'For Sale by Owner' Means Cutting Commission, but at What Cost?
Saturday, April 29, 2006
Michael Mou and his wife listed their two-bedroom Arlington condo with a real estate agent last fall but didn't get a bite in 60 days. Now they're planning to remodel the kitchen and try to sell the unit, near the Court House Metro station, themselves.
The couple, who have two babies and two full-time jobs, know it will take a lot more effort to do it themselves. But Mou, a government information technology contractor, and his wife, Daphne Lin, also an IT worker, think it would be worth the time and energy if they can save the traditional 6 percent commission and put that money toward their next home.
"There were at least 50 people shown our home when we had an agent, but none of them put in an offer," Mou said. "So we thought if we fixed up the kitchen and were able to drop the price because we won't have to pay the agent, that will make it more interesting to buyers. That's one of the main reasons we're doing it: to avoid the cost of the commission."
But is going it alone a good idea now that the climate seems to be shifting from a seller's market to a buyer's market?
It's always tempting to consider "for sale by owner" -- "fizzbo," in real estate lingo. The idea has become more alluring as home prices in the area have doubled in the past six years. On a $600,000 sale, paying no commission means keeping $36,000. But don't sellers need real estate agents even more when the competition is stacking up?
It depends on whom you ask.
The real estate industry, which abhors FSBOs at any time, says this is the worst time to go without professional help because sellers need more guidance in a slowing market, not less. "You need to have it listed with someone who can go the distance. Sure, there are sprinters who can do it for a day. But to continue to market a house for 30 days, 60 days or even 90 days takes a long-distance runner," said Paul Valentino, Coldwell Banker Residential Brokerage's regional vice president for Virginia and the District.
Established brokers claim that FSBO numbers dropped as a percentage of all sellers during the hot market and won't climb when it's colder outside. They even scoff at FSBO savings. Thomas M. Stevens, president of the National Association of Realtors and a senior vice president of NRT Inc. in Vienna, points to a recent survey his organization performed that found that sellers with agents netted 16 percent more than those without. "So why would you go it alone? Why would you sit at home 24-7 and do all the work an agent would do for you and run the risk that you might miss a potential buyer?"
FSBO enthusiasts, however, say that while there are no official statistics on how many sellers try the route or on how much money they make, it appears that the number of do-it-yourselfers is multiplying. That's based just on the increasing volume of Web site listings of such properties and on reports of Web traffic.
The Internet makes marketing a home easier for lone sellers, said Colby Sambrotto, chief operating officer of ForSaleByOwner.com. He contends that a softening market does not mean FSBOs will drop off. "As we transition into a buyer's market, we think it's going to be good for our business. The fact of the matter is that people want to hold on to as much of the equity as they can."
Realtor.com, NAR's official Web site, is the mother lode of online listings, with about 3 million a year. But specialized Web sites such as ForSaleByOwner.com and Owners.com claim to be offering more listings every year and also provide do-it-yourself advice and materials, such as yard signs and "e-books" of information and forms. Big general-interest Web sites such as Craigslist.org and Google.com are also offering or starting to offer real estate listings on their for-sale bulletin boards.
Sambrotto said his site's listings and revenue doubled from the end of 2004 to the end of last year. On its Web site, ForSaleByOwner.com says it has helped sell more than 90,000 homes since 1997, saving about $1 billion in commissions on about $18 billion in sales.