The looming threat of the DIY real estate sales person (i.e. the owner)
Some of my best friends are Realtors. I just might be less than happy if my daughter were to marry one.
Had to share a link with y’all. This came to my attention, because I’ve found myself in the very interesting place of taking on a real estate sale “by owner.”
Selling something the owner owns.
Without the help of a Realtor.
In doing so, I have learned that the current real estate sales model — an industry dominated by the Realtors — may be the next to experience significant digital disruption.
First the travel industry. Then news. And on through music and radio and movies (not to mention movie theaters, killed by VHS and DVD and phones with movies stuffed inside).
As I embarked on this adventure, I found myself sharing the plan. With a lot of people. And everyone with whom I spoke is disenchanted with the longtime real estate sales model that carves 6 or 7 percent from the closing price. That’s $12K on a $200K house, but $36K on a house that sells for 3x? The only difference? Sales price. The buyer and seller and agents all do the same dog and pony, offer, counter-offer, contingencies, yada yada.
So, what makes one deal worth $12K (as if), and the other worth $36K (WTF, right?)
What, in fact, makes any deal worth anywhere near that amount of money? As entry fees to carnival sideshows go. real estate commissions top them all. It’s an exclusive club of wand-wielding sorcerers, uniquely equipped to … meet humans, listen to humans, drive humans, and show humans your property.
Oh, thank you, real estate industry. I couldn’t do THAT, MYSELF. Oh, really?
After decades of charging us to entrust the sale of our assets to them (without which assets, they would have nothing to sell), we now have numerous digital upstart startups providing us a public and inexpensive entry to the inner sanctum. It’s called fixed-fee listing.
With the company I chose, I paid $95 for a listing on the Multiple Listing Service. Another $100 got me signs and some extra photos on my listing web site. If we sell the home for its listed price of $575,000, I’ll have saved $17,000 in listing agent fees by the time we find a buyer, assuming the buyer comes to us through the efforts of an agent working to show them homes. Twice that amount saved if we find the buyer ourselves and handle all the closing without professional help.
A week into this, we have had three serious looks and have two more scheduled. It’s a good property. I’m confident we will find a buyer, in short order. Most of the work will be done then by the escrow company. They get their fees, but it’s nowhere near $17,000, the listing-agent’s slice, divided with his or her broker.
Most people I talk with are fairly smart, and figure that they could gather and prepare the details of a listing. And if a fixed-fee real estate agent offers a much lower path to placing my property on the MLS, and by extension, numerous real estate web sites (Zillow, Realtor, Redfin etc.), why would I not tilt that way? The seller is always involved in negotiating a contract price, so why the need for an intermediary?
Circumstances come to mind in which an agent could provide huge value. Say you and your family have to move, quickly, to take a new job in a distant city. You need to sell your house, but can’t wait around to do it yourself. Hire an agent. Get on with it.
But if it’s a local sale, and if (as I do, in semi-retirement) you have the time, and even better, if you have moved from the property into another house four doors away, well, what’s not to love about that scenario for a DIY deal?
In short, most of us have the smarts and digital tools to FSBO. So? The real estate industry apparently views FSBO types as some sort of unwashable caste, traitors to the established order, heathens at the castle walls.
An escrow agent told me that many of traditional agencies — and their agents — will not show FSBO listings to people who are looking for a home, even though the home appears on the multiple listing service.
So, if you are looking for a home with the help of an agent mining the MLS, you don’t see everything, because your agent is pissed that some sellers chose not to pay $18,000 for someone to spend an hour getting photos, and another pulling comps, and a third entering home data for the MLS.
I know there is more to the job than that. Even so, at a full day or two (as if anyone could take that long), the listing agent could walk away from your property after it pops to the MLS, and pocket $1,000 an hour after some other agent actually sells your house. But even that person gets a share of the other 3%, for what could be just one showing. Pretty sweet.
As the seller, you pay handsomely … only after the home changes hands. Who has incentive to make that happen quickly? The sales agent. Pushing or defending a higher price can only delay a quick close (and commission). So they feel strong financial pressure to close the deal, on the seller’s back (buyers pay none of the commission), by urging price reduction or concessions to the potential buyer.
It’s got to be threatening to legacy Realtors, for sellers increasingly to realize they can list their home and negotiate sales terms themselves — and save a ton of money.
To find out how industries once familiar and healthy have gone belly-up before, just talk with a newspaper publisher from the 1990s, or a travel agency owner, or someone who once sold books and CDs from a four-wall store.
Those were the days.