Most real-estate agents still want a 6 percent cut. But a few clever
brokers have figured out how to sell homes cheaper, by setting up Web
offices.
Brokers do business through the computerized Multiple Listing Service
(MLS), where firms list the houses they have for sale. They work hard
for their customers and know their neighborhoods. The trouble is, they
trade with each other politely, at the cartel price. So a few clever
(impolite!) brokers figured out how to sell homes cheaper by setting up
Internet offices and letting you peep at MLS listings on your own.
(These listings also go onto Realtor.com, but with less information.) A
thousand flowers are starting to bloom:
Discount real-estate firms. If you're selling your house, a discounter
can save you a ton of money. These brokers offer all the usual services
and expertise. But instead of charging you 6 percent of the sales price,
they take 4 percent or even 3 percent. That's a saving of $7,000 to
$10,500 on a $350,000 house—a no-brainer, I'd say.
The granddaddy of the discounters is ZipRealty.com, in 10 states and the
District of Columbia. Zip's participating local brokers charge about 1
percent less than the going rate. To attract home buyers to its site,
Zip offers to rebate 20 percent of its commission. If you buy a $350,000
house, you'd get a $2,100 thank-you check.
The discounter Foxtons operates in New Jersey, southern Connecticut and
New York, charging home sellers 3 percent. Brokers from other firms
receive just 1 percent for finding a buyer. In pre-Internet days, they
might have blackballed Foxtons right out of business. No more. If their
clients find a Foxtons house they like on Realtor.com, the broker can't
escape showing it. CEO Van Davis says that outside brokers are
accounting for half his sales.
You can find discounters almost everywhere. Just enter the name of your
city or county into a Web search engine, along with "real-estate
broker," then "low commission," "3% commission" or "discount."
FSBO sites (pronounced "fiz-bo")—"for sale by owner." People selling
their own homes account for roughly 15 to 20 percent of sales. You'll
find pots of free how-to information on FSBO Web sites. For a fee, you
can buy a FOR SALE sign, an 800-number service for taking calls and a
listing on the FSBO's site, with pictures of your home. You can even buy
a listing on the MLS, so shoppers everywhere can find you. But buyers
have to call you directly. If you want a broker to bring you customers,
you'll have to offer a commission.
The FSBO sites offer different services at varying prices. A package at
ForSaleByOwner.com includes personal telephone consulting to guide you
through the sale. Owners.com is affiliated with Cendant (Century 21,
Coldwell Banker). If your house doesn't sell and you decide to switch to
certain of its brokers, you'll get a $1,000 rebate on the commission.
Owner.com (not affiliated with Owners.com) lists other FSBO sites.
Fee for service. These brokers offer a menu of services, each at its own
price. If you're selling your own house, you might want help with
paperwork after you've found a buyer, or you might want the broker to
show your house, or you might want an MLS listing. You buy only the
service you want. Two such franchises: HelpUSell.com and
Assist2Sell.com.
Referrals and rebates. These sites link home shoppers with real-estate
brokers. If you buy, the broker pays the site for the referral, which in
turn rebates part of that money to you. At Realestate.com, the rebate
ranges from $100 to $2,250, depending on the price of the house, and
comes in the form of a Home Depot or American Express gift card.
Bidding sites. At HomeGain.com, you describe the property you want to
sell or buy and ask brokers for proposals (including commission
charges). A new site, HungryAgents.com, encourages brokers to bid
aggressively for your business.
Unfortunately, some of you aren't allowed to use all these money-saving
services. Your state's self-interested real-estate brokers are driving
them out. Six states (Florida, Illinois, Iowa, Oklahoma, Texas and Utah)
now curtail companies that offer discounts, according to Inman Real
Estate News. Other states have stopped FSBO sites from helping you
market your home through the MLS. A dozen state real-estate commissions
are trying to regulate discounters out of existence. Kentucky bans
rebates entirely—but, in a strike for consumers—it's being sued by the
U.S. Department of Justice for restricting price competition. The
National Association of Realtors was planning to set new MLS rules to
let traditional brokers keep their listings off the discounters' sites.
The Justice Department stopped that, too.
The higher-priced brokers will keep up the fight for their cartel, but
the discounters have the wind at their backs, says Stephen Murray,
editor of the industry newsletter Real Trends. Today they're just 2
percent of the market, but could grow to 12 percent by 2010. Hey, this
is America—we're supposed to support price competition. That means
brokers, too.
Reporter Associate: Temma Ehrenfeld
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