As we were signing the paperwork on Saturday, I asked Paul Liebe of Redefined Realty alot of questions about the growing interest in “For Sale By Owner” movement.
You have to start with the idea that in Wisconsin the typical fees for the agents involved in the sale of a home is 6% (3.6% to the selling agent, 2.4% to the buyer’s agent). For a house like ours, that would amount to $18,000. That is a staggering amount of money. As I said yesterday, we weren’t sure if the value was worth the cost.
The first thing Paul said is that fees cannot stay where they are. Consumers will not stand for it. His business of listing homes for owners has grown doubled to tripled every year for the last four years. That gave me a pretty clear indication of what is going on.
What is really important about a flat fee service like Paul’s is that it changes the relationship. We paid him $500 to take pictures, provide signage and list the house in MLS. He gets his money upfront. If we are unhappy, we can do whatever we like at anytime (with agents you typically have a three to six month obligation).
The flat fee also removes any motivations around what happens with the price of the house. He charges extra for a price analysis, but was able to give us some quick advice based on what he was seeing in the market. The most important thing is that it is objective advice. Before we decided to do it ourselves, we had two real estate agents in and they talked about what they would price the house at. They were significantly different. It was hard to tell how they came to such different conclusions, but it clearly made us wonder.
This move to flat fees in real estate bears a strong resemblance to financial services. There is a growing trend in flat fee services versus planners being compensated as a percentage of assets or by the products they are selling. Again, it is about the agent doing what is in the best interest of the client.
One last thing-by listing in MLS, we are encouraging buyer’s agents to contact us. Those folks still expect to be paid. Many people when selling themselves reduce the rate and say they want to save money any place they can.
We went the other way. By savings some money on the selling side, we decided bump the commission up to 3% (from 2.4%). For our house, this means another $1000 to $1500 in the agent’s pocket. Everyone we talked felt this was an effective way to lure in agents and their clients. We’ll see…