Does The Real Estate Transaction Scare You?

In the current issue of Mcleans magazine, columnist Steve Maich claims that using a REALTOR® to buy or sell a property makes no economic sense and the only reason consumers do so is out of fear. His claim is based on the results of a study (a U.S. one at that) inwhich 680 home sales were reviewed from 1980 to 2005. The point of this study was apparently to determine if using a REALTOR® resulted in a home selling for more money. The homes used in this research were hardly a good representative sampling as they were all homes located on the campus of Stanford University. The average commission rate of the properties reviewed was 6% and equated to $34,000 U.S. In working the numbers backwards this results in an average selling price of $566,700. Not many consumers that I know of are in the market for or have ever purchased a half a million dollar home on a university campus so one might argue that this is hardly a good representative sampling.
The conclusion of this article, based on the somewhat questionnable reserach is that consumers use a REALTOR® out of fear. The article fails to explain the exact nature of this fear so one can only surmise that consumers are just fearful of any or all aspects of their particular real estate purchase or sale going wrong and for good reason. Due to various circumstances, real estate transactions continue to become more complex. Whether it is due to zoning, financing, environmental, insurance or other issues that are constantly changing, successfully navigating one's way through a real estate purchase or sale is not as easy as it once was. In addition is the matter of price. As both a Broker and a Market Value Appraiser I have seen numerous instances where buyers have purchased a home privately and in many case for a far higher price than fair market value. This stems from two fundamental reasons. First, most buyers tend to believe that with no REALTORS® involved there is no commission being paid by the seller so they in turn must be getting a "good deal" as a result of this perceived saving. Secondly, without the use and expertise of a REALTOR® the buyer has no access to comparable market information that would help them to ascertain whether the seller's asking price is relevent to market conditions or not.
Contrary to what consumers might believe real estate commissions are negotiable. What you ultimately pay should be commensurate with the knowledge, skill and service that the particular REALTOR® you select renders. If you wish to read the Mclean's article in full, click on the link below.

http://www.macleans.ca/business/companies/article.jsp?content=20080305_95609_95609