This [unedited] guest post is by a student in my EEP100 class (background post).
Please praise/critique/comment on its economic quality and importance to you.
Hoiying Tang says:People who have bought a house may notice that real estate agents have some common practice, that is to leave a business card in every house. Why are they doing this? Though business cards do not worth much to produce (100 full color, medium weight gloss business card is selling for $27.90 in 123 Print Company, shipping included) it does add up to the cost. Also, for a matter of fact, no one is going to read the business card, therefore it doesn’t serve for advertisement purposes. So why do real estate agents leave a card in the house?
Most people work to support themselves financially. This is also true for real estate agent. However, they don’t get pay for showing houses. There are many cost to build a career in real estate, it includes licensing fee, office rent, a luxury car (have anyone notice that most real estate agent own an expensive car?), gas, office supplies, computer, the opportunity cost of going into other business…. etc. For this reason, they must secure every potential client.
I have once heard a story about a couple traveling to the city for vacation. This couple goes to a real estate agent and informs him that they wanted to buy a house. The real estate agent then shows them around the city like a tour guide, except he did it for free! Of course the couple never buys a house in the city, and the real estate agent suffers losses. To minimize the chance of giving a free ride to other agents’ customer (the customer already with another agent and he just want you to show him the house since his agent is busy), for instance, the agent wants to get a prove that he has serve you. The business card may serve as a form of evidence. If the client later bought the house from another agent, the agent that shows him the house has the right to claim commission.
Bottom Line: Be careful choosing a real estate agent, and go with the one that is honest with you and able to match your schedule. If you seriously want to buy a house, do not trust your real estate completely. They are not only here to serve you, they are here to make money. Please hire an inspection company yourself, and don’t let him fool you around. (ex. The neighborhood, crime rate...)
3 comments:
In a typical residential realestate transaction, the realtor is an agent of the seller. (The realtor(s) fee - buyer's agent and seller's agent - comes from the proceeds of the sale, or the seller's money.) Unless you have a specific contract with your buyer's agent that includes payments not made by the proceeds of the sale, then contract law requires the agents loyalty to the seller.
There was a dual agency case in Minnesota about 20 years ago that publicized this little understood aspect of contract law.
An honest realtor should disclose to you that they are working for the seller and anything you tell them in confidence must be used against you to fulfill their fiduciary obligation to the seller of getting the best price for the seller.
Bottom line: In a negotiated transaction, such as a housing purchase, do not disclose your bottom line to the counter party.
I suspect that estate agents show people around for free for several reasons:
It is a competitive and working market, if they were going to charge you showing you around you would go somewhere else. This is good for consumers.
You have to go out on a limb sometimes to get revenue back, and not every chance you take will pay back. As an example, an estate agent may show 100 houses and only get back $5000 in commission overall, that's $50 per viewing but a long-term strategy. This is also good for consumers as it discourages quick entry and exit to the market (and all the quality issues that go with it).
The estate agent's strategy is very similar to that of most websites, including the one you are reading now. Their only income comes from advertising click-throughs, and a very very small percentage of you will ever do that. Therefore they must play a long-game, by providing good service up front and free at the point of use to users, whilst banking on commissions in the long term from click-throughs.
The expensive cars are also part of their long-term strategy. This is to convey an air of success because lots of deals means lots of money = expensive car...
Of course, inspection company extras and the like are an extra revenue stream for the estate agent, and a convenience that you pay for. This is just like when you go on holiday and the hotel tries to sell you a day-trip - you'll get it much cheaper going direct.
As for trusting estate agents, I am in complete agreement, and in the UK estate agents are to us what lawyers are to US peeps. You are lucky in the States because estate agents are licensed, in the UK anyone can set up as an estate agent and they live and die by the free market economy.
As for the business card as evidence, I'd suggest you just sling it in the nearest bin, as it doesn't form a contract.
With respect to the agent's duties: in Arizona agents, who must be licensed, have a duty of fair dealing to both parties.
As to leaving the cards: I suspect some of its is a curtesy to show that someone has entered a home that would otherwise be off limits. It may also be that agents would say "I don't know why we do it, but I was taught that we should.
I agree that the expensive car is a sales tool that conveys an image of success.
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