One of the great rip-offs of all time has been what realtors charge to sell your house.
More than 30 years ago they used to get 4-6% for selling a home that might cost $50,000. Today, the average home in a large city is around $400,000 and they’re charging more or less the same rate.
Pocketing $20,000 for selling your home! What, precisely, do they do to earn that obscenely extravagant fee? List it in the paper, ya, and … show it to a few people … ya, and … write-up a contract or kick it aside as unsaleable.
I remember reading a Freakenomics book a few years ago that said that the only value of a real estate agent is if he gets you at least the asking price. They’re argument, as I remember it, is that if you list your house for $500,000 a realtor would be more than happy to talk you into accepting $450,000 because what does he lose? Just 5% of $50,000 whereas the owner loses the $50,000 + the fee.
There may be good news in Canada on this. The federal Competition Bureau, in a landmark investigation, has concluded the Canadian Real Estate Association has anti-competitive rules and must change its ways, according to this article in the Toronto the Star.
Details of a settlement have yet to be decided, but the bureau’s findings are expected to have a profound impact on the real estate industry – by permitting more innovative discount brokers into the market while allowing sellers to list their properties less expensively on the Multiple Listing Service.
Stay tuned. The decades of the Great Real Estate Rip-off may soon be over.