Monthly Archives: September 2009

Is There a Financial Benefit to Using a Realtor?

Sell Your House for Top Dollar!

Sell Your House for Top Dollar!

It’s a very personal, a very important thing. Hell, it’s a family motto. Are you ready, Jerry?  I wanna make sure you’re ready, brother. Here it is: Show me the money.

- Rod Tidwell, Jerry Maguire

I was recently researching a somewhat different topic (deflation, inflation, and price sensitivity in real estate) when I came across a paper written in 2007 by a trio of economists at respected institutions.  This paper has me in a tizzy.  I need to know what you think of it, and how we as an industry might answer it.

Prof. Igal Hendel & Aviv Nevo of Northwestern University
Prof. Igal Hendel & Aviv Nevo of Northwestern University

The paper is called The Relative Performance of Real Estate Marketing Platforms: MLS versus FSBOMadison.com (PDF) and the authors are Igal Hendel and Aviv Nevo at Northwestern University, and Francois Ortalo-Magne at the University of Wisconsin.

The findings are… disturbing to say the least if you work in or near the real estate industry:

After controlling for houses and seller heterogeneity, we …find no support for the hypothesis that the MLS delivers a higher sale price than FSBO. Considering that realtors charge a 6% commission versus $150 for FSBO, FSBO sellers come ahead fi…nancially. The lack of a MLS premium does not mean realtors do not provide value to the seller. It means instead that the cost of the convenience provided by realtors seems to be the full commission.

And more:

The raw price comparison shows that the average sale price of homes that sell on FSBO is higher than the average price of homes that sell with a realtor. The characteristics, reported in the city assessor’s database, of houses sold on the different platforms are somewhat different. However, after controlling for these observed characteristics a significant price gap persists. Naturally, platform selection is the main suspect behind the persistent premium. We take several approaches to deal with selection. All the approaches support the same conclusion: MLS does not deliver a price premium.

Emphasis are mine.  If you are so inclined, read the whole paper.  I read through it, but didn’t have time to dive in.  For that matter, I don’t have the Ph.D. in economics to really criticize their work.

Turns out, the New York Times had covered this paper, both in an article and on its Freakonomics Blog.  This is from the blog:

But the paper supports the argument that, unless you’re the kind of person who needs a little help through a “stressful and maybe difficult period,” and unless you’re unwilling to wait a little longer to sell your house, then the commission that you pay your Realtor is in essence a big fat tip.

Oh wow.  This is a problem, y’all.

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[Theory] Multi-layer Brand and Social Media

Last week, I had an opportunity to attend an extraordinary meeting with some of the most senior people at NAR, on the topic of social media. I have to thank Jim Duncan for putting the meeting together, and of course, I am grateful to the leadership at NAR for being willing to listen to a bunch of blogger types. I finally got the chance to meet Jim in person, and it was absolutely fantastic to meet and converse about social media, web, real estate, and marketing with some of the best and brightest in our industry.

Quick shout-outs then to: Dale Stinton, Frank Sibley, Mark Lesswing, Pamela Kabati, Hilary Marsh, and Keith Garner from NAR. And to my fellow realestistas Jim Duncan, Ben Martin, Jay Thompson, Joe Ferrara, Eric Bryn, and via telephone, the redoubtable Benn Rosales, a tip of the ole hat.

However, this is not a post about that meeting. It is, rather, about a concept that was brought up that has really intrigued me: multi-layer brand, and how that interacts with social media.

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Clients, Consumers, Information: Dialogue on My Inman Column

As expected, my latest Inman column brought out only wide agreement and headnodding.  Positively sleepy comments section there.  NOT.  Go read it fast, or better yet, go be a subscriber so Inman can continue to pay me for my ramblings.  (LOOK! A COMMERCIAL PITCH!)

First of all, I owe a word of thanks to everyone who responded over at Inman — especially to those who disagree and are taking my points apart.  I guess I’m a Hegelian in the way I view progress: thesis, antithesis, synthesis.

In any event, I wanted to post a few responses on this blog since I want to carry the conversation beyond just Inman readers, and past the 24-hour paywall deadline.

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