If the house would not sell at $900000, would sell in 15 months at $800000, or would sell in 3 months at $700000, or would sell in 2 weeks at $600000, what do you do?
You try to sell it for $600000. You tell the owner that that is what the home is worth, even if the owner is not in a hurry. Getting your share of the 6% (likely 1.5%) of $600000 in 2 weeks is better than any of the other alternatives FOR YOU.
A better way to align the incentives would be to give the seller's agent a percentage of the amount by which the sale price exceeds the price determined by an independent appraiser. The buyer's agent gets the opposite, getting paid only if the price is lower than the appraisal, and you don't get to be both agents at the same time.
This Freakonomics-style argument doesn't work. The only price that matters is the market clearing price. Appraisers don't know that more than anybody else. The only thing an independent appraiser would do is use (well-known) comps to anchor the price, which is not something a seller wants. Rather, a seller wants competition among buyers.
I used to think that real estate agents were a waste of time until I lived through several difficult transactions. Each real estate transaction involves negotiations for loans, inspection objections, and various legal details. For example, a good real estate agent will make sure the title commitment documents are in hand early enough that you have time to review them, because they often have a lot of mistakes. This can kill a closing and/or require post-transaction work to correct.
I bought a house in the middle of a flood (Boulder 2013). The inspection objection had already been negotiated before the flood occurred. Getting the deal done was a huge task, because the seller was lying about the house being affected by the flood. I still wanted the house, but I needed proper compensation for the remediation. My real estate agent did an amazing job of bringing the deal together by tossing in some money and getting the other broker and seller to contribute a bit.
I'm now living with the above real estate agent, and she's on the phone right now at 7:45p working on a deal. I have watched her pull together deals, and the important thing is that all her clients are happy. I have met many of them, and they are very grateful for her work. I know there are many other agents out there like her (maybe not quite as good :-).
You seem to have missed the point of the appraiser.
The market clearing price is not set in stone. It is determined partly by the actions of the agents.
The appraiser's estimate of the market clearing price would set a measuring point from which the agent's performance can be measured. Agents are then paid according to how their performance exceeds the expectation.
Without the appraiser's estimate, the performance of the agents can not be measured. There is no way to reward good performance or punish bad performance. The agents are simply collecting their cut of the transaction.
In this case, bad measurements are OK. They average out over time. If the bias is one way, then one type of agent (seller or buyer) gets a bit more pay than the other, but this is not a disaster and is compensated by agents competing to work on the higher-paying side of the transactions.
You're not wrong about the incentives, but I think you miss a few things in practice:
1) If everyone else in the market is priced to move, and you aren't doing it, there is always going to be new housing stock that undercuts you.
2) A seller has to maintain insurance and the property, and typically maintains utilities (a house without water/electricity doesn't show as well). They sometimes have to pay a mortgage. And often people who are selling a house are also buying a house, and intend to use the proceeds from the sale to finance the down payment on their next house. Most people cannot treat the extra money from waiting on a better offer as 100% profit.
3) The primary purpose of an appraisal is to ensure that the underlying asset is sufficient collateral for the loan. If you manage to sell a house for significantly over the appraise value... guess what, the loan falls through.
If the house would not sell at $900000, would sell in 15 months at $800000, or would sell in 3 months at $700000, or would sell in 2 weeks at $600000, what do you do?
You try to sell it for $600000. You tell the owner that that is what the home is worth, even if the owner is not in a hurry. Getting your share of the 6% (likely 1.5%) of $600000 in 2 weeks is better than any of the other alternatives FOR YOU.
A better way to align the incentives would be to give the seller's agent a percentage of the amount by which the sale price exceeds the price determined by an independent appraiser. The buyer's agent gets the opposite, getting paid only if the price is lower than the appraisal, and you don't get to be both agents at the same time.