With problems in the mortgage industry and a declining

Question

With problems in the mortgage industry and a declining economy, overall housing sales are down by more than 40% percent. Online real estate broker sites, however, have seen increased traffic and revenues are up by more than 10 percent in the slumping real estate market.

Each of the following, if true, helps to explain the improved performance of online real estate brokers during the housing slump EXCEPT:

A) During a slump in the housing market, buyers are more likely to shop online broker sites in search of the best possible price.

B) When the housing market is strong, both buyers and sellers rely on traditional real estate brokers in an order to buy or sell property more quickly.

C) The cost of selling a property with an online broker is a fraction of the cost of using a traditional real estate broker.

D) Online brokers devote more advertising resources to attracting customers during a downturn in the real estate market than do traditional retailers.

E) Customers of online brokers, but not customers of traditional brokers, can control the cost of listing and selling their house by choosing from a number of available packages and options.

pqhai · Accepted Answer

Hi mate. You deserve a kudo. Very impressive question.

Three important notes:

(1)   The logic of the question, which I believe is more of LSAT than of GMAT, is:
 A ==> B
Not A ==> Not B .  
This is  WRONG  conclusion.
 For example:  
I love wearing suit in formal events. This does NOT mean I don’t love wearing suit in non-formal events.

(2)   This is “ except ” question. Be aware!

(3)   In paradox questions, there is  NO conclusion, just facts.

ANALYZE THE STIMULUS:  
 
 Fact:  With problems in the mortgage industry and a declining economy, overall housing sales are down by more than 40% percent. 
 Fact:  Online real estate broker sites, however, have seen increased traffic and revenues are up by more than 10 percent in the slumping real estate market.

Question:  Each of the following, if true, helps to explain the improved performance of online real estate brokers during the housing slump  EXCEPT:

ANALYZE EACH ANSWER:

A) During a slump in the housing market, buyers are more likely to shop online broker sites in search of the best possible price.
 Wrong.  A can explain the paradox. If buyers are more likely to shop online broker ==> Online real estate brokers’ revenue increase.

B) When the housing market is strong, both buyers and sellers rely on traditional real estate brokers in an order to buy or sell property more quickly.
  Correct.   That people prefer tradition brokers in strong market does NOT mean people prefer non-traditional brokers, says online brokers, in weak market. This is  WRONG  logic and does not help to explain the paradox.

C) The cost of selling a property with an online broker is a fraction of the cost of using a traditional real estate broker.
 Wrong.  Clearly C explains why online brokers’ revenue increase.

D) Online brokers devote more advertising resources to attracting customers during a downturn in the real estate market than do traditional retailers.
 Wrong.  Clearly D explains why online brokers’ revenue increase.

E) Customers of online brokers, but not customers of traditional brokers, can control the cost of listing and selling their house by choosing from a number of available packages and options.
 Wrong.  Same as in A. If customers prefer online brokers for their conveniences, online brokers’ revenue will increase.

Hope it helps a bit.

cssk · Answer

Hi pqhai,

That was a very helpful explanation. I am struggling with timing issues especially when I face these type of "EXCPET" question. My main aim behind posting this question is to get some techniques to improve timing along with accuracy. It took me closer to 3:00 minutes to get the right answer.

Help please.

b2bt · Answer

Why does the option D says tradition retailers? Just to confuse you?

plumber250 · Answer

Hey B2bt,

I hope I'm getting your question right, shout if not:

'traditional retailer' is basically a term used for 'bricks and mortar' business, and is used to contrast with online retailers.

So in this case it is used to allow the author to set up a comparison between online and non online ('traditional).

Hope that helps

James

shahPranay14 · Answer

Hi ,

I'm reopening this discussion. Need help to understand why D helps explain the paradox here.

D just says that Online retailers spend more resources on attracting new customers that the traditional retailers. So what??
This does not guarantee that those attracted would necessarily convert into sales.
I do agree B is correct answer but I'm just analyzing the options here.
Need expert advise. Please help

Shree9975 · Answer

Yeahh i also thought the same...
 souvik101990 
Please explain??

dorane · Answer

Glad this got bumped. Shree, you're clear on A, C and E as incorrect? 
Imagine you're in a Board meeting. You're batting around reasons for the good news. The Directors quickly agree A/C/E are valid suppositions (not "guarantees"). You then propose D as a possible explanation, nothing more; your colleagues all agree - seems reasonable, more spend usually = more revenue or traffic. Now a Director speaks up and says, "Well, we know there's a boom for trad brokers in good times . . . " and his neighbor finishes for him: "Yes, but what about the other side: online activity in bad times?" So B, as conjecture, as stated, is not helpful. 
It's a salty question! 
"revenues are up by more than 10 percent  in the slumping real estate market " is, to me, a bit of poor english and distracting thereby.

email2vm · Answer

With problems in the mortgage industry and a declining economy, overall housing sales are down by more than 40% percent. Online real estate broker sites, however, have seen increased traffic and revenues are up by more than 10 percent in the slumping real estate market.

Each of the following, if true, helps to explain the improved performance of online real estate brokers during the housing slump EXCEPT:

a> During a slump in the housing market, buyers are more likely to shop online broker sites in search of the best possible price.
b> When the housing market is strong, both buyers and sellers rely on traditional real estate brokers in an order to buy or sell property more quickly.
c> The cost of selling a property with an online broker is a fraction of the cost of using a traditional real estate broker.
d> Online brokers devote more advertising resources to attracting customers during a downturn in the real estate market than do traditional retailers.
e> Customers of online brokers, but not customers of traditional brokers, can control the cost of listing and selling their house by choosing from a number of available packages and options.

=======

My question is why E is not the correct answer? 
Independent of the situation of the economy, Customers are of the online can control the cost of listing and selling. Because this is the feature available on the website and it will remain there even when the economy is good or bad.

Any suggestions?

Kurtosis · Answer

Problems in mortgage industry + declining economy --> Overall decrease in housing sales.
Online real estate brokers --> increased traffic + revenues even though the real estate market is in a decline.

We have to select an option that does not support the improved performance of online real estate brokers.

a> During a slump in the housing market, buyers are more likely to shop online broker sites in search of the best possible price. - Incorrect - Supports improved online performance.

b> When the housing market is strong, both buyers and sellers rely on traditional real estate brokers in an order to buy or sell property more quickly. - Correct - Talks about a different condition - strong housing market, whereas the argument speaks about a declining housing market. Also, this option offers support for an improved offline performance by real estate brokers.

c> The cost of selling a property with an online broker is a fraction of the cost of using a traditional real estate broker. - Incorrect - Offers support to improved online performance

d> Online brokers devote more advertising resources to attracting customers during a downturn in the real estate market than do traditional retailers. - Incorrect - Same reason as C

e> Customers of online brokers, but not customers of traditional brokers, can control the cost of listing and selling their house by choosing from a number of available packages and options. - Incorrect - Same reason as C.

Answer: B

Kurtosis · Answer

The argument speaks about a declining economy. So the scope of the argument is limited to the performance of real estate in a declining economy. Moreover, if customers who are online can control the cost of listing and selling, it provides an added incentive for the customers to buy houses online. Therefore, option E offers support for the improved online performance of real estate markets.

OptimusPrepJanielle · Answer

We need to find an option that will tell why the online real estate brokers are performing better than traditional brokers.
Option E clearly gives us a reason why the online brokers are performing well and people do need more options in the time of a slump.

mvictor · Answer

eliminated all except for B and E.
E doesn't work out since the seller has more control on the price - thus, more will use online brokers...

B stands.

Bunuel · Answer

VERITAS PREP OFFICIAL SOLUTION:

Correct answer B.

This is an exception question. It asks you to identify the answer that does not resolve the paradox. The paradox is that while the overall real estate market is down 40%, online real estate brokers are up by more than 10%. In other words, why are the online brokers doing so well in a declining market? Any answer that resolves the paradox can be eliminated. Choice A resolves the paradox by giving a specific characteristic of online brokers that does well in a slumping market. Choice C gives you another advantage of online brokers, cost savings can be important in a tough economy. Choice D gives some powerful advantages that online brokers have in a difficult real estate market. Choice E also gives an advantage of online brokers as customers can control the costs of the service. Choice B does not resolve the paradox for two reasons: first it is talking about a strong housing market, which this is not and second, it explains why traditional brokers are sometimes more popular when we want to explain the success of online brokers.

ShashwatPrakash · Answer

Agreed the B looks the best answer, but to cancel D aren't we making an assumption that 'Since the Online brokers are devoting more advertising resources it has to translate to more sales.

ishan95jaiswal · Answer

IMO option B.
Option B doesn't give a valid connected reasoning for increase of revenues.

gloomybison · Answer

VeritasKarishma 
This question asks us why specifically online brokers are preferred over traditional ones particularly  during a market slump  "Each of the following, if true, helps to explain the improved performance of online real estate brokers  during the housing slum p"

ı believe C and E can be answers as well, since they do not really explain why people would prefer online brokers during a slump. Because these two options are valid for all the time (before the slump, during the slump, after the slump) so it does not really offer a glamour or an advantage to attract people during slump

KarishmaB · Answer

Housing sales are down. 
But online real estate broker sites have seen increased traffic and revenues.

Why? Four options will give a reason why this may be the case. Why online brokers may be doing better than what they were doing before the slump. So the point of distinction is before the slump vs during slump for online brokers.

A) During a slump in the housing market, buyers are more likely to shop online broker sites in search of the best possible price.

Helps explain. During a slump, people are more likely to shop online. Hence it explains why they may be doing better.

B) When the housing market is strong, both buyers and sellers rely on traditional real estate brokers in an order to buy or sell property more quickly.

Ok, this tells us what happens the market is strong but it doesn't tell us what happens when it is in a slump. Why are online brokers doing better now? In a slump, do people not rely on traditional brokers? We are not given. 
Hence, this does not explain why online brokers are seeing more traffic in the days of slump.

C) The cost of selling a property with an online broker is a fraction of the cost of using a traditional real estate broker.

Makes sense. In a slump, people will likely look for cheaper options so that is why online broking might be flourishing.

D) Online brokers devote more advertising resources to attracting customers during a downturn in the real estate market than do traditional retailers.

During a slump, online brokers try to attract more customers than do traditional retailers. That is why online brokers may be getting more customers during the slump. Explains.

E) Customers of online brokers, but not customers of traditional brokers, can control the cost of listing and selling their house by choosing from a number of available packages and options.

Online brokers offer many different packages and hence customers can control the cost. During a slump then it sure sounds reasonable that people prefer online brokers.

Answer (B)

djangobackend · Answer

correct answer B - 
it talks about when HM is strong, but in our case HM is weak so we do not know what buyers and sellers rely on when HM is weak, we only know the case when its strong. We cannot automatically infer about the other side of things just by knowing the one side. so it doesn't explain why the traffic increased.

I marked E initially but its wrong since - if HM is weak and people have the options to control the pricing then they would prefer to go online since they can adjust the prices according to their wishes or manage their profits overall so it gives a reason why more traffic online.

C - gives another reason why people will go online, if their cost of selling is less online than traditional then they would prefer to go online since it will save them money to sell.

D, A- gives clear reasons as to why more traffic online

VerbalBot · Answer

Automated notice from GMAT Club VerbalBot: 

A member just gave Kudos to this thread, showing it’s still useful. I’ve bumped it to the top so more people can benefit. Feel free to add your own questions or solutions.

 This post was generated automatically.

With problems in the mortgage industry and a declining

Prep Toolkit

Top 5 GMAT Debrief Videos

615 to 715 in 15 Days (Ria's Strategies)

More than Quant/Verbal Abilities: Speed vs. Accuracy

745 with Only Self-Prep and GMAT Club

From 555 to 765: 210-point Improvement

Perfect 805 Score Debrief by Julia

My Rewards

GMAT Critical Reasoning (CR) Questions

With problems in the mortgage industry and a declining

Prep Toolkit

615 to 715 in 15 Days (Ria's Strategies)

More than Quant/Verbal Abilities: Speed vs. Accuracy

745 with Only Self-Prep and GMAT Club

From 555 to 765: 210-point Improvement

Perfect 805 Score Debrief by Julia

My Rewards