Class action suit going after 6% commissions
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Last: 5 yr ago by SoTheySay
this made my day
Not a realtor, but I don't like it. If the Realtors association put all the time and effort into creating the MLS, they deserve to reap the rewards for that effort. I always have the option to sell by owner if I don't like their rules. Or I can go out and create my own MLS for FSBO listings and try to compete. Everything is spelled out in the contract and you aren't forced to sign it. Can't believe it, but I'm with the realtors on this one.
Even though you can do it yourself, it's still a monopoly.
I don't get how there's a case here. Commission is negotiable. Nobody is making you sign a 6% agreement - it's a choice.
You can also hire an agent that is not a Realtor. Just because someone is licensed doesn't make them join an association as well.
Because it's a thing in the industry to avoid FSBO or buyers without representation. So while you can go that other route, you're limiting your available options on both sides of the transaction.
I think what she is saying is that there is no objective issue.
What you mentioned was more of a "whoa is me realtors are mean" ... seems hard to justify action against
What you mentioned was more of a "whoa is me realtors are mean" ... seems hard to justify action against
It's not woe (well woe is the right word, but) is me realtors are mean. It could, and probably should, be considered collusion, which can be against the law. They're using that to generate a sort of monopoly to skim 6% off the housing market for their own gain. They've already been taken to court before for anti-competitive behavior and effectively lost that battle. This is just another run at the problem. Will they lose? Probably not, but it is collusion, it's shady, but is it illegal? I don't know.evestor1 said:
I think what she is saying is that there is no objective issue.
What you mentioned was more of a "whoa is me realtors are mean" ... seems hard to justify action against
http://www.washingtonpost.com/wp-dyn/content/article/2008/05/27/AR2008052702977.html?noredirect=on
All of these threads end up the same. A bunch of engineers who don't understand the nature, reality, and cost of transacting in any illiquid markets talk about mass collusion and conspiracy, but offer up no solutions or real perceived 'fair' cost to transact. ('Skim' 6%... give me a break).
Then a bunch of realtors will show up and play defense poorly.
That settlement occurred 11 years ago... has the market changed dramatically for the cheaper? Nope... so what does that tell you about your 'skimming' accusation?
Btw not a realtor or involved in the RE industry at all before being accused of that.
Then a bunch of realtors will show up and play defense poorly.
That settlement occurred 11 years ago... has the market changed dramatically for the cheaper? Nope... so what does that tell you about your 'skimming' accusation?
Btw not a realtor or involved in the RE industry at all before being accused of that.
hph6203 said:It's not woe (well woe is the right word, but) is me realtors are mean. It could, and probably should, be considered collusion, which can be against the law. They're using that to generate a sort of monopoly to skim 6% off the housing market for their own gain. They've already been taken to court before for anti-competitive behavior and effectively lost that battle. This is just another run at the problem. Will they lose? Probably not, but it is collusion, it's shady, but is it illegal? I don't know.evestor1 said:
I think what she is saying is that there is no objective issue.
What you mentioned was more of a "whoa is me realtors are mean" ... seems hard to justify action against
http://www.washingtonpost.com/wp-dyn/content/article/2008/05/27/AR2008052702977.html?noredirect=on
Lol. Wowwww
I've sold all of my houses FSBO and find this class action suit laughable. Two points; no one forced them enter into an agreement with a realtor and commissions are negotiable. Fools looking for a handout.
If those were the standards then why are there price fixing and monopoly laws on the books?Canyon99 said:
I've sold all of my houses FSBO and find this class action suit laughable. Two points; no one forced them enter into an agreement with a realtor and commissions are negotiable. Fools looking for a handout.
The bigger issue is the risk of taking thousands of depositions and having thousands of realtors admit to illegal activity. Wonder what the legal bill would be to have a lawyer sit in on those depos.
gig em 02 said:If those were the standards then why are there price fixing and monopoly laws on the books?Canyon99 said:
I've sold all of my houses FSBO and find this class action suit laughable. Two points; no one forced them enter into an agreement with a realtor and commissions are negotiable. Fools looking for a handout.
The bigger issue is the risk of taking thousands of depositions and having thousands of realtors admit to illegal activity. Wonder what the legal bill would be to have a lawyer sit in on those depos.
The point is that there are a lot of ways to sell a house... realtors don't have a corner on that market.., and I will tell you that the last 3 transactions I was a part of, there were commission negotiations prior to close (ie... none of them ended up being a 6% to the realtor transaction).
The reality is you have a ton more discounted services and FSBO marketing options now than before... and he market has changed very little. That should be a clue as to what the true frictional cost of selling a home is... Illiquid transactions are really expensive no matter what you are transacting in. That's the reality of it.
You are posting on a real estate board, you are an extreme outlier when it comes to purchasing real estate. I'm not commenting on the merits of the case because I really don't know, what I am commenting on is the pucker factor for the owners who employ people in an industry where the entry requirements are minimal and fraud is rampant.
Valid or not, lawyers are gonna get paid.
Valid or not, lawyers are gonna get paid.
Lender, Licensed agent here, not a realtor, and I dont practice.
6% on a low to median priced house makes all the sense in the world. RE agents put a lot time/work into transactions before they ever see a dime, and if a buyer changes their mind they may get nothing. Its not unlike these class action lawyers who work on contingency.
Where it starts to make less sense is in the more expensive homes. Buyer's reps dont spend significantly more money on a $2MM transaction than they do on a $400M transaction. So, they get a much larger payday for the same amount of work (on average). One might argue that the higher-end home sales are effectively subsidizing the lower end markets in the industry.
To me, as mentioned above, the MLS is what creates the real issue. There seems to be a thought in the public that the MLS is some kind of public domain, which couldn't be further from the truth. Its a massive trove of information and its controlled by the Realtor associations, which gives them a ton of power in the industry. The Sales Comp data (especially in non-disclosure states like TX) held in the MLS is the foundation for the entire residential real estate industry. Without it, appraisals couldnt be completed (as easily), and so mortgage loans couldn't be made. So, its effectively the backbone of the whole industry, it's privately held, and access is very limited with high barriers to entry. This seems like much more anti-trust behavior than commissions.
6% on a low to median priced house makes all the sense in the world. RE agents put a lot time/work into transactions before they ever see a dime, and if a buyer changes their mind they may get nothing. Its not unlike these class action lawyers who work on contingency.
Where it starts to make less sense is in the more expensive homes. Buyer's reps dont spend significantly more money on a $2MM transaction than they do on a $400M transaction. So, they get a much larger payday for the same amount of work (on average). One might argue that the higher-end home sales are effectively subsidizing the lower end markets in the industry.
To me, as mentioned above, the MLS is what creates the real issue. There seems to be a thought in the public that the MLS is some kind of public domain, which couldn't be further from the truth. Its a massive trove of information and its controlled by the Realtor associations, which gives them a ton of power in the industry. The Sales Comp data (especially in non-disclosure states like TX) held in the MLS is the foundation for the entire residential real estate industry. Without it, appraisals couldnt be completed (as easily), and so mortgage loans couldn't be made. So, its effectively the backbone of the whole industry, it's privately held, and access is very limited with high barriers to entry. This seems like much more anti-trust behavior than commissions.
With the way "MLS" is fragmented amongst different markets I am surprised CoStar hasn't jumped into residential yet. The interface is just so much more user friendly
I have relatives that are realtors, and I like many, have a love/hate relationship with them. Not all realtors are equal, and not all deserve their commission.
I understand arguments on both sides, but who built the infrastructure is a pretty weak argument in my opinion. The system for home buying/selling has evolved, and will continue to change.
I understand arguments on both sides, but who built the infrastructure is a pretty weak argument in my opinion. The system for home buying/selling has evolved, and will continue to change.
I would disagree that the cost to the agent is the same whether it's $200K or $2MM. I think acquiring that higher dollar client is more costly.
I'm also not a Realtor but I got into the banking business 40 years ago. One thing I've notice is that I cannot recall a time a seller of a $1MM plus house has even batted an eye at the single line item - commission. Those people are busy making the kind of money it takes to pay for that house and value the service.
If the Realtors hadn't created the MLS system how much more costly and difficult might the real estate market be?
If you don't value the service don't use it.
I'm also not a Realtor but I got into the banking business 40 years ago. One thing I've notice is that I cannot recall a time a seller of a $1MM plus house has even batted an eye at the single line item - commission. Those people are busy making the kind of money it takes to pay for that house and value the service.
If the Realtors hadn't created the MLS system how much more costly and difficult might the real estate market be?
If you don't value the service don't use it.
Yes, realtors created the service and now the real estate market is less costly and difficult. So why are commissions still 6%?
The simple answer to all pricing questions is that people charge what people will pay, until people won't pay it.
As i understand, this lawsuit is all about the buyers agent, that the seller has to pay. Yes, you negotiate, but only on the seller side. There is a rule that basically forces the 3% to the buyers agent, from the seller, with no opportunity to negotiate.. and that Realtors are stearing clients away from any other setup.
Anyone that tries to compete with MLS gets muscled out by the Realtor associations, who will play pretty dirty to keep their position.DallasAggie0 said:
With the way "MLS" is fragmented amongst different markets I am surprised CoStar hasn't jumped into residential yet. The interface is just so much more user friendly
Not saying its the same cost, just that the marginal cost is not 10x.
Why does that matter?
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It would be awesome if someone in all major Texas markets charged something less than the standard 6%. Something like a $1,200 base listing fee for Sellers with other optional services offered on an "a la carte" basis. And then for Buyers, something like commission rebates up to 2% of the purchase price. That would be legit.
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What rule are you referring to? Are you saying that when you sell a house there's a rule that says you have to pay 3% to the buyers agent? I was under the impression that even that was negotiable
Ed Carter said:
What rule are you referring to? Are you saying that when you sell a house there's a rule that says you have to pay 3% to the buyers agent? I was under the impression that even that was negotiable
Buyer broker rule. Means buyer pays the commissions. You have to agree to that on MLS sale
Do people care as much about how much the guy selling $5 coffee concoctions, $8 craft beer, $69 jeans or the things they buy fairly often makes or just the guy they might pay every 5 to 10 years?
i don't have a dog in this hunt, nor do i give a fraction of a sh*t about it....but there are readily available alternatives to each of those things that require no additional effort by the consumer. but...yea, i probably hate them all equally. 
I'm pretty sure you said that wrong.. seller pays the commission.... Which is the crux of the suit.
There is no rule written anywhere that says the seller has to pay the commission.cjsag94 said:
I'm pretty sure you said that wrong.. seller pays the commission.... Which is the crux of the suit.
If somehow the courts decided that each party would pay their own commissions.. guess what?
The market would adjust and each party would still net the same thing they do now.
Did anyone actually read what the suit is about? It's not a suit claiming 6% is not fair. And yes, you can negotiate the commission, but realistically only on the seller side. The buyer broker rule means buyers agent gets 3%, and that is paid from seller. As i understand it, if seller after to less than 3% to buyers agent, then there is a claim that agents are steering people away from those listings.
The lawsuit addresses the buyers agent fee, along with control of MLS listing services, and that it is not fair to consumers. Sounds to me like the change that could come is each party will negotiate with and pay their respective agents on their own. Reading about this, the rule came from the notion that buyers frequently lack available funds to pay, so it was pushed to seller to pay from proceeds of the sale.
I'm not a realtor, don't expect to need one for many years... But i do think some scrutiny on real estate commissions is long overdue
The lawsuit addresses the buyers agent fee, along with control of MLS listing services, and that it is not fair to consumers. Sounds to me like the change that could come is each party will negotiate with and pay their respective agents on their own. Reading about this, the rule came from the notion that buyers frequently lack available funds to pay, so it was pushed to seller to pay from proceeds of the sale.
I'm not a realtor, don't expect to need one for many years... But i do think some scrutiny on real estate commissions is long overdue
mazag08 said:There is no rule written anywhere that says the seller has to pay the commission.cjsag94 said:
I'm pretty sure you said that wrong.. seller pays the commission.... Which is the crux of the suit.
If somehow the courts decided that each party would pay their own commissions.. guess what?
The market would adjust and each party would still net the same thing they do now.
I think that's the point.. as it is now, the market doesn't come in to play... It's the rules and expectations established by the industry. I think the lawsuit is seeking just what you said... Create a playing field where market conditions can be dictated by the market.