“Want to Jump-Start the Housing Market? Get Rid of the Realtors®” The waggish title of a recent post on “Freakonomics,” immediately caught my attention. The website, which offers money-saving and investment advice, sometimes does so with clever and quick-witted banter. And while the title did exactly as intended, driving me to click on the post, the content proved to be far short of particulars. Worse, what it did was play to those who somehow believe that real estate agents have become an unnecessary and expensive appendage to the homebuying process.
The article references a paper, “The Costs of Free Entry: An Empirical Study of Real Estate Agents in Greater Boston,” a pedantic and overly complex look into the real estate industry. Addressing the ease with which unqualified persons enter the real estate profession as well as real estate commission structures, the authors seem to have attracted others who interpret the findings to support positions which were never addressed. In describing the purpose, the paper’s authors state: “These empirical patterns motivate an econometric model of the dynamic optimizing behavior of agents that serves as the foundation for simulating counterfactual market structures.” (And unless that statement seems immediately clear, readers may drown in the remaining fifty-one pages.)
The full paper as well as the “Freakonomics” article can be read HERE. And while I heartily support providing money-saving advice and suggestions, and I do so through my WEBSITE and BLOG; what I offer is based upon 4 decades of experience in buying and selling hundreds of homes and other real estate. My experience has shown that the guidance of a real estate professional is always best, often resulting in reduced risk and far greater savings than the costs involved.
In reading the comments to the article I wasn’t surprised to find many who agreed with the suggestion that real estate agents have outlived their usefulness. Many complained that agents are over-paid and rarely earn the commissions they receive. And I doubt that opinion will soon change. Such perceptions seem common among both home buyers and sellers who have little understanding of what agents actually do. And the perception is compounded by the fact that there are and have been many agents who were unqualified, unprofessional and inept. Of course the same can be said of any profession.
Ultimately, I believe that the real estate profession, just as the housing industry, is undergoing significant changes. The dramatic growth in the use of the Internet to assist in real estate transactions is probably still in its infancy, but it’s not indicative of the elimination of the human factor. While it’s easier than ever to search for homes or to sell a home without an agent’s help, doing so presents risks of which most are unaware. During the next decade, new and yet to be identified real estate business models may flourish; but they will just reflect an ever-changing society with new needs and systems. Competent and knowledgeable professionals will always be an asset to the real estate process.
The recent recession has caused great changes across the economy; however, to suggest that eliminating real estate agents would somehow help restore the housing market is not only ludicrous, it’s fallacious, regardless of conclusions based upon anecdotal accounts or complex mathematical formulas. By contributing to the turmoil the authors only exacerbate the problem. Both home buyers and sellers need professional guidance in the confusing maze that has followed the collapse of the housing market. And while I am not an agent and have never held a real estate license, I’m sufficiently knowledgeable not to attempt real estate transactions involving a significant portion of my wealth without the assistance of a trained and experienced professional.
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