The FSBO Blog

A new book hit the shelves last week: “Freakonomics�, by Steven Levitt and Stephen Dubner. (www.freakonomics.com)

Written by an economist and becoming an instant best-seller (quite a feat, if you stop and think about it), Freakonomics takes another look at many widespread public perceptions, and asks some interesting questions – such as “What do schoolteachers and sumo wrestlers have in common?� and “Why do drug dealers still live with their moms?�. (I’m not making this up. These are real chapter titles; and the author really does delve into the answers)

The book is very educational, and a fun read. But the reason I bring it up on this blog is because of chapter #2: “How is the Ku Klux Klan Like a Group of Real Estate Agents?�, which may be reason enough to buy the book for anyone thinking about buying or selling real estate.

It’s no secret that there is an all-out war (PR, legal, et al) going on between the Traditional Real Estate Agent Establishment [National Association of Realtors] and proponents of discounted, alternative real estate companies. So in Freakonomics, Levit seeks out the truth: do real estate agents really get their clients the best deal, as they claim (and as they can explain / justify quite eloquently)?

The data screams “NO.� Levitt goes into much more explanation, comparing real estate to the insurance and stock brokerage industries which were revolutionized by the internet, but a highlight from the book is this: A sampling of 100,000 homes sold in the Chicago area showed that 3,000 homes were owned by the agents who sold them.

The best way to compare whether an agent is working for you is to compare what they do for themselves vs. what they do for you. Of the 3,000 agents in Chicago selling their own homes…

1. The agent’s home stayed on the market an average of 10 days longer than those of their clients
2. The agent’s home sold for an average of 3% more than those of their clients

There you go. No spin, no fast-talking, no beating around the bush. Just hard data that backs up why owners should consider selling their homes “By Owner.�

In the book, Levitt goes into more depth explaining why an agent would sell your home slightly faster for less (hint: holding out for $10,000 more dollars for you means only an extra $175 for them) - and that the internet has now significantly narrowed the information gap between what real estate agents can find out and what you can find out. If you’re interested, go grab a copy of the book even if you just read that one chapter. It’s highly enlightening.

Michael Poythress
The FSBO Blog