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There was a real estate agent who lived in our neighborhood for many years. Whenever she sold a house for a client, she sent postcard mailers around the community boasting that “I sold it in THREE DAYS!!!” Then came the day that she decided to sell her house. Funny thing was this: She set the sale price pretty high — the rest of the neighborhood was rooting for her to get it — and then she waited patiently. Real patiently. In fact, it took her several months to sell her house — but SHE GOT HER RICH PRICE. Of course, the neighborhood loved her because she helped bump prices up to a new level. But I couldn’t help thinking there was a disconnect between what she did for clients and what she did when she was selling her own house.
I’ve always had a suspicion that some (many?) agents pressure their clients to “work with this buyer” (which anyone who has followed this blog was the case with me when I sold my first house) while they hold out for top dollar when selling their own house. In the world of agents, it’s all about turns. Better to move that house today, than wait another six weeks for $20,000 more, since their cut of that higher price is roughly $300 (or 1.5%, assuming the 6% commission is split four ways between two agents and two brokerages). Flip and move on, flip and move on.
That’s all by way of background to say that two economists at Northwestern University have released a study (press release is here, and the actual study is here) concluding that sellers on average reaped just as much by selling their house themselves (as a “FSBO”) as had they used an agent. And factor in that 6% sales commission, and they came out AHEAD by selling the house themselves.
The researchers did find one difference: The amount of time it took to sell the house. Using an agent resulted in a much quicker sale, which isn't surprising since you get the benefit of being listed in the MLS. But so much for agents delivering a higher price.
I can already hear agents complaining that you can't make these types of comparisons -- that many sellers NEED to sell quick because they're starting a new job out of state, or their moving to a new school district, and need a quick sale --even if it means taking less. And the agent I described above could afford to be patient because she wasn't moving out of town. I'm sorry, but I've always thought that something smells rotten in Denmark...
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.