Jury Finds Realtors Conspired to Keep Commissions High (1 Viewer)

[Gally]

I just love people not in the industry and their idealistic views of what they think actually goes on. Sorry, but you guys at best comment on only about 25% of all the things that can happen in a transaction.

LOL at looking up complex, legal issues that come up all the time on google. That's ****ing hilarious

I recently sold and inherited house without any realtor involved. We went through the title company for all the paperwork. We sold the house as-is. The buyer needed to get an inspection and appraiser for his VA loan. He arranged all that himself. We negotiated a price (fairly easy to do without much haggling - essentially we said we want to sell as is for X amount. He said sounds good.

Closed in 45 days, signed the papers, and he moved in. I am sure there are things that could have gone wrong or happen but I am not sure for a sale like this if there was much risk to either side.

I can understand a situation where the transaction might have a lot more complexity and someone with more knowledge of the nuances should be involved but that seems like it would be in 25% of sales (???).

Is there something I just got lucky with in this scenario that could have boned me? What did I need to know that I didn't know?

 

[Todem]

Looks like an opportunity for title companies to offer more direct services. Short term I see this as slowing down the process. Buyers are thinking houses should be cheaper without commissions and sellers want to keep the money they were paying. Not sure who will be there to move the process along.

Houses should be cheaper, why wouldn't they be?

Sellers don’t think their homes are worth any less today than yesterday. They are looking at this as a 6% raise.

Doesn't really matter what the sellers think.

Of course it does. I don't think this will change the market for a little while, if at all. People are accustomed to listing and paying X amount of money for X amount of square footage in X locale. Just because the money will go to the seller instead of an agent isn't going to change that all that much, IMO

That's not how markets work. Both buyers and sellers should save money by paying less in commissions.

Yes this will create a more competitive environment in the realtor world.

Home sellers win getting more money in their pockets now.

I am going to be interested in seeing how buyers agents play this and what compensation scale/fee they create.

 

[culdeus]

Looks like an opportunity for title companies to offer more direct services. Short term I see this as slowing down the process. Buyers are thinking houses should be cheaper without commissions and sellers want to keep the money they were paying. Not sure who will be there to move the process along.

Houses should be cheaper, why wouldn't they be?

Sellers don’t think their homes are worth any less today than yesterday. They are looking at this as a 6% raise.

Doesn't really matter what the sellers think.

Of course it does. I don't think this will change the market for a little while, if at all. People are accustomed to listing and paying X amount of money for X amount of square footage in X locale. Just because the money will go to the seller instead of an agent isn't going to change that all that much, IMO

That's not how markets work. Both buyers and sellers should save money by paying less in commissions.

Yes this will create a more competitive environment in the realtor world.

Home sellers win getting more money in their pockets now.

I am going to be interested in seeing how buyers agents play this and what compensation scale/fee they create.

Given they are highly skilled at complex litigation they will be joining high powered law firms all over the world.

 

[The Z Machine]

The tableta

Looks like an opportunity for title companies to offer more direct services. Short term I see this as slowing down the process. Buyers are thinking houses should be cheaper without commissions and sellers want to keep the money they were paying. Not sure who will be there to move the process along.

Houses should be cheaper, why wouldn't they be?

Sellers don’t think their homes are worth any less today than yesterday. They are looking at this as a 6% raise.

Doesn't really matter what the sellers think.

Of course it does. I don't think this will change the market for a little while, if at all. People are accustomed to listing and paying X amount of money for X amount of square footage in X locale. Just because the money will go to the seller instead of an agent isn't going to change that all that much, IMO

That's not how markets work. Both buyers and sellers should save money by paying less in commissions.

Yes this will create a more competitive environment in the realtor world.

Home sellers win getting more money in their pockets now.

I am going to be interested in seeing how buyers agents play this and what compensation scale/fee they create.

The reality is that buyers agents don't really add that much value to the transaction. Sellers agents do however, as the are essentially marketing and sales, which can definitely influence the final sale piece. Good real estate agents will become sellers agents only. Bad ones will not get business selling houses and leave the industry. Other people / companies / automation will help fill in the gap left by the buyers agents and do it at a fraction of the price.

 

[Todem]

The tableta

Looks like an opportunity for title companies to offer more direct services. Short term I see this as slowing down the process. Buyers are thinking houses should be cheaper without commissions and sellers want to keep the money they were paying. Not sure who will be there to move the process along.

Houses should be cheaper, why wouldn't they be?

Sellers don’t think their homes are worth any less today than yesterday. They are looking at this as a 6% raise.

Doesn't really matter what the sellers think.

Of course it does. I don't think this will change the market for a little while, if at all. People are accustomed to listing and paying X amount of money for X amount of square footage in X locale. Just because the money will go to the seller instead of an agent isn't going to change that all that much, IMO

That's not how markets work. Both buyers and sellers should save money by paying less in commissions.

Yes this will create a more competitive environment in the realtor world.

Home sellers win getting more money in their pockets now.

I am going to be interested in seeing how buyers agents play this and what compensation scale/fee they create.

The reality is that buyers agents don't really add that much value to the transaction. Sellers agents do however, as the are essentially marketing and sales, which can definitely influence the final sale piece. Good real estate agents will become sellers agents only. Bad ones will not get business selling houses and leave the industry. Other people / companies / automation will help fill in the gap left by the buyers agents and do it at a fraction of the price.

Yep I agree that's why I said it will be interesting.

The industry is about to change.

 

[gianmarco]

The tableta

Looks like an opportunity for title companies to offer more direct services. Short term I see this as slowing down the process. Buyers are thinking houses should be cheaper without commissions and sellers want to keep the money they were paying. Not sure who will be there to move the process along.

Houses should be cheaper, why wouldn't they be?

Sellers don’t think their homes are worth any less today than yesterday. They are looking at this as a 6% raise.

Doesn't really matter what the sellers think.

Of course it does. I don't think this will change the market for a little while, if at all. People are accustomed to listing and paying X amount of money for X amount of square footage in X locale. Just because the money will go to the seller instead of an agent isn't going to change that all that much, IMO

That's not how markets work. Both buyers and sellers should save money by paying less in commissions.

Yes this will create a more competitive environment in the realtor world.

Home sellers win getting more money in their pockets now.

I am going to be interested in seeing how buyers agents play this and what compensation scale/fee they create.

The reality is that buyers agents don't really add that much value to the transaction. Sellers agents do however, as the are essentially marketing and sales, which can definitely influence the final sale piece. Good real estate agents will become sellers agents only. Bad ones will not get business selling houses and leave the industry. Other people / companies / automation will help fill in the gap left by the buyers agents and do it at a fraction of the price.

I think the primary purpose of the buyer's s agents is to protect their client from entering into a bad deal, especially first time or inexperienced home buyers. Most home purchases, there's not much to worry about, but it's those few where there could be a major issue (concerning inspection, contingencies, etc).

 

[Stoneworker]

The tableta
The reality is that buyers agents don't really add that much value to the transaction. Sellers agents do however, as the are essentially marketing and sales, which can definitely influence the final sale piece. Good real estate agents will become sellers agents only. Bad ones will not get business selling houses and leave the industry. Other people / companies / automation will help fill in the gap left by the buyers agents and do it at a fraction of the price.

Perhaps buyer's agents added quite a bit of value in the past...and perhaps they may still do so for first time buyers in the future.

However, once someone has been through a transaction or two (combined with technology dis-intermediating much of the home search aspect), for most people the buyer's agent value-add is greatly reduced.

I'm hoping for more fee-for-service models, where it costs X to write an offer, Y to arrange inspections, Z for so many accompanied tours, etc. As well as common sense service bundles.

Most people are more than happy to pay, but there needs to be much better transparency between the standard 2.5% fee and what it costs to provide those services.

 

[Nugget]

Our house goes on the market next Wednesday. My agent put us on a Pre-MLS blast for other agents to see a coming soon listing. We have two visits already scheduled for next week. Two more people stopped at our garage sale last weekend to tell us they are going to visit the house.

I'll happily pay the commission because I don't wanna **** with this. I don't want to do all the legwork and all the photos and all the professional advice. I don't wanna sift through any offers that come and I'll take the advice of the professional I hired.

I KNOW I could probably sell this myself. I could negotiate a lower rate. But I wouldn't be getting this agent we hired. I would be getting someone less thorough and professional. To me it's the same reason pay for any professional to come to my house to fix things. Or whatever.

I wanted to reply here - congrats on the interest in your home and the offers so far above list. At this time, I think you had 65 appointments to show your home and 2 offers. I'm hoping more offers will come in over the weekend.

I'm curious on if these numbers would be lower/higher without the current commission structure. If buyers had an a la carte system, would they be looking at as many houses? If it was $100 per showing, would ChiefD have had the same interest?

 

[acarey50]

since as of now buyers still pay nothing directly

Not directed at you, but easy comment to quote for a thought: In a sense it could be argued that the buyer is really paying everything, including the seller agent fees, and the seller is paying nothing. The commission cost, regardless of how it gets split, is baked into the sales price of the house. The seller has factored it into their pricing for figuring out what their take home is after all the fees. The seller was never going to get that money. The buyer is the one coming up with the funds to pay for the house, therefore one would say they are the ones paying all of the commissions.

I am not involved in real estate at all and have no skin in the game here, just trying to look at this from a different point of view.

 

[ghostguy123]

The tableta

Looks like an opportunity for title companies to offer more direct services. Short term I see this as slowing down the process. Buyers are thinking houses should be cheaper without commissions and sellers want to keep the money they were paying. Not sure who will be there to move the process along.

Houses should be cheaper, why wouldn't they be?

Sellers don’t think their homes are worth any less today than yesterday. They are looking at this as a 6% raise.

Doesn't really matter what the sellers think.

Of course it does. I don't think this will change the market for a little while, if at all. People are accustomed to listing and paying X amount of money for X amount of square footage in X locale. Just because the money will go to the seller instead of an agent isn't going to change that all that much, IMO

That's not how markets work. Both buyers and sellers should save money by paying less in commissions.

Yes this will create a more competitive environment in the realtor world.

Home sellers win getting more money in their pockets now.

I am going to be interested in seeing how buyers agents play this and what compensation scale/fee they create.

The reality is that buyers agents don't really add that much value to the transaction. Sellers agents do however, as the are essentially marketing and sales, which can definitely influence the final sale piece. Good real estate agents will become sellers agents only. Bad ones will not get business selling houses and leave the industry. Other people / companies / automation will help fill in the gap left by the buyers agents and do it at a fraction of the price.

I think the primary purpose of the buyer's s agents is to protect their client from entering into a bad deal, especially first time or inexperienced home buyers. Most home purchases, there's not much to worry about, but it's those few where there could be a major issue (concerning inspection, contingencies, etc).

I've had buyers agent "work" for me who clearly just wanted be to buy anything we looked at as quickly as possible

 

[Snotbubbles]

Lot's of jobs look easy but aren't. People saying it's easy money ... then why didn't you do it ? If the grass is so green for realtors, everyone would be doing it. They go without income for months at a time. It's a lot more legal than people think. And mostly clients are tough to deal with in ANY sales job. Also, you don't have to use one. Nobody is forcing you. The appeal stands a good chance to win. But in the process you will see changes in the industry and I'm not sure most are good for the consumer. Cheaper doesn't = better. This same fee structure is typical in the yacht selling industry, but at 10%. I guess that will be among the next targets for lawyers trying to get 38% of the class action lawsuit penalty.

Everyone is doing it. That’s part of the problem. Barrier to entry is extremely low. There’s more realtors than houses for sale.

Number of realtors is actually going down now. It's cyclical with the market. People see transactions, and they are quick to jump in. Like you say there is an extremely low barrier. But then they realize it's not the easy money they think it is and they get out. The good agents do well, the bad ones don't. And the bad ones give the profession a bad name. Same as most sales industry.

People don't work for free. In any job. Who is gonna show 25+ houses to a buyer, write multiple offers, deal w all the BS, and get paid nothing. People are supposed to get paid for their expertise and effort. In any job. Frankly I could see good realtos asking for more than the commission % that has been offered. Especially as the listing agent There's no guarantee this is going to lower commissions, though it's likely on the buyer side.

Additionally, bigger brokers are going to leave the MLS. I think Compass and Realogy are the biggest two brokerages with like $250B/year in transactions each. What if they simply left the MLS and created their own. Compass already has the ability to do this, and companies like Redfin certainly do. And stopped feeding the listings to Zillow. It would be more like cars ... you want to see what Mercedes has you go to them. You want to see what Ford has, you go to them. If I was a big brokerage I'd go this way because there can't be collusion if you are the only company involved.

This seems like a bad business practice to limit information access to potential buyers.

 

[Snotbubbles]

Lot's of jobs look easy but aren't. People saying it's easy money ... then why didn't you do it ? If the grass is so green for realtors, everyone would be doing it. They go without income for months at a time. It's a lot more legal than people think. And mostly clients are tough to deal with in ANY sales job. Also, you don't have to use one. Nobody is forcing you. The appeal stands a good chance to win. But in the process you will see changes in the industry and I'm not sure most are good for the consumer. Cheaper doesn't = better. This same fee structure is typical in the yacht selling industry, but at 10%. I guess that will be among the next targets for lawyers trying to get 38% of the class action lawsuit penalty.

And those lawyers go without income for months at a time, deal with challenging clients, and it's a lot more legal what they do than people think. Further, and of course, if their jobs were so easy everybody else should be doing it.

Point well taken. I respect lawyers. But hate frivolous class action lawsuits (not that this particular one is frivolous).

I can tell you that as a lawyer I and the majority of my colleagues frivolous major class action lawsuits where, at best, an actual defendant may get something like a coupon.

But, in this case, one has to presume* that there was very much a merit to this case as it presumably passed summary judgment (meaning, in layman's terms, that a judge found that there's at least something valid here) and, given that it went through a jury trial, that the plaintiffs' lawyers almost certainly spent 100s of hours on this matter so their contingency fee is probably well earned in this situation.

*These types of cases are waaaaay outside my wheelhouse, though, so I'll defer to some of the other lawyers on this board if they correct any of my comments.

My firm deals with class actions almost exclusively. It's years of work for a single case and any money received comes on the back end. Everything upfront is paid for by the lawyer. Filing fees, worker costs, expert witnesses, etc. The client doesn't pay a thing, in fact, they're barely involved other than a possible deposition by defense counsel at the beginning of the case.

1. You need to investigate the potential case. This requires identifying a possible case. Having an investigative department to interviewing confidential witness to see if a claim can be filed. Checking court cases to see if something has already been filed, checking relevant state and federal law to see what you could sue for.

2. Then you need to write the complaint and file it. Serve notices, pay filing fees, etc.. Even when you file a case, you have to fight with other lawyers to be named Lead Plaintiff and survive the obligatory motion to dismiss.

3. Then you go through discovery. For a big case this can be a massive undertaking. I've worked on cases where we had 50+ contract attorneys doing doc review, 8 hours a day, 5-6 days a week for a year. I'd say, 12-18 month would be a reasonable discovery timeline. During this time you go through defendant productions to compile evidence and have depositions. Simultaneously, you have your expert witnesses going through information you provide them through discovery so they can write their expert reports.

4. At the end of discovery, you then have to survive summary judgment where both parties summarize all the evidence from discovery and argue that the court should give a ruling in their favor based on the evidence.

5. Then if you jump through all those hurdles and you still have a case and you don't settle, you have to argue the case in court. If you lose, you get nothing.

Fact: I was once working on a case for a couple years. We were asking for like $2 billion from a pharma company and an big investment company who we said broke the law regarding tender offers. We made it all the way to arguing in court. The judge wrote a preliminary opinion where he ruled in our favor on the merits of the case. We still settled the case for like $300 million (forgoing an additional $1.7 billion) because while we knew that our arguments on the merits were strong (the judge ruled in our favor) we didn't believe that our damage arguments were as strong. So we could have won the case but gotten nothing in return because we couldn't show damages properly. There are so many things that can go wrong at so many different places.

 

[Snotbubbles]

Never understood why people hand over 6% of their hard earned equity to these people. Hire a contract lawyer to make sure everything is situated, pay to get it on the MLS and do your own open house yourself.

Open houses rarely sell homes. They are basically done for buyers agents to get leads.


The average home owner has no clue how to handle negotiations for inspection and appraisal issues. A home owner can EASILY put themselves in a huge liability situation if they don't handle inspection issues correctly.

Oh come on. Inspection issues are on the buyer. If they don't like the inspection they can walk. Buyers just want to try to squeeze the seller often times and most listings now are as-is around here.

Yup. The last house I sold the buyer, after inspections, came to me with all these issues with the house that they wanted credits for. I said, "no, I can get them all fixed for like 80% less than what you want in a credit." They didn't want me to fix the issues, so I didn't give them any credits on most of the issues.

 

[Snotbubbles]

I just love people not in the industry and their idealistic views of what they think actually goes on. Sorry, but you guys at best comment on only about 25% of all the things that can happen in a transaction.

LOL at looking up complex, legal issues that come up all the time on google. That's ****ing hilarious

I wouldn’t trust a realtor with any complex legal issues.

Yeah, that's like doing a medical diagnosis by researching WebMD.

 

[Dinsy Ejotuz]

The last house I sold the buyer, after inspections, came to me with all these issues with the house that they wanted credits for. I said, "no, I can get them all fixed for like 80% less than what you want in a credit." They didn't want me to fix the issues, so I didn't give them any credits on most of the issues.

We went the other way as the buyer. Based on how half-assed everything they'd done was ("improvements" we could see), we didn't want them to fix anything themselves. I forget what their issue with the loan was now, but they needed the sales price to be X -- so we let them give us $15k cash after settlement to keep the sales price high. This was 2013 though, and it was a different world.

 

[Snotbubbles]

Unlike most, it seems, I'm not sure what to make of this and what will happen. Here's what I do know, though, having bought and sold a house or two:

1. Like any profession, there are realtors who add value and many who don't. Unfortunately for their reputations, the killer housing market in the last several years has flooded the profession with inept people, so weeding through to find the good ones is harder than ever. I think Zegras gave some good advise here or in another thread (and I'm too lazy to search) about how to find a good one.

2. Holy crap, if a realtor is giving legal advice, you should run! That is not only not their job, but downright scary to me. In the last purchase I did, my realtor advised me at one point to get a lawyer (forgetting I, um, am one), and I appreciated that he didn't overstep his qualifications and knowledge.

Anyway, I'm going to be both a buyer and a seller again soon, because of course I am, so I'll be interested to see how this shakes out. I almost feel like buying right now and doing the sale later might be in my interest, since as of now buyers still pay nothing directly, and I don't see the sellers lowering their prices to accommodate the 3% rather than 6% right away.

I look at this differently. The next house I buy, I'm going to tell my agent I'll pay you $X dollars for your services. If I don't buy, I'll pay you half of $X for your time.

 

[culdeus]

Unlike most, it seems, I'm not sure what to make of this and what will happen. Here's what I do know, though, having bought and sold a house or two:

1. Like any profession, there are realtors who add value and many who don't. Unfortunately for their reputations, the killer housing market in the last several years has flooded the profession with inept people, so weeding through to find the good ones is harder than ever. I think Zegras gave some good advise here or in another thread (and I'm too lazy to search) about how to find a good one.

2. Holy crap, if a realtor is giving legal advice, you should run! That is not only not their job, but downright scary to me. In the last purchase I did, my realtor advised me at one point to get a lawyer (forgetting I, um, am one), and I appreciated that he didn't overstep his qualifications and knowledge.

Anyway, I'm going to be both a buyer and a seller again soon, because of course I am, so I'll be interested to see how this shakes out. I almost feel like buying right now and doing the sale later might be in my interest, since as of now buyers still pay nothing directly, and I don't see the sellers lowering their prices to accommodate the 3% rather than 6% right away.

I look at this differently. The next house I buy, I'm going to tell my agent I'll pay you $X dollars for your services. If I don't buy, I'll pay you half of $X for your time.

But what happens if you end up in the 5th circuit court of appeals?

 

[Sand]

But what happens if you end up in the 5th circuit court of appeals?

Hope you lose - they get reversed on the regular.

 

[SoBeDad]

How will this new law affect commissions for rentals?

 

[The Z Machine]

How does the home sale / home buying system work in other countries like Canada, UK, Australia, etc?

 

[BassNBrew]

How will this new law affect commissions for rentals?

That's a very good question. I assume my compensation field in MLS will go away. I already explicitly state what I'll be offering outside agents in my management agreement. My clients could have always rejected that, but I wasn't offering a discount if they did and it would just be hindering their ability to find the best tenant as quickly as possible. Of course we're talking $100-$400, not 5 digit payouts.

 

[eoMMan]

Didn't read the whole thread.....can I get cliff notes on what this means for future fees/commissions when I sell my house? TIA

 

[Snotbubbles]

Didn't read the whole thread.....can I get cliff notes on what this means for future fees/commissions when I sell my house? TIA

If you're a seller, the buyer's RE agent fees won't be paid by you at closing, they'll be paid by the buyer which means the buyer will need more money upfront and the seller will make an extra 3%.

I assume the work around to this is to negotiate the buyer's agent fees to paid by the seller by offering a higher sale price to the seller so they can cover the commissions and the buyer doesn't have to have a boatload of cash at closing.

 

[FreeBaGeL]

I think the primary purpose of the buyer's s agents is to protect their client from entering into a bad deal, especially first time or inexperienced home buyers. Most home purchases, there's not much to worry about, but it's those few where there could be a major issue (concerning inspection, contingencies, etc).

But they're literally financially incentivized NOT to do that, because they still get paid if the buyer signs on for a bad deal but they don't if the buyer decides to walk away.

Hence swaths of realtors advising their clients to completely waive inspection and appraisal gap contingencies a few years ago. It was obviously the dumbest thing ever for the buyer, but it made the realtor more likely to get paid (as the offer was more likely to be accepted AND more likely to close after acceptance), so that god-awful advice became a very regular occurrence.