The FSBO Blog

On this blog, we’ve refrained from discussing the economy or “housing bubble” - partially because many other sources are covering that topic adequately, but more significantly…..because it’s rather boring to read. For once, however, I ask you to indulge me as I jump into economy talk. I’m not going to write (much) in the typical, ethereal sense though; my purpose is to bring home some of the news of the past few days, explaining how it applies specifically to you and what you can do with it.

Yesterday the General Accounting Office (GAO; a research branch of Congress) publicly released a report entitled “Real Estate Brokerage: Factors The May Affect Price Competition.”

The report is very interesting, not due to its content (it doesn’t reveal much that hasn’t been revealed before), but rather because of the fact that it was even requested and created. Based on the specific questions asked and answered in the report, we can tell that many members of Congress view the current cost to sell real estate paid by many as enough of an abnormality and risk to look into ways to address it. Specifically, what they see is that, as the report notes, the total dollars in real estate commissions are estimated to have risen nearly 50% in just 4 years — from $43 billion in 2000 to $61 billion in 2004. The cost of a house has risen approximately 35% in the same period, while inflation was only 10%. That means agents as a whole have received a 25% pay raise for doing no more than they did before. (Let it be known that I have no problem with a profit growth like that in and of itself, as a matter of principal)

Real estate is directly tied to the economy, being one of the most significant factors. This is why Alan Greenspan is pleased that there’s an “equity cushion with which to absorb a potential decline in house prices.” In real terms: If there IS a housing bubble, and it DOES burst, and the value of your home is no longer rising as you anticipated, MANY can sell without it causing much of a problem — such as having to come up with an extra few thousand dollars of cash to pay off the mortgage.

With an “equity cushion” of 10-15% profit on a house, and the common cost to sell of 5% (which pulls directly from that equity cushion), our economy would appear to be in a far more secure position if the average cost of selling real estate were to dramatically drop….say from 5% to 0.5%. This is accomplished by promoting price competition in the real estate industry. (Rob Steiner addressed some of this in his earlier posts - though we can’t know for sure that DOJ/FTC and Greenspan are coordinating)

As discussed in the GAO report, realty agents have been getting this windfall profit for years. Prudent minds would conclude that now that technology, information and laws have simplified the means, that windfall should be shifted to the people who actually invested — homeowners. The best way you can help your “personal economy,” as well as the “national economy,” is to sell your home By Owner.

And with stories like “Crazy Loans: Is this how the boom ends?” from CNN Money, and “Overdue Credit Card Bills Hit Record High” from the AP, don’t we know that both need help!

Selling By Owner is easy these days, especially if you work with a good FSBO service & advertising company. You can find all kinds of information about the process here on this blog. And feel free to ask questions!

~Robert Creek
The FSBO Blog