I had a little discussion of the realtor market here. Some relevant quotes:
I think the right approach is to try to find the best realtor you can, and then just ask them for a rebate right before the arrangement is final—in a polite way of course, but with an implied threat that you’re still shopping around.…
…realtors are an evil cabal who might conspire against people who won’t play along and cough up. Just kidding, if any realtors are reading this…
…I hear that in commercial real estate, agents working with a seller may work on a commission scheme where they get a much higher fraction of the selling price above a certain baseline, which seems like a very sensible way to better align incentives. For example, US residential real estate sales commissions are typically 2.5% × (sale price). What I’m talking about might be instead a commission of 50% × ((sale price) - baseline), or something like that.
Anyway, I think of the market for people hiring realtors as a bit like the market for boards hiring CEOs: Specifically, there’s a lot at stake, and there’s no good a priori way to ensure that you’re really getting a good person, but if you try to penny-pinch then you know for sure that you’re going to get someone crappy. So the equilibrium involves lots of tremendously-overpaid people who are not actually very good at their job, but good enough at self-promotion to get into the market.
Yes, it makes sense to do a higher marginal commission for the seller with the same expected payout (but that also makes things even trickier for the buyer).
I agree that there are a bunch of really bad agents out there that are getting overpaid.
I had a little discussion of the realtor market here. Some relevant quotes:
Anyway, I think of the market for people hiring realtors as a bit like the market for boards hiring CEOs: Specifically, there’s a lot at stake, and there’s no good a priori way to ensure that you’re really getting a good person, but if you try to penny-pinch then you know for sure that you’re going to get someone crappy. So the equilibrium involves lots of tremendously-overpaid people who are not actually very good at their job, but good enough at self-promotion to get into the market.
Yes, it makes sense to do a higher marginal commission for the seller with the same expected payout (but that also makes things even trickier for the buyer).
I agree that there are a bunch of really bad agents out there that are getting overpaid.