802.11me

Economics for dummies

So, like all good wannabe-intelligent suburbanites, i read my new york times sunday magazine this weekend, and there was a really neat article on UC Economist Steven Levitt (maybe it's stephen, maybe it's levit, but i think i've gotit as is). He's a sort of anti-UC economist in that he's not really a price theory numbers quantitative guy like the rest of the staff there, but rather more of a socio-economist, if you will, considering a broad array of cultural phenomena like "what causes crime to go down?" "is horse racing fixed?" and so forth. One of his hallmarks, we are told, is his apparent interest in corruption/cheating/fixed games/businesses/processes. ANYHOO, one of his papers deals with a conclusion he reaches that real-estate agents are not looking out for the seller's best interests. and i thought, DUH! is this a big surprise? all an agent cares about is transactions, since at 2-3% they really don't make that much incrementally on you selling your house for 3% more? now, the 3% more would be a lot to you in total. so, i've always thought, wouldn't it be smart to pay your realtor the classic percentage up to a point, and afterward pay a fixed fee or increasing percentage based on ability to exceed the asking price? for instance (and i haven't run the numbers, you'd want the scale to slide nicely), let's say i'm selling my house for 100k, my broker gets 2k of that. if i sell for 105k, that might be a big big deal to me based on my mortgage, and could mean the difference between 5k profit and 10k profit....a big deal! but to my agent? well, heck 105 is only....2100 dollars....only 100 bucks more! what's the agent gonna do? agitate to sell it at 105 or tell me to take the first 100k offer that comes along! however, what if we agree on an asking price and then say anything above 100k you take 10% (or some number over asking, i'm sure there's a nice curve here somewhere, obviously you don't want the agent to lowball asking for this...just bear with me). then at 105, it's 2500 instead of 2000, a nice percentage bump and worth the effort perhaps. anyway, this seems obvious to me and i wonder why it hasn't been tried out somewhere. i suppose people just say "well, i'll just push my agent to get my asking price"....still, the numbers in levitt's paper bear out that agents' homes sell for more, 2% more on average, than the non-agent's house, so there's got to be a fix in there somewhere....seems relatively straightforward.