He Who Represents Himself Has A Fool For A Client

Dated: 10/25/2019

Views: 235

My last blog I decided was too opinionated and could be interpreted as a little abrasive so I deleted it. We will see how long I let this one ride, or if I delete it!

Let us open with a simple question. A bat and a ball cost $1.10 together, and the bat cost $1.00 more than the ball, how much does the ball cost? Stop reading and answer the question before you go any further. A bat and a ball cost $1.10 together, and the bat cost $1.00 more than the ball, how much does the ball cost? The mind can see simple answers in simple questions. Most people say "Duh 10 cents." Well that is wrong. If the ball was 10 cents and the bat cost a dollar more the bat would have to be $1.10, so together they would total $1.20. So the answer is the ball cost 5 cents and the bat a dollar and 5 cents for the $1.10 total with the bat exactly $1.00 more than the ball. 

So what is the point of the question? Understanding cognitive psychology and behavioral economics in negotiations, even if only needed rarely, can be enough to benefit from understanding certain principals. This blog is not about those ideas, but rather say that they exist. Just in the past two or three months I have read a handful of books that mention the work of Daniel Kahneman and Amos Tversky. The books I know off the top of my head have been by Malcolm Gladwell, Micheal Lewis, Nassim Taleb, and one by Kahneman himself. In a luxury real estate market where negotiation, rationalization, and emotion can come into play the works of people like Kahneman and Tyersky can give some interesting insight. 

I think real estate is like law in the saying, he who represents himself has a fool for a client. Actually a volume of books would have done away with lawyers a long time ago if you think a database of information can wipe out a relationship based business with human rationalizing, negotiating and emotion. Beyond negotiating even if that was not a thing and the price was the price we still have navigating contracts, financing, appraisal, inspection, estoppel, survey, title, ect. These are things that are second nature and not even though about to an agent, but could bog down an out of town buyer with a full time job in an unrelated field. 

With computers and apps reshaping many industries I do not see the role of an agent in a luxury second home market going away. Sure how you connect with an agent will change. For example instead of walking in a brick and mortar store and looking at print, buyers can just google "homes for sale in..." I think technology is great. Different cupid. Same relationship. 

Artificial intelligence and computers are not actually advanced in reasoning as you may think.  If we could recreate the human brain with computers it would be the size of a city block, take an entire nuclear power plant to run and a river diverted through it to cool it. Yet our brain runs on 20 watts and fits in our head. The BRAIN initiative will map the brain like the human genome project, but that’s going to take possibly decades since there are 100 billion neurons in a human brain. This is about as many as stars in our galaxy, and we want to know what each neuron does. 

Does an iBuyer platform work where computers cut out the agent? Maybe. In a market where margins are tight, homes are not custom, and there are not many intangible variables it could do okay. I do think that internet buying and selling platforms will see an unproportional share of problematic properties. If a home has a problem a seller would try to sweep under the rug or not disclose I think this is where they will go. There is a disconnect created like when banks swapped to originating loans, not holding them and selling them off. Before the model was someone who got a loan did not want to go bad because they saw the person who loaned them the money in the community and there was a personal tie. Then you create a situation where everyone throws the keys back at the bank in the most recent depression and feel like the bank duked them instead of the other way around. So if there is no connection with a listing agent and buying agent and a face of a buyer on the other side the feelings of screwing someone are buffered. Next like you always hear about real estate "location, location, location." can a computer describe the vibes of a neighborhood or compare neighborhood "A" to neighborhood "B" in a human like way? Not really. Best it could do is pull data points or customer reviews but even with data points how do you translate say a computer generated traffic stat to a reliable answer to if you want to live on the road.

I have not visited the topic of internet removing agents in my market much, but I would be interested to hear what other people have to say. If you read this and have an opinion comment here, email, call, DM me on social media. Thats another point, in my market market social media reach of my target demographics is only 23% on Instagram and 68% on Facebook based on percent of users by age. That is the topic of another blog in itself.

Jonathan Hill
Broker Associate

The Jonathan Hill Team at 30A Local Properties

Emerald Coast Association of Realtors Political Action Committee Chair 

Emerald Coast Association of Realtors Young Professionals Network Committee

205.370.5905 

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Jonathan Hill real estate

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Jonathan Hill

Jonathan grew up in Birmingham, Alabama and vacationed from 30A to Destin every time he got a chance while growing up. He attended The University of Alabama where he double majored in finance and busi....

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