This article in the Sunday Times sparked the typical debate between people who use agents, hate agents, and are agents. A few in particular prompted me to write a 2nd comment (my first can be read here). Comments may close before it gets posted, so rather than lose it, here you go.
My experience with people who express such vitriol toward brokers is that their bad experiences were preceded by putting more effort into buying their MP-3 than choosing a broker. For them, I have little sympathy.
To Attorney @ #45: Brokers are paid what the market bears, period. Creating commerce (not rubber stamping it, mind you, but making it) and causing vast amounts of money to change hands is not easy or more people would do it. I don’t besmirch the importance of an attorney in a transaction, but lawyers typically can’t sell. Reminding us how high you are on the food chain doesn’t change that fact.
10% of brokers do 90% of the business. List with an agent with a verifiable track record and happy references and you’ll get value for your money. Better yet, to those who think we sip martinis while we do so little work for such a fat cut of the action, go get licensed. Work nights and weekends on straight commission and then tell me how little work we do for so much money.
All the comments are telling. Stories like these bring out the haters, and they have utterly no clue what a good agent can do in the sale of a home.
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US News is hosting a debate of sorts on the value of using an agent. The person on the side of not needing agents is a VP of forsalebyowner.com, a site whose point of view should be obvious. I have a skin in both games. I will repost my comment here:
Ah, if all agents were good for is to be the database of homes for sale like forsalebyowner.com. Then, buyers could all yell “I saw the house first” and save themselves (or the owner, we never know which) 6%. Too bad it never works out that way except in anecdotal examples and grossly flawed studies like Freakonomics author Steven Levitt ‘s hack job at Northwestern.
A few facts which you don’t need a study to grasp:
1. Most people simply stink at selling anything, especially their own home.
2. For Sale By Owner sites have never been able to specify exactly who saves the 6% when you cut out the agents. Is it the buyer or seller? Answer: whichever one they are addressing.
3. Even though the internet and other innovations have utterly devastated the livelihoods of travel agents, stock brokers and others, Mr Healy himself admits that commissions have risen over 50% since 2000. The market is efficient, Mr. Healy.
4.If selling homes is so easy, and presumably foreclosures are even more popular among buyers than regular homes, why do banks list their REO’s with a a broker? Because they know what works and what doesn’t. And a title firm and attorney can’t sell an REO without brokerage.
5. As a matter of fact, every successful title company and real estate law firm (and mortgage company) has strong relationships with brokers and agents.
6. Every discount and gimmick “business model” like Foxtons and Iggy’s house has flopped.
I have a skin in both games because I run a full service firm and a FSBO assistance firm. I have a front row seat to plenty of FSBOs who sabotage their own deals left and right. Who is right for FSBO? About 5-10% of the market. The rest need a broker.
The Levitt study I allude to is economist Steven Levitt’s conclusion based on his study of the Chicago MLS data for several years that agents sell their own homes for more money because they take more time to wait for a higher offer. Anyone with half a brain knows that correlation doesn’t equal causation and that, all things being equal, older, stale listings will sell for less. I have corresponded with Mr. Levitt and he has admitted to me that the study never truly accounted for distress sales, loss of jobs, divorces, estates, or other conditions which suppress price and shorten time on the market. He only passively acknowledged that agents would likely be better at staging, pricing right to begin with, being flexible with showings and taking delays and extensions with more tolerance than the average Joe.
But beyond that, for every anecdotal example I have ever heard on a successful for sale by owner, I have heard another where someone goofed big time on the buying or selling end and got hurt financially. My question as to who really saves money with in a for sale by owner will never be answered, because there is no answer. If the buyer saves the commission, then what good was it for the seller? If the seller saves the commission, how did the buyer benefit?
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