Ask HN: What is the real Value of Real Estate Agent?

[trapped]

What is the real value contributed by real estate agents?

They get 3% for buying and selling homes and most of the time work is done by Title company and other entities. Do realtors really deserve 3% of million dollar homes?

I know Redfin is trying to work on reducing this but it doesn't look like they are doing something disruptive.

Isn't real estate market riped for a major disruption? I would like to know what HN community thinks about disrupting real estate agents market (going beyond Zillow, Redfin, Movoto)

[codegeek]

In the US, a buyer's agent is worth it. Here is why:

1. You, the buyer are not paying anything. Sure the seller needs to come up with the 3% for your agent and 3% for their own agent which could be expensive for sellers.

2. A good agent knows the local market/area well. They can assess your needs/prefernces and suggest properties that are worth your time. My agent was awesome and every property he showed us, we loved. He knew what we wanted exactly. That helps. Otherwise, you are just running around looking at houses you don't want.

3. A good agent can take care of logistics of viewing a home. They have access to homes, lockboxes etc and most will even drive you around in their own car (saving you time and hassle of driving yourself). Again, this may not mean much when you see 1 or 2 homes but when you start seeing 4-5 homes a week, it adds up quickly.

4. A good agent is well connected with other professionals in the home buying/selling process. They can recommend that home inspector you really need, or the title agent or even a mortgage lender. If you don't have an agent, you need to find all these people on your own and you will HAVE to when you close a deal.

5. Finally, when you actually select and ready to close,l there are tons of paperwork that need to be prepared and signed. You may use a a lawyer but a good agent can even get that sorted for you. My agent was so good that he literally got everything ready for us and I just had to show up at his office to sign like 100 pages of documents.

So yes, they can be worth it if they are good. Otherwise, they are just middlemen. You need to find the good ones.

[alain94040]

Your point 1. doesn't make sense. If the buyer has to pay 6% in commissions, you the seller are paying for it. In other words, if that 6% wasn't there, you could make an offer 6% lower and still keep the seller just as happy.

[codegeek]

correct but it is not just about the commission as I explained in my other points. Good Agents have a value. How much is of course worth a debate.

[rbcgerard]

really only 3% lower

[_ah]

One nitpick: The Buyer Pays.

Even though the contract states that the seller is the one responsible for RE commissions, you have a transaction where one party (the Buyer) is bringing money in, and everyone else is taking money out. Ultimately, the Buyer (as the single source of funding) is the One Who Pays.

The only trick is that, by allocating the fees to the Seller, the buyer has an opportunity to finance the fees as a part of the transaction (and thus also pay interest to the bank), so the Buyer gets to pay twice :)

[lakkal]

I agree with all of this. I have very little patience or interest in the 'red tape' aspects of home-buying (and not a lot of practical home ownership knowledge), so having an agent who really knew what she was doing made things a lot easier for me, so much so that I used her when I bought my first house, then again a few years later when I sold that and got a new one.

[mrfusion]

The problem with 4 is you can't actually trust the professionals they recommend to you. For example You never want to use the inspector your agent recommends. (They won't want to blow a sale and lose the relationship with the agent).

[thehoff]

When we bought a place years ago we used an agent. He didn't do much in finding the place for us. We did most of that legwork (using realtor.com, zillow, and trulia). We'd call him up with a short list of places we wanted to see and he opened the doors for us. So not much value add there.

But he really earned his money by giving us advice on places we looked at (ie. "that doesn't look right, or this neighborhood may not be a great fit for you", etc). We looked at a lot of places. He also gave us advice when it came to closing. We walked from the first house we put a bid on after inspection gave us a pit in our stomachs. And he waived our inspection costs (he ate it) so it didn't cost us anything.

When we did buy a place he really made it happen and really helped us through all the paperwork (we didn't have the strongest offer).

When we sold our place several years later we used a different agent and she helped us move it in under 2 weeks. I really think it was her connections in finding a buyer that moved it so quickly as the first weekend she showed it (through private showings) we had multiple offers. She helped us look through all of them explaining and pointing out things we would never have noticed. And she definitely didn't push us in any direction, not even to the largest one (we went with a middle of the pack one passing up on another 15k). And I don't think it was solely the housing market we were in.

A lot of money for both agents there but in our eyes they both earned it.

[RNeff]

I have purchased four houses and sold three. All of the realtors I worked with earned their money, big time. The price of a house is an emotional number, not a scientific number. Zillow computes semi-random numbers.

Buying: The realtor knows the neighborhoods, how the prices are changing, advantages and disadvantages, what kind of people live there, new construction coming, possible flooding, airport noise, etc. The realtor learns what you want in a house, neighborhood and school district, and tries to find the best fit. The realtor knows contractors, painters, inspectors, plumbers, roofers,decorators, gardeners, who can fix problems. You have to make trade offs. The realtor knows banks and mortgage companies and can find good deals that you would qualify for, and can explain terms and rates.

Selling: The realtor knows the neighborhoods, how the prices are changing, what people are looking for, what to change in your house, how much to spend to help it sell. The realtor knows contractors, painters, inspectors, plumbers, roofers,decorators, gardeners, who can fix problems.

On our last move, we were able to buy the new house, and then sell the old house. They were 120 miles apart, so we usually were not there at the empty house. On the new house, we had to fix dry rot under the bathrooms, completely paint the interior, and fix some floors. The realtor oversaw the workers. Weird feature: hot air balloons fly over our house.

On the old house, about 50 years old, we had the inspections, fixed the roof, totally repainted the interior and the exterior, replaced all of the carpet, added new plants in the front, replaced the kitchen appliances, replaced all of the door handles and hinges, and rented pretty furniture for all of the rooms. The realtor oversaw all of the work. Got eight bids in one week, all over asking price.

So yes, both realtors worked their butts off, their experience and advice and nudging were worth every penny. Both worked for real estate firms, so they received only part of the commission.

[aliston]

How did you structure the deal so that realtors oversaw the contractors? You make it sound like it was part of their commission, but that definitely wouldn't be normal...

[koolba]

It's not normal for realtors to perform the work of a general contractor. At best (worst?) they have a list of people they recommend from which they get an undisclosed commission for referring your business. Realtors, particularly "buyers agents", are utterly useless and act only as a tax on stupid people.

[shanecleveland]

Agreed. In my experience, our agent earned their money. Even if I had simply had the time to do everything the agent (and his team) did, I never could have done it as well. Worth every penny.

[jotux]

>I know Redfin is trying to work on reducing this but it doesn't look like they are doing something disruptive.

I sold my house and bought a new one with Redfin last year. I wouldn't call them "disruptive" but I would say the process was much better than a traditional agent (for me). A few things that make Redfin unique:

- If you're buying a house you get an agent but you don't see them very often. When you want to go see a house you just pick a time online and they'll send someone out of a queue of agents to go open the door for you. This is great if you're in a hot market and want to see homes really fast. Also, every agent we ever met was previously a regular real estate agent that knew the area pretty well. When you buy with redfin they'll give you a cut of the commission they receive. After we bought our home we got a check for ~$3k a month later.

- If you're selling a house they only charge 4%. Listing is easy and like 95% of the paperwork is e-signable.

The biggest complaints I've heard about Redfin from others, mostly from older folks used to traditional agents, is that the process is significantly less personal. You really just talk to whoever is available and they don't ever call or recommend homes for you to see. If you're not tech-savvy or not too serious about buying then it puts a significantly larger burden on you to stalk homes online as soon as they hit the market. This was great for me and I can't see myself ever going back to a regular agent.

[mattbrewsbytes]

As others have said, when buying having an agent is a no brainer since it is no cost to you and they can coordinate multiple showings where you just literally show up. How many phone calls with the realtor or owners does it take to get that scheduled? I don't care since they handled that headache.

As a seller one thing to consider is the laws about selling a home and things you should/should not do. I'm thinking discrimination laws specifically. One mis-worded sentence or comment to someone walking through your home and you could have a lawsuit on your hands. A realtor will basically never let you know any demographics about potential buyers. Agents/Realtors also act as an emotional buffer between the parties.

As far as disruption goes, the pain points for independently buying/selling are:

1. Local/State laws and paperwork required to file with county/towns.

2. Getting access to MLS systems for metropolitan areas - this costs money usually

3. Emotional / legal buffer between parties. Some states will require money to be escrowed until the close of the sale at certain points. Getting the two parties to agree on a price and any additional items (seller pays $X closing costs, appliances included, pending inspections, buyer wants home warranty, etc.)

4. Ensure all parties (buyer, seller, attorneys, inspectors, banks, town/city, etc.) move things along.

I don't think a system can take care of #4 above, that can require a lot of coordination if banks or lawyers are slow to respond.

[fosco]

I purchased a house last July without a buyers or sellers agent. I was very happy to work through lawyers (normal and mandatory in New York) and aside from my first purchase with agents in Virginia I do not plan to recommend an agent ever again. their biggest value is getting you a key to do a walk through and see if you like the pictures of a house previously found on line.

just my two cents -- seems like others see more value than I do, but the knowledge that a buyers agent gave my in New York in an area I grew up in was flatly useless. I think they are a bad middleman whose interest is not yours, just theirs to collect a percentage of the sale.

on a side note, to sell my house i used Redfin after I moved out of state, my experience was very positive with their support for selling the house. I still personally believe that the agent really provided someone to answer some of my questions, had I been less lazy I could have answered the questions myself.

final notes: as house price goes up some agents stop collecting a percentage and do a 'flat fee' -- it may be worth searching for one of those.

[taway_1212]

I wonder if this is not an example of a market failure (i.e. a situation, where a solution that the natural market forces have came up with is very inefficient). I suspect we could well have much less realtors and they still would be able to handle all transactions - which means their fee per transaction could be significantly lower. Unfortunately, the process of buing/selling a property is so rare and emotionally heavy for most people that they don't negotiate the realtor's fee. Also, when a property is locked into a realtor (he's representing it) then, even if he's the worst and most expensive scum, I as a interested buyer still have no choice but to deal with him if I like this property (effectively he becomes a monopoly). All around a rotten situation.

[thisisdallas]

When I bought my first house, I would have gone crazy without an agent. She was absolutely wonderful at providing info, answering questions, and carefully explaining all of the acronyms, numbers, percentages, forms etc. etc.

[sharemywin]

Who's going to let you in the house? Also, your not paying for just you house. you also paying for the other people that waste the realtors time and money running them all around town only not to buy.