How Real Estate Agents Cheat Property Buyers and Sellers

This world is a magical cave. The inside is quite different from the outside. What you see or hear is quite different in reality. You and I only see the surface.

Consider now, the case of real estate agents.

A interesting set of data published in the book ’Freakonomics’ states that real estate agents keep their own houses on the market far longer than they would keep yours.

Now, the question is why they do like this?

You have a $300,000 house to sell. You call and agent and put it up in the market. The agents finds a buyer who is willing to pay the sum.

Now what shall she do? Sell the house for $300,000 or wait for a more lucrative offer - $10,000 more.

This whole world is about incentives. Work done - profit earned. This is the simple formula by which we all live by. And so with the real estate agents - it’s also the same.

A rate of 1.5% commission on $300,000 will give the agent $4500. And, if she sells it for $10,000 more after some hectic negotiations or with a little more effort and dedication what shall she earn? A mere $150.

Now, it is unto you to judge what shall she do? Sell it for $300,000 or $310,000.
Obviously, she will try to close the deal as soon as possible? She will sell it for $300,000 and take away her share of $4500.

But if it was her own house, what shall she do? She will wait for a few days. She will bargain a little. She will try to raise the price a few more thousand dollars. She will sell it for $310,000 and pocket it all.

*Freakonomics is a NYTimes bestseller.