The depressed housing market is likely to continue this year, and it's causing more home sellers, facing a likely loss that would be exacerbated by paying a broker's commission, to try their hand at selling themselves. But the wisdom of this tactic is in dispute.
ForSaleByOwner.com, one of the nation’s biggest “by owner” real estate Web sites expects 2010 to be a banner year for its company and other “by owner” firms. “[As] more real estate data and information is available through numerous online resources…sellers will resist paying real estate commissions and will instead look to 'by owner' selling alternatives,” said Greg Healy, vice president of operations for ForSaleByOwner.com.
He also predicts average real estate commission rates will rise to almost 6 percent while home prices in some markets could fall an additional 4 to 6 percent in 2010, giving consumers even more incentive to shop around.
Nikki Kaleta listed her Chicago home “by owner” on the Internet for just those reasons: “We are trying to save on the agent’s commission.” Kaleta’s property has been on the market for about six months and she and her husband are willing to wait until the right buyer comes around. Kaleta said they have had a decent experience with selling “by owner” in the past. “Recently, we sold our condo on the Web site in three months and paid no commission. We are hoping to have similar success this time around."
Other homeowners also are hanging in there despite disappointing results so far. Jane Pittner has reduced the price of her Chicago home three times on three Internet sites since listing “by owner,” but says she isn't discouraged. “I’m not going to pay an agent to sell my home below market value. What do I need that for! Everyone’s looking to the Internet for their real estate needs these days. If I want to sell my home below market value, I’ll do it myself.” Still, since Pittner first listed the property, she has lowered her asking price by about $200,000.
Vicki Cox Golder, the president of the National Association of Realtors, said that Pittner is a perfect example of a consumer who needs a reality check from an experienced industry expert about the value of her home. “Realtors have been around for 100 years," she said. "As the first, best source for real estate information, Realtors have not only anticipated and adapted to the evolving needs of their clients and customers, but have also influenced industry trends and innovations that will carry us into the future.” The Realtors Association says that real estate agents will tell you the facts, even though they may not always be what you want to hear.
A Chicago homeowner who does not wish to be identified agrees. “We just sold our home and ended up working with an agent. We gave 'by owner' Web sites a try but didn’t get any serious bites. We didn’t know what we were doing.” He said, “Sometimes, agents really do know the best price point to sell.”
Sam Bruce, a new online “by owner” seller in Chicago and himself a retired real estate agent, sees both sides of the argument. “I decided to list 'by owner' because I was disgusted with the service I was getting from my last three brokers," he said. "I’m not going to sell my place for some ridiculous price just so they can get a commission. To me, it’s not about saving money by not paying a commission, it’s about selling my place for a fair price as soon as I can. If I didn’t have brokerage experience myself, I probably would list with an agent. There is so much out there the average consumer just doesn’t even know they don’t know.” Since Bruce’s online “by owner” listing was posted last week, he has received two serious inquiries.
The National Association of Realtors, despite its insistence that professional agents are better in determining an appropriate asking price, acknowledges that "by owner" sellers are doing well. The association says that home sellers who list their property “by owner” sell their home in six weeks while those homes listed with real estate agents typically stay on the market for 12 weeks. Also, “by owner” sellers on average achieve a sales price that is 97.5 percent of their asking price, while an agent-assisted seller gets 95 percent of that asking price.
On the buyers' side, the Realtors Association admits, more buyers are looking to take control over their own housing search. According to data from the association's profile, more than 90 percent of home buyers are looking to the Internet to educate themselves and explore the many options associated with housing research. That’s up from 87 percent in 2008, 84 percent in 2007, and just 71 percent in 2003.
Studies by Northwestern University and Stanford University have found that people who sell their home “by owner” are as effective as agents in maximizing the sales price of their home. These studies cite other research saying that more home buyers and home sellers will use the Internet more to educate themselves throughout the home buying and selling process.
The trend appears to portend less demand for real estate agents. Already, the market has shrunk. National Association of Realtors membership has decreased 17 percent from 1.37 million in 2006 to a current 1.13 million members.