Upsold

Real Estate Agents, Prices, and Neighborhood Inequality

Max Besbris

• Editorial: University of Chicago Press
• Año: 2020
• ISBN:
  9780226721408
• Categoría: Sozialwissenschaften
• Categoría: Soziologie

What do you want for yourself in the next five, ten years? Do your plans involve marriage, kids, a new job? These are the questions a real estate agent might ask in an attempt to unearth information they can employ to complete a sale, which as Upsold shows, often results in upselling. In this book, sociologist Max Besbris shows how agents successfully upsell, inducing buyers to spend more than their initially stated price ceilings. His research reveals how face-to-face interactions influence buyers' ideas about which neighborhoods are desirable and which are less-worthy investments and how these preferences ultimately contribute to neighborhood inequality.
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Stratification defines cities in the contemporary United States. In an era marked by increasing income segregation, one of the main sources of this inequality is housing prices. A crucial part of wealth inequality, housing prices are also directly linked to the uneven distribution of resources across neighborhoods and to racial and ethnic segregation. Upsold shows how the interactions between real estate agents and buyers make or break neighborhood reputations and construct neighborhoods by price.Employing revealing ethnographic and quantitative housing data, Besbris outlines precisely how social influences come together during the sales process. In Upsold, we get a deep dive into the role that the interactions with sales agents play in buyers' decision-making and how neighborhoods are differentiated, valorized, and deemed to be worthy of a certain price.

1

BENEVOLENCE, INTEREST, AND ESTABLISHING AUTHORITY

Why do real estate agents still exist?

Lydia DePillis, Washington Post

A computer pricing algorithm does not know if those countertops were put in correctly, or what lies beneath those new floorboards, or if that third bedroom used to be a garage. It most likely doesn’t know the motivations of the previous owner, upcoming development changes that may affect property values, and it certainly cannot negotiate.

Bret Calltharp, Inman.com

Americans consistently use real estate agents to purchase property, but they don’t trust them. At no point since 1977, when Gallup began measuring public opinion on the subject, have more than 20 percent of Americans rated the honesty and ethical standards of real estate agents as “high” or “very high.”1 While they generally enjoy more goodwill and trust than car and insurance salespeople, telemarketers, and members of Congress, real estate agents are less trusted by Americans than nurses, bankers, pharmacists, and journalists among many other occupations and professions.2

Home buyers are not necessarily wrong to question their agents’ trustworthiness.3 During my research, I came across news stories about agents accused of racial steering, creating Ponzi lending schemes, illegally raising commissions, misleading buyers about prices, using listed houses to film sexual encounters, lying about the square footage of a listing, and even laundering money for a drug cartel.4 Perhaps home buyers are right to be suspicious of agents. So what do agents do to assure their clients that they are worth their commission? How do agents manage their relationships with clients and guard against their occupation’s negative reputation? How have real estate agents become so influential in buyers’ housing decisions given that the public does not trust them?

These were some of the questions I had in mind as I began to meet with and observe real estate agents in 2011 and 2012. Over time I noticed patterns in how agents attempted to shake the stigma associated with their occupation. Individual agents contrasted their own benevolent behavior to vague descriptions of other agents. These other agents served as placeholder projections for the bad and nefarious activities often ascribed to the occupation more generally. Agents also justified their role in the housing market by disparaging online and free sources of information as unreliable or untrue. Real estate websites, agents claimed, do not accurately reflect the market because no one at the website is taking the time to walk around particular neighborhoods and experience them firsthand.

Throughout their interactions with buyers, agents consistently sought to shift focus away from their own interests in housing sales. Clients are obviously aware that real estate agents make money off a completed transaction—agents don’t work for free—and yet agents tried very hard to avoid talking about their commissions. Instead they spoke about the benefits of their work to their clients and to local communities and neighborhoods. They did so in part because experts or professionals in a given market are supposed to be economically disinterested problem solvers.5 Yet the process of becoming a real estate agent does not much resemble that of becoming, say, a doctor or a lawyer. The requirements to become a licensed real estate salesperson (agent) vary from state to state but are, in general, far from onerous. All states establish a minimum age (eighteen in most states, but occasionally nineteen or twenty-one), and most require a high school diploma or GED. All require some in-person classroom instruction, but the levels vary between 40 and 180 hours. Some states do not grant licenses to individuals who have been convicted of a felony. The rules governing appropriate behavior of real estate agents are also quite variable across states.6 Real estate agents, in other words, occupy an ambiguous occupational position in which the barriers to entry are low and their responsibilities are unclear. In this context, agents often felt the need to deemphasize their own economic interests in order to seem professional and trustworthy.

In doing so they established themselves as friendly and knowledgeable confidants who were serving buyers’ interests. As we shall see, this relationship allowed them to more easily shape buyers’ preferences as the search progressed.

A SHORT HISTORY OF REAL ESTATE AGENTS

While there have always been individuals who brokered the sale of land, real estate agents are a product of mass urbanization in the United States. The outlines of the occupation as we know it today—maintaining knowledge about multiple units for sale in a given area, a standardized commission fee, and government licensure—began to form in the late 1800s. Owing in part to their reputation as swindlers and crooks, groups of land brokers formed local real estate boards as a means of reframing their occupation as an honorable one, as well as a way to share information about listings.7

For most of the twentieth century, real estate agents kept close guard over their knowledge of inventory. Local boards created multiple listing systems (MLS) to address the problem of information in the housing market. No one agent could possibly know every house for sale in a given neighborhood, let alone in an entire city or county, so boards established mechanisms for their members to share information on their properties. Members paid an extra fee beyond their annual membership dues to submit and view properties on the MLS, and agents established conventions for sharing commissions on cross-listed properties.8 The existence of local MLS meant that while home buyers and sellers did not have to use real estate agents, there was a clear advantage to doing so. The MLS, in other words, established a fundamental asymmetry in who had access to information about the housing market.

In 1908 a national board (the National Association of Real Estate Boards, which would later become the National Association of Realtors) was formed to further professionalization.9 In 1916 the national board adopted the term Realtor to distinguish between members and nonmembers. The board also recognized the need to change Americans’ attitudes toward housing. Before 1920 the vast majority of urban residents did not own property. Local boards marketed homeownership as a public as well as personal good and partnered with developers and builders to advocate for policies that would expand the real estate market. By the 1920s the national board was highly active in promoting homeownership across the nation.10 Today the National Association of Realtors is a massive and highly active professional group with a large lobbying budget and a host of resources for members.11

Professional bodies also created rules that shaped real estate transactions in ways familiar to today’s homeseeker.12 As a result of the boards’ efforts, the lease between a renter and landlord morphed from a simple agreement between individuals to a complex legal document, eviction procedures became codified into law, local governments began to keep records on land sales, states instituted licensing exams, and listing agents and buyers’ agents agreed to split commissions on sales evenly. For home buyers in particular, these changes complicated the housing market. Residential real estate transactions necessarily entail some legal paperwork. At minimum, the sale of a property requires the seller to transfer their deed—the legal document that affirms the owner’s right to use the land and the built structure on it—to buyers for some agreed-upon sum of money. However, as almost anyone who has ever bought or sold a house can attest, contemporary residential real estate transactions involve plenty of other people. The other parties may include mortgage brokers, real estate attorneys, appraisers, inspectors, co-op boards, neighborhood councils, and insurance agents. One of the benefits of hiring real estate agents is that they provide buyers with connections to many of the other individuals necessary to complete the transaction—transactions that have become more complicated in part because of the lobbying of the real estate industry. Indeed real estate agents often “come with” mortgage brokers, lawyers, and appraisers.

By the 1950s, real estate agents had become an institutionalized part of the housing market, participating in the majority of land sales in the United States. Agents’ state-regulated licenses gave them a veneer of professionalism, and their connection to mortgage lenders allowed the buyers they represented to access federally backed bank loans. Agents’ mobilization through professional organizations also changed housing policy, encouraging federal subsidies for more home construction, suburbanization, and the creation of the secondary mortgage market.13 At the same time, Americans’ ideas about homeownership changed dramatically: the vast majority of Americans now aspired to own their own homes, and they were willing to take on massive amounts of debt to attain that goal.

“THAT’S NOT LIKE ME”

Despite a century’s worth of success in integrating themselves into the process of buying and selling houses, today’s real estate agents still feel the need to establish their authority and prove their worth. In early meetings with potential clients, agents often explained how their approach to their work differed from mainstream conceptions of the occupation as well as that of other agents. In both my interviews with agents and their interactions with buyers, “I’m not like other agents” was a common refrain.

Agents so highly value the act of distinguishing themselves from their peers that instructors in real estate licensing classes made references to it throughout the curriculum. At a real estate licensing class titled “Construction Basics,” ostensibly about building codes and plumbing, electrical, and heating systems, the instructor told an anecdote about how she once inquired about an apartment building’s electrical wiring on behalf of a buyer she represented. She then spoke about how agents need to make similar efforts to build a personal brand and establish a good reputation:

What you want to do is make yourself unique. So tell your clients what you can do for them that other agents can’t or won’t. You’ll want to tell them how you’re special and why you’re the best agent around. That’s the first thing you should be communicating when you meet with them.

The same instructor, in a class on the different types of multiunit buildings (condo versus co-op), said, “You’ve got to have your own type in this business, your own personality, and clients can remember who you are, how you do your work.” She became more animated, raising her arms and pointing at the class as she said, “Be service oriented! That’s how I’ve been in this business for twenty-five years!” In many licensing classes—regardless of the topic of the particular session—instructors stressed the need for clients to like and appreciate their agents.

In interviews, agents made similar points. One agent, who worked in Manhattan and Brooklyn and had a degree in economics from an Ivy League school, said he often cited his pedigree and work ethic when talking to potential clients:

I always tell buyers that most agents are bad at their jobs. They’re lazy and usually pretty stupid. And I’ll say I chose to be an agent when I could have had a Wall Street job. I do it subtly, but I want them to know how hard I work at this, not like a lot of other people, even the other agents at [my firm].

An agent in Buffalo said that she put a lot of effort into establishing herself as hardworking, telling buyers, “This isn’t a part-time job for me, I’m not a housewife who does this on the side.” Agents broadly affirmed their personal rigor and commitment to their occupation in early meetings with buyers, and they belittled other agents in order to create contrast. This helped individual agents establish a sense of their own honesty and availability in their relationships with buyers.

The first time real estate agent Miguel met Josh, who was looking to buy an apartment in central Brooklyn, the two rushed through the viewing of an apartment for sale. Miguel then invited Josh to lunch. They chatted about Josh’s current apartment (a rental in Williamsburg), and Miguel began to talk about his passion for his work. He said he thought most real estate agents did the job because they didn’t know what else to do. Miguel, however, had wanted to be a real estate agent since he was in college. “I love helping people find homes,” he said, “and I love helping people figure out what their best future living situation will be.” He talked about his love for the city and Brooklyn in particular as Josh peppered him with questions about the market. Miguel said that, unlike other agents, he would be in constant contact with Josh throughout the process: “I know a lot of [agents] who sort of shut off after like 6 p.m. That’s not me.” Miguel told Josh that good agents, like himself, actually slept very little and were always tied to their phones in order to have the most current market information. When they parted, Miguel said he would send Josh some new listings to visit in the coming week. He added that Josh should feel free to call, email, or text him at any time.

These expressions of availability and passion were extremely common in early meetings with clients and throughout the search process. In email correspondence, agents sometimes apologized for delayed responses even though their replies were sent the same day—typically just hours after receiving a message.

At least with Josh, Miguel’s declarations of high energy and strong work ethic were convincing. After Josh had purchased an apartment, he explained why he was happy with the process. He told me, “The main thing is that [Miguel] did not disappoint. I’m a very anxious person, or at least I can be, and I don’t think he minded my constant text messages.” Nor was Josh unique in this sentiment: buyers often cited this kind of attentiveness as a reason they liked or were satisfied with their agents.

In addition to describing themselves as devoted to their clients, agents denigrated the work ethic of other agents. Nancy, a real estate agent working in Manhattan, actively disparaged other agents while showing a listing to prospective buyers Adam and Eli. The three were viewing a one-bedroom apartment and discussing the hardwood floor, which looked worn. Nancy said, “Other agents will tell you [that] you have to settle for this,” as she tapped her toe on the floor. “Like they’ll just say anything to close, but I know we can do better.” To another client she made a similar comment about the location of an apartment they had just viewed. She told the buyer that other agents would try to convince him that the neighborhood they were in was the best location for his price point, but she was not going to let him settle.

Nancy worked hard, and she wanted her clients to know it. At another open house with Adam and Eli, Nancy emphasized the amount of effort she was putting into their search. The open house had been announced just the day before—a Saturday—and when Eli thanked Nancy for bringing it to their attention she smiled, batted her eyes and, feigning embarrassment, said, “You know me, always working the most.” Adam and Eli said they would consider making a bid on that apartment, but it sold to another buyer three days later. “They’re disappointed,” Nancy told me after talking to them, “but there might be something else in the building.” Nancy began looking for other apartments to view in the next few weeks, but she also wrote a letter to every current resident in the building where Adam and Eli had considered making an offer. The letter informed residents that her clients wanted to buy an apartment in the building, and that they were preapproved for a mortgage so the transaction should not be difficult. The letter included some personal details about both Eli and Adam—their jobs and how long they had been a couple—as well as background on Nancy’s experience as an agent. Close to a month later, after Nancy and Adam and Eli had viewed half a dozen other apartments, Nancy received a call from an agent representing a potential seller in the building where she had sent the letters. After viewing the apartment with Nancy, the couple decided to make an offer on it.

After he and Eli had made an offer, Adam told me that he thought Nancy had been a good agent. “I remember dealing with agents when I was renting and they fucking sucked. Nancy wasn’t like that.” Unlike other agents, Adam said, Nancy had been responsive and had made a demonstrable effort during...