|
 |
October 7th, 2005: 20/20 Should You Sell Your Home on Your Own? Or Will You Get a Better Deal Through a Broker? By JOHN STOSSEL and GAIL DEUTSCH http://abcnews.go.com/2020/Business/story?id=1192851&page=1 Oct. 7, 2005 — - Owning your home is often described as the "American Dream," but whether you want to buy a home or sell one, it's scary. With so much money involved, it's hard to know if you're getting the best offer for your home, or paying too much when you buy one. There are a lot of tricks of the trade that can cost you time and money, starting with the language in ads. Real estate listings -- with words like cozy, charming and fantastic -- make everything sound great. Phil Loriana -- who is not a real estate agent but shows apartments for agents -- was candid with "20/20" about the apartments he shows and the descriptions used in listings. "You really have to have very little conscience, because you know that you need the sale," he said. Loriana said certain words, like charming, don't mean what you think they do. "It means it's old, it's dark, it's dank and it's small," he said. The authors of the best-seller "Freakonomics," say Loriana is on to something. In their book, they explain that conventional wisdom is often wrong. "Fantastic, charming, spacious, those are terms that are correlated with lower sales prices," said co-author Stephen Dubner. Dubner's co-author, economist Steven Levitt, compared Chicago real estate listings to home sales, and found that you should expect problems when you see exclamation points and certain words like charming, spacious, great neighborhood and fantastic in real estate ads. "The dead giveaway for a house that's in trouble is the exclamation point. When you've got exclamation points littered through the listing, that's probably a sign the house has problems," he said. Many real estate agents told "20/20" Levitt is right that the meanings of certain words are stretched in real estate ads. "Cozy most likely does mean small," said David Oppenheim of Halstead Properties. "'Fantastic' is a lazy broker term. If you can't think of anything else, you tend to throw it in," Felicia De Shabris, a broker for Halstead. By contrast, Levitt found that five descriptors were associated with higher prices: state of the art, gourmet, maple, granite and Corian (that's a material for countertops). Is a Broker Worth It? We watched a real estate agent who was careful to mention some of these things when she was showing a property. That's one reason to hire an agent, even though you'll have to pay 3 percent to 6 percent commission -- they know more. Michael and Danielle D'anna hired broker Kelly Collins to sell their house in September 2005, and they agreed to pay her a full 6 percent commission. "You get what you pay for. And we look at it more as an investment with somebody that we trust and want to do business with. And for us, we sleep easier at night knowing that we have somebody really looking after every aspect of the sale of our home," Michael D'anna said. But 6 percent of the $600,000 they hope to get for their house would be $36,000. Is it worth paying that large commission for one sale? Collins said she's worth it. She may be. Brokers work hard to make the sale. They will negotiate for you. They'll help you write the ad for your house, and refer you to an engineer who can inspect your home. Are Real Estate Agents' Incentives In Sync With Your Own? But the "Freakonomics" authors point out that real estate agents' incentives may be different from yours. Real estate agents' main goal is just to make the sale, even if they don't get the absolutely best price. "We're not saying real estate agents are corrupt or crooked, we're saying they're human," said Dubner. "You have to take a look at how the commission breaks down. She has to split her 6 percent commission with the buyer's agent and then typically she has to kick back half of it to her own company, the agency. So instead of getting fully 6 percent, you're getting one-and-a-half percent," Dubner explained. This means that while selling your house for an additional $10,000 is a big deal for you, it doesn't amount to much for a real estate agent. "To her that extra $10,000 is $150. So you have to say $150 for doing a week or two or three of work. ... It's probably not really worth their time," Dubner said. It made Levitt wonder whether real estate agents get higher prices when they sell their own homes. So he researched that. "What we found is that real estate agents sell their own home for 3 [percent] to 4 percent more than they sell the homes of their clients. And also, they leave their homes on the market for 10 percent longer. The real estate agents are taking their time, holding out for the good offer, whereas with the clients, every once in awhile, they kinda nudge you in the direction of taking an offer they wouldn't have wanted to have on their own home," he said. That sounds like a reason to try to sell your house on your own. Do-It-Yourself House Selling Terri Novara took a do-it-yourself approach to sell her home in New York. She's happy she did. Instead of paying a $15,000 commission to a real estate agent, she paid just $350 to list her house on ForSaleByOwner.com. It's one of many Internet sites that claim to help you save money by eliminating the middleman -- the real estate agent. "How could I pass that up? I thought: $350, versus $15,000. You know, why not?" Novara said. She posted an ad with pictures of her house and 16 people called. She showed the house herself. "No real estate agent can walk into the house and show it with the zeal that I can show it," she said. Within days, Novara had four serious offers. And each offer was better than the previous bid, she said. An agent had told her she'd be lucky to get $470,000 for her house, but she sold it for $495,000. "Think about it. That's $25,000 more than the real estate agents were telling us that we could sell our house at," Novara said. So, who needs a real estate agent? Are Big Realty Firms Discouraging Competition? Dave Lereah of the National Association of Realtors says you do. Lereah said, "You need someone to take you, to guide you" through the process of selling your home. Realty companies run frightening television ads describing home sales as a daunting, complicated process. Is it that much work? Novara didn't think so. "Anybody out there can do it. If I can do it, anybody can do it," she said. I asked Lereah whether the Internet has made a lot of what his members do obsolete. He said no, because most people still use real estate agents. "Eighty-five percent of all households that purchased homes do use real estate agents, in one shape or form," he said. Perhaps so many people still use real estate agents because industry groups like his are squeezing alternative sellers out. Lereah disagreed. "I don't think so. It's a free market," he said. It's not that free. There are discount brokers who offer services at lower rates or flat fees -- like $250 to host a two-hour open house. But real estate agents have helped convince a number of states to pass "minimum service" laws that force discount brokers to offer more services -- like negotiating the sale -- so consumers have to pay a higher fee. Lereah said NAR isn't involved with the states, but his group agrees that minimum service requirements protect consumers. "You have got a lot of new discount brokers out there, floating on the Internet. Not everyone is really legit. Not everyone is providing the adequate amount of services to protect the consumer," he said. I told him I can make my own choice. If I'm unhappy with my real estate agent, I'll go to somebody else. Why should NAR decide how much stuff I have to buy? Lereah said, "We just want to make sure that the discount brokers do the right thing for the consumer." He also said "Freakonomics" is wrong about real estate agents trying harder to sell their own homes and keeping them on the market longer. "It's just not true at all. 'Freakonomics' is a cute book, but they picked the wrong industry," he said. Lereah and Levitt could argue about that for days, but the bottom line is, should you pay 6 percent to a real estate agent to sell your house? You should know you don't have to. You can negotiate, and today the average commission is 5.1 percent. I asked Lereah whether people should start negotiating for even lower commissions -- say, 4 percent or 3 percent. He wasn't enthusiastic about my suggestion. "Let's be real careful there," he said. "You could negotiate, but you get what you pay for as well. A mistake may cost you tens of thousands of dollars, for this very large transaction," he said. It's possible. But paying 6 percent can be a mistake too. Levitt says the high 6 percent commission is going to become history. "I think what's more surprising is that the 6 percent has lasted as long as it has. ... I think in the future, you'll pay $500 instead of paying 6 percent." |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
No Commission. Lots of Help.
- (888) FOR-SALE
- Customer Support
- Live Chat
