"Rogue economist" Steven Levitt, author of Freakonomics, appeared on NPR's On Point Radio in Boston this evening and briefly discussed his research on the performance of real estate agents. Levitt's analysis of 100,000 transactions in the Chicago area revealed that agent properties sold for 3 to 4 percent more than similar client properties, and that agents kept their own homes on the market for 10 percent longer than client properties to get the highest price.
The findings document what industry critics have claimed for some time, namely that some listing agents put their own financial interest ahead of clients because they are more interested in closing the deals quickly than holding out for the highest price for their seller clients (see excerpt from Chapter 2). Levitt blames the industry's traditional two-sided commission structure for failing to properly motivate listing agents, who typically receive just 1.5% of the total sales price after a four way commission split.
If listing agents are more motivated to make the deal work than getting the highest price for their seller clients, should they be called "Dealtors" instead of Realtors? Or should the industry's commission be reformed or abandoned all together? What's your take? If you are selling your own home this Spring, will Levitt's research influence whether you will (1) list your property with a traditional full fee, full service listing broker; (2) sell on your own, or (3) purchase services "a la carte" through a new breed of real estate consultants like The Real Estate Cafe?
Finally, will the debate about real estate bubble influence your decision? We've asked Levitt the same question by email, and will let you know if he writes back or posts an answer to his blog.
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