Here's a headline that might demand some attention from the modern real estate consumer: The Probability That a Real-Estate Agent Is Cheating You (and Other Riddles of Modern Life).

That's the story found in The New York Times Magazine of August 3rd by Stephen J. Dubner. Essentially the article looks at the observations of "heralded young economist" Steven Levitt, observations which deserve review.

"Do real-estate agents have their clients' best interests at heart?" asks the article. Later we are offered this discussion:

"While negotiating to buy old houses, he found that the seller's agent often encouraged him, albeit cagily, to underbid. This seemed odd: didn't the agent represent the seller's best interest? Then he thought more about the agent's role. Like many other 'experts' (auto mechanics and stockbrokers come to mind), a real-estate agent is thought to know his field far better than a lay person. A homeowner is encouraged to trust the agent's information. So if the agent brings in a low offer and says it might just be the best the homeowner can expect, the homeowner tends to believe him. But the key, Levitt determined, lay in the fact that agents 'receive only a small share of the incremental profit when a house sells for a higher value.' Like a stockbroker churning commissions or a bookie grabbing his vig, an agent was simply looking to make a deal, any deal. So he would push homeowners to sell too fast and too cheap."

"Now if Levitt could only measure this effect. Once again, he found a clever mechanism. Using data from more than 50,000 home sales in Cook County, Ill., he compared the figures for homes owned by real-estate agents with those for homes for which they acted only as agents. The agents' homes stayed on the market about 10 days longer and sold for 2 percent more."

Given the information above, are alternative explanations possible?

The easiest one to knock off is the 2 percent premium brokers receive for their properties. If we agree that "a real-estate agent is thought to know his field far better than a lay person" then does it not make sense that a licensee would buy a home with more upside potential than a typical consumer? That a broker would know how to better prepare the home for sale? And could not these factors result in a somewhat higher selling price, say 2 percent?

But what about suggesting low bids? The rules here are very clear: A broker representing a seller is authorized to sell a home through a listing agreement with a given price and terms -- and nothing less.

Could it be that the agents engaged by Levitt were simply buyer brokers, agents who represented purchasers? If so, buyer brokers would be required to represent purchaser interests and not those of a seller -- thus the suggestion of a lower price or different terms would not only be perfectly natural, it would also be expected.

It may be that the reason it takes longer for brokers to sell their own houses is that consumers realize professionals have an advantage in the marketplace and thus want to protect themselves with the use of home inspectors, attorneys, buyer brokers and other experts. A broker with any sense would suggest such consumer protections to stave off potential claims regarding disclosure and condition.

What about higher prices? Is it not true that brokers get little cash benefit from marginally higher prices?

Objectively, and mathematically, if a home sells for another $5,000 an agent's benefit might be $100 after commission splits, referral fees and various costs. So, yes, there is not a lot of cash incentive in this example.

But is cash the only motivation for an agent or broker? Real estate is a localized business. As a licensee you get additional work by being known in your community, having a good reputation and being successful. "Being successful" -- if you're a listing agent -- means getting as much of the asking price as possible.

According to the 2003 Profile of Home Buyers and Sellers from the National Association of Realtors, the single most important way brokers obtain business is through referrals -- the agent was recommended by a friend, neighbor or relative (44 percent) or the agent was engaged previously by the purchaser (7 percent). A broker would be foolish not to further client interests, given that today's buyer or seller is the source of more than half of all future business.

In 2003, says the study, homes typically sold for 98.1 percent of the list price -- that compares with 98.6 percent in 2001. Why the difference? The view here is that the change in sale prices relates to the increased use of buyer brokers -- 63 percent of purchasers used a buyer broker in the 2003 NAR study versus 47 percent in 2001.

No less important, consumers do no rely on brokers alone for real estate information. The NAR study showed that 42 percent of all buyers used the Internet "frequently" when house hunting while 29 percent used it "occasionally" - - that's more than 70 percent. Eleven percent actually found their home online in 2003.

Why does it take different periods of time to sell different homes? Why does it take longer to sell one townhouses than an identical townhouse in the same row? Simple: Real estate is a nonhomogeneic commodity. All properties are different, all parties to a transaction are different and all transactions are distinct.

If the question is: Among the more than 2 million real estate licensees nationwide do some cheat, are some not good at what they do, the answer is plainly yes. There is no such thing as institutional perfection, whatever the institution. Just look at recent headlines regarding The New York Times.

For more articles by Peter G. Miller, please press here.

Published: August 5, 2003

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Peter G. Miller, also known as OurBroker®, is the author of six real estate books -- including The Common-Sense Mortgage -- and is the original creator and host of America Online's Real Estate Center. Peter's weekly columns appear in more than 100 newspapers nationwide, he is also published in a variety of other media outlets and he is a frequent speaker at national events and conventions. Peter welcomes your questions, comments, and news releases via e-mail at .