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Fascinating study by Stanford University economists B. Douglas Bernheim and Jonathan Meer called “How Much Value Do Real Estate Brokers Add? A Case Study.” Bottom line: They don’t add a whole lot. “We find no evidence that the use of a broker leads to higher average selling prices, or that it significantly alters average initial asking prices. However, those who use brokers sell their houses more quickly,” the authors write.
The study was based on data pertaining to sales of faculty and staff homes on the Stanford campus over a 26-year period. “For the median home in our sample, a 6 percent sales commission totals $34,000, a steep price to pay for the value rendered,” the authors write.
The study closely resembles one in 2007 that covered brokers vs. FSBOs in Madison, Wis., another college town.
I called the National Association of Realtors for reaction and got these responses from Paul Bishop, the Realtors’ managing director of research:
—Time is money when it comes to selling a home. If it takes longer to sell a home yourself, it could mean making one, two, or three extra mortgage payments. (Fair point if you’re carrying two houses.)
—The Stanford campus may not be typical of the nation as a whole.
—The NAR’s own annual survey found that on a per-square-foot basis, FSBOs sold for $92, vs. $116 for sales by brokers. (Yes, but the Stanford profs point out that FSBO properties aren’t the same to start with—FSBO sellers tend to be older and less wealthy, for one thing.)
Over to you, dear readers ….
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.