This blogpost will look my personal reputation in a class here at the University of Illinois. There is one professor that I have taken almost every class they have to offer. So my reputation with this professor has been built over several semesters. Each additional class I take with this professor adds to my reputation with them. The reputation that I have tried to build up is that of someone who is very responsible. I make sure to turn in my work on time. I put additional effort into my classes with this professor to ensure that I score highly on exams. I ask this professor questions that pertain to his interests, as well as follow the topic of the class, to show them that I have similar interests. This reputation started to be built with the first class I took with the professor and was strengthened with each additional class and through all of our meetings or email correspondence.
There have been multiple occasions where I have wanted to stray from my reputation with this professor. Turning in all of my work on time and scoring well on all the quizzes and exams is a very time consuming. Every time I had an assignment due or a test to study for I would have to make the decision to do my school work over hanging out with friends. Now most of the time I would actually do my work and skip hanging out with friends but on some occasions I would rely on my reputation to help me out so I could hang out with my friends.
One occasion sticks out in my memory. I had a fairly large project due in this professors class. I had put some work in on this project but still had a fair amount of work to do. My friends were going to a party that I had been looking forward to for a few days by then. I took a risk and decided to go to this party instead of finishing the work I had to get done for the next day. In this instance, I had abandoned my reputation to get some immediate gain, in this case a fun night out. The next day, I had to face my professor with my assignment not completed. Luckily, after taking so many classes and having built a strong relationship with this professor, I was able to get a few extra days to finish the assignment with no questions asked. My reputation of turning work in time and at a high quality had allowed me to not suffer any consequences from temporarily abandoning my reputation. I turned in the assignment a few days late but at a very high level of quality to repair any damage that may have been done to my reputation in the mind of my professor.
In an earlier blogpost, I looked at a conflict between two people in a work situation. This conflict was from a fictional television show that centered on politics in Washington, DC. Frank Underwood is the main character of this program and he was in a fight with Marty Spinella over an education bill that was being brought to the floor of the House and Senate. I bring up this conflict because it serves as an example of someone abandoning their reputation for an immediate gain. Underwood had worked with Spinella numerous times before they started working on the education bill. The show makes it seem like they are friends during the early negotiations for the education bill. In Spinella's mind, Underwood had created a reputation for being an honest man. Underwood abandoned this reputation though in order to get some provisions that he wanted into the education bill. He lied to Spinella about the contents of the education bill and Spinella trusted what he said about the education bill. Through his lie, Underwood was able to get an education bill that served his interests much more than the interests of the teachers, who Spinella was representing. However, unlike my slight abandonment of my reputation with my professor, Underwood's abandonment of his reputation caused irreparable damage to his reputation and he was never able to work with Spinella after the fact.
Saturday, November 22, 2014
Thursday, November 6, 2014
Real Estate Agents
The triangle arrangement I would like to talk about involves a real estate agent, a buyer and a seller. Back in 2010, My parents were looking to purchase a house and went through a real estate agent for the process. I wasn't directly involved in the offering process but I had been brought along on a few house tours. The real estate agent has the job of bringing a buyer and seller together and negotiating an acceptable price to both parties.
The seller would like to get top dollar for their home. They do not want to accept a lower price than what they think their home is worth and they will not accept a lower price, at least at first. They also want their homes sold quickly. Someone who's selling their home has probably found another place to live and wants their old home to sell so they can pay off their mortgage on their new house. This can be time sensitive if they cannot afford the mortgage payments on their new home. Therefore, the seller has incentives to sell their house quickly. If their house if on the market for awhile, the seller is more like to accept a lower and lower price for their home.
The buyer would like to find a home that fulfills their expectations for a new home. My parents, for instance, had very high expectations for their new home and were in a position that allowed them to be patient and review all of their options. On top of finding the "perfect" home, a buyer has a budget that they have to keep within a reasonable range. The buyer would like to get the best deal on a home as they can.
The buyer and seller have different expectations for the real estate agent. The seller wants their home sold at top dollar and sold relatively quickly. The buyer wants the best deal they can possibly get on a home. A resolution to the differing expectations of the buyer and the seller comes in the form of a compromise on price. This can be an even compromise, where the buyer and seller meet in the middle or it can fall mostly on either the buyer or seller. If the house has been on the market for a long time, a compromise on price would fall more on the seller because they just want their house sold at a certain point. If a house is new on the market, the seller would be less likely to take a hit on the price. A buyer is willing to come closer to the asking price when the house in question satisfies more of their wants.
Failure for the real estate agent is different for the buyer and seller. If the agent cannot find an acceptable home for the buyer that meets their needs then the agent has failed. If the agent cannot find a buyer for the seller's home then the agent has failed. If the agent cannot broker a deal between the buyer and seller then the agent will fail both parties. The agent fails the seller if they take a long time to sell their home and get a price well below the asking price. The agent selling a home for a low price is in the interest of the buyer, and interestingly enough, in the interest of the agent as well.
I've gone over what the buyer and seller want, but what about the agent themselves? The agent receives a certain percentage of a deal they set up as commission for setting up the deal. So the agent would want the price of the home to be as high as possible so they get the biggest possible commission, right? Not necessarily. I can't remember the percentages off the top of my head but the commission for selling a home is a small percentage. So if the agent was able to get the seller of a home $10,000 more for their home, the agent would only receive $100. The seller would really enjoy that extra $9,900 for their home and would be willing to wait a few extra days or weeks to sell their house if it means a better offer from a buyer. However, the agent would rather lose the $100 and sell the house now then wait a few days or weeks to make that $100. These few extra days or weeks could be time spent on a new house by the agent. This represents a situation of opportunism, which was talked about in this blogpost. The agent benefits from taking a lower price for a home so they can spend time on selling another house rather than get the most money they can for the seller of the home. Based on a commission system, the agent's interests do not actually line up with the interests of the seller.
The seller would like to get top dollar for their home. They do not want to accept a lower price than what they think their home is worth and they will not accept a lower price, at least at first. They also want their homes sold quickly. Someone who's selling their home has probably found another place to live and wants their old home to sell so they can pay off their mortgage on their new house. This can be time sensitive if they cannot afford the mortgage payments on their new home. Therefore, the seller has incentives to sell their house quickly. If their house if on the market for awhile, the seller is more like to accept a lower and lower price for their home.
The buyer would like to find a home that fulfills their expectations for a new home. My parents, for instance, had very high expectations for their new home and were in a position that allowed them to be patient and review all of their options. On top of finding the "perfect" home, a buyer has a budget that they have to keep within a reasonable range. The buyer would like to get the best deal on a home as they can.
The buyer and seller have different expectations for the real estate agent. The seller wants their home sold at top dollar and sold relatively quickly. The buyer wants the best deal they can possibly get on a home. A resolution to the differing expectations of the buyer and the seller comes in the form of a compromise on price. This can be an even compromise, where the buyer and seller meet in the middle or it can fall mostly on either the buyer or seller. If the house has been on the market for a long time, a compromise on price would fall more on the seller because they just want their house sold at a certain point. If a house is new on the market, the seller would be less likely to take a hit on the price. A buyer is willing to come closer to the asking price when the house in question satisfies more of their wants.
Failure for the real estate agent is different for the buyer and seller. If the agent cannot find an acceptable home for the buyer that meets their needs then the agent has failed. If the agent cannot find a buyer for the seller's home then the agent has failed. If the agent cannot broker a deal between the buyer and seller then the agent will fail both parties. The agent fails the seller if they take a long time to sell their home and get a price well below the asking price. The agent selling a home for a low price is in the interest of the buyer, and interestingly enough, in the interest of the agent as well.
I've gone over what the buyer and seller want, but what about the agent themselves? The agent receives a certain percentage of a deal they set up as commission for setting up the deal. So the agent would want the price of the home to be as high as possible so they get the biggest possible commission, right? Not necessarily. I can't remember the percentages off the top of my head but the commission for selling a home is a small percentage. So if the agent was able to get the seller of a home $10,000 more for their home, the agent would only receive $100. The seller would really enjoy that extra $9,900 for their home and would be willing to wait a few extra days or weeks to sell their house if it means a better offer from a buyer. However, the agent would rather lose the $100 and sell the house now then wait a few days or weeks to make that $100. These few extra days or weeks could be time spent on a new house by the agent. This represents a situation of opportunism, which was talked about in this blogpost. The agent benefits from taking a lower price for a home so they can spend time on selling another house rather than get the most money they can for the seller of the home. Based on a commission system, the agent's interests do not actually line up with the interests of the seller.
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