Agent Conflict of Interest - Not Worth Extra Time to Maximize Price

We tend to think of the relationship between time on market and price primarily in the context of setting the asking price – if we set it too high, it’s going to take longer to sell, or maybe not sell at all, OR if we set that price too low and a buyer pops up immediately maybe we set the price too low.  There is a built in conflict that while it may be in the Seller’s best interest to wait longer for a higher price, brokers prefer to sell quickly because the increase in commission that they get just isn’t worth the wait…  Paul Anglin is professor in the college of business and economics at the University of Guelph in Canada whose research into the relationship between listing price and time on market illustrates some agent/client conflicts that should not be ignored.

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Ideal List Price

Professor Anglin finds that the optimal list price is 3-4% above market and this is consistent with other studies, most notably that conducted by Darren Hayunga.  Tying into this is the apparently intuitive finding that the higher the list price, within limits, the longer it takes to sell - less intuitive, and certainly more pertinent for agents, is that the higher the list price, the higher the sale price is also likely to be – even if it takes longer to sell.  But are agent and client interests aligned if the extra effort to maximize sales price results in a really small commission increase for the agent?

Is Technology Replacing Agents?!

The amount of information you can get scanning the internet for a new home is incredible and is rapidly eroding what was once the exclusive domain of the real estate agent. As the millennial generation comes of age and starts to demand housing in greater numbers, they are going to start buying and selling real estate without agents if agents cannot redefine themselves to accommodate the tsunami of changes that are sweeping over every other industry.

Is the Real Estate Agent Going the Way of the Travel Agent?

The key agent functions being replaced at discount prices include, Provision of photographs, Legal paperwork, Market data, Staging, Appointment setting... But the challenge to the agent system as it currently exists is that the sum of the costs of buying each component of the sales process is very significantly less than the commission the agent charges and so it becomes inevitable to start to ask:  how relevant is the agent role – especially at 5 or 6% of the total sale cost – in an age of technology and increasing access to information?  Isn’t it just as easy for homeowners to sell for themselves now, for less money and, as the research seems to be suggesting, with a better financial result.  Zillow, for one, seems to think so…

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