Last week, the New York Times ran an article called, “The Last Stand of the 6-Percenters?”, which discussed changes in the real estate market, specifically, how homes are sold.
In the future, everyone wonders, will sellers use “traditional” real estate agents – those who charge five (or six, according to the article) percent commission? (Remember, the five percent is split between seller’s agent and buyer’s agent.)
Or, will more sellers go the “non-traditional” route – use craigslist, or advertise online, or use a discount brokerage (like ZipRealty), or use another firm, such as Redfin, which advertises your listing online, but does little beyond that?
What about buyers? Will buyers go the direct route, finding properties online, and visiting homes on their own, and negotiate prices with sellers, face to face?
I don’t know. Actually, I know, but I’m not going to tell.
Appraiser extraordinaire Jonathan J. Miller has his own opinion on the subject:
I find that one of the weaker arguments to the new real estate models has been the idea of cost savings. Despite the near monopoly of listings through traditional MLS systems, there is the assumption that its an even playing field.
In other words, users of these discount brokers assume that the property gets exposed equally whether its a Foxtons listing (remember Your Homes Direct?), a Redfin listing or a full service listing, when in fact, I would speculate that it does not.
More eyeballs on a property, especially broker eyeballs, yield a higher chance for a higher price or simply a sale. In other words, a seller may be saving costs, but they could be working off a lower base (sales price) number because of the lower exposure.
The cost savings seems to be more of a potential future benefit than at present and its not really comparing apples with apples (in theory it is, but not in practice). The MLS system is proprietary.
That’s a pretty important point. If you’re a seller, you want MORE eyeballs, not less. By selling on craigslist, alone, you’re limiting your exposure, immensely. Of course, you may be doing it that way, for a reason (’cause you’re crazy?), but if you want the highest price possible, you need to find as many buyers as possible. If you decide to go the FSBO route, you’ll have to submit your property all over the place.
You might say, well, that wouldn’t be necessary if the local MLS let me put my listing in. I don’t know about that. Let me think about it. I’m not so sure they should be forced to – I mean, it’s a private company, shouldn’t they be able to do whatever they want?
I can’t imagine how it would work, even if you could put your FSBO into MLS. Hmmm.
Sometimes I think it makes sense for sellers to sell on their own. Sometimes I think it’s crazy (most of the time, I think it’s crazy). Sometimes, I think buyers should buy on their own. Sometimes (more than half the time) I think it’s crazy. If I was a buyer, of course I’d use an agent, because the commission is paid for by the seller. Why wouldn’t I?
If you’re a seller, and going the FSBO route, you are severely limiting your exposure. In a slower market, where buyers are scarce, this could hurt you.
What I think you should consider is this: if you go the FSBO route, you might have to accept a lower price, because you are exposed to fewer eager and interested buyers.
If you do end up getting a lower price, will that lower price still be above what you would have received, had you used an agent, and paid out six percent?
(Are you assuming you’ll sell directly to a buyer, or will your buyer have an agent? If your buyer has an agent, the buyer will expect that you are going to be paying the commission. Therefore, as seller, you’ll only be saving 2.5-3%, not 5-6%. You can tell the buyer that he or she will have to pay the commission, but if you do, expect the buyer’s offer to come in lower.)
More: New Brokerage Models Flourish (NAR Needs Redfinâ€™s PR Firm) – By Jonathan J. Miller, Matrix