Home Sellers Save Money by Using Reduced-Rate Brokers
San Francisco Chronicle, Wednesday, March 6, 1996REALTY CHECK Barbara Hass
Businesses offer full service or a la carte menu
Bill Ganci loves to buy fixer-uppers, fix them up and
put them on the market.
Pick From the Menu
Choose Your Service
Realtors' Reaction
He likes to play a hands-on role in the selling phase, too: He would
rather do some work himself than pay a real estate agent a typical 6
percent commission.
Ganci, a Rockridge sales repre-sentative for a communications
company, found a brokerage to suit his needs.
Realty Advocates of Oakland charges him a flat fee for such
services
as putting a home on the Multiple Listing Service and setting
out lockboxes, while Ganci hosts open houses, negotiates contracts and
does other tasks. In the last 16 months, he has sold three rehabbed
homes with Realty Advocates' help.
While most real estate agents charge a commission ranging from 5
percent to 8 percent, many sellers in today's market can't pay those
prices and still break even on their homes. So a small but growing number
of brokerages are offering real estate services for reduced fees.
"It's growing in popularity because the fact is people don't have
the same kind of equity that they did before the late '8Os," says Hal
Feiger, a broker/partner in Realty Advocates.
"They can't afford to pay 6 percent - no way they can afford that.
They find (an office that charges) 4 percent or really try to do it
themselves one way or another."
Some of these companies have advertised reduced commissions for
10 years, and others have just opened their doors. Most of them are small
enterprises consisting of a broker and perhaps an agent or two.
"What makes it possible for independent brokers like myself to
offer reduced-rate services is that we are little guys - we don't have
tremendous overhead," says George Devine, San Francisco real estate broker
and author of "For Sale by Owner; How to Sell Your House in California -
on Your Own or With Help From an Agent."
Some brokers say large real estate firms also don't want the
paperwork and possible liability involved in this kind of work.
While reduced-fee brokers are becoming more common, the real estate
field is still conservative, according to Feiger.
"You have discount stockbrokers," he says, "but you (still) have
very little of that occurring in the real estate industry, unfortunately."
Reduced-rate brokerages offer a variety of options such as full
service for a lower-than-usual commission
; a menu of individual services
for a flat fee; and an advance-fee agreement in which a broker performs
certain guaranteed activities or else returns part of the fee.
"I compare it to a gas station: full serve, mini serve or self
serve," Devine says. "Consumers always benefit from having choices."
Surveys show that home sellers often don't realize their choices.
Many who pay a typical 6 percent commission think that fee is legally
regulated, according to a study by the Consumer Federation of America.
"That may be a standard, but it's not fixed in law," says Les
Bettencourt, San Francisco district office manager for the California
Department of Real Estate. "Typically you might see 6 percent on
residential sales, but commissions are negotiable."
Realty Advocates offers two options to sellers: full service for
a 4 percent commission or for-sale-by-owner assistance
.
With full service, "we do what any other good broker ought to do:
Multiple Listing Service (often called MLS, an association of real estate
brokers that share listings with each other), open houses, brokers' tours,
advertising, the whole nine yards," says Felger.
"We charge 4 percent commission instead of the typical 6 percent.
We think 6 percent is too high considering what prices are like in the
Bay Area."
Realty Advocates also offers "sort of an a la carte menu where they
(sellers and buyers) can choose what they want," Feiger says.
"If they want MLS exposure, we can give them that and they
can still represent themselves. If they found the property and want us
to represent them, we can work on another fee.
"We literally save people thousands of dollars whether they
use full service or if they want to do it more themselves," Feiger says.
Ganci paid the brokerage $475 as a flat fee on each house.
In exchange, Realty Advocates' services included running comps (a list of
similar properties) to help him price his house; listing his properties
with the MLS; setting up brokers open houses; and putting out lockboxes
and for-sale signs.
"They also reviewed sales contracts and helped out with some
advice," says Ganci. "I actually hosted the brokers open houses. I printed
up my own flyers and hosted my own open houses (for the public) on Sunday,
and performed all negotiations and contract review.
Ganci figures he saved more than $19,000 on the three sales
combined.
"I had the time and ability and desire to sell my own house
and save a significant amount of money in the process," he says. "What
I have done I would not recommend to everybody because they may not have
the knowledge of the marketplace and sales background I do - and the
knowledge of contractual type of negotiations. But I would recommend it
to anybody who has those abilities."
John Barry, broker at John Barry Realty in San Francisco,
offers a similar menu of services, from full representation to hourly
consulting.
"As a broker, it makes sense," he says. "I'm glad to get paid
for five hours if that's all a seller needs. In nonalternative
(brokerages), you pay for a full course meal whether you want it or not."
In most real estate deals, the agent representing the seller splits the
typical 6 percent commission with the buyer's agent. Many agents who
regularly take a lesser commission make sure that the buyer's
representative still receives the usual fee.
"The broker who brings in a buyer is doing hard work,"
says Devine. "There has to be a commission there that is large enough
to motivate them. I would not think of that as being a place to save money."
Feiger says that his acceptance of reduced fees hasn't caused
problems in his dealings with other real estate professionals.
"They show and sell our listings," he says. "Occasionally
a broker says, 'Why do you charge less?' - but when you (the other
brokers) have a buyer you show them the best property you can."
Find the right discount agent
In his book "For Sale by Owner; How to Sell Your House in California -
on Your Own or With Help From an Agent," San Francisco real estate
broker George Devine outlines ways to sell your house without paying
a 5 percent to 8 percent commission. |
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