Home sellers in Madison, Wisconsin, in the period between 1998 and 2004, that sold their home using a real estate agent did not consistently get higher prices than those who didn’t. When you factor in the commission, for sale by owner sellers did better. How about them apples?

What stinks is that its likely not representative of the average because the Madison, Wisconsin for sale by owner websites are more popular than others in the nation, but it certainly points to a direction that the National Association of Realtors doesn’t want to go. The primary benefit that real estate agents offer is exposure – specifically a listing in the MLS database. As fewer prospective homebuyers rely on real estate agents and begin scouring for sale by owner, or other sources of homes for sale listing, the less value a realtor can provide.

What can a real estate agent do nowadays that will get you more for your home that you can’t do yourself? If you don’t know how to stage a home and need tips, watch some home flipping or home selling show on A&E. If you don’t know how to play people off each other and getting them to overpay, read a book by Machiavelli. Short of having the legal document templates handy, I honestly don’t think there’s much to offer outside of the exposure/MLS listing and this study backs that up.

What’s funny is that the National Association of Realtors claim that houses sold through MLS get a 16% premium over those not sold through MLS, which is really as fair a measure as the Madison, Wisconsin results when you think about it. Unless they sold identical homes at identical times, some with MLS and some without, there are so many disparate factors that the claim is meaningless. Plus, 16% is before the 6% commission, and 10% is probably getting close to how much error they had on that self-serving study.

If you want to read more, Freakonomics has a great writeup with additional reading material and the original article appeared on the New York Times.

Any real estate agents out there want to defend their commissions?

Two weekends ago a friend of mine in Baltimore was telling a group of us that a rowhome in Federal Hill, two houses down from his, had sold for a mind-boggling four hundred thousand dollars. (My mind actually boggled) He didn’t say that it was listed at four hundred, he said that it actually sold for four hundred, signed, sealed, delivered. Now, without context (other than the boggling), $400k doesn’t mean anything but in that area I think that’s easily an $80k-$100k premium over comparable home prices. Well my friend, always one to talk things up just a couple steps more than they really should be, let that stew before dropping that the sale included a $100k cashback offer. So, it was $400k with $100k cashback… which apparently, according to Stephen Dubner, is illegal.

It seems like a great deal for the buyer, you get an interest deductible loan of $100k from the lender, who doesn’t realize they’re offering an interest deductible loan, as long as the home appraises for the selling price. Neighbors may or may not be excited, depending on their plans, because it boosts the price of their home; and the seller sells the home (though they pay significantly more in tax, 25% more, but whatever). Win-win-win-lose (poor bank!).

The problem is that while the cashback transaction may seem illegal, how is it different than sellers kicking in for closing costs? Or a new plasma television? Or any number of various little kickbacks that happen every single day? In the comments, there’s debate about the legality since it happens all the time, but I’d imagine that banks would frown upon this if they knew.

Personally, I don’t think it should be illegal because the bank has to write the check. If the home isn’t worth $400k, don’t get a trigger happy appraiser and don’t writ the $400k check. If the buyer can get the extra $100k and the seller is willing to offer it, so be it.

Some more Freakonomics goodies about real estate stuff.

Now that everyone has overpaid for their homes, it’s time to learn how to combat the recurring reminder that you’ve overpaid: real estate tax time! They estimated that real estate tax collections are up like 35% the last four years and there’s little chance that those taxes will be rolled back, so the only two weapons left in your arsenal are to:

• Contest potential errors, and,
• Argue your case.

Unfortunately, I believe the artificial floor of your valuation is the price you paid for your home so you can never get it lower than that (it can’t possibly be worth less than what you paid for it, since you likely had a home appraiser come and value the home for a mortgage lender).

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Forbes produced another list of the best home renovations/improvements in terms of their resale value and I thought it would be interesting to compare this list to lists I’ve seen, and blogged about, in the past. With all of these I looked only at the National Average values, since that’s what I’ve always looked at, and tried to pair them up with comparable renovations in past lists. The data they used is from Remodeling magazine’s yearly assessment/survey/magic but one of the lists I used was from a handyman-type site and not a magazine about remodeling.

Overall, Remodeling Magazine makes it sound like a lot of the renovations you make hold a lot of its material and labor value whereas the handyman site doesn’t paint as rosy of a picture. I’m inclined to believe that Remodeling magazine is at least somewhat biased, knowing nothing about it except that it likely sells advertising space to businesses in the remodeling industry, so I’d mark down their resale values a little bit. From a buyer’s perspective, which I was a year ago, I do know that more bedrooms and bathrooms the better (to a point, I’m only one person… I don’t need 8 bathrooms, I don’t even have 8 friends) but a renovated home office means nothing to me. So again, as I approached the other list, I believe the relative rankings of renovation value retention is likely correct though the actual values are subject to a multitude of factors a simple study can’t capture.

The comparative table is available after the jump. (oh, and if you’re going to replace your windows, you might be able to get a tax credit for it because of the latest energy bill)

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This is a guest blogging post by Julie Ali.

It makes me laugh at all the articles in magazines, newspapers and on the Internet regarding how to make money on that last financial frontier – the ordinary citizen’s entry into rental house investment. These articles and the books that joyfully proclaim the good news about money for nothing (or almost nothing), suggest that anyone can make money by going out, buying a house, renovating it and renting it out to the multitudes of renters that are scouring the market for affordable housing. Who writes these articles anyway? And if they have made such a surplus of money and secured their own financial freedom, in this way, then why are they writing articles and books to make yet more money? In addition, if profiting from the rental house market were that easy, sort of like collecting eggs from quiescent broody chickens on a farm, then why isn’t every intelligent citizen putting all their financial eggs in the rental house basket?

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I think the “Ten Things (Someone) Won’t Tell You” series in Smart Money is great and some of them are available online for you to read (in case you don’t get a subscription). In this particular case, the (Someone) is a Real Estate broker/agent and some of the information included in the article is a must read if you’re going to be buying or selling a home.

Here is a summary of the useful nuggets of info:

• Success rate of open houses are 2%, according to the National Association of Realtors. Smart Money warns that agents like open houses because it can get them some new clients.
• Agent fees are negotiable. There are a lot of agents and now that there’s been a bit of a slowdown (just like when things were heating up), there’s more competition. Lots of agents hit the market whenever the housing boom start and now they need work.
• Your agent might not be telling you about every offer. They’re supposed to but sometimes they don’t, which is illegal, but it still happens so demand that they bring every offer to you.
• Remember seller agents work for the seller and must divulge all information, don’t overplay your hand and reveal too much.
• Agents know nothing about zoning so don’t take their advice as to what you could do to your future home.
• Agents are also not lawyers, even if they pretend to act like one. Be careful when you enter into any agreements such as rent backs – your real estate agent isn’t a lawyer and you could get screwed if things aren’t worded properly.

“A rising tide lifts all boats, ” was a term frequently used by President John F. Kennedy and in the housing boom, it’s no wonder that a lot of real estate related professions have enjoyed great prosperity, including real estate appraisers. Whenever there’s any sort of real estate transaction, an appraiser will be needed to assess the value of the home. The bank calls on one whenever someone wants a mortgage or a refinance or a home equity line of credit, so that they have confidence that the home is valued enough to be collateral for the loan. The government calls on one when it’s time to reassess tax assessments or when it wants to buy property. When I bought my house, an appraiser was used to justify the price I was paying over the asking price.

Here are the common duties of a real estate appraiser:

• Collect and analyze data from multiple sources, everything from blueprints to public records
• Stay current on government regulations, zoning laws and appraisal standards
• Understand construction and be familiar with building materials
• Know the marketplace, the local area and the trends affecting it
• Inspect properties and produce written reports.

If you fancy being an appraiser, expect five years before you can start earning the big bucks. The first two will be spent in courses and on-the-job training before you take your state licensing or certification examinations. Getting designations will take another two or three years. Designations refer to becoming a designated member of a regional/national/state recognized appraisal or assessor organization or association, which is more important for states without mandatory licenses. (more info at the US. Dept. of Labor)

And how much can you pull in?

Preliminary results from a nationwide survey conducted this year by the Appraisal Institute indicate that 34 percent of appraisers had gross incomes of $100,000 or more in 2003; of those, 7 percent earned between $150,000 and $200,000 and 9 percent earned $200,000 or more. Another 13 percent earned between $80,000 and $100,000.

via CNN Money.

It does appear that the real estate market has started to slow down, as expected, so it comes as no surprise that cnn/money has an article listing six tips for all you sellers out there. One thing I think deserves mentioning is that if you want to be successful selling your property for as much as possible, you should’ve been doing all these tips in the sizzling hot market anyway.

Tip 1. Improve Curb Appeal

These are the first impressions of your home, mow your lawn, paint your exterior if it needs it, trim the bushes, and move any trash cans or other debris away. Remember that many times people will be surfing a real estate page and one of the only pieces of physical evidence they see at that point is the photo of the front of your house.

Tip 2. Clean Up and Rearrange Inside

They suggest that you remove your own personal touches so you should move pictures, trophies, diplomas, and anything that makes the home “yours” and not “theirs.” If you can handle it, rearrange or remove some of your furniture so there is more open space, which in turn, will make your place seem bigger. While this is a little harder if you’re still living there, the extra hard work could pay off. If you have already moved, rent some furniture to put in the rooms so it isn’t just an empty space. (Their Tip #3). Also, consider doing a little work such as touching up some of the paint in some rooms because it’ll give it a much better feel.

Tip 4. Smell Test

Own a pet? You might want to consider finding him or her a temporary home while you’re selling. Obviously, clean out all the trash and refrain from smoking. You might want to consider repainting rooms in which you have smoked (if you do) to mask the smell of smoke, though that will take a lot of coats of paint.

Tip 5. Pick A Good Realtor

In a sellers market you can afford to have a weak Realtor, but not now. They suggest reading reviews on Homethinking.com and Hungryagents.com to find the best one.

If you’re thinking about some major remodeling jobs to increase the potential selling price of your home, you may be interested to read about the Best Home Value Renovations and an update to the Best Home Value Renovations.