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"A good, ethical agent would understand that it is fair and agree to it."
Not really. It would only become "fair" if the agent agrees to it.
Well, true. But it was designed to be fair. The test is whether they could understand that, and the important information we gleaned was in the substance of their objection to it. If someone had said that it wasn't fair and explained why, that would have been a good response.
Last edited by perfectlyGoodInk; 09-05-2012 at 12:13 PM..
Well, true. But it was designed to be fair. The test is whether they could understand that, and the important information we gleaned was in the substance of their objection to it. If someone had said that it wasn't fair and explained why, that would have been a good response.
"Fair" is a place to go to eat too much deep-fried junk food, look at goats and pigs, and lose money on a midway.
It either is acceptable or it isn't, but "fair" is a hackneyed and overused term in business.
"Fair" is a place to go to eat too much deep-fried junk food, look at goats and pigs, and lose money on a midway.
It either is acceptable or it isn't, but "fair" is a hackneyed and overused term in business.
Well, I guess I do business very differently than you do. It is possible for someone to accept unfair terms due to poor negotiating strength or lack of understanding. I would prefer not to do business on such terms.
Well, I guess I do business very differently than you do. It is possible for someone to accept unfair terms due to poor negotiating strength or lack of understanding. I would prefer not to do business on such terms.
You miss the point. I always am on guard when someone proposes something they have unilaterally declared to be "fair."
I don't think there is a thing "fair" about your proposal until it is accepted by a willing party. That doesn't make it good or bad. It is just a proposal. Labeling it "fair" is just a marketing/sales spiel.
Edited to add: I am not saying it is "unfair." Nor am I saying it is unacceptable.
If you would say, "I am trying to be fair," which is an entirely different statement than, "It is fair," I just might agree with you.
No it isn't. It's designed to get around the commonly understood relationships and transaction dynamics
and very possibly some contract agreements and a few laws as well.
The Smiths can afford a $180,000 mortgage and have UP TO $30,000 for down, closing, etc.
The BEST thing a BUYERS agent can do for the Smith's is probably to get them into a
comfortable ~$140,000 mortgage that leaves them some financial breathing room.
This is also most likely to garner that agent the PERSONAL recommendations that their business
needs and five or eight years later when the Smiths decide to move up to a $250-300,000 house...
who they gonna call?
(feel free to plug in whatever numbers above that you might prefer as examples)
We're still curious to see how it would work in practice and also interested in creating a template for other buyers and agents to use. If our agent understands the standard scheme is backwards, there are probably other agents who do as well. That's part of why I want feedback.
With you not being in the being in the business, how do you plan to get your model accepted throughout the RE industry ?
No it isn't. It's designed to get around the commonly understood relationships and transaction dynamics
and very possibly some contract agreements and a few laws as well.
It's designed to align incentives in a fair manner as possible, but I guess you know what's in my own head better than I do.
Quote:
Originally Posted by MrRational
The Smiths can afford a $180,000 mortgage and have UP TO $30,000 for down, closing, etc.
The BEST thing a BUYERS agent can do for the Smith's is probably to get them into a
comfortable ~$140,000 mortgage that leaves them some financial breathing room.
This is also most likely to garner that agent the PERSONAL recommendations that their business
needs and five or eight years later when the Smiths decide to move up to a $250-300,000 house...
who they gonna call?
I see no reason why a buyer's agent would fail to get the Smiths a home they can afford under my proposal. If the Smiths defined their range as $100k to $180k, the commission for a $140k home would be equal under both schemes at $4,200.
And as I've repeated several times now, personal recommendations are equally important under my proposal as with the standard scheme.
I see no reason why a buyer's agent would fail to get the Smiths a home they can afford under my proposal. If the Smiths defined their range as $100k to $180k, the commission for a $140k home would be equal under both schemes at $4,200.
And as I've repeated several times now, personal recommendations are equally important under my proposal as with the standard scheme.
Do you plan on "selling" this model for a fee or just promoting it on the internet ? What are you going to do with your idea ?
With you not being in the being in the business, how do you plan to get your model accepted throughout the RE industry ?
My plan is simply by talking to as many people about it as possible. The agent also seems interested in propagating this. Since I've found my agent, whether or not this model gets broadly adopted or not doesn't matter too much. It would be nice to see my idea take hold, but it's not like I'll be making any money off of it. I just think the market would work more efficiently and price homes more accurately. A properly and smoothly functioning price mechanism is good for everybody, and it appeals to me as an economist.
The financial crisis is an area of interest for me. While I see the main culprits as securitization of mortgages (which also misaligned incentives because banks no longer cared about default rates anymore) and overly easy monetary policy from the Fed, buyer's agents were probably in the best position to raise a flag about housing prices being too high. Economists failed to raise a flag too, but I chalk that up to too many economists appointed by politicians, resulting in incentives for them cater to political platforms than to improve accuracy of models. Macro is a big mess, but we still do learn some basic principles that are pretty useful, and one of these is that incentives matter. So I'd like to see them better aligned. Corporate governance is the real big principal-agent problem, but the one between buyer's agents and buyers seem easier to fix.
I also think buyer's agents would be able to better compete with the Internet. You've probably noticed numerous threads of folks trying to avoid using agents altogether (I think there's one right below this one). Real estate agents seem to have a bit of an image problem, and I think the culprit is the conflict of interest with buyers created by the compensation scheme.
Last edited by perfectlyGoodInk; 09-05-2012 at 01:16 PM..
Yes, but we prefer that bias over the standard scheme's bias to only show me homes in my higher price range. Since the agent is only paid if we close on a home, they will want to find us a home we like even if it's higher than the minPrice.
The difference you are talking about is usually minimal and not enough of an incentive to only show the higher priced ones. A few hundred dollars at most is not worth having a client go away unhappy. Besides, even if an agent wanted to be dishonest it is impossible to cover up what is really available. People can do their own searches now with the internet. If you really are wanting to stay at a lower price why not just lower your price range?
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