Today’s New York Times Magazine includes an article on real estate agents titled, “Endangered Species” by Stephen J. Dubner, a writer, and Steven D. Levitt, a Professor in the Department of Economics at the University of Chicago. Duber and Levitt are the authors of “Freakonomics – A Rogue Economist Explores the Hidden Side of Everything.” While the authors made a few valid points, they made far more invalid ones. Considering Dr. Levitt has a Ph.D., I would have expected a far better researched article. The errors in the article are so numerous, I’ll address what I consider the worst of them in a 3 part series.
Error #1: Selling a home takes “perhaps 40 hours of work.” I WISH! I would love to be able to sell a home with only 40 hours of work! Dubner and Levitt grossly oversimplify a listing agent’s work. In addition to the “four main functions” listed by them, a full-service listing agent:
Each of these tasks takes hours of time and none of them were included in the “four main functions” (i.e. setting the price, finding potential buyers, prepping and showing the house and handling the negotiations and contracts) the authors assigned to listing agents.
Error #2: Half the commission goes to the listing agent and half goes to the buyer’s agent. I WISH AGAIN! “Half” the commission goes to the listing broker and “half” goes to the buyer’s broker. I use “half” since sometimes one side gets more than half. The brokers then split their “half” with the agents depending on the split that the agents have negotiated.
Error #3: Dubner and Levitt make no mention of the costs that agents incur. Gas to fuel all those trips with buyers and marketing costs are just a couple of the many costs of doing business. Advertising a home in a newspaper (e.g. The New York Times) isn’t cheap! Then there are referral fees. If your buyer or seller has a relocation package through their employer, often the relocation company will require that you pay them 35% of your commission. I had to stop working with a buyer earlier this year because she came to me through a referral company which would have received 25% of my commission. Then I received an e-mail from the buyer’s relocation company telling me that I would have to give them 35% of my commission. With 60% of my commission going for referrals, I would have been working for less than minimum wage and had expenses on top of that.
UPDATE 03/11/06: Link to Part 2 of 3.
Fran Bailey specializes in downtown Chicago, Lincoln Park and Lake View condos, co-op apartments and houses. She has shared home buying and selling advice since 2006 and written about over 130 Chicago high rises. To schedule showings for any listings, get a 
