It’s another of those Freakonomics questions, and we’re taking a swing at it on World News Tonight this evening. Steve Levitt and Stephen Dubner, who wrote the book, say real estate agents are not bad people, they’re just… people -- and their interests may not be exactly the same as yours when you hire one to help you sell your house.
Levitt and a colleague at the University of Chicago did a study of 100,000 real-estate transactions. They report that when real estate agents sold their own homes, they kept them on the market about ten days longer than their clients’ houses, and ended up with closing prices 3.7% higher than what comparable homes got.
Why? Well, I’m going to be a stinker and try to get you to watch the TV version tonight for the answer -- but in exchange, here’s some value-added stuff that won’t be in the television piece:
Top of the list: why is an agent like an undertaker? Because both are “experts” in economic terms; they have information you don’t. How do you begin to guess what your house is worth? Unless you have access to the Multiple Listing Service, which the industry uses to find out what comparable houses in your area are going for, you have to ask an agent.
(Likewise, consider the fix a family is in if a loved one dies. I have no idea what a casket costs, or whether we really need palm fronds. The funeral director can charge whatever he/she likes.)
Levitt says this “information asymmetry” is shrinking, though, for an obvious reason: the Web browser on which you’re reading this blog. If you really want to price your house (or a casket) on your own, the information is much easier to get than it was ten years ago. You may still want to go to the professional for the sale (or the funeral arrangements), but at least you’ll have the ammo to say, “Er, I think that price is a bit out of line… .”
Oh, by the way -- you may notice I haven’t used the word “realtor” in this post. It turns out the word is copyrighted by the National Association of Realtors. The person who helps you buy or sell a house has to be a member to be a realtor; otherwise, they're mere… real-estate agents.