Real Estate Brokerage

Let’s moan about the reality of realty today.

My quick take when I saw that tweet and the comments:

This tweet is getting a lot of hate but…it’s exactly what I did for every place I’ve bought. Got an agent from the same firm so they can double dip. I mean the whole options market revolves around understanding the dynamic of billing both sides.

You’ll get better allocations when there’s a judgment call (there usually is) on the splits if you are a regular client of the broker. Give up a half-cent commission on a 5k lot a couple times a month lot so you can get 1/2 instead of 1/4 allocation on the 10k lot good by a dime.

In the options world, the analytics and nerd stuff get s a lot of attention but it’s also the most democratic aspect. The highest edge (although least scalable) part of the game is relationship maintenance. There’s an equilibrium of tit-for-tat that resides within a snapshot of time that is defined by prevailing technology and the split of predator/prey populations. Large shifts in either the tech or the populations alter the parameters of the equilibrium pecking order. There is one constant — middlemen “control” the flow. Flow is the plankton at the bottom of the food chain.

I think as a metaphor for many businesses — AI is gonna handle the calculus. But getting close to the people who wake up in the morning with opinions that lead them to buy and sell will always be the job to be done. The nerd stuff is satisfying. But making money is just grimy work.

It’s important to have the right expectations lest you cry when you find out who makes the most money (especially per unit of risk).

[A prior riff on the idea: The Juicy Stuff Doesn’t Hit The Pit]

One last thing…if the persistence of 6% broker commissions in our Zillow-enabled world has you puzzled, it seems like times might be changing. A recent settlement seems watershed:

🔗The Middleman Economy: Why Realtors Just Took a Big Loss and Homebuyers Might Benefit (9 min read)
by Matt Stoller

A shocking $1.8 billion antitrust decision by a jury against the National Association of Realtors for price-fixing could rearrange housing markets.