Let’s say you’re in the market to buy a house. Congrats!
Well, the average house in the U.S. right now is a record $350,000. But, you’ve been saving diligently, so are prepared to put down the average of 13%, or about $45,000.
So far so good.
Now comes the mortgage. You get approved for a standard 30 year loan at 6% (note: I know this sounds like free money to readers in 2023, but it is, interestingly, the long term average).
It takes a little while, but you close on a beautiful 3 bedroom in a nice neighborhood and could not be more excited. Heck, you even invite the Realtor who helped to the housewarming party, even though they mostly just set up showings for houses you found online. (Thank goodness you didn’t have to pay them!)
Your monthly mortgage payment: $1,825.
‘Hey, that’s not too bad!’ you think, and are only slightly disheartened when you see on your first statement that most of it is going to interest. But you own a home now! This is what you’ve been working for, and what you plan to rely on for a bulk of your future savings.
Fast forward 7 years (the average length of U.S. home ownership) and it’s time to move.
You call up that Realtor again to put your house on the market. They show you a couple similar properties that sold, and tell you that your house is now probably worth about $450,000, a perfectly fair appreciation for the time period.
You sign with the Realtor for a commission of 6% of the sale price, which feels a little high, but they assure you that number is standard and that this is your only real option.
Your house goes on the market and you're a little frustrated that the Realtor – who you now have to pay – is mostly just a middleman between you and buyers coming to see it. You very quickly get an offer for $460,000 with standard terms and quickly accept.
Even though you still owe $273,000 on the mortgage, this is still very good news!
Inflation has made most other things pretty expensive, so your $187,000 of equity makes up almost all of your savings. You think you’ll pour yourself a drink to celebrate your good financial decisions.
But then you sit down at the closing table, and that “standard” 6% Realtor commission is now due for more than $27,000.
“But wait,” you stammer to your lawyer, “if the rest of the sale is paying off my mortgage, doesn’t that mean I just paid, effectively, almost 15% of my equity, my life savings, to the Realtors?”
Your lawyer, who graduated from 3 years of law school, did most of the negotiation for the sale, and who is making a flat fee of $800 from you simply nods their head a slow ‘yes’.
This has not been an unfamiliar story to a lot of you reading. In fact, it is the situation that the majority of U.S. homeowners find themselves in.
The “standard” Realtor commission rate of 5-6% seems almost reasonable, which it probably was back when we sold our homes only once or twice in our lifetime. But today, with a mortgage and the fact that we, as homeowners, move every 7 years, the cost we pay is effectively almost 15% of our home’s equity.
Every year, this means that over $100 Billion of consumers’ savings are taken as commissions by the Realtors selling our homes. This will compound, eating away almost a decade of our savings over the course of our lifetimes.
This is shocking not only because homes are more unaffordable than ever, or because Realtors are charging increasingly higher rates, but because, with their own technology, Realtors’ jobs entail less specialized function than they ever have before.
So how does this change?
In October 2023, federal courts ruled that the National Association of Realtors (NAR) had acted in an illegal conspiracy with brokerages to extract excessive fees from homeowners.
Consumers are more educated than ever in history, meaning that when corruption is called out, we are ready and able to correct our own course quicker than ever before.
And finally, the technology now exists to democratize what a Realtor does directly into the hands of us homeowners in a way that we can do the job better.
No, this technology won’t come from RedFin; they were named in the collusion lawsuit.
It won’t come from Zillow either; most of their revenue is made selling your information to Realtors.
This will be something new entirely.
Take back control of selling your home.
Learn more at PERISPHERE.IO →