Real Estate NewsAgents Sometimes Choose to Conduct Their Business According to Social Norms
Recently we considered the difference between social norms and market norms as described by Dan Ariely in the book Predictably Irrational. In a previous column it was shown how those differences applied to relationships between brokerages and agents. Today we consider their implications for the relationships between agents and their clients.
Ariely explains the differences in this way: "We live simultaneously in two different worlds – one where social norms prevail, and the other where market norms make the rules. The social norms include the friendly request that people make of one another. Could you help me move this couch? Could you help me change this tire? Social norms are wrapped up in our social nature and our need for community. They are usually warm and fuzzy. Instant paybacks are not required … . The second world, the one governed by market norms, is very different. There’s nothing warm and fuzzy about it. The exchanges are sharp-edged: wages, prices, rents, interest, and costs-and-benefits. Such market relationships are not necessarily evil or mean…but they do imply comparable benefits and prompt payments. When you are in the domain of market norms, you get what you pay for – that’s just the way it is."
As long as the two worlds are kept separate, everything is fine; but when they are mixed, or we try to switch back and forth, disharmony may erupt. "When a social norm collides with a market norm, the social norm goes away for a long time. In other words, social relationships are not easy to reestablish. Once the bloom is off the rose – once a social norm is trumped by a market norm – it will rarely return."
"Real estate is a relationship business." Just about everyone who has a license has heard that at one time or another. But which kind of relationship? One where social norms prevail, or one where market norms rule?
On the basis of my experience (there are no scientific studies about this), I would say that most real estate practitioners think that agent-client relationships are, or ought to be, governed by social norms. There is no question that a business relationship is there – compensation is received for services provided (at least when there has been a successful outcome). Still, for many, that business relationship arises out of a social one. It may, but need not come from some club, church, or affinity group. There are other ways. The creation of agent-client relationships is why real estate folks do things like organize neighborhood garage sales, sponsor kids carnivals, and give away pumpkins at Halloween.
Moreover, many successful agents seek to retain their clients and to obtain referrals through keep-in-touch programs and devices (birthday cards, closing gifts, periodic parties and events) that are inherently governed by social norms. No values are set, and no (immediate) payback is required.
It is this social aspect of relationships between many agents and their clients (past and/or present) that makes it so difficult for some agents to treat their vocation as a business. Moreover, I believe it explains their not-uncommon reluctance to encourage explicit market relationships. It explains the curious phenomenon that so many agents do not use buyer-broker agreements. Often the buyer is someone new to them, and they are (in the habit of) trying to establish a relationship governed by social norms. The idea of introducing something that is explicitly governed by market norms runs counter to that.
I’m not saying either that this is a good thing or that it is a bad thing.
Of course, not all agents seek to do their business within an atmosphere of social relationships. Treating matters as strictly business, they will say, is inherently more efficient, more productive, and, in the long run, less stressful.
Maybe, maybe not. A whole lot of people have made a whole lot of money practicing real estate in relationships essentially governed by social norms. Whether one business style is preferable to another is probably more a matter of personality and taste than it is a question of superior business judgment.