A Freakonomics Odyssey: Thoughts on Cheating Agents

In A Korean Odyssey, a retelling of the legend of the Monkey King, the female lead is a modern-day Real Estate Broker who has a mystery behind her reserved and cold disposition. With only one assistant and no other agents working for her, she achieved success by following this well-known investing slogan: buy low, sell high.

Aside from that, no one else would deal with the properties she’s invested in. Hence, a monopoly in her specialization. Why? Because the properties come with unexplainable, mostly spiritual, events, thereby justifying their low prices. And her secret? She can see and exorcise these spirits—an ability that even her cowardly assistant does not know.

When she sells a property at a much higher price, would she then tell her potential buyers about its creepy history? No. A small leak of this information might still scare people away, even if the supernatural problems are already gone. She would think it is pointless and insignificant anyway. And she’s right because everything is back to normal.

But what if other issues exist within the property or its selling process? Is it ethical for a real estate agent to withhold information about the property in order to sell it? That was what Freakonomics authors Steven Levitt and Stephen Dubner explored in their book chapter “How is the Ku Klux Klan (KKK) Like a Group of Real-Estate Agents?”

A Korean Odyssey's Jin Sun-Mi is conducting an ocular inspection on a cheap property and finds an invisible resident.

Would a real estate agent cheat you?

Freakonomics: A Rogue Economist Explores the Hidden Side of Everything is, as described by its subtitle, a book that tries to answer some freaky questions from an economic standpoint. And one of its recurring topics is cheating in any way, shape, or form—the real estate industry included.

Everyone knows that sales agents live on incentives and commissions (also known locally as “Vitamin C”). And some agents become so successful that people view it as a lucrative profession. But the reality is that incentives come in all sizes, and they don’t come easy. Brokers and agents always start in the business shelling out a lot of money, effort, and time: for education, licensing, transportation, allowances, among others. The only way to recover those expenses is to make a sale—fast—and agents will have to do everything to achieve that. But, and a big BUT, would real estate agents cheat their way to the top?

Let us first answer the authors’ query. What do estate agents and the KKK have in common? Information control.

“The Ku Klux Klan—much like politicians or real-estate agents or stockbrokers—was a group whose power was derived in large part from the fact that it hoarded information.” – Freakonomics

As Ernie Baron always said, “Knowledge is Power.” Those who have the information, when used correctly, will have more chances of getting the upper hand in any situation. And in a real estate transaction, the brokers and agents are the “experts.” They are the ones with an “inventory of similar houses, recent sales trends, the tremors of the mortgage market, perhaps even a lead on an interested buyer.” That is exactly why they are hired.

However, an agent can also wind up abusing this information just to ensure the property sells as soon as possible. They could persuade the homeowners to sell for less than they intended or encourage potential buyers because the price is negotiable. Some might even rush their clients because someone else has their eye on the property.

In other scenarios, important information might be withheld: What should we do when we find a cheap house for sale? If it looks too good to be true, get the home, its documents, and history inspected. Is it a flood-prone area? Does it have unnoticeable damages? Does it have a clean title? These are just some of the questions we need to ask.

But just because you find one bad apple doesn’t mean you should give up on the whole tree. There are a lot of good and competent brokers and agents out there; you just have to find them.

Before I end this post, here are some simple reminders:

• First off, always look for an active license. This makes sure the agent complies with government regulations;
• A recommendation from a friend who is a former client of the agent is another thing, or read up on comments and reviews from their business sites and social media pages;
• When in doubt, ask questions and take note of inconsistencies;

And lastly, one final quote from the book:

“The point here is not that real-estate agents are bad people, but that they simply are people—and people inevitably respond to incentives. The incentives of the real-estate business, as currently configured, plainly encourage some agents to act against the best interests of their customers.” – Freakonomics

P.S. If you love fantasy, you will probably like A Korean Odyssey. Don’t wait, it’s on Netflix! 🙂