The reply was a bit harsh, but let's not act like the real estate industry isn't riddled with skeezy practices.
1) Home inspections that aren't really "inspections" and are just there to grease the skids
2) Buyer's agents don't have a fiduciary duty to protect the buyers.
3) Pricing "knowledge" that is typically public info, just locked behind access restrictions
4) predatory lending practices
It's a very incestuous market where the agents are friends with mortgage loan officers at banks, handymen, inspectors, and law offices that handle closing.
The fact that it costs somewhere between 10-15% of the value of a home to actually transfer ownership is highway robbery.
>Home inspections that aren't really "inspections" and are just there to grease the skids
I hear this a lot on here and I wonder what state people are in or if the laws are somehow different elsewhere. In the states where I do business, there are state mandated checklists of systems and inspectors could be held liable if they don’t show reasonable care and professionalism in gathering the data for their report. The inspectors I use pride themselves on the adoption of technology (drones for checking out roofs, thermal imaging for heat loss and insulation, etc) and often take the better part of a day on even small houses. So, I dunno man - I hear this stuff about inspectors a lot, but it doesn’t jive with what I expect the ones I refer to people to actually do.
There were many, and varied things missed in my inspection. The biggest was the entire HVAC system being messed up. The furnace was incorrectly installed, improperly sized for the house, and didn't even have any return ductwork installed.
The air flow seemed really bad in the bedroom and so one day I decided to climb up into the attic and take a look. The problem with the return air missing was immediately obvious. When I called the inspector to ask why they'd miss something so obvious I was given an excuse and pointed toward the part of the contract that states they're not liable. I eventually got them to refund the cost of the inspection, but it was hundreds of dollars back for over ten thousand dollars in missed issues. I was only able to get anything because I worked for a real estate company at the time and knew the right people who could apply pressure.
I had a friend of mine get his house inspected when buying, they never found (so apparently didn't plug a tester into it) multiple loose plugs, didn't note the plumbing line wrapped in an inch thick of electrical tape for a leak, and said the roof was inspected for leaks and "certified" for atleast a year but told 5 years it would need a replacement. When their kitchen ceiling started bubbling a year in I went up into the attic space and it was clear the roof had been leaking since before they bought it by the stains and mold it left on the wood. It was a complete joke of an inspection, and what makes it worse is none of that was hard to access. The attic space was accessible from the garage area with no ceiling and was easily walkable with 10 ft+ height, the loose plugs were in the living room and in plain view right when you walk in, and the taped up pipe was 15 feet into a concrete basement with a mere glance upward. Not to mention the other laundry list of items that weren't broken really but should have been noted by an inspector doing their job.
They tried to get the inspector for the obvious bullshit roof inspection but after getting ran around multiple times to the point of needing to hire lawyer to go any further. But eventually dropped it when some roofing company came by and offered to do the roof for "free" through their insurance because of supposed hail damage in the area that basically replaced half the roofs in the town. That too was probably a scam on the insurance by the roofers because we never had big enough hail for damage, but they weren't going to complain about a free new shingle job.
TL;DR Don't just grab any random inspector, and especially never take recommendations from anybody connected to real estate.
Here’s something I say to my clients: personally, if I am buying a property, I am unlikely to do an inspection because I’ve seen a lot of houses and systems and am generally able to assess for myself the quality of the systems and construction. But - especially for first time buyers - people who buy and sell houses infrequently and who don’t have a background in these things are at an informational deficit. For that reason, while the list of things an inspector checks can never be complete, it’s more information than a buyer may be able to gather on their own. Houses are just like software systems - they will never be bug free, bugs pop up for various reasons, and all an inspector is really doing is telling you the state of the system on a given day.
Also - I’m about to stop recommending one of my recommended inspectors, because he’s at best a “B”. He catches most issues, but the level of care isn’t what I want for my clients. There’s another guy I used to recommend but again, he’s nearing retirement and getting sloppy.
I agree, it feels really odd that making a huge ticket item purchase, if something goes wrong the max liability it the inspection price. A drop in the bucket for some issues they should have brought to light.
That’s actually very close to the excuse they gave! It’s my opinion that if an inspector can’t identify the absence of a critical and primary component of a home, they don’t really provide much value.
Real life example from Chatham County, NC. Family built a new house. Passed all inspections. House is not structurally sound and they've been advised the house needs to be completely rebuilt. They won a suit against the home builder, but the builder hasn't paid.
The county inspector was fired, but the county is not taking financial responsibility.
Building inspections are not really the same as purchase inspections, or at least don’t seem to me like they should be. Purchase inspection generally might not see a partially-constructed building or blueprints or otherwise be able to verify the engineering plan is being followed—They’re looking for broken/nonfunctional appliances/mechanicals/systems, clear fire hazards, mold, infestations, and the like.
The outcome of a building inspection is a certificate of occupancy where the authority is stating the home is safe to live in, the outcome of a purchase inspection is a report of things to ask for a discount on, part of the purchase negotiation.
The Chatham County thing is crazy, I’m hoping the family manages to find someone accountable in that mess — clearly either the original architect, the builder, or the county let them down somehow. I’m just not sure it’s really an indictment of the “inspector” profession as discussed in this thread.
The seller is paying the buyer's agent so I'm not sure why they'd have a fiduciary duty to the buyer. Agents aren't about representation at all. That's what your lawyer and lender are for (the lender acts in your best interest in their own self interest). The purpose of the agents are to make the transaction happen. The seller's agent handles this on the seller side, e.g. showing the house, making it available for inspections, etc. The buyer's agent makes this happen on the buyer's side, e.g. makes sure the buyer schedules the inspections, has their lender lined up, etc. The agents are there to make the deal happen. That's their only purpose.
Neither agent has a fiduciary duty even to the person that hired them, in the US. That situation took a lot of lobbying to create, and takes a lot of lobbying to preserve. The agents can make a deal between them that they both profit from and screws both the buyer and the seller.
Totally agree on the inspection. They're next to useless - a friend bought a home a few years ago, super-weird water heater/HVAC system (co-mingled, WTF), never mentioned by the inspector. When it broke a year later, it was a VERY expensive fix, and I think they might have recovered a few hundred $$ from the inspector (on a many thousands repair).
An agent is only getting 5-6% of the home value (assuming no split with a second agent). And a big chunk of that goes to the brokerage.
We searched and vetted and found our own inspector. On Yelp of all places, one of the least trustworthy websites. It took us less than a day to find someone good.
And he found absolutely every single imaginable problem even down to the most hysterically unimportant detail. Like the tension on one of the kitchen/garage door hinges being slightly higher than the bottom door hinge. This was on a list of over 100 other things.
The point is, inspectors are jobs like anyone else. Some are good, some bad.
The problem isn't whether they find a problem. Even the best inspector will miss things occasionally. The problem is they have zero legal liability for that miss. The buyer is making the biggest purchase of their life on a report that cost ~$1000 and has no legal backing (beyond maybe recovering the ~$1000 inspection fee).
And then you have home insurance which isn't a whole lot better. They might fix the problem or they might manage to declare is pre-existing and deny coverage, but even if they do fix it, it'll be the lowest bidder installing the cheapest parts possible.
When dealing with Home/Property insurance, always talk to a reputable public adjuster or general contractor. I worked at a general contractor construction company in a state where contractors can also act as public adjusters. We routinely caught insurance adjusters overlooking damage, lying, or straight up committing fraud.
The laws for insurance are very complex, and all of the material standards are locked behind paywalls. For an average person (me before I worked there) insurance is basically a black box; you can't argue against any of their points because they hide the criteria.
>but even if they do fix it, it'll be the lowest bidder installing the cheapest parts possible.
This is true, but illegal. You are owed for "Like Kind And Quality" according to the law. This means that the insurance company can't downgrade your materials, and they have to repair the property to AT LEAST pre-storm conditions. Additionally, it is your legal right to choose a construction crew or contractor of your choice, and the insurance company can't veto your decision. After the work is complete, make sure that you, the construction company, and the insurance company have copies of the specifications of your materials and what work was done. This way it will be much harder for insurance to fuck you over on your next claim.
Most contractors in my area are genuinely trying to help the clients. There are some contractors who take advantage of the innocent and gullible population, though. I hate them just as much as insurance companies.
Sorry, I was thinking of home warranties. You're exactly right on home insurance.
Two very different products, the former being a borderline scam much of the time, the latter being a requirement for financing (and common sense).
Current example for me... house is 50+ year old, with copper pipe for water supply. We're starting to get pin-hole leaks on some pipes. AFAIK, insurance considers this a maintenance item. They'd probably fix a major burst and the damage it causes (after the fact) but have no interest in even subsidizing preventative work to avoid the costly repair.
They consider it a maintenance item, because it is a maintenance item. Things in your house wearing out are not a homeowners insurance claim (at least not in the US).
"And he found absolutely every single imaginable problem even down to the most hysterically unimportant detail."
The fact an inspection document is impressive to read doesn't mean it is accurate. If he blew you away with his ability to name 100 minor things, but missed a structural issue, you'd be screwed, and would have no way to know this until the structure starting cracking.
Thank you for this - the public should redirect a lot of their anger away from the agents and toward their brokerages. Likewise - please don’t use Zillow, Redfin, etc to contact an agent. Call the agent directly, as these online sites take a big pile of money out of the agents pocket as well.
I want to believe changes are coming in real estate, as the long standing brokerage model exploits agents and confuses the public.
Sample of 1, but my agent was frequently closing several homes/week during peak season (Spring, early Summer). At the time (2017), typical listing would be $500-$1 million (Fairfax County, VA).
So I'd guess 20-30/year for her.
Broker keeps 30-50% of the commission.
So, a good agent in NoVA is probably making $250-$500k/year (but has to pay their own payroll taxes and stuff out of that, IIRC).
The estate agent percentage in the U.K. is typically around 2% of property value in total, paid by the seller, with virtually nobody using a buyers agent. I have never understood why fees are so crazy in the USA.
Real estate lobbying associations such as the NAR writing state laws, massively donating to campaigns, and paying huge speaking fees to ex-politicians. I once worked pretty deeply in the industry.
High-value emotional purchases attract it more for obvious reasons. You see it less in cheap commodities. Your transactions at the grocery store tend to be pretty honest.
Weird, having bought/sold a number of houses in the last ten years (our family moved several times), I can't say I've ever run into a real estate agent that seemed like a "high pressure" salesman. Perhaps its just the market so they don't really need to try, but IME the best real estate agents -- on the buyers side, at least -- were the ones that listened carefully and did a good job of finding houses that matched our needs. Definitely requires soft skills/empathy, but not really a sales role.
Do such things exist? Are there real estate agents who are like "and if you buy today, we'll throw in this grill!"? Genuinely curious.
On the general utility of real estate agents...
Really knowing a market and understanding construction/houses/permitting, etc... is a pretty important knowledge/skill set. I had one excellent agent figuratively drag me away from a condo that she understood to have serious foundation/construction defects. The good ones will help you understand what's good/bad about a house, problems to be alert for, etc...
Like a lot of middle men, I think they do provide some service of value. Now, is that worth 3%/6% of a houses value? In many cases, undoubtedly not. We sold a house in Austin when the market was so hot that we got an eye popping offer the day after the agent put a "pending" sign in the yard. I think he did like 4 hrs total work. So afaict, the profession as a whole acts as sort of a rentier over the MLS listings.
A year ago when our market was much hotter, I listed a property that I knew would sell quickly. Where I added value though was in knowing exactly when to list it, the price to list it, how to build pre-market interest, how to bring it to market in a way that would force buyers to compete only on price, and ultimately, I got the price up another $200k (and other concessions) for my sellers because of how I negotiated once offers were on the table. So even in a hot market, your agent’s skill does matter in yielding an optimal rather than just a “good” outcome.
Yes, they have much more skills than just wearing a suit and opening doors.
It's also a job which accomodates way more scum type people than you'd see in typical office jobs. As you note the incentives are very different, the pressure as well, and the recipes for success can involve screwing people over a lot of money.
The profession doesn't seem to have much interest in dealing with moral hazards.
Yes, and even if you are a “top performer” doing gods work… that does not give you any right to belittle others. I wholeheartedly agree with this sentiment and would pay money to see us as a collective (me included) try our hand at something like real estate. I for one know I would fail, but that’s me.
Hard disagree. For people taking 6% of purchase price in fees, real estate agents need to be vastly better than they are. They were insufferable in Austin over the past few years, the silver lining of a serious housing crash would be watching them try to join the ranks of the productive.
It reminds me of IT recruiters in the UK a few years back: [1] sums up the situation very well and applies just as much.
The right thing to do is I think to digitise the process. Having a transparent way of following a bidding session and subsequent legal arrangement to completion would be extremely useful, and would surely scale pretty well.
Ok I’ll rephrase: We software engineers tried to buy/sell houses using algorithms, and failed to the tune of $550m. I think we collectively would have similar success (or lack thereof) as actual real estate agents.
In my experience, there are people with a talent for talking, and have a natural attraction. People just want to talk to them. But that's not most people in sales (even if they are often top).
The key skills to be successful in sales are similar. Dedication, problems solving, and an interest in what you're doing. Many here could pick it up.
> I think you highly under-estimate the sales skills and other life competencies required to be in a high pressure sales job like being a real estate agent.
Agreed - I laugh when people call me a “salesman”. Matchmaker and project manager are more in line, with a whole lot of very specialized knowledge of finance, marketing, negotiation, soils, fencing, construction, environmental law…
Right. "opening doors" can euphemistically describe any capable salesperson. Gotta open doors to sell that $100m fighter jet. For that matter, it can describe a dealmaker in any tech company.
