Updated almost 15 years ago on . Most recent reply
Are real estate agents shady?
I compiled a bunch of excerpts for my blog, was wondering if there were any reactions
How much does your traditional real estate agent make?
[COPYRIGHT MATERIAL REMOVED]
Most Popular Reply
Having read "Freakonomics" recently, the point that the authors, Levitt and Dubner, make is that realtors, as with any other profit-seeker, responds to incentives. The different situations discussed in the book also present different (personal) incentives.
Hiring a realtor also brings up what economists call "the agent/agency" problem. The agency (the person hiring a real estate agent) to represent them in selling a property has a slightly different set of incentives than does the RE agent especially if the contract between the agent and the agency is strictly a percentage basis.
Perhaps a better arrangement would be that the agency (seller) pays the agent 5% of the sales price for a sale at a specified price and an addition 15% of the sales price ABOVE that specified price. The agent then has incentive to work harder to get the higher price ... which is also what the seller wants.
My $0.02