3 ms·

Yeah except the same real estate agent will try to push you to sell that property for $9 million, against your interest, if they think that the extra commission

Yeah except the same real estate agent will try to push you to sell that property for $9 million, against your interest, if they think that the extra commission on that $1 million is not worth their effort for several extra months or years, often using manipulative tactics. This is a very perverse incentive and should be replaced with regular time based billing, perhaps with bonuses for certain milestones based on the final sale price of the property, especially given the information assymetry between realtors and owners. Until realtors have a legal duty to their clients, like lawyers or doctors, predatory behavior in the industry will remain.

cwilkes 10y ago
so if the agent is more incentivized to sell at $9m and make guaranteed money rather than $10m and making a little more at the risk of losing the deal, but it gains you ~$1m in income in selling it, doesn't that mean the agent should get a higher percentage of the sale? I can see this going either way where the seller is annoyed the you are making a lot more money for not that much more work or that the seller realizes that if he can make an extra $900k by paying someone $100k it would be worth a 10% commission.
- akiselev 10y ago
  Who said anything about losing the deal? It just takes longer to sell the house when the seller is looking for a better deal. Studies have shown that when a realtor sells their own home, they have better returns and keep the property on the market longer because of information asymmetry [1][2][3] while also displaying the opposite behavior when they sell their own property in competition with their own clients, which is in and of itself a huge conflict of interest [4]. It's not about annoyance. If the realtor gets more money for the client they deserve more money themselves. Before that sale takes place, however, the commission creates a perverse incentive which combines with information asymmetry, resulting in shady behavior. If realtors were bound by law, like other professions or fiduciaries are, this wouldn't be a problem. [1] http://www.mitpressjournals.org/doi/abs/10.1162/rest.90.4.599 http://www.mitpressjournals.org/doi/abs/10.1162/rest.90.4.59... [2] http://www.sciencedirect.com/science/article/pii/105113779290012F http://www.sciencedirect.com/science/article/pii/10511377929... [3] http://www.sciencedirect.com/science/article/pii/S0304405X05000218 http://www.sciencedirect.com/science/article/pii/S0304405X05... [4] http://link.springer.com/article/10.1007%2Fs11146-015-9543-y http://link.springer.com/article/10.1007%2Fs11146-015-9543-y

cwilkes 10y ago

so if the agent is more incentivized to sell at $9m and make guaranteed money rather than $10m and making a little more at the risk of losing the deal, but it gains you ~$1m in income in selling it, doesn't that mean the agent should get a higher percentage of the sale? I can see this going either way where the seller is annoyed the you are making a lot more money for not that much more work or that the seller realizes that if he can make an extra $900k by paying someone $100k it would be worth a 10% commission.

akiselev 10y ago
Who said anything about losing the deal? It just takes longer to sell the house when the seller is looking for a better deal. Studies have shown that when a realtor sells their own home, they have better returns and keep the property on the market longer because of information asymmetry [1][2][3] while also displaying the opposite behavior when they sell their own property in competition with their own clients, which is in and of itself a huge conflict of interest [4]. It's not about annoyance. If the realtor gets more money for the client they deserve more money themselves. Before that sale takes place, however, the commission creates a perverse incentive which combines with information asymmetry, resulting in shady behavior. If realtors were bound by law, like other professions or fiduciaries are, this wouldn't be a problem. [1] http://www.mitpressjournals.org/doi/abs/10.1162/rest.90.4.599 http://www.mitpressjournals.org/doi/abs/10.1162/rest.90.4.59... [2] http://www.sciencedirect.com/science/article/pii/105113779290012F http://www.sciencedirect.com/science/article/pii/10511377929... [3] http://www.sciencedirect.com/science/article/pii/S0304405X05000218 http://www.sciencedirect.com/science/article/pii/S0304405X05... [4] http://link.springer.com/article/10.1007%2Fs11146-015-9543-y http://link.springer.com/article/10.1007%2Fs11146-015-9543-y