We were listening to the always excellent Freakonomics podcast recently. Episode 618 is called ‘Are Realtors Having an Existential Crisis?’, realtors are the US version of estate agents.
American estate agents have for decades charged 6% of the house price on sale. The reason for the ‘existential crisis’ is that this model is being challenged, with a large lawsuit having just been lost in one of the states.
The whole podcast is a fascinating listen if you want to understand the economics of percentage charging in the estate agent business or financial advice business here in the UK. In fact you could replace the word Realtor in this podcast with the words Financial Adviser or Investment Manager and all the economic arguments against percentage charging are the same.
There is evidence that percentage charging amongst Realtors incentivises the agent accept the first proceedable offer in their own interests, rather than a higher one in their client’s interests. In the same way, we have long argued that a Financial Adviser taking a percentage of your wealth, incentivises them not to recommend that you spend or gift your own capital, that you withdraw to pay down debt or that you use cash or National Savings.
It is great to hear independent economists giving the evidence against percentage charging and very funny to hear the desperate defence of the other side.
You can listen here: https://freakonomics.com/podcast/are-realtors-having-an-existential-crisis/
Then contact us to be put in touch with a Flat Fee Adviser who you know will act in your best interests.