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Old 09-23-2012, 11:05 PM
 
Location: Orange County, CA
204 posts, read 336,667 times
Reputation: 94

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Quote:
Originally Posted by Captain Bill View Post
Sure you said "strongly resembles price-fixing", and that is an accusation, no matter how you try to gloss it over
When a large number of sellers sell a product or service at the same price (e.g. 3%), that strongly resembles price-fixing. If most mutual funds had the same expense ratio, that would strongly resemble price-fixing too, so I stand behind this observation. I don't think anybody here has disclosed that they go by a commission structure that always sticks to this standard, so this is clearly not directed at anybody specifically. This is also not quite an attack on the unknown agents who do follow this pricing because the obvious defense is that they don't realize this and are merely going along with what their peers are doing without realizing the economic implications. Similarly, my arguments that buyer agency is not free is not necessarily an attack on agents who claim otherwise to their clients -- the agent might actually believe it is free. You'll find that I'm one who generally gives the benefit of the doubt and who is inclined to blame institutions rather than people.

Of course, an agent reading this thread who understands the arguments presented and who does not have a good counterargument will no longer have that defense anymore. But I don't consider my observation to be any more of an ad hominem attack than saying the rational actor assumption used by most economic models creates unreliable predictions resulting in recessions and crises. This is not an attack on economists because most economists think irrational behavior cancels out when you add everything up. If you were to point an economist to behavioral research that indicates systemic irrational biases that do not cancel out -- and they continued to use the assumption in their models anyway -- then that would be a different story.

So I'll say it again. Any kind of pricing standard strongly resembles price-fixing and creates inefficiencies by inhibiting price competition. Are you arguing otherwise?

In contrast, saying that somebody's idea is dumb is also a claim that the person was dumb to have thought of it. People on this thread have also called the proposal "dishonest" and "deceptive." These are far different arguments than criticizing the proposal for undesirable effects it would have. Notice that while I have been very critical of x% * sales price, I never called it dumb. In contrast, I said it created misaligned incentives and conflicts of interest, and some agents agreed.

Last edited by perfectlyGoodInk; 09-24-2012 at 12:15 AM..
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Old 09-24-2012, 09:09 AM
 
Location: Gilbert - Val Vista Lakes
6,069 posts, read 14,731,435 times
Reputation: 3876
Quote:
Originally Posted by perfectlyGoodInk View Post
When a large number of sellers sell a product or service at the same price (e.g. 3%), that strongly resembles price-fixing...
You know that is not the case, otherwise the anti-trust people would be all over the real estate industry. In fact you do not, and can not, know that a large number of agents are charging the same fee, because you do not see the listing agreements of a "large number" of agents. You are merely guessing.

If agents conspire among each other to charge x as a fee, then that is price fixing.
Quote:
perfectlyGoodInk....People on this thread have also called the proposal "dishonest" and "deceptive." These are far different arguments than criticizing the proposal for undesirable effects it would have.
A deceptive proposal does have "undesirable effects". No one called you dishonest that I'm aware of; the remarks were aimed at your proposal. You may be very honest and just naively think your proposal is the holy grail. You presented the proposal to the agents on this forum and the majority of them rejected it. Because your proposal was rejected, you now want to accuse the agents here of attacking you, and accuse the industry of price fixing.
Quote:
perfectlyGoodInk...
Notice that while I have been very critical of x% * sales price, I never called it dumb. In contrast, I said it created misaligned incentives and conflicts of interest, and some agents agreed.
You didn't call it dumb; you called it "price fixing" which is illegal, and amounts to saying that agents have conspired to fix a price. Unless you have "proof" of a price fixing conspiracy that you can take to the DOJ, then you are way off base with that accusation.

Quote:
perfectlyGoodInk...In contrast, saying that somebody's idea is dumb is also a claim that the person was dumb to have thought of it...
Let's examine that theory:
  • You are dumb
  • Your idea is dumb
You are dumb is an attack on the person
Your idea is dumb is not an attack on the person. It is saying the "idea" is dumb. Presidents of our country may have had some "dumb ideas", and made "dumb, and even stupid mistakes", but the person was far from dumb. President Clinton, who "did not have sexual intercourse with that woman" is a good example of an intelligent person who had a "dumb" idea that he acted on.

Let's now change the wording in the example:
  • President Clinton is dumb
  • President Clinton made a dumb mistake
Any reasonable person understands that President Clinton is a very intelligent person, and that the statement "President Clinton made a dumb mistake" is not an attack on the President; it is an attack on his "dumb mistake".

I think you're too intelligent to really believe that "your idea is dumb" could be interpreted by any reasonable person as an attack on a person. But you can prove me wrong if you continue that argument.
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Old 09-24-2012, 10:10 AM
 
Location: Orange County, CA
204 posts, read 336,667 times
Reputation: 94
Quote:
Originally Posted by Captain Bill View Post
Any reasonable person understands that President Clinton is a very intelligent person, and that the statement "President Clinton made a dumb mistake" is not an attack on the President; it is an attack on his "dumb mistake".
Point taken. However, by similar logic, a critique that an industry practice bears strong resemblance to one that is illegal isn't attacking the people. It's attacking the practice. As I said, "the obvious defense is that [the agents] don't realize this and are merely going along with what their peers are doing without realizing the economic implications." But both pricing standards and price fixing have very similar effects on inhibiting price competition and thus market efficiency, thus the resemblance. You still have not argued otherwise.

Also, if you look earlier in the thread, you will find more obvious examples of ad hominem attacks. The above analogy isn't quite as applicable for "dishonest" idea, for example.

Quote:
Originally Posted by Captain Bill View Post
In fact you do not, and can not, know that a large number of agents are charging the same fee, because you do not see the listing agreements of a "large number" of agents. You are merely guessing.
My buyer's agent has been providing me with the MLS printouts that they see. We have viewed 11 houses. At the bottom right, it says "BuyerAgent 3.00%" on all 11 listings. Pull up 11 mutual funds at random and see what their expense ratios are.

Also, when we were interviewing buyer's agents (and earlier, listing agents in California), all of them also had said 3% (although two of them offered to lower it after we asked). We interviewed 3 listing agents in California and 7 in Texas. Four of the buyer's agents initially claimed that they were free and gave me a blank stare when I explained how sellers pass on costs to buyers. This is why I do believe they actually had thought it was free -- does that mean you would consider them naive?

Last edited by perfectlyGoodInk; 09-24-2012 at 10:58 AM..
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Old 09-24-2012, 11:02 AM
 
Location: Gilbert - Val Vista Lakes
6,069 posts, read 14,731,435 times
Reputation: 3876
Quote:
Originally Posted by perfectlyGoodInk View Post

My buyer's agent has been providing me with the MLS printouts that they see. We have viewed 11 houses. At the bottom right, it says "BuyerAgent 3.00%" on all 11 listings. Pull up 11 mutual funds at random and see what their expense ratios are.
You saw 11 listings where the listing agent together with the seller, agreed to pay the buyers agent 3%, and are you saying that is price fixing

Your argument that this amounts to price fixing does not hold water. If it did, you would be reporting it to the DOJ.

Pull up a bunch more and in my area you'll find 2%, 2.5%, 3%, 4%; and I've also seen 5% and 6% to buyers agent.

Look at rental listings and you'll find $100, $150, $200, $250, $300, $350, $400, and so on, and 2%, 3%, etc.
Quote:
perfectlyGoodInk.....Also, when we were interviewing buyer's agents (and earlier, listing agents in California), all of them also had said 3% (although two of them offered to lower it after we asked).
They are free to charge whatever they want. ALL COMMISSIONS ARE NEGOTIABLE. They just cannot conspire with others to fix pricing. Either get some PROOF that the RE industry is price fixing, or you have no basis for an argument.
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Old 09-24-2012, 11:11 AM
 
Location: Orange County, CA
204 posts, read 336,667 times
Reputation: 94
Quote:
Originally Posted by perfectlyGoodInk View Post
Also, as [3% * sales price] is an "industry standard" (which to me strongly resembles price-fixing, a form of collusion), any buyer will be hard-pressed to find a buyer's agent offering a different compensation scheme (unless the buyer takes unusual measures, like I have).
Quote:
Originally Posted by Captain Bill View Post
You saw 11 listings where the listing agent together with the seller, agreed to pay the buyers agent 3%, and are you saying that is price fixing
I am and I have been saying this is is a pricing standard, which strongly resembles price fixing because it has the same effect on competition and market efficiency -- a point you still have not argued.

Indeed, neither 3% * sales price nor the existence of any sort of industry standard pricing serve any purpose for the buyer.

Last edited by perfectlyGoodInk; 09-24-2012 at 11:20 AM..
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Old 09-24-2012, 11:42 AM
 
12,973 posts, read 15,731,308 times
Reputation: 5478
You are still beating the dead horse.

The buyers agent does not set his compensation in the standard case. It is offered by the listing agent who agrees with seller what it should be. When I list I generally recommend 3% though I may suggest a little more in rare cases. I generally don't go below 3% as it lowers the number of showings significantly. I might though if it is a hot property. If I discount a listing I take the discount on the seller's agent side.

I have done a Buyer's Broker Agreement in two instances in the last ten years. Both because of unusual circumstances. I have never had a client request one...So over perhaps a thousand clients nobody was trying any unique payment schemes. We work a relatively deluxe client base - more than half our clients are retirees paying cash.

So don't expect your concept to go anywhere...it won't. The system is simply acceptable to the vast majority of the clients.
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Old 09-24-2012, 11:50 AM
 
Location: Gilbert - Val Vista Lakes
6,069 posts, read 14,731,435 times
Reputation: 3876
Quote:
Originally Posted by perfectlyGoodInk View Post
I am and I have been saying this is is a pricing standard, which strongly resembles price fixing because it has the same effect on competition and market efficiency -- a point you still have not argued.

Indeed, neither 3% * sales price nor the existence of any sort of industry standard pricing serve any purpose for the buyer.
  • There is NO real estate industry pricing standard which resembles price fixing, so there is no point to be argued. Any resemblance of price fixing would be investigated by the DOJ.
    .
  • If an agent accepts a listing on "contingency" of being paid only on close of escrow, then there is a percentage of sale fee (which the vast majority of buyers/sellers choose because they do not have to pay unless a transaction closes escrow). The amount of the fee paid to the listing agent is negotiable, as well as the fee paid to the buyers agent.
    .
  • If the seller would prefer a flat fee listing, fee for service, pay by hour plus expenses, then there are many agents who have models for that
    .
  • All real estate fees are NEGOTIABLE, from pay by hour to a percentage of sale.
    .
  • It takes 2 sides to negotiate the fee. The parties may agree, or not agree. If the parties cannot come to a fee agreement, then either one or both are free to move on.
    .
  • You are free to negotiate with an agent for your scheme. One agent may accept it. Another may reject it; but the fee is NEGOTIABLE, meaning that it takes a meeting of two minds.
    .
  • If you cannot negotiate an acceptable fee with an agent, then you are also free to buy without an agent.

Last edited by Captain Bill; 09-24-2012 at 12:24 PM..
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Old 09-24-2012, 12:34 PM
 
Location: Orange County, CA
204 posts, read 336,667 times
Reputation: 94
Quote:
Originally Posted by lvoc View Post
You are still beating the dead horse.
Because I have always agreed that a pricing standard is not the same as price fixing due to presence of negotiation (once a buyer brings up price -- many don't due to the "buyer agency is free" confusion). I said that way back here:

Quote:
Originally Posted by perfectlyGoodInk View Post
Yes, price-fixing is illegal, but recall that said "strongly resembles." Many agents try to avoid competing on price simply by not making it clear what exactly their price is. However, once you ask them, that price quickly becomes negotiable.
My original quote again:

Quote:
Originally Posted by perfectlyGoodInk View Post
My impression both from this discussion and from my interviewing potential agents is that most buyers agents claim that their services are free. If the buyer believes this, then the agent has a relatively free hand choosing the x% * sales price compensation scheme. Also, as this is an "industry standard" (which to me strongly resembles price-fixing, a form of collusion), any buyer will be hard-pressed to find a buyer's agent offering a different compensation scheme (unless the buyer takes unusual measures, like I have).
The possibility of negotiation is probably the reason the DoJ does not get involved (besides, our government regularly tolerates high amount of inefficiency across our economy, such as agricultural subsidies and steel tariffs). My point is and always has been that an industry standard for pricing "strongly resembles" price fixing in that both inhibit price competition and market efficiency -- a point neither of you contest.

11 out of 11 is extremely unusual. If all agents restricted themselves to commissions betwen 2.5% and 3.5% with increments of only 1 decimal point (e.g. 3.2% is acceptable but 3.25% is not), this is only 11 possible prices. Assuming an even distribution, the odds of 2 bids being identical are 1/11. The odds of 11 bids being identical are (1/11)^10, or 0.000000000038554, or about 1 out of 25,937,424,601 (while the distribution may be normal instead of even, note that there's also no reason agents would restrict their pricing to the above constraints).

Furthermore, everybody here continually dodges these two questions:

1) What purpose does x% * sales price achieve for the buyer?
2) What purpose does an industry pricing standard achieve for the buyer?

Last edited by perfectlyGoodInk; 09-24-2012 at 12:54 PM..
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Old 09-24-2012, 12:53 PM
Status: "Made the Retirement Run in under 12 parsecs!!!" (set 1 day ago)
 
Location: Cary, NC
43,062 posts, read 76,604,643 times
Reputation: 45388
Default To quote Marisa Tomei, "It's a bogus question!"

Quote:
Originally Posted by perfectlyGoodInk View Post
...
Furthermore, everybody here continually dodges these two questions:

1) What purpose does x% * sales price achieve for the buyer?
2) What purpose does an industry pricing standard achieve for the buyer?

You were serious about dat? - YouTube
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Old 09-24-2012, 12:54 PM
 
12,973 posts, read 15,731,308 times
Reputation: 5478
Quote:
Originally Posted by perfectlyGoodInk View Post
Because I have always agreed that a pricing standard is not the same as price fixing due to presence of negotiation (once a buyer brings up price -- many don't due to the "buyer agency is free" confusion). I said that way back here:



My original quote again:



The possibility of negotiation is probably the reason the DoJ does not get involved (besides, our government regularly tolerates high amount of inefficiency across our economy, such as agricultural subsidies and steel tariffs). My point is and always has been that an industry standard for pricing "strongly resembles" price fixing in that both inhibit price competition and market efficiency -- a point neither of you contest. Furthermore, everybody here continually dodges these two questions:

1) What purpose does x% * sales price achieve for the buyer?
2) What purpose does an industry pricing standard achieve for the buyer?
Actually there is very strong evidence that 3% is close to the minimum necessary to successfully run an RE operation. That proof is that those who price below it virtually always fail. If it was straightforward to run a buyer's brokerage at 2 or 2.5% there would be a whole lot of people doing it. I myself would consider taking such a flyer - but I think it is an illusion that works pretty well in the 2004 market but starves to death in the 2008. If you had good and consistent sales velocity you could probably make it fly at 2.5%. But in fact the first year of slow sales the overhead eats you and you fail. So I think the 3% comes more out of necessity than greed. And I would note that with present commission splits the brokerages cannot actually make it on commission alone. The "admin commission" or whatever they are titling that junk fee actually makes the place whole.
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