Kris Berg reviewed the new Freakonomics movie, and how they criticize realtors for telling their clients to sell early. Just like in their book, they refer to a study that realtors wait longer to sell their own personal residences, and get more money. In the end, the one guy states that he’d rather wait to get his hypothetical extra $10,000 that magically comes one week later.
http://sandiegohomeblog.com/2010/10/04/kriss-most-awesome-movie-review-freakonomics/
The movie makers are just picking on a common target, realtors. If they really wanted to get some scoop, they’d include the rampant short-sale fraud or how realtor inexperience is costing the clients. No, instead they keep the focus on a hypothetical case that sounds juicy – the reality is:
1. Today the listing agents are telling sellers to hold out, not dump and run.
2. Agents who over-price their own house are commonplace; it’s because they aren’t very good.
3. Today you are either priced to sell, or priced to sit. There isn’t magic that happens a week later.
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Here are two studies that back up what we see on the street, from the latimes.com:
If you’re considering listing your house and you’re serious about selling, you’re better off being realistic right from the get-go. This is according to a New Zealand housing analyst whose study of online buyer habits echoes one done this year in the United States.
Alistair Helm, chief executive of Realestate.co.nz, concluded that a property receives four times as many views in the first week online as it does a week later. His company looked at 1,100 New Zealand properties during a six-week period in July and August.
Helm told the New Zealand Herald that the “most important people in the market” are serious buyers who are searching online every day, and they’re fully aware when a home that might meet their needs becomes available.
A few months ago, the online brokerage Redfin.com looked at traffic for listings in multiple markets.
The homes studied had gone on the market early this year and had been for sale at least 60 days, and the listings had been updated — had a price change or some other significant condition change — at least once.
Redfin.com came to the same conclusion: Brand-new listings get four times as many online viewings in that initial week as they do immediately afterward.
If you’re fishing for an unrealistic price, you may be blowing it, the company said.
Author Mary Umberger writes for the Chicago Tribune.
Sent in by a seller of a house that I was trying to show a client:
Sorry about today. Honestly, I am really getting tired of lookyloos and resal estate agents. Here is the deal.I am motivated seller, ok, I am flexible and will consider owner financing. Of the three properties I am aware of for sale now in my tract, mine is for sure the best value.
No bank bs, so escrow could be quick.If your client has previewed other homes for sale, and knows the area, and really wants to live out here, is serious, then he/she will want to make an offer on my home. It is that simple. If your client ain’t sure, I ain’t got time for your client. And, I need advance notice.
Re: #1. Wow, Jim, just wow! I especially chuckled at the last two sentences…
I was not impressed by the Freakonomics book. Long on marketing, short on material.
As for JtR comment #1, sounds like a case of seller mental illness to me.
Jim,
That reminds me of 1176 Nardo in Encinitas, who wanted $695,000 for a rundown rental in a marginal neighborhood:
Please DO NOT DISTURB OCCUPANTS. SHOWN WITH ACCEPTED OFFER AND 24 HOUR NOTICE TO OCCUPANTS/TENANT. DO NOT DISTURB TENANTS!! CALL LISTING AGENT WITH ANY QUESTIONS. Shown with accepted offer only with 24 hours notice to occupants/tenants.
Do I even need to tell you the punchline? It sold more than a year later for $507,500.
Is it wrong that I really hope the seller communicating with Jim in #1 takes a year to sell and a $100k haircut?
Whadda jerk.
Although the movie just came out, “Freakonomics” was written in 2006 with data collected in the first half of the decade. I suggest that the conclusions regarding real estate don’t apply today so one should not get to bent. I found it to be a very entertaining book that demonstrates another way to look at day-to-day reports from so called “studies”.
I’m officially in escrow–(out of state). Thanks to JtR and all the regular posters. I’ve learned so much and am very grateful…
I loved Freakonomics. The whole point about real estate agents in the book is that they no longer control the information, so what are they doing to earn commissions? (Jim makes it clear what he’s doing.) Also, a good agent should be interested in just getting deals done – that’s what the compensation schedule calls for. Why put forth the time and effort it takes to hold out on price if it’s for an extra $20k to the seller? It’s not worth the extra $600 to the agent. They’re better off spending their time on the next deal, which is why the model is flawed; the seller’s and agent’s interests aren’t aligned. We’ve seen plenty of hack agents who think by holding out on price they’re defending their clients’ honor. Instead they’re choosing to be poorly compensated for their time. A fee schedule would make more sense. A realtor like Jim could charge more because he’s worth more.
Re: #1, “Of the three properties I am aware of for sale now in my tract, mine is for sure the best value.” Is this true? If so, it would make him a half-moron instead of a total moron.
After reading #1, I feel like I’m back in 2005. WTH. Does this person live in a vaccuum and is not paying attention to what’s going on w/our economy?
The agent piece in freakonomics was literally the only thing in there that had NO study done. They interviewed a couple of people and called it research. I liked the book, but that piece was like a kindergarten kid sneaking his crayon drawing into a portfolio of Picassos.
The REAL REASON why Realtors get more???? They take their own advice. Paint, stage, clean up, do open houses, take appointments, and we don’t screw around with the paperwork. I get those of my clients who listen to me FULLY and completely top dollar (not imaginary dollar cause that’s for those who don’t listen – but top realistic value). And those clients that insist on their own pricing eventually sell for far less than what I originally told them I could get. I have countless of those stories and I try… repeat try… to use them to convince the most pig headed to PLEASE take my advice and save themselves some money.
Freakonomics is hog wash on this point. How can they do so much intricate study into the minutest details on arcane topics and completely white wash the Realtor story.
Moral to the story…. hire a GREAT Realtor, then TRUST them and their advice. We know how to sell homes for top dollar (and we also know how to take advantage of stupid sellers and their agents when we represent buyers).
SFrealtor, actually there was research and it showed that realtors keep their own houses on the market 10 days longer. This shows they’re willing to put forth more effort on their own homes. And, of course, they should – the result is worth 33.3x more on their own home than a clients’ (100% vs 3%.)
Just to be clear, I’m not trying to crack on realtors. I’m just saying the model is flawed. Regardless, if you do all the things you describe, I’m sure you, like our host, have been able to differentiate yourself in your community.
Here in Sonoma county I see many homes still sitting that would have sold 6 months ago if priced right. Prices are down substantially since late may and these sellers will be getting $100k-$200k less than they would have if they priced right at the beginning if they find a buyer now. Stale listings can sit a long,long time.
“2. Agents who over-price their own house are commonplace; it’s because they aren’t very good.
3. Today you are either priced to sell, or priced to sit. There isn’t magic that happens a week later.”
That’s some classic JtR right there, folks! Love it.
“Helm told the New Zealand Herald that the ‘most important people in the market’ are serious buyers who are searching online every day, and they’re fully aware when a home that might meet their needs becomes available.”
That’s so true! That was me when I was home shopping. The Internet has totally changed the game, in terms of home buyers doing their own research. My wife and I would find the homes we’d want to see and then send the info to our agent to do further research on. She would occasionally send us something we hadn’t already seen, but for the most part it was all us. And yes, when you are seriously ready to buy, you will be searching the new listings a few times a day!
SFrealtor, actually there was research and it showed that realtors keep their own houses on the market 10 days longer. This shows they’re willing to put forth more effort on their own homes.
If the study doesn’t control for why people are selling the house, then it’s not that useful. It could be that realtors look at houses more as investments, so when they sell they are less likely to be under distress.
I think the issue that freakonomics was pointing out was information assymmetry. Basically, that realtors have more information than the average seller.
I’m not so sure that is the case anymore. Perhaps it was back in 2001 when you had to look at houses through printed up flyers in a book in each broker’s office. Now, everyone has everpresent internet access with automated alerts and real-time comparable pricing information with a few clicks. One can assess the value/non value within 60 seconds or less. And, price drops are propogated throughout all systems in more or less real-time (give or take 30 minutes).
considering that writing an offer takes more time than getting the information, I’d say that differential of several percent is pretty thin nowadays.
Besides, in a declining market, faster sales are usually higher, not lower. It only works to wait in a rising market (assuming you’re priced to get views, and ceteris paribus)
Chuck
re: #13 & #15
that was the case when I was buying last year, refreshing the listings on the net multiple times per day, jumping on potential deals within hours with my agent. More so towards the end of my 6 month search.
I forgot to mention, this also lends credence to Jim’s idea of initially listing for a very low price to start a bidding war. If I were to sell my home, I would go with Jim and try this out, though to be honest it does scare me a little.
Is this really a new idea in SD? My realtor up north was doing this 15 years ago.
Hmmmmm, mechanics cars routinely last 25000 miles longer than the average persons. I am the contractor on my rental propertys so the concrete is always stronger and the plaster is always waterproof (I count the bags of cement used and supervise the mixing). The wiring I do never catches fire, the pressure, gas and poo pipe plumbing I do very very seldom gives problens. Finish carpenters cupboards are ALWAYS better made than their customers using the same wood. When lawyers are in trouble with the law they ALWAYS prepare their cases more thoroughly. When last did you hear of an IRS auditor failing an income tax audit. Why do dentists children always have superb teeth. Why the surprise that REALTORS make more money on their own houses rather than their clients? It is their profession after all so surely they also do their own private jobs that bit better just like any other professional or tradesperson?
When you sold your propertys Jim did you get absolutely top dollar?
What makes a long term succesful realtor is despite him recieving 10% more for his propertys is if he consistently gets his clients 5% more than the average realtor for theirs when selling (or 5% less if buying) plus has the nous and experience to avoid hoo haas like the one mentioned in your next post.
I miss-spoke when I said there was “no study” – what I meant was there was no study of the study. They took one fact – Realtors homes sell for more and then interviewed a couple of brainless people and called and that was that. For all the other examples in the book TONS of study went into discovering why the intial fact was true. For the Realtor piece they did NOTHING.
JordanT is on the right path…. but it’s that there are a LOT of reasons why Realtors’ own homes may sell for more – INCLUDING that the initial study may be wrong. It could be that Realtors do more upgrading. It could be that we buy smarter and cheaper on the front end. It could be many reasons – but the #1 reason is we take our own advice.
Bad on Freakonomics for being so lazy on this point when it COULD have been a useful piece to sellers and agents IF they had really looked into with any effort.