Imagine you walk into a Best Buy store and head to the TV section. There, wandering among the big-screens are blue-shirted folks ready to tell you exactly why that 60-inch, 3-D, LED TV is just right for you.
Now how do you view these people? As trusted television experts working on your behalf to make sure you get the right TV at the right price and advisors that will potentially tell you to sit and wait if now's not the right time to buy? Or as Best Buy employees who have the company's and their own bottom lines in mind?
I figure most of us would say the latter.
When it comes to real estate agents, though, that may not be the case. Though the incentives are no less out of whack -- the more the buyer pays for the house, the more the agent makes, and the agent makes bupkis if there's no sale -- homebuyers are much more likely to treat a real estate agent as an expert that is guiding them through the complex process of buying a house.
But, as University of Arizona professor Brent White points out in a new paper, real estate agents aren't viewed by courts as advisors at all, but simply as salespeople. That means that agents are free to say pretty much anything they want to potential buyers and have no fear of legal liability.
While the vast majority of agents may have the best intentions in mind when "guiding" buyers, White argues that in the wake of a housing bust that's left a great number of homeowners so far under water that they might find Jimmy Hoffa, the gap between perception and reality for real estate agents needs to be closed.
Professor White suggests that real estate agents either "fully professionalize their role" -- meaning they become accountable and legally liable -- or accept the role of salesperson and avoid providing advice and guidance to buyers. I think this is a brilliant idea and have come up with a few ideas of how implementation might work.
- Dress code. To make it simple for buyers to know what kind of agent they're dealing with, agents could be split into the two classes that White outlines and the professionalized agents will wear business suits while the sales group would be forced to wear a getup similar to waiters at Jimmy Buffett's Margaritaville.
- Taxi service. Since pretty much anyone with an Internet connection can get all the information they need about for-sale properties from the sites of companies like Zip Realty (Nasdaq: ZIPR) and Move (Nasdaq: MOVE), agents could become more like a taxi service to simply transport homebuyers from place to place. The National Association of Realtors would become a call center and would keep its trap shut on anything economics related, while chitter-chatter in the real estate taxis would stick to normal taxi topics like lower back pain, why the Yankees suck, and what a jerk the last guy in the car was.
- Buttons. While with buyers, every real estate agent will have to wear an oversized button that says "I take 6% of whatever you pay and the more you pay, the more I make." Require that they clear their throat and tap the button every time they give anything that can be construed as advice or guidance.
Sure, my ideas might take some getting used to, but it's all about changing the paradigm so that we don't repeat past mistakes, right?
