Real Estate, Freakonomics, And Another Rant: or Are Dubner and Levitt Like….?

I love (that has changed) the book Freakonomics. I like to look at information counter-intuitively to see what is maybe missing.  Such as killing the cats made the plague spread quicker because it was the fleas on the rats that were the real culprit

In the video above they don’t look outside the box; they just go with normal motivations.  They say that people (agents) are motivated by money which is true on the macro level.  I know agents who are “those” people who just want to put the deal together.  If you read my blog you know about me showing over 60 homes to a client (I wasn’t counting, they were) and you know I have talked people into renting.  That is not in my best monetary interest.

While their explanation is fine for motivation in general, to place this label on agents specifically is unfair.  Though one of my clients is a good friend, his Dad questioned whether I was telling him the truth about something, “You know how Realtors are.” I was actually happy he checked up on me and saw I was telling the truth.

A problem with economists is that they think everyone is rational and predictable. I read a quote that said, “If your results are explained by people not being rational then you haven’t set up the data correctly.” Rational people should buy a coffee maker not go to Starbucks.  Rational people should not smoke, overeat, overdrink, overspend, underfund their retirement, give to charity unless they want the tax deduction, etc.  We aren’t ‘rational’ or incentivized by the same things

When I told that client he should rent and wait while other things settled in his life his mouth dropped open and he was silent for about 15 seconds before he said, “But you’re a Realtor.” My motivation is not money, it’s to help people, regardless of how corny that sounds.

Do Steven Levitt and Stephen Dubner who wrote Freakonomics just put this data together to sell books?  Did they title their chapter “How is the Ku Klux Klan Like A Group Of Real Estate Agents?” to sell fear? I guess if we are to worry that money is the incentive then we have to wonder why and under what methods they wrote the book.  That doesn’t seem fair does it?

I realized when I originally read the book  I skimmed this chapter not realizing how bad they treated us. I reread the excerpt linked above and now I’m annoyed.  Here comes the rant. Feel free to step away.

In that chapter they wrote,

A big part of a real-estate agent’s job, it would seem, is to persuade the homeowner to sell for less than he would like while at the same time letting potential buyers know that a house can be bought for less than its listing price.

I bolded that line.  Awesome. Write it so it sounds like a fact but subtly mention that it isn’t a fact. Later in the excerpt they talk about the subtle ways that agents can drop hints, like code words to buyers to let them know they can get the house for less.

There are people who still don’t know what “lol” means but they want to lead you to believe there are code words? And if everyone knows these code words then why wouldn’t the seller them from using it?  Of course they use an example of a savvy buyer and a sixty-five-year-old retiree not knowing the code words.  Jeeze, this is really getting pathetic.

They list five terms associated with lower sales price and five with higher sales price. Imagine that.  The words that correlate with expensive things like granite and gourmet which means there is likely to be a higher price.  And in the example I give in the above paragraph is about using word “well-maintained.” which isn’t even on the list of lower price terms.  Nice job not using the code words from your lower price list that Grandpa can’t understand as an example that we are screwing old people.  My grandfather is pretty sharp at 87 and he understands the power of words. Are Dubner and Levitt ageists? It seems like stereotyping to me. Maybe I should title the blog like that to get hits like they did in their book.

Are agents supposed to lie and say there is granite in a house? If there is a run of the mill home with no upgrades or anything that stands out, we are left with words like spacious, charming, and others. Of course those will be lower priced.

And lastly on their argument about agents letting their home stay on the market later, in 2005 homes sold around here like it was an auction.  After the summer of 2006 or so prices changed and I have heard story after story about how people wished they had taken previous offers.  Client after client lost money that summer because they were stuck on a price too long.

If agents were doing that because they were hard headed then they got burned too.  Most sellers price their home to high at the beginning and it has been proven that will get you a lower price in the end.

I think they treated agents unfairly just to make a chapter in their book interesting.  Sure the data is interesting about what words correlated with price and how agents hold their price longer but I guess you got to sell books regardless if you are right or not.  Since I’m not an insider on the other industries they talk about I wonder how badly they butchered them as well. I have told people about Freakonomics for years.  That’s over.

*I’m annoyed. There may be typos.