[jedberg]

The commission shouldn't be based on the full price though. When a car salesman sells a car, their commission is based on the profit, not the total price. Selling a Honda can get you more commission than a BMW if you are good at what you do.

To make the same for a house, the seller should say "this is how much I want" and then the agent gets to keep say 50% of whatever they get over that price. Then the incentives are aligned.

[scarface74]

So does the real estate do less work based on how much a house has appreciated since it was bought?

[jedberg]

I didn’t say base it on profit for a house. I said base it on a price the seller wants. Like consignment.

[scarface74]

It’s still a horrible idea. If I know the market value of my house which is easy to find out based on comparables, how much over could the real estate agent sell it for? The buyer can’t get a loan for more than the house is appraised for. In most house buying situations, the seller,buyer, and mortgage company all know what the house is worth with only a little wiggle room.

[dragonwriter]

> The buyer can’t get a loan for more than the house is appraised for.

The buyer in most cases (there are exceptions) probably can't get a loan with a LTV ratio higher than some number less than or equal to 1 times the appraisal value (.8 typically for a conventional, first mortgage alone), but can generally put as much of their own money into a purchase as they want.

[scarface74]

Outside of a very few areas of the country. There is more than enough housing inventory for people not to pay over the appraised value of the house. Most people are smart enough not to be upside down on their home the day they move in.

If you have good credit you can still get 100% LTV loans. Heck you only have to have a 600 credit score and not have had a foreclosure in 3 years to get a government back FHA loan with 3.5% down.

There are plenty of people who did “strategic defaults” on multiple properties after 2008, rented for three years and got an FHA loan for a new mortgage (ask me how I know).

[jedberg]

If the seller doesn’t offer enough wiggle room no agent will take the deal.

The seller would have to offer enough wiggle room that the agent wants to take on the risk. Combined with a flat fee, the system would guarantee income for the agent and also align the incentives.

[jedberg]

You could make the same argument about cars. “Why would anyone sell cars if any buyer can look up the base price of the car?”

Or literally the sale of any other item in the world. Why is a house the only thing where the commission is based on the full price?