Day 3 of the U.S. News & World Report “Housing Rumble” debate has been posted.
On Day 2 my opponent in the debate, Greg Healy, Vice President of Operations at ForSalebyOwner.com, posted his first “volley”.
Greg’s post was primarily (and not surprisingly) focused on the “6% Commission”, which is an erroneous assumption. First, all commissions are negotiable. Factually, the national average commission is around 5.1%. That’s an average, so of course in some places real estate commissions are typically higher, and in some places they are lower than 5.1%.
Then of course there is the common misconception that of the mystical 6%, all of it goes to the listing agent/broker. Try half that, at best.
My debate posts are limited to 400 words, which is probably a good thing as I could have written a War and Peace length tome in rebuttal to Greg’s post. There are several other points I wanted to make, but there wasn’t enough space available.
A response from Greg is due tomorrow, and I’ll have one more shot to fire on Friday.
Thanks to all who have expressed support here, elsewhere, and on the U.S.News & World Report blog!
Debate Posts:
Day 1 – Thompson
Day 2 – Healy
Day 3 – Thompson
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{ 18 comments… read them below or add one }
Michael 07.16.08 at 5:30 pm
It’s simple really.
Old lawyers adage:
“A person who represents himself (in real estate) has a fool for a client”.
Kick some fanny Jay !!
Mike 07.16.08 at 11:29 pm
What’s the going rate in Phoenix? I notice 6% seems to be the standard rate all across the country. I read on a website about Boston Condos that the standard rate there is 5%, and heading towads 4%…… however real estate outside of the city are usually around 6%
carolyn 07.17.08 at 7:59 am
Congratulations Jay! You won!
Here’s some ammo…
Heally….”Is an agent needed to put a home on the MLS? No. Websites like ForSaleByOwner.com have access to put listings on the MLS.”
…. Ask Healy if he is a Realtor, the answer would need to be yes for him to provide this service or at least he needs to employ an agent or something like that. You win, you do need an agent to sell your home even on his FSBO site.
Ask if the reps who go meet the homeowners to sign them up on their FSBO site are realtors.
Is he sending realtors in the homes? (I’m curious)
Some FSBO sites tend to be a “cloak” for realtors. They offer a sell it yourself plan because while some are lucky and have success selling their home themselves, the odds are in the agents favor that the FSBO homeowner will fail. When they do fail, the FSBO site will come to the rescue and put them in the mls.
Now the owner is paying the cost of the initial advertising on the FSBO site to try to sell it himself and 3% because he ended up in the mls and what the FSBO site charged him to put him the mls. “cloaked’ fees all over the place probably add up to the average or close to what you would pay a listing agent.
The fact that these sites have no way to prequal buyers who want to see the home is a HUGE advantage of realtors.
Good luck!
Go JaaAy, Go JaaAy!
carolyn 07.17.08 at 8:08 am
..by the way I’ve assumed the odds are in the agents favor, for odvious reasons.
Tucson Michael 07.17.08 at 10:11 am
Ii think the numbers tell the truth somewhere around 90-95% of FSBO’s eventually end up listing the property for sale with an agent if it was so “easy” to sell your own home.
Cedar City Utah 07.17.08 at 11:15 am
Ya he who represents himself has a fool for a client. I love that comment because it is almost verbatim what I was thinking and about to say.
Jay - The Phoenix Real Estate Guy 07.17.08 at 12:23 pm
My opponents latest rebuttal has been posted:
http://www.usnews.com/blogs/th.....day-4.html
< < sigh >> I wish I had more than 400 words… My next (and final) post in the debate will be up tomorrow.
Ken in Elgin 07.17.08 at 2:21 pm
I am so SICK of people quoting the “6% standard”. That is so outdated for most areas and the average proves it. If you want to use a “standard” (which there by no means is one) at least use the average.
Ken in Elgin 07.17.08 at 2:30 pm
BTW Jay at the end of the rebuttal Greg says “These buyers can get a better deal on homes, as they can negotiate the commission savings into a lower offer and sales price.”
Kind of funny his whole premise has been that the sellers are saving 6%, yet he says the buyer gets a better deal too.
Jay - The Phoenix Real Estate Guy 07.17.08 at 5:06 pm
@ken, - Yep, I got to that line and had to read it a couple of times… I sat there shaking my head and said to myself “Self, did he just torpedo his entire ‘money saving’ argument?”
Steve Belt 07.17.08 at 7:15 pm
Jay,
Sorry I missed finding this nice nugget until now, so first, let me say, what a cool thing to debate over.
I suspect the vast majority of successful FSBO sales had a 2.5-3% co-broke to an agent that brought a buyer. That’s the only way that FSBO got into MLS and MLS is quite simply head and shoulders the winner in getting a home sold.
Average listing commission is 5%, so the savings potential is 2-2.5%. Next, subtract off the $1k Greg suggests a lawyer is going to cost, and the additional profit to a seller just dwindled more. To account for the “double speak argument”, split the profit potential (2%) equally between the buyer and seller, giving the buyer a 1% discount to fair market value, and thus the seller will potentially yield an additional 1% in profit, via the FSBO approach.
For this sample $300k home (which is far above the median home price, even in Phoenix), the seller will potentially profit an additional $3k. Was all of the hassle, risk, frustration, confusion, and time worth the added $3k? For those without a real job, and experienced in selling many, many homes, it will be. For most people, they realize it isn’t and thus hire a REALTOR, wisely spending that additional $3k to have a trusted adviser at their side protecting their interests.
Daytona Beach Real Estate 07.17.08 at 10:05 pm
A point that I haven’t seen mentioned is that many buyers when they approach a FSBO seller expect a reduction in price because the seller is not paying commission. Mr. Healy cites university studies without citing the parameters of the studies, this is a dangerous practice. I can go find a study or two that proves any point. Who funded the studies?
Also, the effectiveness of many FSBO sellers as marketers and sales people is miserable. When we bought our first home in Florida, we just stopped going to see FSBOs after a few. Part of the reason is that calls are not returned in a timely manner. You can’t see the property until they are available. As a Realtor, I can’t count how many times I’ve been called to see a property in the morning and I’m showing the home within a few hours. My experience is that it doesn’t work that way with a lot of FSBO sellers. You will see the property when it is convenient for them, not for you.
My opinion is that in a seller’s market, FSBOs can be effective. In buyer’s markets like we are seeing today in many cities, they are very effective. There’s just too much competition.
Lynn
Jay - The Phoenix Real Estate Guy 07.17.08 at 10:25 pm
Great points everyone! I’d love to squeeze them all in my final post in the debate (which will be up tomorrow.) The problem is, I only have 400 words — that’s really not very much.
I think I’ll come back to this blog and try to wrap my arms around the whole deal…
Lynn - I did say this at the end of Day 4 post, “And get ready to deal with buyers who also mistakenly think you’re saving 6 percent—they’ll want a piece of that, too.” that was my sole attempt to point out buyers will expect a price reduction. But as Ken pointed out in the comments here (and on USN&WR) my opponent even brought that up!
Katherine Gleason 07.18.08 at 8:22 am
What amazed me about the whole thing was how your esteemed opponent didn’t really mention that pretty much everything in the contract, including commissions, is negotiable. And while I agree that a vast majority of folks in the market to buy are using the internet to research homes, we’ve had several clients who simply bring us the printouts and say, “Here…find me more like this.”
My husband is an attorney, and he laughs at the idea of purchasing or selling real estate without an agent.
Jim Gatos 07.19.08 at 6:13 am
http://massrealestateguy.com/2.....ming-down/
A good amount of “FSBO’s”, for sale by owners, and other sellers seem to try to “compare what we do for our commissions, rather than focus on the results. I can certainly understand that line of reasoning, and probably would’ve thought along those lines if I was not in real estate, however, I am in real estate, and have been active in real estate since 1985. Selling real estate cannot be compared to “manual labor”…
When it comes down to the nitty gritty, you’re not paying an agent to do the most open houses, the most mass mailings, print the most flyers.
You can commonly get all the above, AT NO CHARGE, with an agent that will fail to sell your house. I actually heard a seller tell me once, “Matilda” (not her real name) didn’t sell the house, yes I know.. Will YOU be able to make the “just listed” cards as nice as hers?”..
Whether or not the cards will come out looking just as nice is NOT the issue; whether or not you want the same results is the issue..
If you’re serious about selling, you should prefer an agent that will get you the results that you should get. “Get” the results… and the ONLY way to “Get” the results, is to actually “Sell” your property. Preferably, you would like to get the absolute best price possible, at the best terms & conditions possible, & as speedy as possible.
THAT’S what you’re paying an agent for, not how many tasks they can perform.
Since 1986, I’ve done my share of open houses. I personally have never sold THE HOUSE BEING FEATURED using an open house. If the house is very competitively priced, I usually would get bombarded by calls from other agents the minute it hits the MLS system… I’m sure someone out there has, but the statistics are lousy…
Have I sold any houses ever by using an open house? Yes, of course….however, it was NOT the house I was doing the open house for..
I tell my clients this stuff. A number of them probably think I’m just being negative. I am not. National statistics have been saying the same things for years. Yet real estate agents continue to do open houses. Probably they think they have to prove to the seller they are doing something. Probably because this is their way of “drawing blood” for the seller.. I’ve sat a couple of times at open houses watching a “Star Trek” movie on VHS.. Point? House priced too high. No demand. Tell seller to reduce or dump the listing. Note to self: Try to avoid “overpriced” listings..
If you want flyers and mailouts, after a day on the internet looking at other examples, practically anyone can come up with a standard flyer. Spending money for color printouts does not need a real estate license.
Real estate is a commodity. Your house is a commodity. However, a good real estate agent who is a good negotiator can learn to take advantage of the opposing parties weaknesses (if any are exposed, even soooo slightly)… and TAKE ADVANTAGE OF THE SITUATION, particularly if the opposing agent is not as experienced in negotiating.
If I am a buyer agent, that means I am working for the buyer. If I see the listing agent is “flubbing” negotiations, I try to take advantage. If I am a listing agent, and the buyer’s agent says something to me that I may be able to use, either to get a little better of a price, or perhaps a more favorable term or condition, you bet I’ll try to take advantage!
That “advantage” could be as high of an average of a 10-% difference…!
That’s where the value of a good real estate agent comes in, who knows HOW to negotiate…
FSBO’s, you don’t know WHAT you could have had good if you never had it better to begin with.. Think about it..
Ryan Urtloski 07.21.08 at 11:42 am
All you agents are the same. No matter what you think your commissions are justified. Why are they so high when (as one commenter wrote) that people go online and see the homes they want. Then they give you the list and the realtor makes so much on commission.
It should be a flat fee. You cannot tell me it is harder to sell a $750,000 house than a $325,000 house, yet the commission is TWICE as much. Come on! Stop ripping us off please!
Ken Smith 07.21.08 at 12:18 pm
Actually Ryan in many, if not most, markets it is much harder to sell a $750k home then a $325k home. In our market a $750k home will take 3 times as long on the market then a home priced at $325k. Even if you marketed a $325k and a $750k home the same way (which most agents don’t) the marketing costs will run you almost 3x’s the cost plus you personally have much more time invested.
Ryan we are not assuming that our commissions are justified, we know what our expenses are and what we need to charge to make a living.
If you want a rip off go sign up for a FSBO program. They get paid without any results, they have no risk of investing thousands of dollars marketing and countless hours invested just to have a home not sell. FSBO programs are paid upfront, Realtors are paid only for results.
I have listed and sold countless homes for more then they attempted to sell with ByOwner(dot)com. These homeowners spent upwards of $3500 of upfront nonrefundable “marketing” dollars for zero results. Then turned around and still had to hire a professional to get the job done. Funny thing is each time I actually listed the home for more then they had it by owner for and netted them the same or more then they would have netted with ByOwner (the big player in the Chicagoland market).
Ken Smith 07.21.08 at 12:19 pm
BTW, Jay did I miss your post for Day 4 or did it just not happen?