I'm a Realtor, but I'm not here to turn this into a pissing match - if you believe that representation doesn't benefit you, then don't use a Realtor. In the same way, if you believe you can represent yourself successfully in court don't use a lawyer or if you can adequately assess your financial future, don't use a financial advisor. Expertise exists for a reason - because I can tell you a lot about water rights, land use, zoning, negotiations, market and pricing, and I can connect you with other professionals to meet your needs. Many people find those professional services to be worth their time and money.
All that said - yes, I think we will see changes to the cost (commissions et al) of real estate services. But when I hear people talk about "normal" real estate transactions or comments like "you don't need an agent for residential" I know this person is either very new to real estate or very experienced. The newbie doesn't know what they don't know, and the experienced person likely has sufficient knowledge that they will only bring in an agent to supplement that knowledge. The majority of people do not transact enough real estate such that they may think they know more than they do.
Similarly, how are real estate agents a guard on investing?
I'm not convinced they are bad, mind you. Curious on your angle, though.
Perhaps this statement should be restricted to just say the costs of investing in real estate would be reduced. Small difference I know, but I think it’s an important distinction.
That’s not good. Not like this, at least. Maybe this was more appealing to people in the past because it wasn’t so overtly bad for communities and society.
I'd be happy about it too, but am overwhelmed by guilt when talking to my intern, our newly hired engineer, my younger siblings, and many of my friends who rent at ever-increasing rates.
That $230,000 was taken from the pockets of my non-homeowning friends. I don't understand how so many seem to be cheering the rising prices, oblivious to what it's doing to our society.
Even if it really did increase 10%, you'd be giving up a lot of that difference in all of the various costs involved with selling a house and moving, even if you could cut agent costs to $0.
I have some friends who became real estate agents and thought they'd use their position to flip houses while being their own agents to save on costs. They're learning the hard way that even when you're not paying agent fees, buying, selling, and holding homes is expensive.
you're not doing labour. You're injecting capital into the system. The person who sold the house to you, presumably, is using the proceeds of their sale (and profit) to do something else productive.
I don't get why so many people consider taking asset risk as "doing nothing".
There are multiple factors that pushed the prices artificially up since 2020. They will look retrospectively obvious (as the 2008 subprime crisis seem obvious now). I'm usually not in favor of timing the market but I believe we are currently in the single worst time to buy a house in history.
Effectively, rising house prices harm me too, not just first time buyers
House prices increasing are only a benefit to people treating it as an investment, and if it's your primary home, then that means planning for trading down.
I would REALLY hate to do this electronically.
We might replace people with something like ticketmaster or the "get a flight/hotel/car" mess.
It's only worth 10% more when you sell it for 10% more. Right now home closings (the finalized deals) are 50% lower than before the pandemic and lower than in 2007. So selling your house to get that 10% increase is going to be hard.
But even if you did sell it, then it isn't quite worth celebrating yet, because it is likely that your 10% increase estimate is because the entire market is selling 10% higher.
So the problem with this is that if you sell your house and take your handsome 10% profit, you still can't pop the champaign because as it turns out... having a home is one of those sort of necessary things of survival. So if you want to go out and buy another home that is roughly similar to the one you previously had, then it will cost you 10% more than the last time you bought a house, which just so happens to be roughly the same price that you just sold for, so you end up not really making anything.
But wait, there's more. Because you sold you need to pay closing fees, which includes generally 6% (see article) in agent fees, plus various closing costs which generally come out to around 10-15% of the home price. So you gained 10% in the sale price of your home, but you lose 10% or more when you close the deal, which wipes out your "profits".
Oh, but you only bought a house "recently" which means you probably lost 10-20% in closing fees when you bought it. So your investment is actually more like 110% - 120% of the value of the home. So again, gaining 10% value just brings you up to even. But add the seller closing fees (mentioned above) and it pulls you back down, to losing money.
Oh, and now with the cash in hand you buy the next house which is 10% more than before and interest rates are probably several percentages points higher than before as well. So not only is the house 10% more, plus you lost 10% in your last deal, but now your payment will be higher even on the same loan amount thanks to higher interest rates.
People underestimate interest rates all the time too. Let's say you had a $400k loan before at 4.5% interest. Well the 30yr fixed payment on that is around $2,500 /mo. Now lets say you do all the shenanigans above and end up with another $400k loan again in 2023, but it is 6.5% interest. It is only a 2 point increase in interest, not a big deal right? Wrong. The same loan amount but on 6.5% interest is $3,000 /mo. So you are now paying $500 a month more for the same loan and home value as just 18 months ago and you would pay 20% more over the lifetime of the loan.
Just to instill the shock and awe effectively, I will use the same real numbers as above. Let's say you had a $400k loan at 4.5% interest before (the early 2022 rate). You would have paid $851,626.85 over the lifetime of your loan on that.
Now the same loan ($400k) but at the late 2023 rate of 6.5%, because you wanted to sell your house for that 10% profit, remember? Now the same loan amount will cost you $1,036,344.62 over the lifetime of the loan. The house just got $150k more expensive even though the sticker price on Zillow looks like it has been flat since 2022.
So... still excited about your 10% home value?
For the rest totally agree, disrupt the middle man in real estate is OK++.
I think if you're buying a house for the first time, trying to wing it is probably not the best idea.
I think you might be mixing up hedge funds and market makers (commonly knows as high frequency traders)?
As an outsider we don't want any side to win. If RedFin wins they could become the new NAR.
"Disrupt" doesn't always mean, for the benefit of consumers.
There's a LOT of people buying up multiple properties and then renting them out.
Often these days they're renting them out on the short-term holiday market like AirBNB and Stayz. Ultimately these rentals are often a net-negative on the neighbourhood community they're in. In small amounts that's fine, but in large concentrations it's an unsustainable burden, and the majority of the benefit goes to those not living in that neighbourhood.
Those that don't do short-term rentals are often putting the least amount of effort/investment into the property. Minimal maintenance, often deferring or only doing the minimum required upgrades in terms of energy/water efficiency makes them unpleasant to live in.
That's aside from the often onerous and arbitrary requirements forced on tenants.
Examples include being forced/"strongly encouraged" into payment methods that add costs to your rent. Being required to hand over all sorts of PII to a huge range of platforms. Then there's third party rent management platforms/companies like RealPage that coordinate rent increases to maximise revenue; not because of any underlying cost increase, but because they can force market prices up.
Making it a neutral investment by adjusting real estate taxes based on changing value of the land.
The real problem is a lack of supply which is mostly political (although some areas have geographical constraints that make it harder to build... but that's largely solvable by building vertically)
Sadly, this has been the cornerstone of american culture for the last seventy years. AirBNB & the chase of "passive income" are only exacerbating this.
Now if you want to say that you should buy a house betting on significant capital gains over inflation, that's foolish.
Realtor here - if you believe that, don't use Redfin or Zillow or their competitors, because they are yet another middleman adding friction. I'm not going to go into a monologue here, but both are leeches on the system that add more cost. Yes, it's wonderful that they have made more info available to the public - for that they are to be commended. But if you understand how they actually make money they are adding more friction and contentiousness and I do not believe they are actually saving your, the consumer, money.
>I don’t even think houses should be investments
It's a sensitive and emotional topic certainly, but I would encourage you that if you feel that way, try to imagine what set of laws or social changes would need to happen in order for that to not be the case - like what would that world look like? Because each time I try to do that thought exercise with people, I continue to come back to a belief that the alternatives are not superior to the system we have. Real estate is an asset. Cars, bennie babies, stocks, bonds, gold - there are lots of types of assets in the world, but real estate with its permanence and immovability is a very, very special type of asset. Thus, it is very difficult to separate the asset from its investment potential.
when has silicon valley ever actually disrupted anything, rather than creating a new, well-funded middleman?
Market makers don't charge fees. (I mean, maybe they charge their LPs, but that's a different matter)
> I'd prefer real estate investors drive for their properties to generate regular income, though, rather than the common practice of buying property with the main goal of selling it later at a decent profit.
I'd prefer no real-estate investors other than home owners, honestly. They don't seem to add value to the world.
They take 6% out of most housing transactions and add very little value. They managed to put themselves in the critical path by lobbying and regulatory capture. You don't get access to the listings and MLS open houses unless you go with a realtor. They also made the process artificially complex.
Most other countries seem to rely on direct customer to customer for most transactions, with a notary making sure the contracts are binding. Why can we not do that in the US?
I feel like these institutions exist to pressure unsure people into making unsure decisions by trying to get them to gloss over details that might not matter.
I don't feel too guilty about taking up her time for 3-4 hours a week for 2 1/2 months.
Even if we assume she did the same amount again, if not double, lets say 10 hours/week for those 10 weeks, her 'hourly rate' (which I figure similar to a contractor, as there are of course other expenses) still comes to $300/hr, which is approaching associate/partner levels at a "reasonable" law firm (not white shoe or corporate).
As a buyer I got an excellent rate from their recommended lender, I got a solid lawyer rec, and I got experienced guidance throughout the whole process. Was it expensive? Yes, but was it worth it? In my case, very much so.
What counts as "guidance" anyway? A realtor can't be relied upon for structural issues, you'll need an inspection. They can't tell you anything about the market that you couldn't dig up yourself in 5 minutes searching Redfin. HOAs, contract language, and other legal matters will need a lawyer. You're basically gonna have to find a dedicated professional for anything that matters.
The limited benefits I can think of are:
- you're buying in a tight market, and they can find some off-market listings through their network
- a reputable buyer's agent might make your offer seem more legit
No you didn’t, they suckered you on a good rate and screwed you with stealth fees on closing costs.
With a few hours of hunting I saved $50k, beating their rate and cash to close. “Preferred lenders” are almost always a scam, but as always DYOR
Realtors are everywhere.
In the Netherlands selling a house is mostly exclusive to realtors, and there are good non-realtor alternatives available at a fixed fee for more than a decade. But the consumer wants a realtor. Note that in NL the realtor agreement is exclusive, meaning you cannot use multiple realtors, contrary to many other countries. The result is a much lower realtor fee or appr. 1.5%.
That said, is this actually going to change how Redfin operates? They used to rebate part of the agent fee in certain markets, but at least in my market, they no longer do. Now they're the same price as everyone else while providing a slightly worse service.
Let me be clear. Redfin is only breaking ties now because the NAR is fatally wounded. Redfin now thinks they can scoop up a lot of market share in the chaos that is going to happen in the next year. They’re not doing this for altruistic reasons.
[1] https://www.housingwire.com/articles/re-max-settles-buyer-br...
This sounds like they're making a case for cartel behavior.
With the general unaffordability of housing, realtors are a good target right now. Not that they have anything to do with interest rates or have more than minimal impact on asking price, most people aren't going to think that far.
That said, if Redfin can open up access better (and still securely!), this could work out in the long term too.
In 2005 NAR got their friends in the TX legislature to pass a law limiting what discount brokers could do - regulatory capture at its finest, and most blatant: https://www.npr.org/templates/story/story.php?storyId=496379.... IIRC the feds actually sued to overturn this law on antitrust grounds. I think they were successful but using Google to search for non-current events can be extremely painful so I gave up.
As some rando, I can't pay for access to the local MLS (or any MLS anywhere else).
I could take some classes and get a Realtor™-brand (don't forget to pronounce it real-tore or they get huffy) License and get access that way, but what the hell?
We ended up going to a local real estate attorney in town, and paid less than $1000 in fees for the whole transaction - didn't even use an escrow company, I handed the seller a personal check in the attorney's office. (biggest check I've ever written, had to write the numbers small to fit in the small box on my check!)
Perhaps Redfin should drop a line to Lina Kahn at the FTC.
I did this years ago, and it all went well. There's a substantial opportunity for Redfin here if they can connect buyers and sellers directly and charge a reasonable fee for all the boilerplate involved. At the time there wasn't an infrastructure to find homes with this selling arrangement so it was literally a "for sale by owner" sign in the yard.
I'm curious about the specific wording here:
> NAR membership is required for agents to access listing databases, lockboxes, and industry-standard contracts
Is it possible even in places with this regulatory capture for them to facilitate direct sales? Is it only NAR "databases" "lockboxes" and "contracts" that are unavailable to them, and if Redfin brings their own for both buyers and sellers they're in the clear?
I think real estate agents do add some value, after all there are things about properties that you won't know just by looking at online listings and having somebody familiar with an area out there doing some legwork for you is indeed a real job, but it's certainly not commensurate with the 3% of the entire transaction they're extracting.
FTFY
Wow, they’re really pulling out the big guns. I applaud their efforts to decouple MLS access from NAR, that seems to be the biggest hurdle in advancing the industry.
Technologically it's a market that's ripe for disruption, but socially as well: there just isn't enough boom left in the market to fund 1.5MM people working in it full time.
Possibly I’m a cynic but I suspect Redfin’s endgame here is not to reduce transaction costs but to capture those for themselves instead. Perhaps part of my cynicism is looking at transaction expenses in jurisdictions without realtors - usually there’s some middleman who tends to capture a single-digit percentage of transaction value (either a notary or the government or both or others). Funny how that pattern seems to repeat itself.
Houses have a huge transaction cost, unlike say trading cost. Yeah the value goes up and down due to supply and demand but the transaction fees are zero at many internet exchanges now.
That said, I don't think consolidating the fees in a tech company is necessarily a win for the greater society.
I briefly had my license and the entire industry is like a giant pyramid scheme with fees on top of fees on top of fees.
I’m half tempted to reopen my license just to get involved with Redfin because I have no real estate relationships to lose.
All that said - Redfin can also go pound sand. They exploit information asymmetry where the public doesn't understand real estate services and think Redfin et al are somehow standing up to big bad exploitative realtors. Look man - the new boss is the same as the old boss and Redfin et al are not doing you any good. Find a good agent you trust in your local market, or go your own way if you think you can do better.
Still demanded 10% of the yearly rent though :)
I get these aren’t the same brokers, but brokers delenda est
If they pull this off they will crack open innovation and some long overdue lower cost options into the real estate markets.
Read the Redfin post. The rules the REALTOR association imposes to get access to MLS data is monopolistic.
Of course, this probably comes at a cost to realtors who get their margins squeezed even more.
We sold and bought our house in 2021. We bought for $1 million and sold for almost $3 million over 8 years. When it came time to selling the house, my realtor was able to extract an extra $100k from the buyers as well as make it an all-cash offer with no contingencies.
When we bought our new house later that year, the house we were looking at was on the market for about a month. We were going to give an offer at list price, but she could tell the selling agent was a bit desperate, so she was able to get it $100k below list price, something that is unheard of in the SF Bay Area.
Overall she netted us $200k over both transactions, and she was singlehandedly the reason for this. That's what you get when you have a really good agent.
Now you may have been able to do this with a discount broker or not, nobody will know. But they didn't net you $200k.
Particularly, on the sale, we kept hearing "wait, you'll get more offers. wait, you'll get more offers. AirBnB investors are going to love this". No other offers turned up.
The process _could_ be streamlined and made less of a hassle, but since so many take a cut, there are perverse incentives.
I skew progressive/liberal on many policy issues, but on this one, I'm fiercely in favor of the libertarian argumentation. Realtors have an eff-ing insane monopoly / cartel. Sorry, it makes me crazy.
If you go back in time and/or to some markets, 3% of a $100,000 house = $6,000. That makes a bit more sense in terms of hourly compensation.
As a buyer and seller of multiple homes, I've not had success with RedFin and I've had varied success with realtors.
That said, a good realtor is absolutely worth 6%. A bad realtor (of which there are plenty) is actually worse than DIY / RedFin.
I say this because I want everyone with the position that "Realtors are never 6% value" to consider that they may have simply not worked with a good realtor yet.
First home so had no idea how this was supposed to work, but seemed other real estate agents didn't treat Redfin as a "real" realtor in any case.
On one end is a traditional realtor arrangement, with the 5% commission divided between the two agents. On the other end is for sale by owner, with potentially no commissions. Adjacent to that is a flat fee listing service, which costs about 2.5% in buyer's agent commission. If you sell through Redfin, your total commission is reduced to 4% from the industry standard 5%, with 1.5% going to your agent. If you buy through Redfin within twelve months of selling through them, you get an additional 0.5% off the commission for a grand total of 3.5%.
Not bad. It can save you $10k or more at jumbo mortgage house prices. Redfin has already done well by doing good and offering a differentiated product in the middle of two other offerings.
I have sold two properties, one using a flat fee listing service and one using Redfin. The former was a fair amount of work, while the latter was way less, comparable to a traditional realtor in the level of service offered. I would recommend Redfin to anyone.
Redfin offers a 1.5% listing fee, and lowers that to 1% if you buy and sell. However you'll still be expected to pay the typical local buyer's agent commission.
https://www.statista.com/statistics/257344/top-lobbying-spen...
It's a grift.
In at least most places you can submit the paperwork to your county/state recorder & transfer money between each other completely outside of "the system" for a few dollars. And/or hire your own title agent to facilitate and hold the money.
There's also nothing that says you have to pay each agent exactly 3%. Commissions are negotiable on both sides like anything else. Especially in this sort of situation where they're no shopping/showing and you're paying them just to perform the transaction.
2-2.5% each is routine in some markets and price points. I built our last couple houses on empty lots, found the lot on my own, and my agent was happy to shuffle some paper for a couple hours for 1% (several thousand dollars) and give me the other 2% at closing.
…and for the people who end up looking at dozens of houses before deciding, negotiating, losing an offer, rinse repeating, 3%/$hours_spent_on_you could be a pretty low hourly rate for them.
We had negotiated ours down to 1.5%, which I thought was fair, but that was continent on the sellers realtor also accepting a 1.5% fee. The sellers realtor would not accept 1.5%, nor would the sellers reduce the price by 1.5%.
Since someone was going to get that 1.5%, I insisted the commissions be matched to be fair to our agent, and the sellers agreed to pay from their proceeds – after a somewhat heated back and forth.
It was dumb.
Why did you have to do that? is it your state/city law? because I know that's not a general requirement. You can always sell/buy directly.
And that's before I bring up how everyone, from the titling company, to the attorney, to the inspector, also insisted we "needed" a realtor, with multiple potential vendors refusing to talk to me without one.
It felt, at the time, like a racket, with everyone in on the grift.
----
We bought our current house without an agent. Happens that the seller was an agent, but we worked with them directly.
That escalated quickly.
It is incredibly user hostile.
In general the best markets are have low transaction fees, efficient, trustworthy, maintain minimum quality bar, and many balanced players on both ends.
In this scenario NAR has created an inefficient market.
Same with most states having a very hefty permitting processes that takes more than half a year for new construction.
Not saying we abolish permits, but Americas solution to housing crisis is making the permitting process faster and transparent.
We can’t call ourselves capitalists when the markets are rigged.
Gotta let the builders build, the sellers sell and the buyers buy.
do they have processes in place to not just become another NAR?
