Nominate me Ikonoklastes, for I am come to raze this temple of half-baked ideas. I want to come back to the MLS later in the week, and I have a deep need to expose the motivations of brokers, as these are distinguished from the motivations of lesser licensees. But for now I want to take on the idea of market value.
Jeff Brown, whom I admire without limit, asks of me:
I’m still wondering though about the apparent premise underlying your argument that says the buyer pays everything.
That premise is this: That somehow the market value of the home is controlled by something other than supply/demand, and the other factors of which we’re all aware. Would you please clear this up for me?
There are actually two different issues on the surface there, and there is still a third issue buried in the underlying premises.
First things first: In every economic transaction, unless the seller is taking a loss — or unless the seller pays for something outside of the transaction — the buyer pays for everything. This is true of anything that can be bought, and it is why — in every business except real estate — the buyer is given the red-carpet treatment. The seller (of anything) brings the value to be sold, but the buyer brings every dollar of the money, and every dollar that is disbursed to the seller and to any other involved parties is disbursed from the buyer’s pile of dollars.
In real estate, we make believe that the money is first transferred to the seller and then instantaneously distributed to the other parties, but this is a sleight of hand we effect in order to get the sales commissions past the lender. It might once, historically, have described a sequence of events, but even then the activity was a pantomime.
The seller does not cause the sale by claiming to pay for it. The buyer causes the sale, and no uncoerced sale ever happened until the buyer caused it.
Moreover, nothing in the laws of god or man ever prevented a seller from paying sales commissions out-of-pocket, in advance, instead of Read more
