Housing Elephant Unseen

[don]

Re: Housing Elephant Unseen

There are some differences between a realtor and a travel agent.

Travel is a generic commodity. For the most part, a seat on one airplane is identical to another. But more importantly, the variables and legal issues attached to travel are few.

Real estate, on the other hand, has legal issues like title issues, covenants and conveyances, comparable pricing, etc etc.

A good realtor understands the local market in a historical sense should the buyer not - price history as well as other issues like schooling, urban development direction, etc.

The real issue as I see it is the commission. The 'standard' 6% commission is simply too high for the modern era; it was designed for a lower volume and smaller income to house price multiples but has carried over due to historical inertia.

Unfortunately or fortunately the recent several decades' worth of higher real estate transaction volumes look to be returning to historical mean; perhaps the ultimate remedy is simply the death of the RE bubble which in turn will relegate real estate realtor-dom to those who choose to be professionals as opposed to 'get rich quick'.

I believe the old house turnover rate for occupants was 5 years nationally, 3.5 for California, with its always simmering appreciation. Housing follows inflation historically in appreciation. Doing the math realtors' 6% takes a third, and usually more, of 'owner' equity. This for an agent that takes little to no liability for the transaction- that's the title company, if you're lucky (and a lawyer). Their role in selling the house is usually minimal. If the market is hot, it sells itself. Cold, you wait...and wait. My experience has been if you are selling custom-floor plan property, you're lucky if the showing agent knows what's behind each door. A bedroom? A closet? A third of your equity?

[c1ue]

Re: Housing Elephant Unseen

I believe the old house turnover rate for occupants was 5 years nationally, 3.5 for California, with its always simmering appreciation. Housing follows inflation historically in appreciation. Doing the math realtors' 6% takes a third, and usually more, of 'owner' equity. This for an agent that takes little to no liability for the transaction- that's the title company, if you're lucky (and a lawyer). Their role in selling the house is usually minimal. If the market is hot, it sells itself. Cold, you wait...and wait. My experience has been if you are selling custom-floor plan property, you're lucky if the showing agent knows what's behind each door. A bedroom? A closet? A third of your equity?

The turnover rate in the past decade is an order of magnitude greater than the turnover rate in the 60s and 70s - which is when the 6% commission first started appearing.

In the 'good old days', people would buy 1 or 2 houses in their lifetimes on average - quite different than the last 15 years.

[don]

Re: Housing Elephant Unseen

Another anecdotal tidbit for the irreplaceable real estate industry.

When the Feds cooked up the tax credit for 'first time buyers', something I could not be more against, realtors bumped up asking prices by a larger margin than the tax credit. Their justification- they were losing commissions on the $8k reductions. What hubris, what ******* arrogance. They felt that was their money. I have no sympathy for their current plight and only hope it's permanent. They're the bottom feeders of FIRE.

[cjppjc]

Re: Housing Elephant Unseen

Another anecdotal tidbit for the irreplaceable real estate industry.

When the Feds cooked up the tax credit for 'first time buyers', something I could not be more against, realtors bumped up asking prices by a larger margin than the tax credit. Their justification- they were losing commissions on the $8k reductions. What hubris, what ******* arrogance. They felt that was their money. I have no sympathy for their current plight and only hope it's permanent. They're the bottom feeders of FIRE.

BULLSHIT.

Anecdotal tidbit you say?

I say BULLSHIT.

I say it never happened. Real estate agents get paid on the sales prices of the house. An $8,000 tax credit from the government does not affect the commission.

If a "Seller" agrees to sell their house for $250,000 and offers or agrees to a $10,000 credit for closing costs, the commission is based on $240,000.

[don]

Re: Housing Elephant Unseen

BULLSHIT.

Anecdotal tidbit you say?

I say BULLSHIT.

I say it never happened. Real estate agents get paid on the sales prices of the house. An $8,000 tax credit from the government does not affect the commission.

If a "Seller" agrees to sell their house for $250,000 and offers or agrees to a $10,000 credit for closing costs, the commission is based on $240,000.

You're most likely technically correct, with 2 caveats:

1- Housing asking prices saw an immediate bump when the fed tax credit was implemented.

2- local realtors told me that had to be done because of the commission loss due to the fed $$. These are realty foot soldiers and may have been told this (falsehood) as justification to ramp up the tariff on home buyers.