All Forum Posts by: Will E.

Does anyone have a checklist of things to check for when screening an investment property management firm?

What are some ongoing items that should be reviewed periodically to make sure you are not being overcharged?

Does any vendor show average rents over the last five or so years, organized by county in the US?   I am looking at Texas.

What would be ideal would be to see average rents at different sizes, so:

* 1000 to 1499 sq ft

* 1500 to 1999 sq ft

* 2000 to 2499 sq ft

* 2500 to 3000 sq ft

* etc

Is there a web site that would help me to see changes in a local area's real estate economy over that last N years?   I'm interested in economies that are driven by high tech growth.  Because not only do these economies get job growth, but the job quality improves with higher wage earners.   It would be nice if you could peek into a time graph for each zip code in a region to see how the composition of wage earners is changing over time.   Does anyone sell or give away that kind of data?

What are the pros and cons of Redfin?    I would guess the agents there might get less involved with a seller deal, and the quality of agents might be lower?

Why would the buyer care about cutting down the buyer's agent fee, since that is paid by the seller?   

In any profession there are individuals who are so exceptional that they get a premium price for their service.  I am not talking about those exceptions.

I am asking why very bad brokers who do not perform or add any value also manage to get 5% commissions (split buyer and seller agents).  There appears to be something structural that prevents competition.

I'm trying to understand the industry structure, and you keep trying to justify your personal worth.  You are answering questions I never asked, and you are not contributing to answering the questions I do ask.

What you describe is exactly what should happen in a competitive market.   Where would you look for discount brokers?   I guess they do not advertise much.

As a seller in the Bay Area, I think what you describe is correct.   Every property quickly gets multiple offers.  In fact, Bay Area feels like it is moving into a mode similar to 2004 to 2005.   Pricing is rapidly escalating, and in Cupertino average price is moving close to $2M.

You think the large Bay Area brokers will negotiate down to a flat 4% to cover both buyer and seller agents?

I never suggested FSBO is a better approach. You want the distribution network brokers offer. My question was why do brokers fails to compete these rates down.

I asked the question why are fees held so high.  That is a question not a point, so why are you asking for a point to be made?   

I gave an example where a comparable sized transaction that involves far higher complexity and far higher skill levels (merger and acquisition lawyers) is priced at about one sixth the price per hour.   I guess that part was a point:  brokers are paid enormously higher amounts for less service delivered, and I am trying to understand why.

I'm not complaining about those high fees.  I am asking what are the structural impediments within the system that prevent these rates from being competed down?   I'm asking a question about industry structures.

You are implying brokers are worth those rates, but that statement misunderstands the nature of my question.   In any competitive business, capitalism doesn't really care about your worth.   If firms compete on price, the price is bargained down over time to a place where every firm just covers its cost with a small profit.   The fact that rates are held high implies a lack of competition, and I just do not understand why that is the case.

Can you explain that in detail? There is more than one brokerage firm, and there appear to be small barriers to entry in that area. Anyone can add a listing to the MLS service. So where is the monopoly?

I agree with you that the high broker fee suggests some kind of lack of competition, but I just do not see where that it.

In a competitive market, you would expect real estate commissions to get competed down between brokers.   For reasons I don't understand, commissions stay high across all brokers at around 5% to 6% per deal.   Can someone help me understand why that happens?

Looking at a comparable process, consider selling a $3M business.   In this kind of deal, lawyers on both sides end up getting something like $30K to $50K.   So your closing costs are something between 2% ($60K) and 3.3% ($100K), but split between buyer and seller (each side pays their own lawyer costs).    What do you get for that $50K of legal services? Assuming lawyers are $300/hour, you are getting about 166 hours of service, which is enough to review the three inch thick document that a large buyer might create for such a deal.   

Looking at selling a $3M home, the seller is losing 5% to 6%, which $150K to $180K.   What is the seller getting for that fee?   Are the agents involved spending even 40 hours on the deal?   And does that 40 hours involve even a fraction of the skill and training required to negotiate and wordsmith a legal contract?    At the $150K commission level, assuming buyer and seller agents together spent 80 hours of time, the rate per hour is $1,875.   That might get split between the broker and the firm that hires him, but it is still many multiples of the closing cost when selling a business.

How did such a high fee system develop, and really the bigger question is why don't brokers compete amongst each other to bring these fees down.   There must be some sort of structural impediment within the system that prevents competition and maintains these high fee structures?