Spend Management on the Home Front: The Realtor Scam

As someone who has purchased two properties in the past two years without real estate brokers being involved, I can vouch for the ease with which a non-broker transaction can go down (on the buying side). And now we have academic evidence -- at least early proof -- that non-broker deals (registration required) do nothing to decrease the value of a real estate transaction for the sellers. In fact, broker deals significantly increase the overall costs to sellers. According to the above-linked article in the New York Times, the conclusion "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."

I've always contended that for educated buyers and sellers -- even those with little time on their hands -- that a 6% broker's commission on the sale of property (for those European and Asia-based Spend Matters readers, that's the standard percentage in the US) is absurd, especially on higher value properties. While I'm sure that the National Association of Realtors will do its best to discredit and cover up this study, we should all take it as further proof that selling through a broker is not a good Spend Management decision -- on either a unit or total cost basis. Curious to learn more? Read the Freakonomics blog on the subject.

Jason Busch

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