Markets Eventually Eliminate the Undocumented Operator

An agent can work on handshakes for years and do perfectly well, because nothing has tested him yet. The test, when it comes, is usually a fight over commission. There is a familiar version. A seller tells an agent over coffee to go ahead and find a buyer. The agent shows the house, a buyer makes an offer, and the sale goes through. Then the seller, who also let a second agent show the house, says the first one never had a mandate and is owed nothing. The first agent may be telling the whole truth, but with no signed mandate and no written record of when he introduced the buyer, it comes down to his word against two others.

The same test turns up in other clothes. A rental agent is asked where a tenant's deposit has been held and cannot show it. An agent is asked whether a buyer went through FICA checks and has nothing on file. Each time, the one with a file answers in a day, and the other starts losing arguments he might have won on the facts. Over time the serious clients drift towards people who can prove things. Nobody announces it.