The Principal-Agent Gap in Real Estate Did you know that you may actually do a better job selling your own property or buying one, as the case may be, than your agent. Some agents have never taken even as little as a one hour course in real estate brokerage or marketing. It is true that many real estate agents can provide you with quite a robust amount of information, including important services, such as telling you the selling prices of other homes in your neighborhood. However, there are other important details you should also know. For example, quite often, agents work with multiple clients at the same time. Therefore if another client represents a more lucrative opportunity or commission, the agent will spend more time with that client and probably cause you to suffer lost opportunities. When you talk to an agent or broker they typically like to make it sound as if their fees are engraved in granite. Well, that's rarely the case. During the recent housingâ€„bubble in the United States for example, the number of brokers sharply increased, and so did listings. And with that many agents had to lower their fees. Now, even when the bubble burst and the crash occurred, clients were still able to negotiate a better deal because the same brokers were still out there in their numbers and competing for even fewer listings. Quite often you the client may think you have had very few or even no offers? Actually, most likely there have been several. To be fair, the broker or agent you have hired is obligated to tell you about all offers that come in. In reality, many of them do not, because often the broker may think that the price is too low for his own liking. You must be clear with your broker that you want to be informed of all offers, otherwise, you may be leaving him to make decisions that you should be making. In Nigeria, sellers often get surprised that a buyer who had agreed to pay on the property suddenly fails to make the payment and may even never answer phone calls from the seller. The reason for this is unrighteous pricing. The real estate agent fails in his intermediation to properly match buyers and sellers because of his opportunism and insincerity. Consider this situation. The potential buyer not well informed on the lowest price the seller would accept, approaches the transaction hoping to be lucky, perhaps the seller desperately needs money. Say the seller's unknown asking price is N200 million. The buyer knows he only has N50 million, but demands to know the asking price. When he finds out it is N200 million, not wanting to embarrass himself or disrespect the seller he offers N150 million, hoping the seller will say no. So if the seller turns around and accepts the offer, this potential buyer will obviously not be able to pay and will switch off his MTN. Our hidden economics for you.
Posted: Mar 3rd, 2016 @ 02:11:43 AM