19 June, 2007

Real Estate agents be warned, you are not needed. A new study shows that real estate agents do not raise the sale price of homes. The new study shows that people who used For Sale By Owner methods to sell their property were better off financially after thier home was sold. The myth that real estate agent can get you more money for your home has been proven wrong.  Read on for more details.

Taken From The ChronicleHerald of Halifax, Nova Scotia.

You may need a real estate agent, but maybe not

By JEFF BAILEY The New York Times

It sounds like the setup for a dull economist’s joke. Who gets the better deal: the cautious economist who sells his house through a real estate agent, or his risk-taking colleague who finds a buyer on his own?

But the question — debated by two Northwestern University economists who chose different methods to sell their homes — and the research it helped prompt are serious. And the answer will be of interest to anyone who has paused to consider whether paying a real estate agent’s commission, typically five per cent to six per cent of the sale price, is worth it.

The conclusion, in a study based on home-sales data from 1998 to 2004 in Madison, Wis., is that people in that city who sold their homes through real estate agents typically did not get a higher sale price than people who sold their homes themselves. When the agent’s commission is factored in, the for-sale-by-owner people came out ahead financially.

Madison is home to one of the biggest for-sale-by-owner websites in the country. The economists pitted that site against the local multiple listing service operated by real estate agents.

There are asterisks. The authors cautioned that they did not know whether the results from Madison applied to the country as a whole; certainly, selling a house without a real estate agent would be harder in a city without a heavily trafficked for-sale-by-owner website. The authors are also analyzing Madison data from 2005 and 2006, when the housing market cooled after a long run-up, to see how their findings might have changed.

Some aspects tilted in agents’ favour. The researchers found that homes on the multiple listing service sold somewhat faster than houses on the for-sale-by-owner site. The study also did not place a value on other services provided by agents in selling a home.

The authors have presented their paper at forums at many leading universities, but it has not yet been submitted to a journal for peer review.