Will Work for 2%

No, not milk: commission.

Last week, ForSaleByOwner.com's own general manager Eddie Tyner was on a panel about the relevance of the for-sale-by-owner business model, at the National Association of Real Estate Editors conference in San Antonio.

Also on the panel: Michael Crowley, representing the National Association of Exclusive Buyer Agents (NAEBA..sounds like 'neighbor,' get it?)

Inevitably, a question was raised by one of the journalists in the audience about whether or not agents shun by-owner listings. Tyner, of course, reiterated the point of view long espoused by ForSaleByOwner.com: that it's smart to offer a buyer's agent at least 2%, and only fair that buyers' agents be compensated for their work.

To which Crowley commented that buyers' agents actually had to do more work for their commission to get a by-owner listing over the finish line, as compared to getting a seller-represented listing to closing.

Really? With 93% of buyers culling online listings to zero in on the houses that fit their needs and budget? With agents confessing in other panels at the conference that online listings have all but wiped out the 'tour guide' aspect of their jobs? Really?

We recently heard from a ForSaleByOwner.com successful seller who offered a 2.5% buy-side commission. When buyers showed up, agent in tow, the agent thrust a document demanding a 3% commission at our customer even before the showing commenced. Wisely, our customer set the document aside and never signed it. And, even smarter, she read every line of the sale contract that the agent later presented, discovering that the agent again rewarded herself a 3% commission.

Guess what? That agent so bumbled the negotiations that her clients lost the house to a competing, full-price offer.

Lesson to buyers' agents: You'll get your commission. Make sure you actually earn it.

CMA or CYA?

Everybody loves getting something for nothing. Then, of course, there’s the usually-true adage that you get what you pay for. And when you don’t pay for something, what you get is…something that’s not worthy anything.

Which brings us to the Comparative Market Analysis, or CMA. For years, real estate agents have used CMA’s as a wedge to get their foot in your door and their rears on your sofa. Once firmly settled in, they’d line up impressive-looking reports that compare the features and drawbacks of your house to those of recently sold houses. The more like yours, the better the comparison – or ‘comp’ – and the better the indicator of what your house would be worth if you listed it with the agent, which of course we’ll be doing today, won’t we? and I have the contract right here!

In an era of free and abundant real estate information – like the brand-new ForSaleByOwner.com Pricing Guide -- the CMA has been rendered nearly moot. With public records databases online and a wide menu of free or low-cost tools for thumbnailing the value of your house, there is no reason to beg a real estate agent to wave her magic wand over secret multiple listing reports and come up with a CMA.

Agents like to talk about the CMA as though it is a rare prize. The truth is that the CMA was, is, and always will be, a marketing tool. Once you sign with an agent, agents immediately start amassing evidence that your house really shouldn’t be put on the market for a price at the upper end of the CMA…the CMA that, remember, was the gospel truth just a week or two earlier. Suddenly, the CMA becomes a CYA: the agent starts to push you to the lower end of the spectrum because that ensures her an easy, quick sale.

Let’s pause for some agents to pipe up about how they don’t get paid unless the house sells, therefore they are paid for results.

Nice try. As we outline , agents’ business models are severely misaligned with what’s best for their clients. That’s why they are so quick to abandon their carefully crafted CMA: it’s not their own A that they ultimately strive to C.

Forbes Sez: Internet Tools Make It Easy to Sell Your House

We're all capitalists when it's time to sell our houses, so we're inclined to take seriously the recommendations of Forbes, the venerable business magazine, whichcalls itself "The Capitalist Tool."  

The February 14 issue of Forbes (page 68, if you are now headed to the newsstand) highlights all the ways that home owners can easily sell real estate on their own. Among the story's main points:

• The market for homes is fraught with conflicts of interest. Forbes recommends checking Trulia and Zillow's agent critiques posted by clients. We say, don't overlook Yelp, either.  
• Not impressed with what recent sellers in your area said about the agents that purportedly helped them? Forbes gets on board with selling by owner, recommending that you list your house on the MLS for 'just a few hundred dollars." Gee, that's what ForSaleByOwner.com charges.  
• Check closing prices of all houses that sold recently in your area to see beyond the scope of the agent-controlled multiple listing service. As Forbes endorses our own advice, we in turn will congratulate Forbes on its wisdom.  
• Evaluate the entire market. Agents have a bias towards their own system, says Forbes (understandably, as they, too, are capitalists).  Check out 'by owner' listings, says Forbes.