Who gets higher real-estate prices, owners or agents?

agents

It’s time to take a few steps back, build up a head of steam and dive headfirst into our favorite descriptive data sets and reader questions. Here’s the latest Data Dive!

Owners vs. agents: Who sells it best?

Do for-sale-by-owner sellers do better than sellers who hire a real estate agent?

— Atul Rai in Wichita

Killer question! Agents definitely are winning in the marketplace: 90 percent of home sellers use an agent, according to the National Association of Realtors. Of the remainder, fewer than half are true for-sale-by-owner listings; most are sales between friends and family members.

Does that mean almost all of us are leaving tens of thousands of dollars on the table when we sell our homes, perhaps the highest-stakes financial transaction of our lives?

Apparently, yes!

When three economists built a mammoth database tracking more than 2.2 million real estate transactions from 2000 to 2019, they found that owners consistently beat agents on sales price.

Owners reeled in 1 to 4.3 percent more for similar properties than agents did, depending on the market. And that’s before you consider that owners also are saving up to 3 percent by not paying a commission to a listing agent.

All told, the economists calculate that owners saved around $20,000 on a typical home sale, which averaged around $280,000 during the period studied.

The economists — Lily Shen of Clemson University, and Chris Cunningham and Kristopher Gerardi of the Atlanta Fed — focused on three major markets (Minneapolis, Houston and Charlotte) where they could use the multiple listing service (MLS) to track the performance of 16,000 individual agents. They also scoured companies in each metro area to figure out which were full-service Realtors such as ReMax and Century 21 and which were “flat fee” brokers, who provide few services beyond listing a property on the MLS.

They found your choice of agent can have tremendous consequences. Switching from one of the worst (fifth percentile) listing agents to one of the best (95th percentile) would increase the sales price of your home by 15 to 20 percent. But only the very best agents were able to beat owners selling their own property.

In case you’re curious, the pattern among agents who represent buyers is similar to the pattern among selling agents: A top buying agent will negotiate a price 17 percent lower than one of their least-successful peers.

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