Housing Rumble: Do You Need an Agent? (Day 6)
Welcome to the sixth and final day 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:
Day 1 (Thompson)
Day 2 (Healy)
Day 3 (Thompson)
Day 4 (Healy)
Day 5 (Thompson)
Healy, you get the last word.
From Greg Healy:
Commissions might be negotiable, but agents don't proactively tell this to unsuspecting sellers. After all, agents are salespeople and want sellers to sign listing agreements at the highest possible commission rate.
I would argue that the rise of the Internet has provided sellers and buyers with more real estate tools, resources and pricing data to successfully complete a real estate deal without the help of an agent. More than 84 percent of buyers, for example, use the Internet to search for a home.
As I noted previously, the average commission has gone from just over $9,000 in 2000 to nearly $14,000 in 2007—an increase that has easily outpaced the inflation rate. Sellers should not have to pay so much to sell a home, especially since the Internet is doing so much of the agent's work.
In his last post, Jay tries to infer that agents make deals successful. But where's the data or statistics to back up his claim? I've pointed out that studies from Northwestern and Stanford universities have each found that "for sale by owner" sellers are more successful than agent-represented sellers.
Not only were these sellers able to negotiate everything from the home's price to contractual terms, as well as find qualified buyers, they made more money going FSBO than if they went with an agent.
I also don't quite understand Jay's comparison of real estate agents to attorneys, as the latter is required to obtain an undergraduate degree and a degree from law school. That's seven years of school, compared to the couple weeks it takes to get a real estate license.
Agents like to drive fear into people in the hopes of getting people to use their services. The reality is that their services aren't needed. Selling real estate essentially involves three steps: pricing the home, marketing the home, and transferring title to the new owner.
Sites like ForSaleByOwner.com can handle the first two tasks. Agents can as well, but for 5 to 6 percent of a home's value. The third step—transferring title—is handled by an attorney or title company no matter if a seller uses a Realtor or goes uses a FSBO route.
The goal of any home selling experience is to maximize the money a seller puts in his/her pocket from selling the home. There's statistical evidence that FSBOs do indeed get more money.
Tomorrow, I will post a voting poll, and the readers will decide the winner.
Tags: real estate | housing market
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Reader Comments
Healy is wrong
If there was no need for a real estate professional, the profession would have long died and gone. It is as simple as that.
A professional MARKETS the property, not just a yard sign and wishful thinking. And. yes, homes sell at a higher price with a professional.
Professions Don't Rise By Accident
Ah, if all agents were good for is to be the database of homes for sale like forsalebyowner.com. Then, buyers could all yell "I saw the house first" and save themselves (or the owner, we never know which) 6%. Too bad it never works out that way except in anecdotal examples and grossly flawed studies like Freakonomics author Steven Levitt 's hack job at Northwestern.
A few facts which you don't need a study to grasp:
1. Most people simply stink at selling anything, especially their own home.
2. For Sale By Owner sites have never been able to specify exactly who saves the 6% when you cut out the agents. Is it the buyer or seller? Answer: whichever one they are addressing.
3. Even though the internet and other innovations have utterly devastated the livelihoods of travel agents, stock brokers and others, Mr Healy himself admits that commissions have risen over 50% since 2000. The market is efficient, Mr. Healy.
4.If selling homes is so easy, and presumably foreclosures are even more popular among buyers than regular homes, why do banks list their REO's with a a broker? Because they know what works and what doesn't. And a title firm and attorney can't sell an REO without brokerage.
4. As a matter of fact, every successful title company and real estate law firm (and mortgage company) has strong relationships with brokers and agents.
5. Every discount and gimmick "business model" like Foxtons and Iggy's house has flopped.
I have a skin in both games because I run a full service firm and a FSBO assistance firm. I have a front row seat to plenty of FSBOs who sabotoge their own deals left and right. Who is right for FSBO? About 5-10% of the market. The rest need a broker.
Its ALL about Protecting their Commission
Listening to these Realtors is an absolute JOKE!!!
Of course they disagree with everything said by Mr. Healy - They are trying to protect their best interest - The COMMISSION!
Lets see, I have so called "Skin" in both games also - And I will be perfectly honest - I was able to become a licensed Real Estate Agent by taking the required courses on-line and then taking the test. I did all the required courses in less than 15 hours, and easily passed the Test. Does that make me one of these so called EXPERTS at selling a home?? And to all you Sellers out there who were told by agents you have no idea how to negotiate - I NEVER ONCE was required to take a negotiations course to obtain a license. I am not sure how they have become experts??
I also LOVE the thought process that using an Agent gets the Seller 10-20% more on average of their final sales price! If that was true - WHY THE HECK would any buyer use an agent when he purchases a home?? Wouldn't he be paying 10%-20% more just to buy the home? I am sure if this was true - the general public would have figured this out by now - Thats why FSBO's are becoming more popular - Cut Out the middle man and save yourself the $$.
And to Mr.Faranda - Banks list their homes with a Broker because your ever popular lobbying group - The NAR - has lobbied lawmakers against letting Banks into the Real Estate Market. You cut out some of your main competition - what else is next??
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