Chad Syverson
speaker
40 appearances
1 recordings
1 series
first heard Jan 2025
last heard Jan 2025
Chad Syverson’s voice in public audio — every appearance, attributed to the second.
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Appearances
It's just hard not to say, man, these prices seem way higher than they need to be.
Okay, we all know how this thing works, wink, wink. And if we just don't rock the boat too hard, we can keep it together. Consider the boat rocked, starting now.
They do know the market better than most buyers or sellers. They deal with transactions all the time. That's exactly why you would hire them. That is Chad Severson. He's an economist at the University of Chicago. I'm mostly a microeconomist. And within that, my field is industrial organization, which is really just the economics of companies.
Yeah, including some of my relatives, but it wasn't true hate in that case. I have a bone to pick with you, is a quote. What was the nature of these complaints, then? What did they say that you got wrong? It was usually more diffuse than that. It was just like, you're painting us in a bad light. I do care about my clients. I would never do something that's not in their best interest.
Well, both things can be true, though, correct?
I think that's totally right. And I am happy to think of this as a problem with the system rather than a problem with the people. In fact, I think that's the right way to think about it.
What's unusual about residential real estate is both sides have an agent at the same time. That's not totally unique, but it's atypical for agency-based businesses. purchase industries.
That's right. You've got two sides, and each side has their own representative. It is different from other agent-based, middleman-quote-type companies. purchases like buying insurance through an insurance agent or using a financial advisor to buy stocks or securities, there's only one party you're dealing with.
Whereas residential real estate, you've got your agent and the other side has their agent.
And in fact, quite likely in most markets, they might be familiar with each other and have worked together before and importantly, expect to work together again. Quite often, they actually work for the same company. They're actually sharing their compensation and the back office bits and their colleagues, which is not so typical in, say, law.
In fact, I think there are rules against that for lawyers where it's just a matter, of course, in residential real estate. In fact, every once in a while, you get two sides represented by the same agent. They're working both sides of the deal.
Yeah, I think you nailed it with that description. There could be good things in terms of understanding the market from both sides. But on the other hand, these frequent, repeated interactions between agents can lead to to this behavior of, hey, this is how it works in this industry and it works well. And if you want to do something different, I'm not sure we can keep working together.
You have the legal right to propose that. They have the legal right to take you up on it. But they choose not to. Now, why do they choose not to? Because they know if they start deviating from how things work and everyone starts doing that, then the system might fall apart. The NAR will tell you, of course, you always have the right to negotiate over commissions.
But your experience and the experience that I know other folks have had is when you try, you're often met with what you describe, which is, I'm sorry, that's just not how I do business.
Yeah, interesting.
Can you quantify that? That's the $64 billion question. There's some estimates out there. I'm not sure if anyone's agreed on how big it actually is. I can say that there are a lot of countries who have agent-mediated real estate transactions that end up with much lower effective transaction prices than the U.S. So the U.S.
historically has been up in this 5.5% to 6% commission rate, and there are other places down in the 1, the 1.5% effective rate. If you look at those other countries and say, are there reasons why selling houses should be fundamentally cheaper in those places? You would say no, and certainly not by a multiple factor that we've seen.
So it's just hard not to say that, man, these prices seem way higher than they need to be to get the job done.
There's nothing really you can look at in the costs of selling a house that would scale up one for one with the price of the house. It shouldn't be twice as expensive to sell a house that costs twice as much.
One way to think about it is just the gross pot of money involved is enormous. Total number of houses sold per year times average price times five and a half or six percent. That is billions and billions of dollars. If that's the pie and it is extremely low cost to get in and try to start slicing off a piece of that pie, you're going to have a lot of bakers trying to cut the pie. Now,
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