How to Buy a House

If you go to a real estate agent in search of a house, there are two questions you are likely to be asked. One is how much you want to spend. The other is what sort of house you are looking for—how large, how many rooms of what sort, in what location. 

It is in the agent's interest to ask the first question; since his commission is a percentage of the sales price, he would like to sell you the most expensive house you are willing to buy. It is not clear that it is in your interest to answer it. Even if you can afford a two hundred thousand dollar house, you might prefer one that fits your requirements a little less well and costs substantially less. If you tell the agent that you are willing to spend two hundred thousand dollars, he may decide not to show you any house that will sell for much less than that.

The second question raises another problem—what you want to buy depends on what it costs. You would prefer a house with a bedroom for you and your wife, a bedroom for each child, and an extra room for a home office—but if an extra bedroom increases the price of the house by too much, you could put your desk at one end of your bedroom or persuade two children to share a room. In order to give a sensible answer to the question, you need a price list, a description of how much more you can expect to pay for a larger house, one with more bedrooms, one in a better location. If you had such a list, you could figure out about what sort of house you wanted to buy and what it should cost and ask the agent to select houses to show you accordingly.

So far as I know, no such price lists are currently available—but there is no good reason why they shouldn't be. Realtors have access to extensive information on houses that have sold. In any area with a sufficiently lively real estate market, it should be possible to use conventional statistics to work out from that data about how much more a house costs with one more bedroom, all else held constant, or with an additional hundred square feet of area, or with a larger yard, or in a better school district. My proposal is that somebody, perhaps the existing multi-lister service that provides the data to the realtors, should do so. The realtor could then provide his customer with a price list, the customer could decide about what sort of house he wanted, and the realtor could proceed to find the houses that came closest to fitting what his customer wanted.

I should  add that it is almost twenty years since I was last in the market for a house. If what I have just proposed is, at this point, common practice in the industry, perhaps one of my readers with more up to date information can tell me.