In Defense of Real Estate Agents

By Adam Rose

Articles and Blogs blaming real estate agents for overvaluing properties prior to the collapse of the
housing market are starting to appear with frequency. This makes as much sense as blaming a waiter for
the high price of food. This tendency, to blame agents, says much about the desire to place blame and
avoid responsibility and little about the source of the nation’s housing woes.
The professional responsibilities of a real estate agent (representing the seller) include finding
properties for sale, persuading owners to agree to professional representation, and marketing the
property to potential buyers.
Real estate agents do not invent home values. There are licensed appraisers who professionally
determine the value of a home. However, the market has the strongest say in determining price. When
real estate agents suggest a sale price they do so based on the “comps” or the prices that comparable
homes have sold for in the neighborhood. Naturally the owner would like to sell for the highest price
possible and will choose to work with the agent that is able to secure the highest sale price.
Buyer’s agents (representing the buyer) locate available homes in the location and price range
suggested by their clients. Their job is to find properties for sale, arrange for their clients to see the
properties, and, if their clients are interested, to negotiate a sale agreement. Naturally, the buyers would
like to pay the lowest amount for the best house.

All Real estate agents are independent contractors that work on commission. Most work on 100%
commission. They provide for their own benefits and are paid nothing unless they close deals.
Incidentally, during a housing downturn, many agents become virtually unemployed.

For most people, buying a home is the biggest financial decision they make in their adult lives. In order
to make a responsible and informed decision, buyers should conduct some basic preliminary research. A
brief study of the housing market should reveal two glaringly obvious facts of interest. One is that the
housing market operates in repetitive cycles of downwards and upwards trends. Two is that real estate
agents are commissioned salespeople.
With these tidbits of knowledge stored away, any buyer should know beforehand that a home will not
always rise in value in the immediate future. Also, he should consider that the advice of the agent may be
influenced by that agent’s desire to make a living. Finally the buyer should be aware that a seller’s agent
has no responsibility legally or ethically to the buyer. The seller’s agent is legally bound to do what is
best for the seller. Many buyers try to save the price of a commission by working directly with seller’s
agents.
Financial speculation is a risky business and requires foresight, planning and perhaps some luck.
Those wishing to “flip” houses for a quick buck should be aware that they stand to lose as much as they
stand to gain. However, the homeowner that wishes to spend the next twenty years in a house raising
children should feel relatively confident that once those twenty years have passed, his home will have
risen in value.
Real Estate agents do not provide mortgages or pre-approve their clients. This is the job of mortgage
agents. Real estate agents do not sell high interest or deceptively low rate loans. Mortgage agents sell
these loans, but even they don’t create the loans. They merely connect the borrower to the lender. The
lenders create loans based on Federal guidelines. In the recent housing crisis, the lenders then bundled
together several shaky loans, misrepresented them as secure, and sold them to retirement, municipality,
and mutual funds throughout the world. Thus they secured a quick profit and minimized their risk.
The housing crisis is a result of federal guidelines that were easily abused and the fraudulent
packaging and selling of high risk loans as secure investments. Greed played a strong role. Those who
made a fortune in the process are keeping their mouths shut and playing golf. Those who lost are trying
to blame their real estate agents for not making them rich.

Here’s my question. If two real estate agents offered to sell your house for you, one for a million bucks
and the second for two million bucks which agent would you work with?