@Wayne Brooks yes the selling agent did get a higher price but the question is that the true market clearing price? My original points with the post is that 1) the incentive/broker compensation system is broken and 2) "unscrupulous" agents beware 3) show other BP members that as a buyer you have options in an often opaque market where there are little checks and balances on the agents with the exception of self policing. Imagine if you went to buy a share of MSFT. There is only one share currently available. You think it's worth $100. Your broker says somebody just bid $125. You want to own the share, and since that is the last market bid price you bid $125 or slightly higher. Yes you win, but was the price you paid a fair price? Thankfully, we have stock market ticker prices, liquidity, SEC regulators, and an incentive system not predicated on the dollar value of shares you buy but simply the number of shares you buy. I do love the fact that RE is opaque and not every house is the same. This affords opportunity. What I don't need is a broker jacking up the price.
@Russell Brazil I love how agents say they have zero incentive to cheat. You have 2 million agents in the US and you are telling me that zero have ever fudged numbers? It's the law of large numbers and there are going to be a few bad apples. I'm not saying all are bad. I'm just saying that RE agents who have acted poorly in the past should think twice in this age of the internet where information is readily available. Furthermore, who pays the selling commission of both the buying and selling agent usually? The seller, and it's predicated on the final sale price. As a seller if you get me another $100k price higher, I'll gladly pay you 6% all day, but is that fair to the buyer if there are no other buyers (Note: I realize that this is not the case here and there are other buyers)? Here's the economics of the deal. $40k is real money but represents less than 6% of original sale price of $699k. Price was lowered to $660k. Comps provided by my agent were $600-610k. It's no wonder why it sat for 2 months. I bid low 580k as a starting bid figuring we should end up somewhere in the middle. Some might say it's a low number, but the property had sat for 2 months and the comps supported my bid. I did come up to $640k in the end. Now let's do some math for the selling agent. 660-580=80k difference. He owns his own brokerage so he makes 3% if he gets a full price offer or $2.4k more. Now some would argue that's not much. But for doing very little work and sitting on an offer for a week it's not bad money. Let's say he uses this same tactic once a month conservatively. That's another 28.8k a year in his pocket. That is starting to look like real money. What's his chances of getting caught? As most of the forums I've read, there is little chance. Even if he does, he probably gets a slap on the wrist.
@Kelly Crone There are 2 million agents in the US. There are 3007 counties in the US. Hudson County NJ happens to be one of the more densely populated counties in the US but for simple math's sake I divide 2mm/3007 and get 665 agents per county. The likelihood that this particular selling agent now reps me as a seller is extremely low so I really don't think that's the first thing that crosses his mind.
@Mark Gallagher what my post does is that it's simply a resource for other buyers. If you are an upstanding agent you have nothing to worry about. I'm not saying that the house wasn't priced right nor that we are not in a white hot market. My point is that the selling agent sat on my offer and two there are games that some selling agents do to artificially raise the price by artificially demand that may or may not be there. You could be right that he was gathering bids but it goes contrary to what some people have said that all an agent wants to do is sell the house as quickly as possible. I'm pretty sure that my agent relayed what was heard from the selling agent correctly. Another shady thing was the selling agent said he was authorized to counter on behalf of the seller. He countered at the same list price. We said we want to see the counter in writing (which would have required the seller's signature). He did not produce this counter. I'm trying to buy property but I'm not willing to overpay. I'm an investor not a lemming. I did save money because I didn't overpay for the property, but now I'm out time for the search and I'm still sitting on a ton of cash to deploy earning zero in the bank.
I'd like to see an incentive system where the buying agent has more incentive to fight for better pricing for their clients. Perhaps a tiered flat fee for every $100k in sales price they get X. Additionally, if they save the home owner say a delta of $25k between the sale price and the bank appraised price they get some percentage kicker. Finally, a slightly more transparent system where selling agents have to show any and all bids after close as a checks and balance system. Buyer names can be redacted. Unfortunately, most of the players (agents, sellers) in this game have little incentive to push for change.
You are not supposed to spoof prices in the Stock Market (although it happens. Read Michael Lewis' Flash Boys). Why should you be allowed to do so in the housing market? Also the fact is that in today's rising market agents can sit on offers. Let's say I would give you $100 today. If you wait until tomorrow I'll give you $101 and if you wait a week I'll give you $110. Which offer do you think you would take for very little effort involved?
