The Hillarious Bias of Real Estate Brokers and Agents

Real Estate Agents and Brokers generally like to portray themselves as experts who are “on your side”.  While you might find the occasional agent who is working in your best interests, we believe that most agents are in it to make money and little else.  And as you will see, there is incredible bias in this department

Whether you’re planning on selling your house or buying a new house, the average real estate agent just wants to use you to earn commission.    If you ask them if right now is a better time to buy or sell, they will say “BOTH”.  If you ask them when is the best time to sell, they will say “RIGHT NOW”.  This is because their goal is to earn sales commissions and earn them as soon as possible.

Buy Side Bias

The Buyer’s agent wants one thing – for you to buy the most expensive house you can afford, ASAP and overpay for it.  When the sale closes they get a percentage based commission.  The more you pay, the more money they receive.  But even more importantly, the more they can convince you to offer, the more likely the sale will close and the more likely it is they will receive their payday.  A truly horrible conflict of interest.

Sell Side Bias

You might think that sell side bias is diminished because the agent who is selling your house has incentive to sell it for the higher price, for they will then earn a higher commission.  In theory, yes, but in practice, no.  Their commission increase is generally insubstantial as the price increases, for it’s a relatively small percentage of the final sale.

e.g if you sell your house for $100,000 and the selling agent/broker receives 3%, that’s $3,000.  Not pay for potentially doing next to nothing (as the buyer agent and lawyers probably did most of the work).  But, if you’re able to help your clients negotiate a higher price of say $110,000, the agent will only receive $300 for the sale.  Not a very good pay day for all the extra negotiation involved.

In addition, trying for a higher price will probably take longer and the longer it takes to sell, the more likely your clients are to fire you and try another realtor rainmaker.  So, you incentive is convince your clients to sell for basically the lowest price they’re willing to accept.

So, you have the buy side agent trying to convince their clients to pay more so the sale will close and you have the sell side agent trying to convince their clients to accept less, so the sale will close.  They’re both trying to do the same thing, earn their commissions.    I’ve heard multiple anecdotes of buy side agents essentially colluding with the sell side agents to try to close the same sale.  i.e.  they will ask “how high can you get your client to offer?” and the other agent will ask “how low can you get your client to drop their price?”.  This is the product of an extreme conflict of interest.

 

Double ending

An even more sinister conflict is a situation where the same agent (or brokerage) represents the buyer and the seller.  It’s supposed to be “frowned upon” or “unethical”, but if you look around, you will see it happening all of the time.  The bias here is crazy, but I would argue that it isn’t much worse than having an independent realtor on either end of the deal because they mostly appear willing to collude anyway.

To us, realtors seem akin to the Rainmaker con-men of yesteryear.  They portray themselves as “experts”, even though their expertise is drawn from a laughable 2 week training course.  They try to sell your home for their own interests and do very little to make it happen.  If it sells basically on its own, they’ve “made it rain” and you will praise them.

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