patrick.net

If a store advertises a toaster for sale for $20, and then when you get to the store refuses to take less then $30, that's called "bait and switch" and it's illegal.

Just saying that we should enforce the same thing for houses.

No one should ever be liable to a realtor for anything.

rando says

If a store advertises a toaster for sale for $20, and then when you get to the store refuses to take less then $30, that's called "bait and switch" and it's illegal.

Just saying that we should enforce the same thing for houses.

No one should ever be liable to a realtor for anything.

I don't see how it will make any difference. Houses are always going to sell for the highest bid, regardless.

It may change the way the game it played, but won't really make much real difference.

bob2356 says

I have no idea what "prices for properties lower than the buyer would refuse to ever accept" would possibly mean.

Oops, meant "seller". Corrected now. Thanks.

joeyjojojunior says

I don't see how it will make any difference. Houses are always going to sell for the highest bid, regardless.

First, no, they frequently do not sell for the highest bid. Some bids are "weaker" than other because of financing, and other bids maybe never get seen by the seller at all because the agent is trying to get both sides of the commission for their own agency.

But you know, you're right. If we just had public and notarized bids, that would eliminate a lot of the games realtors play which harm both buyers and sellers. Maybe I should drop this one and concentrate on public notarized bidding.

rando says

First, no, they frequently do not sell for the highest bid. Some bids are "weaker" than other because of financing, and other bids maybe never get seen by the seller at all because the agent is trying to get both sides of the commission for their own agency.

OK--"highest" is the present value of offer which includes risk of the deal not going through. And if the agent is not showing all bids, that is fraud and illegal. Making the listing price a binding offer will not change that in the slightest.

rando says

But you know, you're right. If we just had public and notarized bids, that would eliminate a lot of the games realtors play which harm both buyers and sellers. Maybe I should drop this one and concentrate on public notarized bidding.

Granted--I'm not a realtor, but I find this conspiracy theory, like most on here, to be greatly overstated. The cost/benefit of not showing all bids to a house seller seems very low. Like someone lying on their expense reports--I'm sure it happens now and again because some people are idiots--but why risk a good job over a hundred bucks? But, I find it very hard to believe that it is prevalent.

"First, no, they frequently do not sell for the highest bid. Some bids are "weaker" than other because of financing, and other bids maybe never get seen by the seller at all because the agent is trying to get both sides of the commission for their own agency."

You got to be a retard to hire that kind of agent or cant see through that stuff.

There are hundreds of agents, its not that hard to pick the right one.

While not being a fan of tactics of realtors like this, I think they can get away with it because buying a house is like an auction - maybe with a reserve.

Not a perfect analogy, but you get the idea.

This obviously wouldn't work, becasue it would be even more subject to abuse by corrupt realtors than the current system. IT would mean that it's the first buyer at that price gets it.

This proposal would assume a contract where there is none. This violates basic property rights. I'm sorry, Patrick. I do feel your pain, and came to this site originally because of the same struggles. Of course, you're in the most difficult market in the USA, and that's got to be especially frustrating. Best of luck, and I mean that!

Why is it true for toasters but not houses then?

If a store advertises a toaster for $40, it cannot raise the price just because you want to pay that price.

Maybe businesses are held to a stricter code of conduct than private individuals, or perhaps real estate, being that each property is technically unique, gets special treatment in the world of property.
We also don't pay toaster taxes each year based on the value of our toasters. We do pay vehicle taxes, supposedly to support the maintenance and construction of the roads and waterways they use.

In the case of homes, how would the sellers distinguish between identical full price offers if each buyer had the right to buy the house for that price? If several offers were straight no contingency cash offers?

I'd have no problem with the buyer accepting whichever offer they like, as long as they accept their asking price from somebody.

What I'm objecting to is outright fraud: asking a price you will not accept.

To ask a price is to offer to house for that much money. To then reject a qualified offer for that much money clearly shows that the asking price was a lie.

rando says

Why is it true for toasters but not houses then?

If a store advertises a toaster for $40, it cannot raise the price just because you want to pay that price.

Morality is based on the dual pillars of cooperation and reciprocity. This is why people are mean while driving, but nice while walking on the street or interacting with neighbors (for the most part). It is also the reason your local supermarket is much nicer to you than the car dealership or retailers. In the former case, the business makes a lot of small repeated sales that add up over time. They have a vested interest in a long-term relationship with you, and thus not fucking you over. In the latter case, the business makes a single, huge sale and probably never sees you again. They are motivated solely in fleecing you during that one opportunity. There is no incentive to be nice, and plenty of incentive to be mean.

The same holds true for short-term and long-term sexual relations. Relationships between men and women have suffered greatly because they shifted to short-term, and neither man nor woman has the incentive to be nice or to look out for the other party's interests. Long-term relationships, whether business or personal, are always more healthy and mutually beneficial than short-term ones. Game theory predicts far more defection in any short-term game.

A final example is that we live in the most peaceful time in history precisely because of commerce between states, which requires long-term cooperation. Nation-states used to invade each other because the short-term gains outweighed the risks and long-term consequences. Today, war between two industrialized trading partners seems ridiculous and implausible. You don't bomb the factories that make your electronics. You don't kill your customers -- well, unless your a drug dealer like Big Tobacco and plan to replace them with new ones.

Pretty much all evil can be traced back to short-term thinking. Good really is more profitable in the long-run. Again, this is all laid out in Game Theory.

^^ 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.