When the real estate meltdown first happened, a lot of people blamed real estate agents for inflating house values. Although I’ve been active in real estate finance and marketing for more than thirty-five years, I had only been a licensed agent for scarcely two. I didn’t buy the accusation, mostly because I’d never seen much of it.
My old Remax office in Hillsboro has some pretty cool people working there. I don’t think I ever saw any of them do anything smarmy or less than straightforward. Since going out on my own, though, I’m finding that much of the agent world is different. My Remax colleagues were a breed apart.
Do agents pump value? Consider this. In two instances over the past week, clients have had serious interest in homes for sale. I did the numbers, and both these homes appeared to me not just priced high, but seriously overpriced. In both instances, the listing agents have fallen all over themselves to imply their clients might lower the price or do this or that–just get in an offer.
The psychology behind getting an offer written up is that the buyers, whether they intend to or not, become invested in the process and start chasing the property, perhaps paying more than they initially wanted or giving up stuff like closing costs or repairs.
Without leveling accusations, it’s the process that pumps up the price. Since neither agent gets paid unless a deal happens, neither has the objectivity to be able to fully represent her or his clients. It’s like the doctor and the hospital not getting paid unless the patient gets sick.
Now, of course an owner expects her listing agent to get the highest possible price, and of course a buyer expects his agent to obtain the lowest possible price. But I do not believe either of these metrics occur in a commission-based compensation system.
Look. A six percent (or even five percent) commission on a $300,000 is pretty lucrative. $15,000 to $18,000? If you’ve been working a long time without a paycheck, as a lot of us agents have been doing, you start to get anxious, if not desparate.
And this is one way we agents pump up value. I think it’s time to do it a different way.
Pumping Up Values
by William Metzker on January 19, 2010
When the real estate meltdown first happened, a lot of people blamed real estate agents for inflating house values. Although I’ve been active in real estate finance and marketing for more than thirty-five years, I had only been a licensed agent for scarcely two. I didn’t buy the accusation, mostly because I’d never seen much of it.
My old Remax office in Hillsboro has some pretty cool people working there. I don’t think I ever saw any of them do anything smarmy or less than straightforward. Since going out on my own, though, I’m finding that much of the agent world is different. My Remax colleagues were a breed apart.
Do agents pump value? Consider this. In two instances over the past week, clients have had serious interest in homes for sale. I did the numbers, and both these homes appeared to me not just priced high, but seriously overpriced. In both instances, the listing agents have fallen all over themselves to imply their clients might lower the price or do this or that–just get in an offer.
The psychology behind getting an offer written up is that the buyers, whether they intend to or not, become invested in the process and start chasing the property, perhaps paying more than they initially wanted or giving up stuff like closing costs or repairs.
Without leveling accusations, it’s the process that pumps up the price. Since neither agent gets paid unless a deal happens, neither has the objectivity to be able to fully represent her or his clients. It’s like the doctor and the hospital not getting paid unless the patient gets sick.
Now, of course an owner expects her listing agent to get the highest possible price, and of course a buyer expects his agent to obtain the lowest possible price. But I do not believe either of these metrics occur in a commission-based compensation system.
Look. A six percent (or even five percent) commission on a $300,000 is pretty lucrative. $15,000 to $18,000? If you’ve been working a long time without a paycheck, as a lot of us agents have been doing, you start to get anxious, if not desparate.
And this is one way we agents pump up value. I think it’s time to do it a different way.