About page 33
Charles Wheelan declares war on page 33, but I still like his book.
He writes:
“Take real estate agents, a particular breed of scoundrel who purports to have your best interest at stake but may not, regardless of whether you are buying or selling a property. Let’s look at the buy side first. The agent graciously shows you lots of houses and eventually you find the one that is just right. So far, so good. Now it is time to bargain with the seller over the purchase price, often with your agent as your chief adviser. Yet your real estate agent will be paid a percentage of the eventual purchase price. The more you are willing to pay, the more your agent makes and the less time the whole process will take.”
Mr. Wheelan understands and explains financial markets well; he even uses real estate as an example. It should be clear to him that negotiation in real estate is within a small range that could be acceptable to both parties. It’s where both parties feel they are getting maximum utility. That range, in my experience, is about $30,000 tops. The skill a good agent brings to the table is knowing where that $30,000 range lies and how it relates to the asking price. For Mr. Wheelan not to recognize that is, in his terms, sloppy thinking.
I read here on this blog where real estate spectators cling to the idea that Zillow estimates and assessed values tell you something about the fair price of the house. Those who want to believe in these numbers are just not looking at them in comparison to actual sales data. The best way to know what a house should sell for is to compare it to houses like it that have just sold. It’s a backwards indicator, but it is still much closer to reality than anything a automated system can do. No program can replicate a human-done market study until the quality of information about houses is much better than it is right now. One day, but not yet. You don’t need a real estate license to do a market study, but you need experience to juggle the data accurately. Some readers here are probably pretty good at it.
Mr. Wheelan’s attack on my profession also fails to understand the power of reputation and integrity. That, my friends, is also sloppy thinking. A buyer’s agent who deceives a buyer into overpaying would gain a few hundred dollars, maybe; and lose referral business that would bring in thousands. A seller’s agent who goes around underselling houses also gets a reputation that drives him or her out of business.
Frankly, it is good business to work with people who will be happy with their outcome in the long run. I can't be the only agent out there who tells wanna-be buyers not to buy. Those I turn away sometimes come back later; most tell their friends about me.
Whereas, if I can keep qualified buyers in the lower part of their price range, meet their needs, and negotiate as hard as they want based on their I-want-to-save-money versus I-want-this-place matrix, I get the business I need. I remain fat and happy.
Mr. Wheelan, like Mr. Levitt and Mr. Dubner before him, just doesn’t get it. They are all smart enough to understand, they just choose not to.
