Home Sellers Might Be Getting Ripped Off By Realtors
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Home Sellers Might Be Getting Ripped Off By Realtors


We’ve done a lot of talking throughout the
years here on Ring of Fire, about powerful lobby groups here in the United States. But one that’s kind of flown under the radar
is the National Association of Realtors. Now, believe it or not, this is actually an
exceptionally powerful lobbying organization in Washington DC. They pull a lot of weight and as such, you
may have noticed last time you sold a house or maybe you bought a house that you had a
really, really high realtor fee on there. In fact, according to a recent lawsuit, we
here in the United States are paying double what realtors actually charged to sell a home
in other countries. Joining me now to talk about this new lawsuit
against these realtor associations is Scott Hardy from Top Class Actions. Scott, this is interesting because the National
Association of Realtors, they pull a lot of sway in Washington DC. They spend a lot of money. They typically, you know, you don’t pay too
much attention to them because they’re not out there doing horrendously evil things like
some of the other companies we’ve had to talk about. But now they’re finally getting, kind of popped
a little bit, at least with this lawsuit for these exorbitant realtor fees that they’re
charging for no other reason than they can. Tell us what’s happening here. Yeah, exactly. They can and how they enforce this policy
was super interesting. You know, because it all comes down to the
MLS, the multiple listing service that you use to list your house. And the MLS works with the largest realtors
according to this class action and nails down that 6% commission fee. And so they all work together saying, hey,
if you want to be on the MLS, you got to charge 6%. Now there have been other services in the
past that would get you on MLS and potentially save you some percentage. But as is stated here, you know, you’re, you’re
not going to have a whole, a whole lot of luck. And I’ve actually been discussing this class
action with some realtor friends. One of my best buddies, Eddie, who sold me
my house is, you know, talked to me about it and you know, they made some really good
points. According to this class action, you know,
what they’re really putting down here is that they want the buyers to end up paying the
fee and that fee could be going back and forth. Right now it’s split, you know, the, that
6% is, is paid for by the seller and then that is split between the buyers and the seller’s
realtor. But if you’re in a buyer’s market or I’m sorry,
a seller’s market, that homes are just flying off the listing service, you know, homes are
going for more than they’re actually getting listed for. The sellers are saying, why the heck am I
paying my 3% to a realtor? My house is going to sell, you know, whether
I have a realtor or not. Even really, whether it’s on the MLS or not,
someone’s going to buy that house because it’s a hot market. And what I, the feedback I’ve got from some
of my friends is that there really should be some flexibility there. Is that if it’s a seller’s market, then you
know that fee might drop down to 2%, 3% but if it’s a buyer’s market that might go way
up. I know that my guy Eddie, when we went and
bought my house, we looked at so many houses and it was a buyer’s market, not a seller’s
market. And we actually added it up and I said, Eddie,
I think, I don’t even know if he made minimum wage. We spent so much time looking at houses based
on the fee you paid, but he’s a good guy and he took care of me. But that’s really what this is all about,
is being, having some flexibility built in there. So according to the market, realtors can adjust
their fees up or down depending on the work that they have to put forward to sell these
houses. Well, to me it seems like, you know, this
is a little bit of the market responds, right? Or The market is supposed to respond to I
guess, supply and demand. I mean that, that’s the, basically the fundamental
principles of capitalistic economics. Supply goes up, price goes down, demand goes
up, price goes up. But right here with these fees, that’s not
what we’re see. You know, if there’s high demand for houses,
the fee doesn’t change. If there’s no demand for houses, the fee doesn’t
change. If you want to be on the MLS, you have to
pay the fee, which means if you want to get the most possible eyeballs, essentially you
have to pay to play here. And this lawsuits trying to say, listen, that’s
not how this is supposed to work. You can’t just charge us whatever you want
when you’re not having to do as much, put as much effort into this. So is that, is that kind of the gist of what
we’re seeing here with this? Exactly. You know, our community manager, Nicole, she
went and purchased a new house in the last couple of years and she was talking about
that she and her husband were that they found their house on Zillow and they still had to
get a realtor involved to actually buy it. They said, well, we found the house. This is exactly what we want. We know we went and we just to look at it
and confirm it’s what we wanted. All of a sudden we have to essentially pay
somebody or the seller’s going to have to pay somebody 6% so we can buy that house when
they didn’t do anything. Right? All they were doing is showing up, opening
the house saying it looks good, good, and then managing the paperwork. You know, I know that I’ve talked to realtors
in the past when they’ve just done a private sale and they’ll charge 1.5% or 2% for that
kind of, for that service because what they’re doing is they’re making sure that the paperwork
is done, the title work and everything is set and that everybody is taken care of. That seems very fair and that seems like would’ve
been a much better option for somebody like in Nicole’s position where they knew exactly
what they wanted. They found it themselves and the realtors
involved, they really didn’t have to do much. This is a relatively new, I guess, phenomenon
you could call it with this, you know, exorbitant fee paid to realtors. Cause you know, when I was growing up and
I’m, I’m not that old, at least in my opinion, you know, everybody knew a realtor. You probably knew a couple and they lived
a decent middle class lifestyle. But now you see these realtors and you see
these shows on Bravo, I think it is where they, they glorify this and these million
dollar listing programs, realtors just living the high life. And it wasn’t always that way. So I, I think the culture around it has changed
a little bit. I feel like some greed has definitely come
into play here. You know, if we can charge 4% let’s charge
4%. Well wait a minute. I think we could charge 6% so we start charging
6% and it will unless action is taken from an outside force, continue to go up. That’s what happens. That’s what always happens in this country. So hopefully this suit does something. Hopefully this suit changes it because yes,
if somebody is working hard to sell your home, that’s their living. They deserve to make money. I understand that. I’m not arguing that one bit, but we have
to look at what kind of effort is being put into this and see if that’s actually worth
it or even allowed or if this is in fact some kind of form of price gouging. Maybe it’s some kind of form of pay to play
with the MLS, but something’s not right here. So thank goodness that we do have lawsuits
like this that tell everybody, stop, look at this because something’s not right here. If anybody needs more information about this
particular lawsuit, you can follow the link in the description of this video and head
over to topclassactions.com and while you’re there, sign up for the weekly newsletter to
get all of the information consumers need to know about delivered directly to your inbox. Scott Hardy, Top Class Actions. Thank you very much for talking with me today. You’re welcome. Thanks Farron.

39 Comments

  • OrionPax09

    Considering that corporations are all insatiable engines of greed and destruction right out of "Mortal Engines", this should come as a surprise to no one.

  • Lou Cypher

    I've said it for years man! I believe real estate is the main problem we have here at home. They pull prices out of their asses making it very hard to live. A house that cost 80 grand thirty years ago is now close to a million bucks! The prices rose dramatically in such little time. All bullshit to rob us blind.

  • John Debest

    Realtors have replaced the used car salesman as scoundrels. They just want you to say YES the second you walk onto the property. Hugely overpaid for the "work" they do. They should be extinct in the next 5-10 years, due to to the internet. Good Riddance.

  • Gi E

    6% has been the standard for about 20 years now, why is this now breaking news lol? Realtors are kinda being phased out due to technology. Commissions are also negotiable …

  • Lisa Godin

    The realtor for my place misled me on the provided property taxes. They were much higher. And a ceiling fell in and could've killed me or my animals.

  • Ancient Pollyanna

    Buying, selling, it's all a scam and until our income meets the necessary levels to buy a home, it's also cruel. Everyone who swooped in after the crash of 2008, fuck you.

  • Chris Eggleston

    There are tons of discount realtors around here that charge 1% listing fees.
    Those people that found the house on zillow could of done the paperwork through a lawyer possibly for less $$$. They did not bother to educate themselves on the topic and shop around.

  • Pyroman /

    My uncle is a reactors in Canada has a few buddies from the states he says it sick what they do in the states I dunno if you guys have it in the states we have a companies you pay a flat fee you show the home yourself they just advertise it to you it's really good in seller markets cuz the house sells It self then they do all the paper work for yah

  • Mark Cross

    Sounds a lot like price fixing which USED to be against the law. Certainly isn't any " FREE MARKET"
    I was a broker back in the 80's and 90's , way before price shot through the roof.
    No longer are house prices anywhere NEAR an annual salary which they were for a LONG time and 6% wasn't a big deal.
    Now with an inordinate amount of over 1 million for prices, it is extreme and has not kept pace with inflated prices.

  • The Chatih Team

    In California, commissions are not fixed by law. We personally ask for 5%. 2.5% for each party’s agents. Which is then split by my team. They don't consider also how much we spend on advertising/photos/staging out of our own pockets. If the home doesn't sell we don't recoup that money. Also our Brokerage takes at least 20% of our commission. That didn't include all the time and effort we put into listing the home, open houses, showings etc. Then all the paperwork that is included, inspections, title, disclosures home buyers and sellers do not see and would never be able to handle by themselves without the guidance of a realtor. On top of all this we are strictly a commission based business, which means no monthly salary. thankfully I am in the LA market where competition is high and companies like redfin, Rex, and purple bricks are constantly under cutting us. But most realtors not in high demand markets barely make anything from the sale of a home. Majority of realtors do not make enough to support their families. Only a small percentage do a large percentage of the deals.

  • Cygne Vara

    This lawsuit is a JOKE! You can buy shoes from WalMart or Saks Fifth! You can buy a $2 burger from Burger King or $400 burger from that restaurant in Vegas. You can buy a hyundai or a Masaerti! You get what you pay for and you can chose what you want to pay in commisions in real estate.

  • Calvin Burr

    What's not right is the common myth that real estate agents are rolling in the dough and do very little. Nothing could be further from the truth. I'm not saying there aren't a lot of poor and mediocre agents, but the only ones who make a good living are those who work very hard. Finding and choosing a good agent is up to the client…if they are choosing an agent because they are a relative or a relative of a friend, then the risk of getting a crummy agent is high. Only about 20% of all licensed agents make a living at it, and only 4 or 5% are making a very good living at it. The rest usually fail because it isn't easy to master all the skills needed to help people buy and sell their homes. In addition, there are a whole lot of legal pitfalls a good agent will help their clients avoid. If you end up in a legal dispute over a real estate deal, the 6% commission that realtors end up getting will seem like pocket change by comparison to the legal expenses. And, one more thing people often miss is that the 6% commission is split between the two agents involved. So, it is only 3% for the listing agent, and 3% for the buyer's agent…and both of those agents have to split their portion with the brokerage they are working under. A typical situation is this: You sell your house for $300,000 dollars. The total commission is $18,000. The listing agent is going to get half which is $9,000. The brokerage they work for has a commission spit arrangement that might be 60/40 or 70/30. If it is 70/30, then the agent is going to receive $6,300. That might seem like a lot of money, but their a lots of expenses to be deducted from that $6,300 and it might have taken several months to sell the house. All agents have to pay for Errors and Omissions insurance which is analogous to the malpractice insurance doctors have. There are advertising expenses, car expenses, membership fees, lockbox service fees, listing service, office supplies, etc. The agent might end up with $5,000 in the end, which of course he still has to pay income tax, social security, and medicare taxes out of it. If you sell one house of similar value each month on average, you are making an income of $60,000 before taxes. If you are working with first time home buyers looking for home in the $150,000 range, you would have to sell 2 houses each month to earn the same income….and that is practically double the amount of work you have to do. And, for most agents, selling one house every month is not easy. On the other side, it you are working with buyers, the amount of work is even greater because you may have to show each client a dozen or more houses and there are all kinds of problems and obstacles that an agent has to deal with. It's not easy…way harder than most people think. Most new agents are shocked at how hard it is to establish a successful career as a real estate agent….most have to find other work to make ends meet in the beginning, or they give up entirely. So, this lawsuit is BS.

    On the other hand, there are too many poor to mediocre agents because it is too easy to get a license…that is truly a valid problem. But, that solution is not to claim that Realtors are making too much commission, the solution is to make getting a real estate license more difficult by requiring more extensive education and stricter testing.

  • Calvin Burr

    For clients who have worked with both good agents and poor agents, they fully appreciate the value of the good agent and are happy to pay the commission because the good agent almost always more than earns his commission through skillful negotiations on behalf of their clients, by helping them avoid problems, and by nipping a multitude of problems in the bud before they become nightmares.

  • Calvin Burr

    Many go into real estate thinking it is easy and good money, then they get a rude awakening…over 80% totally fail. If you think it's easy and agents make too much commission, then try it….you'll change your mind real quick.

  • GROOVE ECHO

    They should get a fixed fee. A percentage of the property for any normal home is ridiculous. I just paid the mortgage for fifteen years. I assumed all the risk and paid through the economic crisis… Then i sell it at a 24k profit… All said and done… I get 4k. WTF!? criminal. And i was dumb enough to accept an offer of 170 where i pay closing cuz it's an FHA loan. But the selling realtor wouldn't figure the commission against 164900 which is what the offer really was… Nope. That bitch wouldn't budge… Crooks.

  • Danny Vaughn

    All Commissions are negotiable. Nobody makes you use a Realtor. And I wish these guys new what kind of money we spend just to be in this business. Being a Realtor isn't free. We are lucky to clear 1% after everything is paid. .

  • Z06 Cali

    Commission is completely negotiable, as realtors you don't just show houses or put houses on the MLS you represent your clients best interest, if a seller doesn't want to pay comission they can sell they're house themselves or find an agent who is willing to discount they're fee and they're are many who will

  • fuck you

    Im a realtor. The lawsuit is correct. Buyer agents hold their buyer's hostage for 2.5-3%. Sellers can't give buyer's agents less because they won't show the home. There is no negotiation, it's not designed in a way that's conducive to negotiation. Realtors have cemented the fee. Listing agents can negotiate their fee way down and lots of companies offer a reduced listing fee, but the buyer agent commission is stuck and can be advertised less than 2.5% but the agent won't show the house and the buyer doesn't realize a higher fee drives up the sale price of the home. They end up mortgaging the fee without having a say in the matter.

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