any inspections? No appraisal? No negotiations? No review of disclosures or tax records?
A good agent will help you with all of these. They we be on the ground and in the house multiple times during an escrow. They will connect you to professional for further investigation. They will provide you with details and resources regarding available utility and service providers and how to get those set up.
They track your escrow and ensure you are meeting contingency timelines (sounds like maybe you didn’t have any of those). If things go south they advise you as to your options and contractual obligations. Often they are helping pull legally required disclosures out of sellers to ensure you get the information you need, or running back out to meet the appraiser or grab photos for the lender when an underwriter starts to put the breaks on funding. Sometimes an escrow is just perfect and they get an easy paycheck. Sometimes they spend hours trying to get a deal done that falls through and don’t get a paycheck at all.
Negotiate the price down, and you should have done that before you engaged their services. I think 3% is ridiculous, and I’m a licensed agent. Many buyer agents (selling agents) ask for the 3% and tell you they’ll get the buyer to pay. Like that should ease your mind. No one should pay 3%, not you nor the seller.
Honestly it’s irrelevant to you, are you hiring them or is the seller? If the seller is paying the commission then the agreement is already made, and if you want to buy that house that’s the terms the seller has agreed to sell their house under. You can find another house and convince them to sell it to you without a broker on either side. If the seller is offering 0 for the buyers agent then you can find a broker to work with you for what you are willing to pay, if they choose to.
Are you paying them 3% or is the seller?
Did you sign an agreement to pay them 3%?
You’re paying for their expertise and experience.
I paid a surgeon $10K for a surgery (cosmetic, so not covered by insurance). It took 4 hours. Was I paying him $2500/hour or was I paying for the value of his skill?
Realtors are able to charge what they do because the real estate market is a cartel.
The primary leverage they have (in the US) is being able to list properties in Multiple Listing Service (MLS) and their policy of blacklisting anybody who doesn’t play by their rules.
If you try to buy or sell a house on your own, realtors won’t cooperate with you and will do their best to shut you out of the market.
Recent changes to how their fees are negotiated and inroads on providing alternative public listings (such as through online services like Zillow, Redfin, etc.) are gradually eroding their control of the market, and eventually they’ll lose their market control. That may still take several years, though.
At that point, you’ll pay a more modest fee for actual service — one not based on the price of the home, but on the actual service provided.
Not all realtors are the same. Some are really good. Some are passive. Some are quiet. Ultimately a proactive person is who you need. A realtor can set up a private MLS search for clients by creating a personalized portal through their MLS system. Some don’t, they just wait around for you to tell them what you like from seeing things on Redfin or Zillow. If yours waits around, fire them.
Liability
That’s why I sold my house with only a real estate lawyer.
Our realtor stuck with us for 2 years. Showed us a dozen houses. Put in 7 offers. Finally landed us our dream house after arranging all of the relevant inspections, title company, bank and insurance connections. Buying in a buyers market or selling in a sellers market will always seem extremely easy but there is almost always a realtor on the other end working their ass off.
They most likely have to split that 3% with their managing broker.
They’re 1099 employees so they’re paying for their own health insurance OOP. They’re paying their own taxes.
That 30K is probably closer to 8ish when it all shakes out.
well home prices have skyrocketed in the past 20 years and their fees are commission based so their income has also skyrocketed. Hourly or flat fee makes much more sense than commission…. it is frustrating. And they used to have to work more bc we didnt have access to mls listings like we do now 😂
This will all change soon when you can just use an ai agent to do all of this for you.
They can’t. Dont use one and if you really feel like you need one just find one that charges a flat fee
We have a professional license that we maintain, continuing education we pay for, Association Boards we have to belong to, Brokerages we need to split our commissions with, etc , etc all to help ensure your transactions go through without a hitch. 27 years experience.
Professionals make it look easy, but that’s our job. Try hiring a plumber – we put up with a load more shit than they do, 24/7 without hardly a vacation that we can’t detach from our phones for an hour.
It’s not always how long it takes but knowing where to put the X. -Retired
Why are you using a BA? This is entirely on you. Next time call the listing agent directly if you want to. You do know that you’re not paying your agents fees, right?
I mean, y’all know Realtors don’t get the full commission right? A lot goes to brokerage fees, marketing, tech debt, etc.
Its a lot of money, and it’s a racket, but agents aren’t to blame.
Same! I’ve bought and sold four times and found the places I wanted to look at (cuz they wasted my time and didn’t listen). The last time it only took one showing. Each time it was legit one day because I already did so much work/decision making before contacting them
I hated spending that much money on paperwork but I didn’t want to hire a lawyer so 🤷♀️
The last one was worth it because she was formerly a lawyer , and knew how to make appropriate demands with the sellers. They had a ton of shit to get rid of and had priced it too high, plus their agent was a moron
Use a RE lawyer instead.
When we moved from Alaska to Utah last summer we had a realtor help us with the purchase. She was great, very helpful. Any issues that came up she dealt with as we were still back in AK. She also helped after we came down and needed to find tradesmen to put on a new roof and painting.
I wrote my own offer letter and told the sellers agent at the open house that we had no agent and would work with them. I had previous offers with agents rejected so I took one and filled it in with information for the house we went to see. Got the house this way.
The NAR lobbies heavily to prevent change.
the entire industry is due for a massive shake-up, and it’s happening, albeit it’s been slow but definitely picking up
the loan origination process included. AI is going to plow through that and has already begun. we recently used an online-only lender whose rate terms and fees beat everyone out for an off market investment purchase. the company uses AI for a large chunk of the initial onboarding and it’s FAST. then we dealt with a human midway and final processing. no more waiting for a human to get back from the weekend to process the requested loan documents you uploaded.
When I bought my first house in 2012, I would find properties online. My realtor would swing by my house and take me to all the houses. Probably 3-5 at a time. Over the course of three months, he probably drove me around to 40 houses. He could spot what was good and bad about a home. Small but important things I’d never notice. He knew which neighborhoods were good, which were bad, but significantly which direction they were trending in. After a while he knew what I wanted and started suggesting neighborhoods. Not specific houses, but general areas I should be looking. He suggested one neighborhood I hadn’t even thought of. Checked it out online, loved it. Checked it out in person, loved it even more. Ended buying a house there with his help. A lot of negotiation. Got $12k back on a $280k house. He worked directly with a lender to get me a pre approval. Then guided me through the full loan application process because I was a first time homebuyer and had no clue what dealing with a lender was like. All for $8.4k. I think I more than got my money’s worth.
The mountain of paperwork that comes after the offer is accepted is where they earn their money
My realtor group has a lawyer to over see all paperwork and help if any issues arrive. We did have an issue when the seller didnt clean out the house and left $1,000’s of trash clean up on the property. Not to mention many of the behind the scenes things you have no idea about from offer to closing.
You are not just paying for a showing.
Our realtor immediately negotiated $20k+ off the house we loved (and bought) purely because she knew the market and the sellers realtor and had enough inside knowledge to know what they’d accept. Not even factoring in everything else she did in that process that alone made it worth it.