Beware the salesperson's incentives

Only 1.5 percent of the purchase price goes directly into your agent’s pocket.

So on the sale of your $300,000 house, her personal take of the $18,000 commission is $4,500… Not bad, you say. But what if the house was actually worth more than $300,000? What if, with a little more effort and patience and a few more newspaper ads, she could have sold it for $310,000? After the commission, that puts an additional $9,400 in your pocket. But the agent’s additional share – her personal 1.5 percent of the extra $10,000 – is a mere $150…

It turns out that a real-estate agent keeps her own home on the market an average of ten days longer and sells it for an extra 3-plus percent, or $10,000 on a $300,000 house. When she sells her own house, an agent holds out for the best offer; when she sells yours, she encourages you to take the first decent offer that comes along. Like a stockbroker churning commissions, she wants to make deals and to make them fast. Why not? Her share of a better offer – $150 – is too puny an incentive to encourage her to do otherwise.

“We both want the best price” is true in the same way that two people in a taxi both want to arrive: one of them is also watching the meter. The homeowner receives most of another $10,000. The agent receives $150 and another week of chasing viewings. Their interests overlap beautifully until the precise moment that matters.

That little split turns up wherever one person advises and another person lives with the result. Commission at signature rewards the salesperson before Support inherits the heroic promise. A recruiter gets paid on placement; the manager gets eighteen months with the hire. A fund manager enjoys the upside of a risky quarter while the client owns considerably more of the downside. None of this proves wickedness. Incentives rarely need a moustache-twirling villain. They work quite happily through sincere people who find the recommendation that suits their own arithmetic increasingly reasonable.

Follow the money one decision further. Who benefits from speed, who benefits from quality, and who opens the email when the consequences arrive? Pay for retention or realised outcomes where those measures are credible. Show buyers how the adviser earns before calling the advice impartial. Broadly aligned is corporate language for “the conflict is hiding in the final ten grand”. Find it before the person holding the meter explains why this is an excellent place to get out.