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2 Things Your Real Estate Agent Won’t Tell You

By Jordan Wathen – Mar 16, 2014 at 1:46PM

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See why your real estate agent may be costing you money.

Photo: TaxFix

"I don't mind leaving thousands of dollars on the table."

Your real estate agent won't ever utter the words above -- at least not around you -- but they're true. A real estate agent doesn't always have your best interests in heart.

The book Freakonomics uncovered agent-listed homes typically sell faster than homes listed for sale by owner, but they sell at lower prices. The reason, the book suggests, is selling a home cheap has little impact on the brokers.

At a 6% commission rate, selling a home for $10,000 less than market value only costs brokers $600. It costs the sellers much more.

A study from the National Bureau of Economic Research backed up the Freakonomics claim.

"Our central finding is that a seller's use of a broker reduces the selling price of the typical home by 5.9 to 7.7 percent."

You can do the heavy lifting
Where a real estate agent can add value is in the pricing of your home. As professionals, they should have a better feel for pricing in your area.

But real estate is largely valued on a case-by-case basis. And even then, you have access to the same data that a professional does.

Zillow (NASDAQ: Z) has done a lot to make home sales more transparent. Zillow's Recent Home Sales feature allows you to see recently sold homes in your neighborhood, complete with specifications, sales prices, and addresses.

This allows you to compare your home to similar bedroom and bathroom configurations to determine a reasonable price per square foot. From there, it's easy to compute a reasonable price range for your home. In addition, the site keeps pictures in its database, allowing you to adjust for things like renovations or remodeling.

So the next time a broker suggests they can help you price your home, keep this article in mind. Brokers have an incentive to sell your home at a below-market price. And, thanks to free online tools, they have little informational power over those who choose the for-sale-by-owner route. 

Jordan Wathen has no position in any stocks mentioned. The Motley Fool recommends Zillow. The Motley Fool owns shares of Zillow. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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