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Real Estate Experiment

July 28, 2007

Most everyone I know believes that it costs 3% of sale price to sell their house.  When we sold our first house I didn’t think twice paying $7,500 to our realtor for showing our house once (the first buyer bought it).  Six months ago, again, I didn’t really think twice about the prospect of paying $14,000 to sell our current home.  But after reading Freakonomics I started to think that I might be able to pay someone less to sell our home.  Turns out you can sell your house for less than $1,000 here in Dallas.  Here is my story:

DenWe have been trying to sell our house for about six months.  It is a great place, with a less than ideal location for most buyers.  It has worked great for our family for over 5 years, but as we are increasing the size of our family we needed a bigger place.  Back in May we bought another home and have been renovating it (see renovations here).  We also raised the price of our property by $50,000 as an experiment that I wrote about in a post titled, "Selling our house, the new strategy!".  Everyone told us it was a mistake, including our realtor, but just a week later we got a fair offer on the property that we subsequently accepted.  The buyer, for reasons we never quite understood, wasn’t able to close. 

This month our contract with our first realtor expired and we decided not to renew it.  He was a great guy, very knowledgeable, helpful; but I didn’t see the value in continuing to keep trying a sales strategy that wasn’t working.  The only activity on the property was as a result of ‘not following’ his advice.  I started thinking about what to do next.  I asked my self: What does a listing agent do?  Is it worth 3% of the sales price?  From my experience, an agent lists your house in MLS, adds it to CSS to allow realtors to show the property, puts a sign in your yard, adds it to realtor.com and puts a lockbox at your front door.  The Title Company (and your lawyer, if you are smart) handles the transaction details for both the buyer and the seller.  I wonder what that service is worth?  I figured it might take an hour to sell (i.e. talk to me on the phone), an hour to fill out the MLS form, an hour to add it to CSS, an hour to add to realtor.com and two hours to stop by and place the yardsign and lockbox at the house.  For a total of six hours.  I figured it might be worth around $150/hour and decided to propose the offer to several realtors to see if they agreed.  My current realtor wasn’t interested and quickly indicated he wasn’t interested.  But after posting an advertisement on Craigslist more than a dozen realtors contacted me, each more than interested in the offer.  I will keep you posted on whether or not my latest experiment works. 

 

Written by Alexander Muse · Filed Under Blog 

Comments

3 Responses to “Real Estate Experiment”

  1. mike simonsen Says:
    July 30th, 2007 at 6:45 pm

    Good luck on with your experiment, Alex. Your view of realtor value is not uncommon. It’s also driving a lot of innovation in the online real estate world. There are hordes of internet-based brokers trying to capitalize on the perception that agents take too big a cut. Though because all the states have tight regulations, it takes a lot of effort to go national. I’m not sure that any are operating in Texas yet. But they’ll come and you’d be a prime candidate.

    Anyway, our firm does real-time market analytics. We could probably provide you some actionable insights for your experiment. give me a buzz if you feel like more details.

  2. Jason McMinn Says:
    July 31st, 2007 at 10:32 pm

    Realtors make too much money considering the work they do.

    15 years from now, they will be a thing of the past along with travel agents.

  3. Ryan Roberts Says:
    August 1st, 2007 at 1:01 am

    I read Freakonomics and was left with the same impression about real estate agents. When I bought my current house, I experienced some of the misaligned incentives pointed out in the book. I’m considering doing a FSBO the next time I sell.

    Personally, I have more of an issue with commercial real estate agents than the residential ones. But I’ll leave that for another day.

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