Wednesday, November 10, 2010

Do Real Estate Agents Get You Higher Prices?

Not according to this study by Aviv Nevo at Northwestern and François Ortalo-Magné at Wisconsin. They compared two types of sales in Madison, Wisconsin - ones using real estate agents and ones completed through FSOB Madison. Sellers represented by real estate agents did not realize higher prices; in fact, the prices were actually a bit lower. And this is before the commission is paid.

The one apparent benefit of using a real estate agent? Homes sold through agents tended to sell faster.


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  2. This is an example of incentive conflict and was covered in the book Freakonomics. The principal (i.e. the seller) wants the agent to work on her behalf, but the agent will operate self-interestedly and make a sale as quickly as possible to earn a commission.

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