This story is a bunch of malarky. basically suggests that a real estate agent will try to convince you to take the first offer you get on your home, even if the agent thinks you could potential get more. Why? Because the agent is motivated by greed and wants his/her commission as quickly and as simply as possible, and puts his/her own interests ahead of the client. And, because the incremental increase in money in the agent’s pocket from a higher sales price isn’t enough to get them to want to wait around to see if a better offer comes along.
The author quotes a study that’s been around for awhile and made the rounds. I don’t think anyone has ever tracked down the original study to figure out if it’s even reputable. Two holes in the study’s findings, right off the top of my head are 1) Most properties in the big cities sell for AT LEAST full-asking price and 2) What, prices haven’t gone up enough? The study is suggesting, indirectly, that prices are lower because of what agents are purportedly doing.
I think not.
Is your agent really working for the enemy? A user’s guide to home economics (and how to beat the expert industry).
By Steven D. Levitt and Stephen J. Dubner
(O)n the sale of your $300,000 house, her personal take of the $18,000 commission is $4,500. Still not bad, you say. But what if the house was worth more than $300,000? What if, with a little more effort and patience, she could have sold it for $310,000? After the commission, that puts an additional $9,400 in your pocket. Yet the agent’s additional share – her personal 1.5 percent – is a mere $150. So maybe your incentives aren’t aligned after all. Is the agent willing to put out all that extra time and energy for just $150?
There’s one way to find out: measure the difference between the sales data for houses that belong to real estate agents themselves and the houses they sold on behalf of clients.
Using the information from those 100,000 Chicago homes, and controlling for any number of variables – location, age and quality of the house, aesthetics, and so on – it turns out an agent keeps her own home on the market an average of 10 days longer and sells it for an extra 3-plus percent, or $10,000 on a $300,000 house. When she sells her own house, an agent holds out for the best offer; when she sells yours, she pushes you to take the first decent offer that comes along. Like a stockbroker churning commissions, she wants to make deals and make them fast.
Why not? Her share of a better offer – $150 – is too puny an incentive to encourage her to do otherwise. So her job is to convince you that a $300,000 offer is in fact very good, even generous, and one that only a fool would refuse.
Complete article: Cracking the Real Estate Code
Originally posted 2005-05-05 21:20:00.