11 ms·

The post above is not saying that realtors are evil or useless, just that the standard commission schema means that a realtor's payoffs/incentives are quite dif

The post above is not saying that realtors are evil or useless, just that the standard commission schema means that a realtor's payoffs/incentives are quite different than the owner who hires the realtor.

DougWebb 14y ago
That's pretty much always the case when one person hires another person to do something. The hire-er wants to get as much work done for as little money as possible, and the hire-ee wants to get as much money as possible for each unit of work. They're polar opposites, yet this arrangement happens all of the time. The problem with having different incentives is when one party doesn't recognize that there is a mis-alignment. If you're selling your home and you don't realize that your Realtor's time is not an endless, worthless resource at your disposal, then you may be inclined to insist on your Realtor spending endless hours of aggressive negotiation, potentially putting the offer at risk of closing at all, for an amount of additional money to you that's not really going to make much of a difference to you. (My wife's been involved in deals where one party or the other has risked a deal that's been in the works for 2-3 months over less than 0.1% of the house's value.)
- philh 14y ago
  0.1% of a house's value seems like a fair amount of money. I doubt it would seem strange to put a lot of effort into getting that much money, if it was framed differently. Admittedly, not spending 2-3 months to work out another deal is worth quite a lot of money as well. But this behaviour doesn't seem obviously irrational.
  - bartonfink 14y ago
    0.1% of a house's value is almost certainly not an appreciable amount of money. It's so low that, if the parties could not find a way to come to terms over it, the agents may swallow it themselves just to get the deal done. For a half-million dollar home, which would be a relatively nice house for most of the country, you're talking about $500. For any party on that transaction (buyer, seller or their respective agents who each stand to make $15k on a normal 3% commission), that's not a lot of money and is almost certainly not worth arguing over if you're in all but the earliest stages of negotiation.

DougWebb 14y ago

That's pretty much always the case when one person hires another person to do something. The hire-er wants to get as much work done for as little money as possible, and the hire-ee wants to get as much money as possible for each unit of work. They're polar opposites, yet this arrangement happens all of the time. The problem with having different incentives is when one party doesn't recognize that there is a mis-alignment. If you're selling your home and you don't realize that your Realtor's time is not an endless, worthless resource at your disposal, then you may be inclined to insist on your Realtor spending endless hours of aggressive negotiation, potentially putting the offer at risk of closing at all, for an amount of additional money to you that's not really going to make much of a difference to you. (My wife's been involved in deals where one party or the other has risked a deal that's been in the works for 2-3 months over less than 0.1% of the house's value.)

philh 14y ago
0.1% of a house's value seems like a fair amount of money. I doubt it would seem strange to put a lot of effort into getting that much money, if it was framed differently. Admittedly, not spending 2-3 months to work out another deal is worth quite a lot of money as well. But this behaviour doesn't seem obviously irrational.
- bartonfink 14y ago
  0.1% of a house's value is almost certainly not an appreciable amount of money. It's so low that, if the parties could not find a way to come to terms over it, the agents may swallow it themselves just to get the deal done. For a half-million dollar home, which would be a relatively nice house for most of the country, you're talking about $500. For any party on that transaction (buyer, seller or their respective agents who each stand to make $15k on a normal 3% commission), that's not a lot of money and is almost certainly not worth arguing over if you're in all but the earliest stages of negotiation.