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"Some home builders are so desperate to attract interest they are offering agents the chance to win Louis Vuitton handbags or Super Bowl tickets with round-trip

"Some home builders are so desperate to attract interest they are offering agents the chance to win Louis Vuitton handbags or Super Bowl tickets with round-trip airfare, if their clients buy a home." That seems like a serious conflict of interests.

thinkingkong 8y ago
Its not a conflict but its sort of weird. Sellers pay the commissions.
- froindt 8y ago
  The buyer's agent is supposed to act in the best interest of the buyer. It's tough to say that's always the case when the buyer paying a bit more rather than walking away would actually help the buyer's agent earn more. Normally there are pre-negotiated commission rates the buyer's agent would receive. To ensure you've got someone who is truly on your side as the buyer, maybe it'd make sense for your agent to be paid for services as consumed. E.g. $50 for doing a private showing, $200 for putting together the first offer and $70 for subsequent offers.
  - dvtrn 8y ago
    maybe it'd make sense for your agent to be paid for services as consumed I've actually heard/read of a few boutique style agencies taking this approach in LA. Will dig around the history and update this post if I find the blog post talking about it.
  - prawn 8y ago
    Why would you even have a buyer's agent? In Australia, the seller has an agent (often on commission) to arrange ads and conduct opens. Buyers visit and then make an offer if they wish. A buyer's agent would be quite rare - maybe only for very, very expensive properties. Does the buyer's agent in the US handle the role of a conveyancer in sorting paperwork of the final sale?
    - laurencerowe 8y ago
      US estate agent fees are absurd too. Standard seems to be 5-6% split between the buyer’s and seller’s agents (both paid by seller) - almost $100K on the median San Francisco home. In UK only seller has an agent and fees are 1-2%.
dnadler 8y ago
It is, but incentives for the buyer's agent are already messed up. They want to close the deal, they don't really care about the price because the bump in their commission for a few extra thousand is nothing compared to the risk of not closing. Buyers will talk up their clients and seller will talk theirs down.
- sgc 8y ago
  It's not as crazy as it seems. Usually the best thing to do is compromise to close, since the Buyer wants the house and the Seller wants to sell it. Buyers and sellers often overestimate the other side's patience and wear it to the bone, then lose a home/sale pointlessly. Presumably everybody is in contract because they want to do the deal, and agents work to make that happen. Agents do have a fiduciary relationship with their clients, but if you enter into a real estate transaction don't be surprised if the people involved act as if you are serious about it and it's in your best interest to actually close. That said, of course there is a group of agents who sweep problems under the rug to close. In my experience, there is a higher than average amount of agents like this among the top producers. But the group is not that big.
  - mindslight 8y ago
    This sounds exactly like a narrative used to justify an ongoing conflict of interest. For any piece of real estate, there's basically a price at which it would sell itself. People hire a real estate agent because they believe the agent will work to sell for more than that base price. In my experience, both real estate agents represent the buyer as it is the buyer who is supplying the money. Your closing attorney is the professional more likely to represent your interests.
    - sgc 8y ago
      There is a reason why 90% of homes placed on the market without an agent don't sell and wind up being listed with an agent. I think you overestimate the average person's capacity to navigate a transaction without losing a ton of money. I once thought more like you do, but have seen too many cases where people were just not capable of much of anything without a lot of help. Those people would be destroyed on the open market without an advocate, and every professional advocate will require payment. Agents earn about 1.5% per side once brokers take their commission. They are usually worth the money.
dvtrn 8y ago
If you'll humor the anecdote for what it is: I worked as a consultant business partner to real estate agencies and property management groups for a few years out of college (friend and I started a handyman company, grew it, sold it, became consultants), the phrase 'serious conflicts of interests' could unironically be adopted, publicly as an industry wide motto for the real estate profession and I don't think a soul would blink.
- deleted 8y ago
  [deleted]
cheez 8y ago
I believe one of the first few chapters of the four-hour workweek talk about this exact conflict of interest. Blew my mind when I first read it many years ago.

thinkingkong 8y ago

Its not a conflict but its sort of weird. Sellers pay the commissions.

froindt 8y ago
The buyer's agent is supposed to act in the best interest of the buyer. It's tough to say that's always the case when the buyer paying a bit more rather than walking away would actually help the buyer's agent earn more. Normally there are pre-negotiated commission rates the buyer's agent would receive. To ensure you've got someone who is truly on your side as the buyer, maybe it'd make sense for your agent to be paid for services as consumed. E.g. $50 for doing a private showing, $200 for putting together the first offer and $70 for subsequent offers.
- dvtrn 8y ago
  maybe it'd make sense for your agent to be paid for services as consumed I've actually heard/read of a few boutique style agencies taking this approach in LA. Will dig around the history and update this post if I find the blog post talking about it.
- prawn 8y ago
  Why would you even have a buyer's agent? In Australia, the seller has an agent (often on commission) to arrange ads and conduct opens. Buyers visit and then make an offer if they wish. A buyer's agent would be quite rare - maybe only for very, very expensive properties. Does the buyer's agent in the US handle the role of a conveyancer in sorting paperwork of the final sale?
  - laurencerowe 8y ago
    US estate agent fees are absurd too. Standard seems to be 5-6% split between the buyer’s and seller’s agents (both paid by seller) - almost $100K on the median San Francisco home. In UK only seller has an agent and fees are 1-2%.

dnadler 8y ago

It is, but incentives for the buyer's agent are already messed up. They want to close the deal, they don't really care about the price because the bump in their commission for a few extra thousand is nothing compared to the risk of not closing. Buyers will talk up their clients and seller will talk theirs down.

sgc 8y ago
It's not as crazy as it seems. Usually the best thing to do is compromise to close, since the Buyer wants the house and the Seller wants to sell it. Buyers and sellers often overestimate the other side's patience and wear it to the bone, then lose a home/sale pointlessly. Presumably everybody is in contract because they want to do the deal, and agents work to make that happen. Agents do have a fiduciary relationship with their clients, but if you enter into a real estate transaction don't be surprised if the people involved act as if you are serious about it and it's in your best interest to actually close. That said, of course there is a group of agents who sweep problems under the rug to close. In my experience, there is a higher than average amount of agents like this among the top producers. But the group is not that big.
- mindslight 8y ago
  This sounds exactly like a narrative used to justify an ongoing conflict of interest. For any piece of real estate, there's basically a price at which it would sell itself. People hire a real estate agent because they believe the agent will work to sell for more than that base price. In my experience, both real estate agents represent the buyer as it is the buyer who is supplying the money. Your closing attorney is the professional more likely to represent your interests.
  - sgc 8y ago
    There is a reason why 90% of homes placed on the market without an agent don't sell and wind up being listed with an agent. I think you overestimate the average person's capacity to navigate a transaction without losing a ton of money. I once thought more like you do, but have seen too many cases where people were just not capable of much of anything without a lot of help. Those people would be destroyed on the open market without an advocate, and every professional advocate will require payment. Agents earn about 1.5% per side once brokers take their commission. They are usually worth the money.

dvtrn 8y ago

If you'll humor the anecdote for what it is: I worked as a consultant business partner to real estate agencies and property management groups for a few years out of college (friend and I started a handyman company, grew it, sold it, became consultants), the phrase 'serious conflicts of interests' could unironically be adopted, publicly as an industry wide motto for the real estate profession and I don't think a soul would blink.

deleted 8y ago
[deleted]

cheez 8y ago

I believe one of the first few chapters of the four-hour workweek talk about this exact conflict of interest. Blew my mind when I first read it many years ago.