While watching a 60 Minutes interview with all-time douchebag superagent Drew Rosenhaus the other day, I began to wonder more high paid individuals don’t use agents for salary or business negotiations? While most people use agents to buy houses, I don’t see them many other places besides sports and the arts. Is it just because they stakes are too small to bother?
Most people don’t use agents to buy houses. They may think they do, but in the vast majority of cases the agent is acting for the seller. Most people do use agents to sell houses in large part because real estate agents have resources that homeowners don’t.
I would guess that agents don’t get used in a lot of industries is because agents cluster around industries where there is a pool of knowledge. Chemists don’t use agents because there aren’t many agents who know the chemical industry and can figure out arguments about market value.
CEOs of various industries? I dunno, but I suspect for a similar reason – they emerge of of industries that don’t have agents, so they don’t have agents. But I’ll bet you a ton of them have lawyers to look over their contracts.
Where do you see agents being useful, and why?
Anyone who uses an employment agency is using an agent. And that’s a LOT of industries besides sports and CEOs!
In my experience, the agent stays out of the salary negotiations, but they do find the leads and make the initial contacts, and some other important stuff.
There are agents for salary negotiations called trade unions. Not so much in the US I understand, but in other parts of the World.
I’m a consultant and I always work through agents; my mother often says “I have a daughter who works like movie stars, sportsment and bullfighters: you don’t call her but her agent, she’s not unemployed but considering some offers, and so forth”.
Construction full-service contractors often work in a similar fashion as the agents I work with: for the end client they’re a single point of contract and a single bill, but the people working for them are subcontractors and the price the main contractor has obtained from the client is reflected in the price his own subcontractors get from him.
I don’t know what parts of the world did Floater have in mind when he talks about unions as agents, but in Spain they have no such function - they’re part of collective salary negotiations (country-wide, sector-wide or company-wide) but not of the negotiations of individual workers, nor do you contract people through the union (which you do in the US).
Sure they do. This is a fact, irrespective of your latter argument.
Well, no. You could argue they are working to close a deal asap, and thus not always working in their client’s best interests. But, they are not working for the seller in any sense.
They really don’t need to know the specifics, they just have to make compelling arguments based on statistics and available data. An agent needn’t know any more about stem cells (for example) than baseball pitching. The point is that an agent will maximize the compensation of their client. You can base that on a number of things that have little to do with the specifics of the career. It helps, but it’s not a prerequisite.
Well, it seems that careers paths where people have agents have employees who get a greater share of revenue or profits. Today, the trend for most normal workers seems to be going in the opposite direction. Even though the arguments for causation typically revolve around capital expenditures borne by employers allowing for greater worker productivity, and thus more revenue (deservedly) going to employers or share holders, the same seems to be true for sports and movies where employment compensation seems to have increased. In some cases (like movies), compensation has even been tied to gross revenue. Accordingly, the era of free agency in sports has coincided with an net increase in wages.
It seems as though agents can function on an individual level the same way unions do in a group sense. The typical argument against unions is they confer the same compensation and benefits to unequal employees. Having agents would fix that on some level since each teacher (for example) could argue for compensation based on available performance metrics.
That said, it would seem to me that everyone could theoretically benefit from representation if the cost was reasonable. It today’s professional world, whether you are a chemist or a lawyer, it would seem as though salary negotiation are an uneven affair. The employer has the power and information. While the internet has given employees more information, it has not really filtered down, nor has it made specialized employees in non-business fields better negotiators. So that information and experiential asymmetry is something that could seemingly be mitigated by agency.
More specifically, say an agent were able to “sign” every graduate in the top 10% of the top ten law schools in the US. Since big laws firms typically compete heavily for those people, an agent could likely extract greater compensation. Or if you signed prominent college professors. If you were able to sign a number of well known professors like Cornel West, Alan Dershowitz, Dan Ariely, Noam Chomsky, or Nouriel Roubini, you could certainly get better contracts for them.
You are completely wrong about this. In the vast majority of cases, the real estate agent contracts with the seller, is paid by the seller, and has specific legal obligations and duties in regards to the seller that they do not have to the buyer.
Some real estate agents will occasionally enter into contracts as a “buyer’s agent”. In these cases, they contract with the buyer, are paid by the buyer, and have specific legal obligations and duties to the buyer that they do not have to the seller.
They cannot act as both the buyer’s and seller’s agent in the same transaction because it would be a conflict of interest.
In the house transactions I have been involved in and the transactions of friends and colleges. There is a sellers agent and a buyers agent. It is very common for this to be the case in the US.
For the OP: I think agents in the entertainment field are important because you’re always having to look for your next gig. Even something like a long-running TV series leaves you plenty of time free to take up other projects, and those projects vary widely. An entertainer may do acting, voice-overs, lectures, product endorsements and more. For the entertainer, tracking down all of this work would be too time-consuming. For the agent, it means a steady stream of income.
An agent who works to place most other talent would have fewer opportunities. If you hire on a new CEO, you probably expect it to be his only job and you want him to be there a few years. So an agent placing a CEO might only get paid once for every CEO placed. This is why employment agencies and headhunters are not usually lumped together with other agents. While they are agents, they rely on a different model.
Not only is it common in the US, some states require that the seller’s agent be a different person from the buyer’s agent. Boyo Jim is either from an area I’m totally unfamiliar with, or he doesn’t know the first thing about real estate agents.
I don’t understand your first sentence. Most buyers go to real estate agents when they start looking for homes, and they are shown places and given assistance in making the purchase. They may not understand that the agent does NOT work for them, and the agents is not likely to make this clear, but the agent is working for the seller by default unless the buyer enters into a separate contract with the agent.
Certainly there are cases with both a buyer’s agent and a seller’s agent, but they are not the same person because they can’t fairly represent both parties’ interests simultaneously. The more educated the buyers, the more likely it will be that they do get an agent of their own. A lot don’t because they THINK they already have one – the seller’s agent. And they are wrong.
Agents take 10% of your income. Not 10% of the deal they make, but 10% of your income. Forever. (The 10% is an arbitrary number. Book agents take 15%, sports agents take 6%, etc., although there are always exceptions.) That’s a deductible business expense, but it still means that you lose 10% of your money before it comes to you. (At least it does in writing: publishers pay agents, not authors.)
So three things. 1) You have to make enough money so that you don’t miss that 10%; 2) You have to make enough extra money by using an agent that you don’t wind up with a net loss; 3) Your agent has to make enough money from you to justify the hours put into handling that tiny share of income.
That limits the use of agents to high-earning independent contractors. Sports, actors, writers. Once the presence of agents is accepted and institutionalized - and all those fields had long battles to allow agents to negotiate - then smaller earners enter because it becomes easier for agents to amortize their time (they also tend to get palmed off to the intern) and the payer is used to dealing with the one agent instead of the many individuals.
There just aren’t that many fields where agents are a good match. To make the big bucks the agent has to have a client that makes huge bucks, eight- or nine-figure incomes, big enough to pay the office costs for everybody else. Chemistry professors may make decent six-figure salaries, but they don’t have the outliers that pay the freight for the assistant professors.
We’re in a transition to a “gig” economy, using the latest lousy buzzword. That’s a world of freelancers, contractors, temps, and specialists who don’t have permanent employers. (“Gig” as in a musician’s gig, or single performance.) As that grows we should expect to see more agents develop because the returns will be there.
Most very highly paid people are financially sophisticated enough to be their own agent. What’s unique about sports and the arts is that you have people who are frequently very unsophisticated about money matters who are also paid enormous amounts of money. In this situation there is both the need for and ability to pay for agents.
That’s what we’re saying: They seller’s agent and the buyer’s agent are two different people. When I bought my home, I went to a real estate agent, just as you say. I was shown places, just as you say. When I chose a house for sale, those sellers were represented by another agent, not the one that was showing me around. Their agent represented them, the sellers, my agent represented me, the buyer. The two agents were from two entirely different real estate companies.
I have always entered into a contract with the agent when I am buying a house. All the people that I have personally discussed house buying with have entered into contracts with an agent who shows them various homes. This is very common.
That’s fine. But I was responding to brickbacon’s comment, and that’s not what I understood from it, particularly this one:
An agent it legally obliged to work in his client’s best interests, and the interests of a buyer and seller are different.
Many buyers go through the process working with agents who have contracted with the sellers, and get shown properties that the agent has a specific financial interest in selling, or properties the agency he’s affiliated with have that same interest. They may or may not get to the stage of signing a separate buyer’s agent agreement. They may be offered this and decide not to, and the deal could go through anyway.
I may have erred in using the term “most” – I’ll look around and see if I can find any data about this.
This is not how it has worked for myself or anybody I personally know. It does not seem to be a common way of purchasing houses in California or New Mexico, the places I am familiar with. It also does not seem to be how things work on the home buying shows on TV.
I’m quite familiar with theatrical agents, at least in New York. First, saying they are used for high earning people is stretching that term quite a bit. Second, most acting jobs at the basic level are covered by union rules and leave fairly little room for negotiation. The agents I’ve seen play a dual role. First, they winnow down the population of potential actors, so that the ones they present to a casting director will be adequate. My daughter signed with lots of agents when she was acting, and auditioned for each one. Second, they provide a small number of contacts for casting directors, and outsource the process of selecting actors who meet the requirements for a part to the agent. I suspect they also find agents useful as someone they can yell at if something goes wrong, which lets the agent yell at the actor.
In New York anyhow child actors also typically use managers who take 15%. You sign with lots of agents but only one manager, and the manager is the one actually concerned with you. We found the 15% to be well worth it.
Isn’t it true that agents also are used to screen books for publishers? There are lots of books sold without agents. Academic books don’t use them, and my wife has sold ten small not super well paying books directly to publishers and packagers.
No, I am not. I am not sure where you get your information, but as many other people have told you, most buyers have their own agents to negotiate on their behalf. These agents have basically no legal obligation and duties in regards to the seller. Although they are often paid out of proceeds from the sale of the house, they do not work for the seller in any sense.
Then you clearly misunderstood what I said. It’s a given that we are taking about agent working for the buyer, not the seller. My comment was speaking to the issue that buyer’s agents often have a financial incentive to have their clients close on a house as soon as possible in order to make more money.
Either way, you seem to have a fundamental misunderstanding of how housing sales work in the US.
I don’t think so. I did understate the commonality of buyer’s agents, but according to this article citing the National Association of Realtors, more than 40% of home buyers did not have an agent in 2010. According to Wiki, the EBA (Exclusive Buyer’s Agent) movement didn’t even start until the 1980s.
Here is an article published by Texas A&M University which does a much better job of describing what I’ve been trying and apparently failing to describe.