Are Real Estate Agents Like Waiters?
Marginal Revolution weighs in on the rumored DoJ anti-trust case against the National Association of Realtors.
Aside from the news at hand, they attack the puzzling reality of fixed percentage commissions. Houses in California cost more than houses in Idaho but real estate agents get 6% in both cases. They essentially expend the same amount of effort but one gets paid more than the other. The phenomenon is like tipping a waiter in an expensive restaurant the same 15% as one in a cheap restaurant, even though both do essentially the same thing.
The effect on the real estate industry is that a zoo of real estate agents move to California to compete for a small amount of home sales because they think they can earn more. Even as the price of houses rise in Idaho, more people think about becoming real estate agents and the landscape in every market becomes more competitive. That means that most of the real estate agents time is spent prospecting for customers and less on selling actual homes. That means home sellers and home buyers are presented with an increasing noisy and complex picture when making a decision to engage a real estate agent. Does that sound like a bad situation getting worse?
