Comparing Commissions: For-sale-by-owner versus Realtor

“We’re doing the for-sale-by-owner thing first, just to see if we can do well,” Zack Atchley said. “We’re not against going with a Realtor, but it saves us money if we can sell it ourselves, obviously.”

Given that the average real estate commission in southwest Missouri is between 5 percent and 7 percent, according to Scott Rose, president of the Greater Springfield Board of Realtors, the Atchleys could save as much as $13,000 if their University Heights home at 1515 E. Stanford St. sells for the $184,900 asking price.

While still rare, the Atchleys aren’t alone in their desire to bypass a Realtor. According to the National Association of Realtors, last year roughly 12 percent of U.S. home sellers sold property without the help of a Realtor.

That number, however, is down from its 18 percent peak in 1997, according to NAR, and GSBOR’s Rose, who is also a Realtor with Murney Associates, attributes the decrease to more homeowners realizing the value of a Realtor’s services.

“When a Realtor lists your home, they take on all the expense of marketing and the legwork required, but they only receive the compensation if the home sells,” Rose said. “You can’t go into the doctor’s office and ask if you can wait to pay them until after you’re healed.”

Rose also attributes the decrease in for-sale-by-owner transactions to a realization by sellers that the Internet isn’t a magic solution.

“In 1997, with the beginning of the Internet, people thought they could easily market their own properties,” he said, “and now they’re seeing that they still need to rely on the expertise of a Realtor to sell their home.” The Atchleys have listed their home on springfield.craigslist.com.

While national trends may be down, at least one Realtor says he’s seeing more local homes for sale by owner than ever.

Scott Myer of CJR Commercial Realtors said he saw six “for sale by owner” signs in a span of just a few blocks during a recent drive down a southwest Springfield street.

He attributes the increase, in part, to recent issues with subprime mortgages that have caused increased foreclosure numbers and created a buyer’s market.

“People are trying to reduce the price of their home by eliminating the Realtor so they can sell their home faster,” Myer said. “I tend to believe that you need representation to sell your house, but if it’s a good house at a fair price, it’ll sell.”

Though Myer now focuses on commercial properties, he’s no stranger to the residential sector. Myer spent three years with Carol Jones, Realtors, before opening Scott Myer Realty, a flat-rate firm, in May 2004. He closed the firm earlier this year for reasons he would not disclose.

Negotiating prices

GSBOR’s Rose said there is no set standard for Realtors’ commissions, which pay the Realtors’ expenses, including ads, materials such as yard signs and paperwork, insurance, gas and taxes. Part of the fee also goes to the broker of the Realtor’s company for services provided.

Generally, commission in a real estate transaction is paid by the seller and split between the seller’s agent and the buyer’s agent.

Even though the percentage of commission is negotiable, Rose said sellers should be wary of agents who give in easily to requests for lower rates.

“Remember that a Realtor who immediately caves on your commission probably won’t be the strongest negotiator when it comes to getting the best price for your property,” he said.

Flat fees

Jim Stewart’s Springfield-based company, Oz Sold it, offers another opportunity, geared toward sellers who want to spend less on the transaction, but not go it alone.

Founded in 2006, Oz Sold It is a flat-rate real estate company. For a set fee – usually $795 – the company provides advertising and marketing services for homes on the market.

“What typically happens with every traditional Realtor-sold property is it’s either overpriced because of the commission, because people have to raise the price in order to afford the commission, or it’s less price-flexible,” Stewart said.

He pointed to a June study by economics and real estate professors at Northwestern University and the University of Wisconsin-Madison, stating that homes sold by their owners in the Madison market – which is similar to Springfield in both population and pricing – brought about the same price as homes listed on the Realtors’ Multilist service, resulting in a higher net gain for sellers who didn’t have to pay commissions. Stewart said he’s not surprised by the study results.

“A Realtor does not have any magic dust that they can sprinkle on your house and make it worth 6 (percent) to 10 percent more,” Stewart said. While FSBO homes can take longer to sell than Realtor listings, Stewart said they can bring just as much money “if they’re priced right and they’re marketed right.”

Pricing and marketing, however, can be tricky; the Northwestern study showed that homes on MLS sold about 20 days faster than their FSBO counterparts – and that’s where Stewart’s business comes in, offering yard signs, online listings and advertising for homes.

Other flat-rate service providers in Springfield include Help-U-Sell, which opened a Springfield office in 2005, and Assist-2-Sell, which opened in 1994.

FSBO homeowner Atchley is aware that his home may not sell as fast as if it were listed with a Realtor, but he’s not concerned.

“We’re not in a hurry – we don’t need to sell our house right now, so we don’t need the exposure,” he said.

In the end, Myer said sellers need to do their homework when choosing the best way to sell.

“Whether it’s a fee-based or flat-rate service, what the seller needs to look at is are they full-service, and what do they do,” Myer said. “Full service to one company can mean a lot different than it does to another company.”