I love real estate. I think it is a great way to accumulate long term wealth. But to be honest I am not a huge fan of real estate agents. Their job is to sell your house for the best possible price. And the good ones do.

But they also have pressures to get the house sold as quickly as possible and will cost a seller money to accept the closest offer. The agents live on 1.5 percent of the selling price, so a 10,000 dollar cut in price is only a 150 dollar cut in their commission. They also speak a language that to a lay person means one thing and to another agent means something completely different.

Wired Magazine has a article referencing this that has been floating around for a while. I read it in the print magazine and just came across it on their web site. Read the whole article, it is very well written and explains to the layperson how real estate really works.

So a big part of a real estate agent’s job is to persuade the homeowner to sell for less than he would like while at the same time letting potential buyers know that a house can be bought for less than its listing price. To be sure, there are more subtle means of conveying this information than blatantly telling the buyer to bid low. The Chicago study also reveals how agents exert influence through the listings they write. A phrase like “well maintained,” for instance, is full of meaning to an agent – the house is old but not quite falling down. A savvy buyer will know this (or find out once he sees the place), but to the retiree who is selling the house, “well maintained” might sound like a compliment, which is just what the agent intends.
An analysis of the language used in real estate ads shows that certain words are powerfully correlated with the final sale price of a house. This doesn’t necessarily mean that labeling a house “well maintained” causes it to sell for less than an equivalent house. It does, however, indicate that when an agent labels a house “well maintained,” she is subtly encouraging a buyer to bid low.
So consider the terms in the box on the previous page: A “fantastic” house is surely fantastic enough to warrant a high price, right? What about a “charming” and “spacious” home in a “great neighborhood!”? No, no, no, no, and no.

Wired 13.05: Cracking the Real Estate Code.

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