Freakonomics Asks: Does your real estate agent have your best interest in mind?

Agents tend to advise accepting good offers quickly because the marginal commission from a higher price is tiny while holding out requires extra marketing, time, and the lost opportunity to earn a full commission on another listing.

A listing agent's extra take from pushing the sale price up $10,000 is very small because a typical 6% commission is split with the buyer's agent and then shared with the brokerage, leaving roughly 1.125% (about $150) for the individual agent.

Real estate agents sell their own homes for higher prices because they hold out for better offers and keep the listing on the market about 10 days longer, which raises the final sale price.

The seller–agent contract creates misaligned incentives because the agent's pay converts large gains for the seller into much smaller personal gains, so the agent optimally prefers selling quickly while the seller optimally prefers holding out for more money.

You can often predict people's actions because they respond to incentives—identifying the rewards and costs they face reveals which choices are more likely, since behavior shifts toward higher net payoffs.