patrick.net

^^ a thoughtful, well-reasoned, and informative post by Dan.

If this did become a law, I think you would just have the asking price being inflated. Because everyone would know that the real price was lower, it wouldn't drive serious buyers away. It would probably keep some people away from real estate, because prices would seem unobtainable.
I think a bidding system is necessary. It would be nice if there were a central MLS that was not controlled by NAR. It could have a standardized system of presenting and scoring offers. All offers would go through the system and be viewable by the seller. You could make them viewable by all a la eBay, but that would nudge prices up a bit. Frankly, the current bidding system is a little onerous and may keep bidding wars at bay.
If someone wants to set a fixed price and sell at that price, they are free to do so.

Dan brings up the game theory involved with continuous long term relations versus short term one of transactions. I would say another factor is the size of the transaction. If the possible price swing is 20k, most people are going to want to negotiate. If it's a carton of milk or a toaster, it's not worth the hassle. Cars are still a negotiation, although the Internet and the non_uniqueness of the product makes it easier to play dealers of each other.

rando says

extra $100 can make the house sale price appear $100K higher, etc. (Sale price is not recorded in San Mateo County, only transfer tax from which sale price is "estimated")

Interesting. Sale price definitely recorded in NJ and GA

bob2356 says

LarryPatrickMaloney says

In Ohio, it's that way... in fact if you offer asked ng, the selller must accept the offer.

Simply not true. The seller is never forced to accept an offer. The seller would be liable to the realtor for the commission if a full price offer was refused. http://ohiorealtors.org/2014/02/03/legally-speaking-the-case-of-the-reluctant-seller/

Sounds like pretty powerful incentive to accept asking price offer under 99.9% circumstances.

It seems to me that Patrick is talking about some form of estoppel. This usually applies to a quote or a lease agreement. It would be a stretch, but this seems to be a possibility.

How widespread of a problem do you believe this to be? Nationwide or just the Special Snowflakes that just have to live in The Bay Area ? Doesn't seem to be an issue here in the Susquehanna Valley.

One problem i see here, is you would have to leave the seller an out. Many people that are selling a property, live in it, and their ability to vacate is contingent upon their securing a new place to move to. So I can see a situation where I want to sell you my house, at asking, and you want to buy it. However, my deal on the next place fell through, so now i no longer want to sell

Also, I'm not sure it's a problem in need of a solution. Say someone is selling their place, and are content with taking 250k. Both you and I really, really want that particular place. It's unique and there won't be another place in this area with these particulars. Isn't the most equitable solution, a bidding war?

If the bid were real, perhaps.

But how do you know any other bid is real when all you have is a realtor's word for it?

Do you trust "realtor ethics" when making the biggest purchase of your life?

Same sort of thing happens in auctions, they usually use shills.

YesYNot says

Dan brings up the game theory involved with continuous long term relations versus short term one of transactions. I would say another factor is the size of the transaction.

Yes, people only make a few very large purchases in their lives. As such, large purchases tend to be one-time transactions and thus are particularly susceptible to defection. Also, the payout matrix is different. When the reward for defection is high, it is almost certain to be the optimal strategy even if you lose a lot of sales.

One of the keys to economic prosperity is to eliminate perverse incentives, that is, to align the fiscal incentives of the individual with those of society.

Dan8267 says

One of the keys to economic prosperity is to eliminate perverse incentives, that is, to align the fiscal incentives of the individual with those of society.

Yes, this is what makes Georgism such a good idea.

It eliminates the perverse incentives to monopolize land (land ownership currently has low taxes) and to stop working (work currently has high taxes).

Dan8267 says

defection

Is there a specific meaning of this related to game theory or do you just mean going back on an offer? My point regarding large sales was just that it is not worth negotiating on the price of something small. Negotiation takes time for both the buyer and seller. Thus, it's a lose lose proposition to haggle over small purchases. But for big purchases, it's worthwhile, especially if done efficiently.
rando says

But how do you know any other bid is real

Why does it matter? I think that what you are really objecting to is a buyer who gets sucked in at price X, makes an emotional decision to buy it, then when the seller asks for another $20K, the buyer goes ahead and pays it, because they don't want to 'lose' the house. In some cases, a sale is made even though the buyer would never have bid at X+$20K. I do believe that this happens a lot, because it probably works.

YesYNot says

Is there a specific meaning of this related to game theory or do you just mean going back on an offer?

In game theory, there are two basic moves a player can make in a multi-player game. One is to cooperate with the other player(s), and the other is to defect, that is to harm the other player for the sake of some personal gain.

The classic example is called Prisoner's Dilemma. Two prisoners who cannot communicate with each other are in separate rooms and given the same choice. Each can either rat the other one out or stay silent. If they both stay silent, they both get very light sentences due. If they both rat each other out, they both get a long sentence. If one rats the other out and the other stays silent, the rat gets goes free and the silent person gets a very long sentence.

The optimal solution is for both to cooperate, but it is in the interest of each individual to defect regardless of what the other person does. Hence, the prisoners both rat on each other and both get longer sentences.

Everything is math including morality.