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21 February 2015 Posted by 

REAL ESTATE SALES

Why handsome people get better prices

WHILE driving to an appointment in central Brisbane, Robert Tumarkin's eye was caught by a giant hoarding that showed the smiling face of a rather handsome, confident man.

It was not a movie star on a poster for his latest film, but a real estate agent and there wasn't even a glamorous property as a backdrop.

Tumarkin, a senior lecturer at UNSW Business School, began to wonder why there was so much emphasis on estate agents' appearances and whether this was having an impact on the prices that properties were fetching in the market.

To test his theory, Tumarkin and fellow UNSW Business School senior lecturer Joakim Bang focused on the Australian market where buyers are directly exposed to the property and the agent at the same time.

There is plentiful existing research that shows people make poor decisions on small transactions when they are influenced by a person's looks. It's known as the "halo effect" and it's where a person's overall impression of something affects their evaluation of its individual aspects.

But buying a property is probably the biggest purchase most people make, so it's hard to believe that rationality would go out the window when so much money was at stake.

"There's a huge incentive to be as rational as possible when buying a home. So the interesting question is how far do behavioural biases go? If I overpay for a DVD I can live with that, but if I get overcharged $50,000 on a house, I'm going to be upset," says Tumarkin.

The researchers' results, arrived at by matching the photographs of estate agents (who had been rated on attractiveness in independent tests) with property sales where the average investment was A$500,000, showed that good-looking agents were achieving substantial price premiums.

"Specifically, we argue that the degree of attractiveness of an estate agent spills over into the property they are selling, making it more attractive in the minds of buyers," Tumarkin says.

"Our initial results show that a one standard deviation increase in the physical attractiveness of a real estate agent increases the final sell price of a property by 2.3%."

Presenting well

Alexander Phillips, one-third of Sydney's eastern suburbs real estate agency Phillips Pantzer Donnelley, says he isn't surprised at the results. Tall and handsome by any yardstick, Phillips came second in industry rankings for most successful agent in 2014.

Phillips believes the lifestyle and demands of the job are the reasons that attractive people are drawn to the profession. "It's largely to do with what they eat and how fit they are because estate agents need to be very energetic," he says.

On whether positive discrimination towards attractive people is a factor when hiring, Phillips says: "I don't disagree that subconsciously, when you're employing someone it will be in your head; yeah, for sure. After all, you are representing clients' biggest assets, [and] presenting well gives a sense of exclusiveness."

Further evidence of the halo effect comes from 2013 in the US where selling property is rather different to Australia. Home-buyers never meet the agents selling the house; instead buyers' agents are hired to seek out properties and manage price negotiations.

Nevertheless, a study by Frank Mixon, a professor of economics, accounting and finance at Columbus State University, suggests that attractive real estate agents get access to the better properties which sell for higher amounts, generating US$15,000 more than sales prices achieved by average-looking agents.

However, the research also showed that less attractive agents had more listings and sales – which evened out the results.

"There is a growing literature in economics that relates physical attractiveness to productivity in the workplace, and to all sorts of choices people make," Mixon told The Telegraph (UK).

The beauty premium

The economics of beauty even has a word to describe it: pulchronomics. The acknowledged expert in the field is American Daniel Hamermesh, a University of Texas labour economist. He and Jeff Biddle of Michigan State University were the first economists to study beauty's financial power in the 1990s, tracing the effect of appearance on earnings potential for a large sample of adults. "Beauty is scarce," Hamermesh said at the time, "and that scarcity commands a price".

A good-looking man makes 13% more during his career than an ugly man, according to Hamermesh's book, Beauty Pays. A little surprisingly, the percentage for an attractive woman is slightly less than for a plain Jane. In the US labour market as a whole, looks have a bigger influence on earnings than education. But thankfully, intelligence still trumps looks.

As for investing in the stock exchange, shareholders may want to study the findings of research that came out of the University of Wisconsin last year which showed good-looking CEOs have "a positive and significant impact on stock returns".

Authors Joseph T. Halford and Hung-Chia Hsu told The Atlantic magazine: "Our findings suggest that more attractive CEOs have higher compensation because they create more value for shareholders through better negotiating prowess and visibility."

There are in-built biases to this "beauty premium" as Hamermesh terms it. First, our human susceptibility towards beauty, which attracts us like a magnet and makes us give a beautiful person the benefit of the doubt.

Second, there is a strategic bias used by companies in the service industries in particular who recognise that people like looking at beautiful faces and are willing to pay a premium for them.

Lookism

In the US, some states such as Washington have banned "lookism" or the act of discriminating against someone because of their appearance. Outside of the US, the Australian state of Victoria has brought in similar legislation.

The little known reform was introduced by former Liberal premier Jeff Kennett in 1995 but so far has not led to some of the multi-million dollar payouts seen in the US, such as the one involving retailer Abercrombie & Fitch. It paid a $US50 million settlement after lawyers proved the company had a policy of only hiring shop assistants who were white, young and physically fit.

In Victoria, however, it appears that awareness of the "lookism" legislation is growing. In the year the act was passed, there were 93 enquiries from employees made to the Victorian Equal Opportunity and Human Rights Commission. Ten years later that figure had doubled.

The study, led by Chris Warhurst, a professor of work and organisational studies at the University of Sydney, showed that, surprisingly, most complaints came from among the manufacturing sector, rather than sales and service jobs.

NSW also considered adding "lookism" to its anti-discrimination laws in 2000 but the state's law reform commission decided against it. Peter Rochfort, a Sydney-based workplace relations practitioner with 30 years of discrimination case experience, says he would like to see a test case put before the equal opportunity commission to see if the argument for discrimination based on looks can be won because "lookism is everywhere".

"People are routinely passed over for jobs, pay rises and promotions because, in someone's eyes, they're not seen as attractive. And they become self-conscious. As a society we need to really examine our attitudes to appearances and start looking beyond the superficial," Rochfort says.

Article courtesy Business Think @ UNSW.



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