
Computer vs. Realtor: Computer Wins. Twice. - r7000
http://www.techcrunch.com/2008/03/25/computer-vs-realtor-computer-wins-twice/
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Xichekolas
This seems like a perfect example of a cartel-esque market that could be
dominated by fee-based technology-using upstarts.

Now the case for selling agents making a percentage-based commission is
stronger, assuming they actually actively work to sell the home (holding open
houses and active promotion).

But when it comes to buyer's agents, the whole idea of paying them based on
the sale value is a massive conflict of interest. Why would a buyer's agent be
a good faith representative in negotiations if it was in their personal
interest that the sale price be higher?

The only reason this has worked for so long is that Realtors collude on the
commission (it's 6% everywhere... there is no price competition). They also
actively try to control entrance into the profession to make sure everyone
tows the line.

To me, a fee-based buying agent makes much more sense. Barring that, at least
pay them as a percentage of the difference between the asking and final price.
That way if you get the house for $10k under the asking price, they can have
35% of that, rather than 3% of the total value of the home.

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mhb
_Why would a buyer's agent be a good faith representative in negotiations if
it was in their personal interest that the sale price be higher?_

This belief follows from the mistaken notion that if there are two brokers
involved in the transaction where one has listed the property and the other is
assisting a buyer in finding a property, then one of them has a fiduciary
responsibility to the buyer. This is almost never the case in conventional
real estate transactions - all the brokers involved work for the seller. The
listing broker receives a fee for having listed the property. If a non-listing
broker is involved he/she receives a fee for locating the buyer. As you point
out, the nature of this relationship should be clear when you notice that all
the brokers' financial interests are aligned with the seller's.

It is possible for a buyer to hire an agent to act on his behalf and there
would be no reason for this agent to be paid a percentage of the sales price.
Very few people do this - either because they don't think it is worth it or
don't understand that the broker who showed them the house isn't working for
them.

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jmzachary
"This belief follows from the mistaken notion that if there are two brokers
involved in the transaction where one has listed the property and the other is
assisting a buyer in finding a property, then one of them has a fiduciary
responsibility to the buyer. This is almost never the case in conventional
real estate transactions - all the brokers involved work for the seller."

This is only true in subagency situations, which are going away in most MLS
regions in favor of designated agency. In designated agency states (many, if
not most) and broker-buyer agreements, the licensee representing the buyer
does indeed have a fiduciary responsibility to the buyer.

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mhb
Is the benefit attributable to Redfin or to the selection bias of Redfin
users?

~~~
marcus
That is a very good question, buyers who use Redfin are obviously more price
sensitive and market savvy than the average buyer.

~~~
jmzachary
Maybe tech savvy, but not necessarily market savvy.

~~~
marcus
Whatever the difference is between Redfin buyers and non Redfin buyers it
obviously might be statisically relevant.

I'd like to see the comparison for purchases where the users considered using
Redfin but ultimately went the traditional way instead and users who used
Redfin. It will have less selection bias.

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Flemlord
Good for them. I'm closing on a house tomorrow in Denver and I have nothing
but contempt for the real estate process. I passed on my first house when I
found out the selling agent was trying to collect 2x the fee simply because I
didn't have my own agent. I finally found an agent who would kick me back 2/3
the fee, since I was doing all the legwork myself.

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xirium
Could this model be applied to recruitment?

~~~
soundsop
This maybe something like what you were thinking: <http://notchup.com>

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stcredzero
Freakonomics covers this in their book. Realtors are motivated to do as many
transactions as possible, so they are not the best negotiators. They will
settle for a so-so price to get transactions done so they earn more money per
unit time. There is even academic research to support this.

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fendale
Not being from the USA, I am not sure how this works. In the UK, generally the
person selling a house finds an agent to sell it for them - they normally
charge a fee based on the sale price that the seller has to pay.

The buy doesn't require an agent, or pay anything (apart from the price agreed
for the house).

After the sale is agreed, the solicitors get involved, and both the buyer and
seller will have to pay his own solicitor.

In the USA do you need to pay a fee to an agent to buy a house too? Do they
perform the duties of a solicitor or provide any useful function at all for
this fee?

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wave
When I bought my house, I knew the area I want to live in. I searched for
homes using the various websites (realtor.com, craigslist.com ...) I got
comparable homes using Zillow. I didn’t really see a need for an agent, but
once I found a house myself and ready to buy, I needed to get an agent because
the seller wasn’t comfortable selling without an agent. I assume this will
change in near future.

