Exerpt from Freakonomics book regarding real estate agents.

Pages 5-8:

Freakonomics was written by Steven D. Levitt & Stephen J. Dubner. It’s a really good book.

Hahahahhh, interesting Nick…Thanks for sharing that. :smiley:

So are you saying people should use their own judgement of what the house is worth when selling and ignore feedback from the Agent?

I don’t believe Mr. Gromicko is trying to say anything. He has only quoted the “Freakonomics” book. From this little section I would expect the remainder of the book to be interesting and might be worth reading.

To answer part of your question:

Simply put the answer might well be yes! One of the ploys of agents and brokers is to start advising their seller clients to reduce the price of their home after some mythical period of slow activity. If the home hasn’t shown in a few weeks after first listing they might jump in and start the “Price Reduction” pressure tactic then. Somewhere along the line it appears agents and brokers are using a $10K price reduction figure, obtained from whatever logic they use. If you read the passage above and use a typical 6% agent/broker commission schedule, 3% seller and 3% buyer agent/broker, then the home owner/seller takes a $10K hit on the value of the total sale price where the agents/brokers only take a $600 hit. The individual agents/brokers only take a $150 hit after their costs/fees.

As the book points out if the home is owned and being sold by an agent/broker then they are the ones taking the $9400 hit on a price reduction and will bend over backwards to try and save that $9400. The book rightly asks what incentive is there for an agent/broker for just another seller to take the extra time and effort to make sure their client does not take that $10K hit?

So there are times when a seller needs to to not listen to their agent/broker and refuse the price decline. Let the agent/broker earn that large commission check. If you don’t then the agent/broker will eventually scare you into enough price reductions where anyone would buy the home at such a reduced price.


I believe that Nick is pointing out that there are many unknowns in a brokerage transaction and that we inspectors are lucky not to have to renegociate all the time.

We have our job to do!

Take the best house at the best price, the selling broker still needs a client with or without a broker to step up to the plate and propose.

You have to see the bottom line! What if the house does not sell John, do you know how much the broker makes? That is right! ZERO! X 100% = 0
As inspectors, we come in during the Buyer and Seller wedding ceremony.
(Please don’t talk about divorce, Valentines day is coming).

If a home does not sell then that is either the unluck of the draw for the Broker OR the Broker/Broker’s Agent did not perform. Either way it is the nature of the business model that the real estate participants (Agents and Brokers) have established and long supported.

The current commission based business model no longer works as it did and should be changed. The discount brokerages are on the track of changing this but are under heavy attack from traditional real estate participants. Many discount brokerages are offering an ala carte system for sellers which is the beginning of this change. Long ago, before the Internet was so prevalent, Agents really worked for that commission. Now however they do little with part of the reason being so many laws, rules, and lawsuits that have created a very different attitude and way of doing business. Add to it the large number of national chain brokerage operations that do nothing more than add significant overhead cost to the process with little return for the additional expenses.

This was an interesting read . What is said here is becoming evident in our area . We are getting the FSBO and Internet home marketers . The RI’s have been trying to fight back , but still see the new way getting stronger with the amount of business they are getting .

Their is a roamer going on in the real estate industry that NAR will be forced to make their Multiple Listing Service (MLS) an open source to the public because of the monopoly that they currently hold.