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 ends up there's so many, the slice that any average person gets is really tiny. But I think that's one way to think about it is just a ton of money, super easy to get into. How easy is it? Here's Sonya Gilbook.
Additional information has radically changed a lot of industries. Going back a few decades, travel agency lost 60% of its revenue when people figured out they could buy airline tickets themselves online. And airlines figured out flyers were happy to do that. Basically, one of two things happened. Either... The industry does totally restructure itself.
That's kind of what happened with travel agency. Or it's a little bit of a squeezing the balloon thing like car sales where they've moved some of the obfuscation, for lack of a better word, to other parts of the transaction. Or they just try to make profit on other dimensions now through repair deals or whatever. So that tends to be how a lot of industries have responded.
Residential real estate has changed less, and I think it's because you have this two-sidedness of the deal. So it's not just one agent decides to do things differently and things start falling apart. If one starts doing things differently, the other one can say, oh, no, you don't, and here's what's going to happen if you do.
There's explicit collusion. the smoke-filled rooms where parties in an industry get together and say, hey, let's make a plan so we can monopolize this thing and make more money. I don't think there's ever been evidence of this happening widespread in real estate.
The kind of collusion that Steve and I talked about in the paper is what an economist might call tacit collusion, which is there's never an explicit agreement and no one's signed contracts of this form, which would be completely illegal. But there is a sense of, okay, we kind of all know how this thing works, wink, wink, and this thing works well for us. And if we just...
Don't rock the boat too hard. We can keep it together.
If I go out to dinner and the restaurant accidentally puts an extra thousand dollars on my bill, I'm incensed. But when it comes to selling a million dollars, it's a thousand here, a thousand there. I just want to finish this. What does it matter?
It's just the nature of the industry. All that happens when house prices go up is you get more agents. this structure now doesn't help the average agent. Maybe it helps the ones who do super duper well. It helps the brokerages because the more volume they get under their umbrella, the better they are. It helps the NAR because the more agents there are, the more dues and fees they collect.
But at the individual agent level, this structure isn't what's making what they think would be nice about the industry nice. You know, the flexibility, I can do this part-time, et cetera. You could do that in a world where you get paid by the hour too, right?
The current structure is completely allowable under the new settlement. It's just the way that that structure is agreed to has to be a little more explicit and there are more rules about how the communication of the commission rates are done. But if you follow those rules, you can still have, say, a 6% total commission split evenly between the buyer's agent and the seller's agent.
What might happen is the new rules give more leeway to agents who want to do things differently.
I think it makes a lot of sense just to start with an hourly fee. We hire a lot of professional services at an hourly rate. And the hourly rates are settable agent by agent. You want competition in this market, too. Certainly, you don't want any coordinated hourly rate. It doesn't solve all the problems. You're still going to have information gaps, and it'll create its own problem.
When you pay someone by the hour, you get a lot of hours that maybe you don't really need. So it's not a panacea.
I can see people trying it out on their own and not liking it, certainly. There's probably going to be a set of really sophisticated sellers and buyers who will just keep doing it by themselves. But I think what you described could happen, which is the typical house seller is like, geez, I might have the mechanism to do it, but I really don't know what I'm doing enough.
I don't have the time, et cetera, et cetera. And so they want to hire an agent. Again, there are reasons why agents are valuable, but if the structure of compensation falls apart and people do want to run back to agents and I understand why that would happen. I would hope the compensation structure doesn't reverse itself back to what we've got now.
I would consider doing a for sale by owner. If I did, I would, quote, cooperate with buyer's agents. In other words, if... The buyer's agent was expecting to be compensated through a split with the sell-side agent. I'd effectively pay money because I would know that if they weren't being compensated by their own client, they've got no incentive to bring their client to my house.
There are reasons to have a sell-side agent that are valuable, particularly in the neighborhood I live in. It's sort of a small niche market, and it's good to have that relationship pre-advertising component that having a sell-side agent can give you because they talk to other people in the market.
I think I could really handle the buy-side myself. The exception is If I thought the market were tight enough that having knowledge of sales to come was important, just tootling around on the internet myself, I'm not going to know a house is for sale until it's for sale. And in a hot market, it might be essentially gone by that point. So in that world, I might consider a buyer's agent.
But in a slower market, I think the agency component I would do myself.
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