The Housing Market

[TDIRunner | 2,742]

My mom grew up in a house with eight people and one bathroom.  The bathroom was in the house before she was born, but the bathroom was not original to the house.  

[Daniel_Doyce | 475]

12 hours ago, Link said:

https://antiquehomestyle.com/plans/sears/1916sears/sears-264b179.htm

 

My parents bought a Sears house in the early 1970s. Apparently the workers came, built the foundation and other underground stuff, and just plopped the house down basically. It's still holding strong. I believe it was $25K all in.

[Jfreakofkorn | 282]

https://duckduckgo.com/?q=sears+house+kits&iax=images&ia=images

[avatar! | 1,819]

Real estate industry trembles over commissions on home sales

https://www.washingtonpost.com/business/2023/11/11/real-estate-commissions-nar-changes/

In a federal civil case, a Kansas City jury last month found the National Association of Realtors (NAR) and major brokerages conspired to keep commissions artificially high. The result has left the real estate industry holding its collective breath, as experts say it is on the cusp of a radical reorganization that could affect everything about the business.

"There's a lot of speculation out there around how this will play out," said Ryan Tomasello, who covers the real estate technology sector for Keefe, Bruyette & Woods. Although much remains uncertain, "we have a high degree of confidence that, at the conclusion of this storyline, significant changes will be made to the commission structure in the U.S."

The most immediate and striking blow could come as a result of the federal case in Kansas City, Mo. The judge overseeing the case has the power to issue an injunction that could break up the century-old "bundled" or "cooperative" commissions system, in which sellers' and buyers' agents split a commission that typically ranges between 5 and 6 percent of the home sale price. The timing of such an action remains unclear.

A settlement in which NAR agrees to change the system is also possible, according to Michael Ketchmark, the lead plaintiff attorney. "We're in the process of having conversations with the [Justice Department] and NAR, and we remain hopeful that we're going have a resolution that brings relief to millions across the county," he told The Washington Post.

NAR, Keller Williams and HomeServices of America have denied those allegations and vowed to appeal the Oct. 31 verdict that awarded $1.8 billion to a half-million Missouri home sellers, an amount that could swell to $5 billion. Those organizations say the existing commissions structure is transparent, and they denied that the payment structure was anticompetitive. NAR said after the verdict that the "matter is not close to being final."

Mantill Williams, an NAR spokesman, said the association is open to a resolution that "maintains a way for buyers and sellers to continue to benefit from the cooperation of real estate professionals and eliminates our members' risk of liability for the claims alleged." "That being said," he added, "we remain confident we will prevail on our appeal."

Yeah, if "confident" means shitting bricks, I agree with the NAR spokesman.

Carole Higgins, a real estate agent in Suttons Bay, Mich., said changes are long overdue because agents have largely failed to appropriately explain contracts and commissions to consumers. "We've grown so sloppy with the way that we are training our Realtors that this was the natural outcome," Higgins said of the lawsuits. This "is a wake-up call."

Edited November 13, 2023 by avatar!

[RH | 4,910]

But what, exactly, is the problem?  It's been my general understanding that home commission sales tend to be around 6%.  As mentioned, if someone sales the home and it's not listed under them, they get 50% of the commission, while the listing agent gets 3%.  This seems reasonable to me.  Sure, I'd prefer total commission to be 2% but it's a business.

If they are "artificially inflating" commission rates, how are they doing that?  Over valuing homes and selling them at those prices?  I mean, when an agreed upon commission percent is understood from the beginning, then how is this over-inflated?  6% of final sale is not hard to figure out.

I guess my real question is, what has this company (and potentially others across this country) done to squeeze more out of these real estate transactions beyond what the article outlines as common practice.  I don't see what they've done that's wrong?  I mean, you may not like a 6% rate, but I don't see that as illegal.  That's business.

[avatar! | 1,819]

3 minutes ago, RH said:

But what, exactly, is the problem?  It's been my general understanding that home commission sales tend to be around 6%.  As mentioned, if someone sales the home and it's not listed under them, they get 50% of the commission, while the listing agent gets 3%.  This seems reasonable to me.  Sure, I'd prefer total commission to be 2% but it's a business.

If they are "artificially inflating" commission rates, how are they doing that?  Over valuing homes and selling them at those prices?  I mean, when an agreed upon commission percent is understood from the beginning, then how is this over-inflated?  6% of final sale is not hard to figure out.

I guess my real question is, what has this company (and potentially others across this country) done to squeeze more out of these real estate transactions beyond what the article outlines as common practice.  I don't see what they've done that's wrong?  I mean, you may not like a 6% rate, but I don't see that as illegal.  That's business.

They were found guilty of conspiring to artificially inflate inflate commissions for home sales --

https://www.cnbc.com/2023/10/31/missouri-jury-hits-realtors-real-estate-companies-with-1point8-billion-in-damages.html

Home sellers complained that this model suppressed competition by keeping commissions for buyer brokers in the 2-1/2 to 3% range despite the brokers’ diminishing role, with many buyers able to find homes independently online.

Sellers said the arrangement had “severe anticompetitive effects” and made “no economic sense, except for the buyer broker.”

Also --

The U.S. Department of Justice is separately asking a federal appeals court in Washington to let it revive an antitrust probe into the NAR’s practices.

Brokers need to follow the rules and regulations in place that allow for a free market and clearly this has not been happening. Overall I would say this is great news for both buyers and sellers.

[RH | 4,910]

1 minute ago, avatar! said:

They were found guilty of conspiring to artificially inflate inflate commissions for home sales --

https://www.cnbc.com/2023/10/31/missouri-jury-hits-realtors-real-estate-companies-with-1point8-billion-in-damages.html

Home sellers complained that this model suppressed competition by keeping commissions for buyer brokers in the 2-1/2 to 3% range despite the brokers’ diminishing role, with many buyers able to find homes independently online.

Sellers said the arrangement had “severe anticompetitive effects” and made “no economic sense, except for the buyer broker.”

Also --

The U.S. Department of Justice is separately asking a federal appeals court in Washington to let it revive an antitrust probe into the NAR’s practices.

Brokers need to follow the rules and regulations in place that allow for a free market and clearly this has not been happening. Overall I would say this is great news for both buyers and sellers.

Ok, so this is legit clarification statements because I need that from time to time... the problem is that the current structure might say that sales commissions are 6% (as an example) where the lister gets 3% and the selling agent gets 3%?  If two different real estate parties are involved, this is cut and dry.  I assume it's also cut and dry that if the listing agent happens to also be the selling agent, (s)he getting the full full 6% is understood because they have done 100% of the work.

However, when someone shops online and finds the home they want, it's "confusing" because they found the home and (possibly) bought it without interact much with a seller agent?

Again, I'm not trying to be dense. I'm just not seeing all of the pieces.

[avatar! | 1,819]

8 minutes ago, RH said:

Ok, so this is legit clarification statements because I need that from time to time... the problem is that the current structure might say that sales commissions are 6% (as an example) where the lister gets 3% and the selling agent gets 3%?  If two different real estate parties are involved, this is cut and dry.  I assume it's also cut and dry that if the listing agent happens to also be the selling agent, (s)he getting the full full 6% is understood because they have done 100% of the work.

However, when someone shops online and finds the home they want, it's "confusing" because they found the home and (possibly) bought it without interact much with a seller agent?

Again, I'm not trying to be dense. I'm just not seeing all of the pieces.

I'm no expert, but it looks like this as far as I can tell --

You sell your house for X dollars. Then it turns out you owe the buyer's broker 3% of that! "Wait! What? I'm the seller, the buyer should pay his broker 3% of what they paid!" Well, no, apparently you also need to pay, because...
How does this make sense? It does not! That, I believe is the heart of the matter... as best as I can tell

Edited November 13, 2023 by avatar!

[RH | 4,910]

That lady at the end hit the nail on the head. "Buyers agents" won't work for free, that's for dang sure.  What we will see is a shift in the market where buyers agents will have to some-how pre negotiate that "3% will be added to the sale", or something worse than that.

This will not reduce costs.  It's either going to further complicate the sale and make it MORE confusing to compensate the buying agents, or worst case it will eliminate the 3rd party buyer agent altogether.  Practically speaking, that means if Joe Shmoe Realty lists a home, you have to get him or someone at his office to show the home, rather getting the closest realtor in a 2 block radius.

The split-fees allows for easier selling and moving of homes and I 100% disagree that the buyers agent does NOT work for the seller.  True, the buyers agent by definition helps the buyer but if they don't do their job, homes won't move (or move fast) without their assistance and this helps the buyer.  The benefit is not mutually exclusive to one party vs. the other.

I don't see this as a market "conspiring" against consumers. Instead, I see it as a smart approach to make sure all parties involved get paid their fair share. IMHO, it's more like the listing agent gets paid the 6%, however, they give a 50% cut to anyone who sells there home, not just agents within their company.

The housing and real estate industry has a lot of problems, but I don't this is one. It feel more like a law firm that's trying to exploit a system for a multi-million/billion dollar pay day.