Less Is More
Full-commission real estate agents say they're worth their fancy price. A new study begs to differ.
(MONEY Magazine) – Traditional real estate agents--those charging a full 6% or 7% commission--are more expensive than discount competitors. But they're worth it because they can get you a better price when you sell. Right?
Maybe not, say Abdullah Yavas and Ron Rutherford, finance professors at Penn State and the University of Texas at San Antonio, respectively. They've just completed the first major study on the issue in years--and have given MONEY a peek at their preliminary findings.
The two analyzed 55,000 Texas home sales in 2002 and found that homes sold by discounters fetched 1.7% less than comparable properties sold by full-commission agents. But since the typical discounters charged 4%, their clients still came out 0.3% ahead. On a $350,000 sale, that equals $1,050 saved.
Why the difference in sale price? Yavas doesn't believe it's because full-commission brokers are better salespeople. He blames boycotting, which is when full-price agents refuse to show homes listed by discounters. This spring the U.S. Justice Department has been investigating the realty business for that and other alleged abuses in the field. --JON BIRGER