Buyers Should Beware of Certain Agents

Steven D. Leavitt is a professor of economic at the University of Chicago. In January, 2004, he received the John Bates Clark medal from the American Economic Association, awarded to the economist under 40 years of age who has made the greatest contribution in that field. Levitt also knows how to get the attention of his readers.

The title of the second chapter of Levitt’s new book, Freakonimics, is: How is the Ku Klux Klan Like a Group of Real Estate Agents? Does he have your attention yet?

The book has been a success, sitting on the New York Time’s Best Seller List for over 24 weeks. Anyone looking for a Florida home loan may wish to take note of this recent article in The Sun-Sentinel that focused on the aforementioned section. Levitt makes his shocking comparison by claiming that the power of the Klan was derived from secret information, such as passwords, meeting locales and, of course, identities. Eventually, the society was infiltrated and its power diminished.

In a similar context, the author argues, real estate agents derived strength and importance by controlling important information. As examples, Levitt includes listings, comparable sale numbers and valuation percentages. No consumer had access to these areas without contacting an agent.

Fortunately, the Internet swooped in and changed this dynamic. Information became available to the public at all times and buyers/sellers were privy to the same insight that controlling brokers had relied upon for so long to give them a strong position in negotiations.

Levitt also challenges the common belief that real estate agents are after the same goal as their clients: selling a home at its highest possible price. If an agent, for example, were to put in a little extra work, he or she may sell a house for $10,000 more than the listed price. This only nets the agent a couple hundred dollars more, however, often not enough of an incentive for he or she to go full tilt.

Unsurpringly, Levitt has raised the ire of the agents he writes about. What does he suggest that buyers and sellers do to help equalize the playing field between themselves and agents?

“Learn about the market,” he said. “By going to open houses and looking at recent home sales prices, you should be able to determine roughly the value of your home even without an agent.”