The National Association of Realtors is a rent-seeking organization. This is because commissions should be strictly proportional to the amount of work required for the specific task able to change with market forces rather than an arbitrary percentage of the value of a particular property, since the effort needed to sell a property is not necessarily proportional to the value of said property.
I’m disgusted that they’ve managed to make a percentage of property value the accepted norm for commissions. How were people suckered into that rather than demanding per-hour rates?
Every organization is, to some extent, rent-seeking. NAR is evil because they’re good at it.
I don’t agree with your labor theory of value—there are many complex and individual valuations that are quite valid. One can easily argue that the limited resource of buyer attention is worth a fair bit of money to secure, and the percentage-of-sale is just a nice way of charging more to people with more money.
The evil part is they’ve managed to enforce a monopoly on some kinds of advertising (MLS and collusion among realtors). This gets them the ability to charge more than they could if there weren’t a network effect that they take advantage of.
I don’t agree with your labor theory of value—there are many complex and individual valuations that are quite valid. One can easily argue that the limited resource of buyer attention is worth a fair bit of money to secure, and the percentage-of-sale is just a nice way of charging more to people with more money.
I could be convinced to have a more nuanced understanding. I’m confident I have not read enough of the writing on the topic. What would you recommend?
To a seller, the value add is the outcome of selling the property, not the effort put in by the realtor. Why doesn’t it then make sense for realtors who provide equivalent value quicker, to be paid more per hour?
Because absent their monopoly on certain types of advertising, competitors could offer the same value for much less. In retrospect I suppose the actual problem is then the monopoly power not strictly the effort from the seller or lack thereof. I’ll add to the OP to reflect that/cross out what I no longer endorse.
The National Association of Realtors is a rent-seeking organization. This is because commissions should be
strictly proportional to the amount of work required for the specific taskable to change with market forces rather than an arbitrary percentage of the value of a particular property, since the effort needed to sell a property is not necessarily proportional to the value of said property.I’m disgusted that they’ve managed to make a percentage of property value the accepted norm for commissions. How were people suckered into that rather than demanding per-hour rates?
Edited to reflect insight gained from comments.
Every organization is, to some extent, rent-seeking. NAR is evil because they’re good at it.
I don’t agree with your labor theory of value—there are many complex and individual valuations that are quite valid. One can easily argue that the limited resource of buyer attention is worth a fair bit of money to secure, and the percentage-of-sale is just a nice way of charging more to people with more money.
The evil part is they’ve managed to enforce a monopoly on some kinds of advertising (MLS and collusion among realtors). This gets them the ability to charge more than they could if there weren’t a network effect that they take advantage of.
I could be convinced to have a more nuanced understanding. I’m confident I have not read enough of the writing on the topic. What would you recommend?
To a seller, the value add is the outcome of selling the property, not the effort put in by the realtor. Why doesn’t it then make sense for realtors who provide equivalent value quicker, to be paid more per hour?
Because absent their monopoly on certain types of advertising, competitors could offer the same value for much less. In retrospect I suppose the actual problem is then the monopoly power not strictly the effort from the seller or lack thereof. I’ll add to the OP to reflect that/cross out what I no longer endorse.