Do people who lie, cheat, and steal always do better than the rest of us? Apparently in some professions they do. Obviously, in criminal professions, the people who get ahead are the ones most willing and able to violate the rules. In professions with shades of gray, and real estate sales has some dark fringes, living on the dark side of the shades of gray has financial rewards that seduce many. Real estate sales offers a chance for quick riches with little or no accountability and few educational hurdles to overcome. The profession does attract some good people, but it shouldn’t be surprising that such circumstances also attracts the dregs of society.
The most odious characteristic of the National Association of realtors is how they seek to legitimize bad and unethical behavior by labeling it “sales,” or as I prefer to call it, “bullshit.” To the NAr and many of the agents who adhere to their marketing tactics, the truth has no meaning. There is a narrative, somewhat loosely tethered to reality, that is designed to create false urgency among buyers in order to generate sales commissions. realtors simultaneously want to be recognized as experts yet held harmless when their expert advice is revealed as bullshit, often with costly implications for the buyer who relied on the inappropriate expert advice.
Acting badly in your name
Many people employ obnoxious real estate agents because they know that agent will do and say things the client would never do or say. People want the advantages of bad behavior but none of the responsibility or guilt for it. People will conveniently ignore the lies agents tell in their name because they want the extra money they believe this atrocious behavior will get them. What most fail to realize — mostly through willful ignorance — is that anything an agent says on their behalf is a reflection on them. Lying through a surrogate is still lying. Think about it, if you hire a hit man to kill someone, aren’t you still guilty of murder?
The agency relationship creates responsibilities on both parties. Clients need to know and take responsibility for what the agent says and does, and clients also need to take responsibility for knowing when their own agent is lying to them as well. Many people trust real estate agents far too much to their own detriment. Some of this is foolish gullibility, but some of it is willful ignorance as many people want to be flattered. The agent needs to take responsibility for the veracity of the information given to their clients as well as statements they make to the general public. Most don’t.
I described the dilemma this way in Urgency Versus Reality: realtors Win, Buyers Lose:
With Expertise comes Responsibility
Bad realtors want to have their cake and eat it too; they want to be recognized as experts on real estate and real estate markets, but they want no responsibility when their expertise is confirmed as chicanery, a conundrum with no resolution. realtors are responsible for their representations that buyers rely on. If they say prices are going to the moon, then who is to blame when that doesn’t happen? Buyers for relying on the experts? Or the experts for making stuff up that people rely on?
Does this make my butt look fat?
Perhaps this analogy is politically incorrect, but… Imagine you are shopping for clothes in a high-end retail outlet. You are trying on an outfit, and you are concerned about its appearance, so you ask the salesperson, “Does this make my butt look fat?” What is the salesperson to do?
If the salesperson responds, “Yes, that is not flattering to your shape,” they fear they will not close the sale, so even if the garment does, in fact, make your butt look fat, the salesperson is probably not going to tell you. As a customer, you asked a question hoping for accurate information to help you make a purchase decision. What you are likely to get is a self-serving answer that makes the salesperson money.
If a buyer walks out of the store with ill-fitting or unflattering clothes, who is to blame? Is the buyer responsible for failing to see the conflict of interest, or is the salesperson at fault for dissembling for dollars?
Unfortunately, in the world we live in, agents who act irresponsibly and even nefariously often get rewarded. As the story below explains, realtors who are assholes sell more homes. This is either a sign that unethical behavior is the best way to accomplish the task, or its a sign that far too many unethical realtors dominate the field. You can tell me which one you think it is.
Real-estate agents, take note: It’s better to be feared than loved.
Research led by a professor at Morgan State University has found that brokers who score high in Machiavellian personality tests sell more real estate than their kinder, gentler colleagues.
The advice given to agents today: be an asshole.
Abdul Aziz, associate professor of management at the Baltimore school, and Jim Meeks, a senior at the time at the College of Charleston, devised a “Mach-B scale” to measure Machiavellian behavior in people across various occupations. The personality test looks for traits described in the writings of Niccolò Machiavelli, a 15th-century Italian diplomat. A Machiavellian person, Prof. Aziz explains, is emotionally detached, prone to deceive and believes that the end justifies the means, even if it is not morally right.
Doesn’t that aptly describe many realtors? If there is one philosophy that best describes how realtors operate its the idea that the end justifies the means. That’s why they find bullshit perfectly acceptable. The end they want is a real estate commission. Telling people what they want to hear is a means to that end. Even through many find this behavior immoral, they see no problem with it because the end justifies the means.
“Machiavelli believed in using dirty tricks in order to succeed,” says Harvey Mansfield, professor of government at Harvard University and author of numerous books on Machiavelli.
“The key word in Machiavellian is manipulation,” Prof. Aziz says. “It’s a dirty word, but in our average daily life, we always manipulate information.” Machiavellian people are very good in business situations and are astute at reading others, Mr. Aziz says. “They need to understand the needs of other people and gain their trust,” he says.
Once realtors gain the trust of their
clients victims, only their personal ethical standards limit what they do. Unfortunately, some realtors have very low personal ethical standards.
For the Mach-B test, people from various occupations were asked how much they approved or disapproved of seven scenarios: for example, how they would judge a person who took a prime parking spot on a stormy night that someone else was waiting for. The answers were graded on a scale from 7 to 28, with 7 indicating the least Machiavellian personalities. Real-estate agents came in at an average of 14.8, which Mr. Aziz categorizes as a moderate score. The number falls below those of automobile salespeople, stockbrokers, health-care employees and timeshare sales agents.
realtors have the same personal standards as used-car salespeople.
Real-estate agents who exhibited more Machiavellian traits tended to see higher sales, meaning Machiavellian behavior and performance were found to be highly correlated. Automobile salespeople and stockbrokers with higher Mach-B scores also saw increased performance.
It shouldn’t be terribly surprising that the most manipulative realtors also have high sales. They put their nefarious talents to work for their own personal ends, and some are successful at it. However, and this is a big caveat, not all real estate agents succeed by manipulating their clients. Bullshit and manipulation is a short-term strategy that’s most effective in high-pressure sales environments like car lots, new home sales, or timeshare sales offices. Those salespeople often only get one chance to convert a customer, so they aren’t focused on building a relationship of trust over time. Ethical sales takes more time and effort, and many agents don’t survive long enough to build a successful and ethical business. And unfortunately, many others don’t see the need.
Of course, not all real-estate agents have Machiavellian personalities, says James Larsen, a professor of finance at Wright State University who has studied ethics in real estate.
“In general, anyone in real estate is likely to be dependent on repeat business. If you take a Machiavellian approach, then that would hurt your long-run prospects.”
Perhaps assholes in real estate do generate more sales. That says less about the efficacy of their methods than it does about the people drawn into the profession. The dark path may be quicker, but the success is fleeting and always limited by the ability of the realtor to find new gullible marks. The agents who prosper in the long run are those that treat clients with respect and earn referrals and repeat business.
There must be a better way. Although I’m not sure love is the answer either…
Twenty years and $317,000 later…
The former owners of today’s featured property bought it twenty years ago. Instead of selling it today for a $325,000 profit, the former owners already stripped the property of all its equity leaving them with nothing besides their bad credit.
- This property was purchased on 7/31/1992 for $210,000.
- On 10/1/1997 they obtained a $43,000 stand-alone second.
- On 10/30/2003 they refinanced with a $285,000 first mortgage.
- On 7/29/2005 they refinanced with a $375,000 first mortgage.
- On 12/29/2006 they refinanced with a $412,000 first mortgage.
- On 8/6/2007 they opened a $125,000 HELOC.
- Total debt was $527,000 assuming they maxed out the HELOC.
- Total mortgage equity withdrawal was $317,000 plus their down payment.
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Proprietary OC Housing News home purchase analysis
$499,900 …….. Asking Price
$210,000 ………. Purchase Price
7/31/1992 ………. Purchase Date
$289,900 ………. Gross Gain (Loss)
($16,800) ………… Commissions and Costs at 8%
$273,100 ………. Net Gain (Loss)
138.0% ………. Gross Percent Change
130.0% ………. Net Percent Change
4.2% ………… Annual Appreciation
Cost of Home Ownership
$499,900 …….. Asking Price
$17,497 ………… 3.5% Down FHA Financing
3.46% …………. Mortgage Interest Rate
30 ……………… Number of Years
$482,404 …….. Mortgage
$124,497 ………. Income Requirement
$2,155 ………… Monthly Mortgage Payment
$433 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$125 ………… Homeowners Insurance at 0.3%
$503 ………… Private Mortgage Insurance
$0 ………… Homeowners Association Fees
$3,216 ………. Monthly Cash Outlays
($319) ………. Tax Savings
($765) ………. Equity Hidden in Payment
$19 ………….. Lost Income to Down Payment
$145 ………….. Maintenance and Replacement Reserves
$2,296 ………. Monthly Cost of Ownership
Cash Acquisition Demands
$6,499 ………… Furnishing and Move In at 1% + $1,500
$6,499 ………… Closing Costs at 1% + $1,500
$4,824 ………… Interest Points
$17,497 ………… Down Payment
$35,319 ………. Total Cash Costs
$35,200 ………. Emergency Cash Reserves
$70,519 ………. Total Savings Needed