Freakonomics read aloud

I’ve written about this before, but Money Magazine has just given more press to the ideas and observations recorded in the book “Freakonomics” so I want to add my nickel again. The author spends time scraping Realtors off the bottom of his shoe, and I believe he has his so called facts skewed. His main point is that Realtors are driven by the commission of the sale; that Realtors will counsel their clients to take any offer just to make a commission because the financial incentive for increasing the bottom line of the sale by $5000 to $10,000 is negligible for the Realtor even though it is significant for the seller.  While I am sure there are a few (very few) Realtors who are commission driven, most professional Realtors are insulted by this very idea. It shows that the authors of this book do not understand the basics of real estate sales: a real estate sale is all about two things: price and terms.

Generalizations are hard put to be accurate without a full disclosure of the terms for each of the transactions included in the set of statistics. There are times when terms trump price! The author uses a statistic that reflects that when Realtors sell their own homes, they demand and get a higher percentage of the  sales price than when they are representing a client. One of the terms that is true of every real estate sale is that the seller gets to set the price, and as every professional real estate broker knows, you can provide a professional price opinion for the property to the seller, and the seller will turn around and demand that the property be priced at a higher price than is reflected in the market place.  They want to try it out for a month or so at the higher price. When the property doesn’t sell, the price gets lowered, and an offer will come in under the listing price. This is not a valid statistic to use when describing the work that Realtors do.

One other missing point from the book’s trashing of Realtor’s integrity is that real estate brokers depend on repeat business and referrals to stay in business. They can not last by acting without integrity. Realtors are bound by a code of ethics the foundation of which is their oath to Agency….the representation of their client’s best interests. As with other professionals, there are people who practice real estate brokering who are not ethical or honest, or who are just not smart. But to attack the integrity of all Realtors based on statistics that don’t represent the total picture is also not right.

Realtors provide a professional service to the community They are hard working and committed to their communities. They are diligent about maintaining their education and they are generous to the community and to their clients. Realtors are full of answers about property, community, real estate. Fostering the idea that Realtors are dishonest and lack integrity is irresponsible. What do you think?