Howard's Blog

This is Howard C. Park's blog. Interests: live music, simulations and modeling, languages, iPod, social and business networking, systems thinking, history of science, management, BBQ, trivia, good coffee, organizational learning, traveling, personal histories.

Monday, May 16, 2005

Mr. Soprano, the realtor

We're looking at moving in the next few months to a year. That means we have the joy of looking for houses and putting up our own house for sale. That means we're likely to deal with realtors.

Now, if you are a realtor, or have a realtor in the family, do not be offended. There are many nice, hard-working realtors out there who do a good job. The world will still need realtors, at least in the near future.

There are, however, times when we civilians feel rather helpless when confronted by the professional realtor. They make us think that their secret ability to do whatever they do is worth the 6% of the price of the house. With their well-polished manner, market knowledge, and access to "stuff", we come to believe that they hold the keys to our future and success.

Well... time's are-a-changing. Thanks to geeky folks like you and thanks to our employers who make it possible to surf the web during work, many of us are starting to see (and demand) that we have direct access to the secret info that the realtor has. The Justice Department thinks so. Fresh off the heels of dealing with Microsoft and the mafia, they are going after the stronghold of the MLS (the secret info that keeps realtors in power).

The problem lies with what's often called the princial-agent problem. You hire someone, but that person does NOT have exactly the same goals that you do. And you can't seem to get your hired hand to actually act in your best interest. For example, you might not mind waiting 4 months to sell your house to get a better price. The realtor will almost always want you to lower your price for a quick sale. For you, a $20K difference is worth waiting 4 months. For the agent, the difference in their cut is only a few hundred bucks. They'd rather sell your house quick, and move on.

Not sure how the DoJ piece will play out. It's likely some sort of compromise will be reached. This is good news... for the consumers who want to take a more active role, we will likely see more choices, lower selling costs, etc. If you want (or need) the realtor to take care of a lot of stuff, maybe it's worth 6% to you.

Let the buyer (and seller) beware.
|| hcpark, 12:26 AM

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