The best evidence that Realtors are RIDICULOUSLY overpriced

Whenever I hear advertisements, I wonder what in the heck they are broadcasting for. I now have some commercials that make me change the station. It seems like commercials used to be more about introducing new products. I guess there are still a few that do that today, but I am getting sick of the ones that tell me I need something.

The ones that bother me the most are the new real estate ads. The power company doesn’t heavily advertise, they know that we need their service and they provide a good value. You don’t here a lot of ads for gasoline. If you have to advertise that much for a service that everyone knows about, what you offer as far as service does not coincide with what you are charging.

Real estate agents were much more valuable 25 years ago. They were the information holders, the only people with access to the MLS. They held the information on what had sold lately and what was for sale. Without them, your main information source was the classifieds and rumors.

Now the internet has spread their information far and wide. Do you want to know what houses have sold for? Use Zillow. The level of expertise of most realtors is not commiserate to their salaries. I remember one ad in which they said you need a realtor, and that being your own realtor would be like having a job for a month. If you have a house that costs $200,000, the commission will come out to $12,000. That is pretty decent pay for one month’s work.

I was just reading freakonomics (picked up a copy at a garage sale). It talked about the difference between how a realtor treats their own house and how they treat the house of their client. They are more willing to hold out for more money on their own houses, and it is based on their cost benefit analysis. If they can sell your house for $190,000 in half the time it takes for them to sell your house for $200,000, they make $2,850 compared to $3,000. 150 bucks is not much extra dough to them, but they just burnt through a good portion of your profit. A lot of the realtors I know are not that intelligent. They aren’t worth that much cash for not much work. The commission is not set in stone. In Australia, commissions go from 2-4%. The National Association of realtors would have you believe that the 6% is sacred.

The other thing that makes real estate agents worth less is the law of supply and demand. During the last three years, half of the housewives in the country became realtors. The mortgage market is in disarray, further reducing the amount of available sales. When you have that many realtors trying to represent fewer sales, you have a lot of negotiating power. It is crazy to simply agree to the 6% without looking at other alternatives. Real estate agents realize this and are now starting to offer reduced fee services. They can’t stay competitive in their old business model, don’t let them take you for a trip. You can have an appraiser come by for $200. The information that the real estate agents sell at so high a price is available on google for the cost of a few hours.

If you want to see how much the real estate industry has your interests, look at the books written by their chief economist, David Lereah. In 2005, he put out Are You Missing the Real Estate Boom?: Why Home Values and Other Real Estate Investments Will Climb Through The End of The Decade—And How to Profit From Them. In 2006, he released Why the Real Estate Boom Will Not Bust—And How You Can Profit from It, which is pretty much the same book retitled. He is either a complete fool, or his chief loyalty is to his employer, and his employer wants him to keep those properties changing hands, with a 6% cut to the NAR every time. I wonder how people who took advice from a representative of the NAR are doing right now?

Just my thoughts on an industries that think they are so necessary that they have to air frequent commercials reminding us exactly how necessary they are.


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