Housing Rumble: Do You Need an Agent? (Day 4)
Welcome to Day 4 of the Home Front's new Housing Rumble feature, a regular series that will match up opposing sides of an issue in an online debate format and let readers decide the winner.
The current Rumble features Jay Thompson, a blogger and real estate broker in Phoenix, and Greg Healy, vice president of operations at ForSaleByOwner.com—a Web-based company that markets the homes of independent sellers.
The subject: "Do you need a real estate agent to sell your home?"
Here's a recap of the action so far, if you're just tuning in:
Healy, you're up:
From Greg Healy, vice president of operations at ForSaleByOwner.com:
If Jay wants to argue that the average commission is 5.12% and not 6%, that's fine by me, because paying more than $15,000 in commission to sell a $300,000 home is too much. There's been a dramatic rise in commission costs over the past 10 years because of huge home price increases, even with recent price decreases.
For example, the average price for a home in 2000 was $178,500 and in 2007 it was $267,700—a whopping 50 percent increase. Because of this, the average commission increased dramatically, going from $9,300 to $14,000. Inflation and the consumer price index haven't grown anywhere near that pace.
It doesn't matter to the seller who gets the commission and how it's split between the listing and selling agents. The bottom line is that sellers are losing a significant chunk of home value—for work they can do themselves.
Jay notes that many ForSaleByOwner.com customers are willing to pay a commission if an agent brings them a buyer. He is referring to a package we offer that puts a home on the MLS and Realtor.com, and people want that additional exposure. It's true that they might have to pay a 2.5 percent commission, but only if a buyer is working with an agent. All homeowners should have the right to choose whether they are willing to pay a commission.
While we provide sellers with such options, agents don't. Agents have most clients sign an "exclusive listing agreement" that binds them to paying a commission, no matter how a buyer is found. Imagine writing an agent a $16,000 commission check when you, the seller, mentioned at the monthly PTA meeting that your home is for sale and that landed you a buyer. What did the agent do to earn that $16,000?
It's an important topic, and perhaps Jay can explain why agents don't allow their clients to sell through an agent and simultaneously sell "for sale by owner." It isn't fair and is another reason to skip the agent.
On the other side of the transaction, homebuyers don't need agents either, and many don't want to use an agent because they want to deal directly with homeowners. A real estate attorney can handle all of the contracts needed to complete a sale. These buyers can get a better deal on homes, as they can negotiate the commission savings into a lower offer and sales price.
Tomorrow, it's back to you, Thompson.
Tags: real estate | housing market
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Reader Comments
Double Talk
"These buyers can get a better deal on homes, as they can negotiate the commission savings into a lower offer and sales price."
Greg you say that you are saving the sellers the whole commission then turn around in your own words and say that the BUYER can negotiate a lower price...so who is really saving money?
Seller Safety
So how does the FSBO know if the stranger calling to see their home is:
1. A serious qualified buyer?
2. Do they know the ramifications of "non" disclosure
3. What is the price if a stranger enters the home under the pretense of wanting to "look at the home" and harms your family. What is the dollar amount on that?
The big argument for FSBO's always is commission- to me there is so much more at stake, and as a home seller prior to becoming an agent, paying a Realtor commission, was the last thing I thought of, I valued all the details that my agent took care.
Market Conditions
Despite the compelling argument of saving money, the real equation is the current market conditions. When houses were selling in days with multiple offers, a routine real estate transaction could be performed without an agent. But when normal market conditions occur then there is marketing skill needed. That is after all what is being paid for. But beware, most realtors are just doing the minimal marketing. Find an agent that really knows how to market a house using all the high tech and low tech methods available, and it will be well worth it.
Frankly, I think realtors are their own worst enemies, because there are so many that only do the minimal amount of work. These folks should be drummed out of the business. But like anything else, once you have found good people to work with, they are worth more than you are paying them!
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