Wednesday, June 13, 2007

Big Ten Study: Realtors Add No Value

Have you ever been caught in a lie? I mean, it's happened to all of us at one time or another. Maybe a little sweet white lie, or a real mushroom cloud-laying whopper! When it's a really blatant lie and it's suddenly uncovered before you and everyone else, don't you hate that gurgly, sinking feeling in the stomach, as if it were trying to speak for itself: "Oh God, please no!".

Maybe now one can imagine what American realtors, and their political spin organization, the N.A.R., must be going through right now? In 2005, the NAR, in it's own patented arrogant fashion, purported that by using a REALTOR(R), homesellers could achieve as much as 16% more value when selling their home.

Even if this statement were not a provocative, unabashed lie, the NAR seemed to forget that by using such rhetoric they removed the left foot from their mouths and proceed to insert their right leg entirely. Sure, the 16% is a considerable, favourable outcome for homesellers. Good job. Now what about the buyers that your members also represent?

Oh! Uh, errrh, ummm.... yeah. Kind of forgot about them. Um, they gladly pay 16% more for that house?????

Listen, the American public can't wait any longer for Penn & Teller to write up a "Bullshit" TV program on cable about American realtors.

Let's all just step aside and let students from some of the Big Ten schools do what they do best - study, research and then lay it all out in a report for others to see and critique.

Economists at Northwestern University and the University of Wisconsin-Madison (GO BIG TEN!) have recently decimated the NAR's, cannibis-invoked 16% theory with an empirical study. The study results indicate that there is, within a normal margin of error, no benefit whatsoever in using a realtor in terms of home sale value achieved:
But a recent study showed that home sellers in Madison, Wis., along with a little help from an FSBO site, sold their homes for higher prices than their neighbors who used agents.

The report by three economists from Northwestern University and the University of Wisconsin found that homes sold on received an average price of $175,068 during the seven years studied, while homes sold on local multiple listing services (MLS) brought an average price of $173,205. Those averages are essentially equal after taking into account sampling errors.

"The survey validates what we've been saying all along," said Colby Sambrotto, chief executive of, a D.I.Y. Web site with a national reach. "Our business is growing very rapidly with listings increasing 50 percent to 70 percent a year," he said. "We're having 60,000 homes listed."

A NAR report from 2005, however, found that, nationally, FSBO sellers got a median price of $198,200, but those sold through an agent went for an average of $230,000, for 16 percent more.

"That 16 percent always smacked us as not true." said Sambrotto. According to him, NAR's data included "non-arm's-length" sales, such as those made to relatives. And, he said, the mix of properties may have skewed toward lower-priced homes.

Glenn Kelman, founder of Redfin, a web-based, discount broker that charges a flat fee of $3,000 to list a house, said, "Consumers are a lot smarter than the real estate industry gives them credit for."

Dammit! If only American real estate consumers would continue their illiterate ways, that 6% realtor commission achieve with nominal effort would continue to be so "in the bag"!

And now some important questions for American real estate agents:

1.) What value-add services do you now provide to the marketplace?

2.) How do realtor services benefit the consumer (homebuyer and homeseller, respectively) any more than using an online and discount broker services already would?

3.) How much will you be charging for issuing such services, and what makes you as a realtor believe residential real estate consumer will be willing to pay it?

Now is a great time to be a Realtor(R). Now is a great time to be a travel agent.

1 comment:

Anonymous said...

I've found this blog very entertaining and informative over the past months...thank you. I'm wondering if anybody out there can post the basic steps to buying a house without a realtwhore? I'm watching the market quickly plummet and plan to buy in SoCal when house prices get back in line with fundamentals. How should I go about it??