One increasingly popular alternative to traditional real estate brokerage in some parts of the country is a form of do-it-yourself realty that calls for minimum involvement by an agent.
While the customary 6 per cent commission on a $60,000 house is $3,600, for instance, a realtor-assisted "For Sale By Owner" arrangement can cost as little as $175.
The trend to assist sales is most evident in the Southwest and Canada and on the West Coast. While almost non-existent in the Northeast, it is beginning to take hold in Virginia, according to Houston realtor Edmond B. Wood Jr., president of the newly formed National Association of Real Estate Service Agencies, an organization of firms that provide such assistance.
Fees, as well as services rendered by these agencies, vary widely depending on the region and market conditions. Firms typically charge a flat fee, although a few prefer to charge 3 per cent of the house price. In a dozen such realty companies surveyed from Baileys Crossroads, Va., to Sacramento, Calif., fees ranged from a low of $175 to a high of $1,200, with an average of about $675. A two-tier price structure, in which a higher fee is charged when the agency supplies the buyer, is also common.
The concept of assisted selling ranged from a little help to a lot. Most of these agencies provide certain basic services, including advice on pricing the house and aid in preparing the contract and arranging financing. None will drive prospective buyers around or show the house (except in unusual circumstances such as when the owner is out of state).
Some will furnish a "For Sale by Owner" sign, while others will put up their own company signs. The "For Sale by Owner" sign often carries the telephone number of the owner and the agency's number. Confusion sometimes results as prospective buyers ask how a person can be selling his or her own home through a realtor. The sign indicates nothing about the fee or commission involved, which is, after all, what matters to the economy-minded buyer in this situation.
Much of the advice offered by the agencies is common sense. For example, United Services of Virginia offers these words on getting the house ready to show. "A bright kitchen with immaculate appliances is most important to eye appeal. If redecorating appears to be necessary, select non-controversial colors."
Similar information can be found in libraries or in pamphlets like "How to Sell Your Own Real Estate." This $1 booklet by a Denver ad agency extolls the value of psychological selling: "Bake a cake or cookies and have the aroma lingering when the prospects arrive," it counsels. Or again, "Have the bed turned back and a negligee placed upon it."
There is also more down-to-earth information such as how to calculate the selling price: Original price plus 10 per cent a year plus improvements and compared with comparable properties in the area. The biggest pitfall, according to the booklet, is not allowing 90 days to yourself to sell, followed by not investing enough money in clean-up or advertising.
The main differences between the service agencies concern advertising and buyer referrals. Some leave the bother and cost of ads entirely to the seller, whereas others will include media advertising in the fee.
Agency showrooms, where prospective buyers can look at pictures and descriptions of homes, are popular. If a buyer visits a home on the list and a sale results, a referral fee may be charged.
Then there are house specialties, such as the computer analysis provided by Real Estate Marketing Services, Inc., of West Palm Beach, Fla. Its $350 fee includes a computer print-out listing the deposit the seller can hope to get along with closing costs for the buyer, worked out for conventional financing, FHA, VA, mortgage assumption or cash, as the terms may be.
Locally, United Services Homeowner Association, a real estate company with offices in Baileys Crossroads, increases its fee from $300 to $450 when it comes up with a buyer. A USHA franchisee in Forestville near Andrews Air Force Base ups the price to $550 in this case. Virginia Homeowners of Springfield and Vienna, Va., charges a flat fee of $575, which includes weekly advertising.
This last fee includes a non-refundable $75. The client signs a contract for 60-, 90-or 120-day listing. If the contract is broken, the client is held liable for $500 by Virginia Homeowners. (In practice, if the owner elects to go with some other firm while still under contract, the other realtor will often pay the $500 fee.)
Sometimes a portion of the fee for listing is non-refundable. Rick Dural, director of For Sale by Owner, Inc. of Tucson, Ariz., is so confident he can get clients' homes sold, he offers them the choice of paying a non-refundable $300 to list, or $610 at the time of sale. Dural claims that most of his clients are willing to gamble, given his 17 per cent share of the real estate market there.
R. M. McMillen Realty, of Temple Hills in Prince Geroge's County, charges the lowest rate of the firms surveyed in the Washington area - a $175 fee, $100 of which is payable in advance and non-refundable, covering advice and paperwork. There is no buyer referral and no advertising; McMillen does not represent the seller at settlement.
Marketing assistance - or a "fisbo" (For Sale By Owner), as it's known in the trade - is not for everyone, as even its backers will agree. Asked what attributes owner-sellers have in common, virtually every agent questioned mentioned "sophistication." As defined by Charles Whitfield of USHA in Forestville, a "sophisticated" individual is less likely to be influenced by real estate industry admonitions against trying to sell a house alone. Conventional realtors frequently try to dissuade sellers from operating on their own by telling them that they will either have to list their homes on the realtors' multiple listing service or sign up exclusively with a high-powered firm to attract enough potential buyers.
Edmond Wood, the national association official who also heads Real-Serv, Inc., in Houston, says that about 60 per cent of his clients manage to complete the sales themselves, while the other 40 per cent eventually need help from a full-service firm. (Half of NARESA's members also offer full service, often at a flat fee.) Daland Webb of USHA in Baileys Crossroads feels that many people overprice their homes to start and then become discouraged when they don't sell.
John F. McMahon Jr., the principal broker and a major stockholder of Virginia Homeowners in Springfield, is also an associate broker with House of Brokers, a multiple listing realty firm in Annandale that charges standard commissions. If Virginia Homeowners' clients fail to sell their own homes and ask for multiple listing, they are referred to House of Brokers (although they may go with any realtor without forfeiting more than the initial $75 fee after the contract period has ended.) The House of Brokers pays Virginia Homeowners a $500 referral fee, the standard industry practice.
McMahon acknowledged that a conflict of interest was "conceivable," but said it had not occured because he was "too busy to be out selling" property for House of Brokers.
More than half the members of the National Association of Real Estate Service Agencies are also conventional realtors. Critics allege that such dual-purpose firms may be guilty of bait-and-switch tactics by failing to "push" For-Sale-By-Owner homes and then suggesting that the sellers go to their commissioned agents.
Wood says NARESA's aim is to launch a nationwide referral program, a publication listing names of owner-sellers. The trade group also hopes to establish procedural standards that to explore the possibility of mass marketing warranty and title insurance.
Meanwhile, with only 60 members, NARESA still has "very little voice," in Wood's words. Collectively its members' greatest problem seems to be pressure from the industry, they indicate, adding that this is particularly true when a cut-rate realtor is just getting started.
Christine O'Donnell, of Home Owners Services Association in Virginia Beach, Va., reported that The Virginia Pilot newspaper refused to publish ads for her firm that noted "for sale by owner" because they would "deceive the public." O'Donnell - who charges $400 to assist owners whose houses are priced below $45,000, and $500 for houses priced higher - set up her business last year to help military wives like herself in Virginia Beach, home of many Navy families. Military wives frequently take charge of selling their houses when their husbands are transferred, she said.
"They move so often - an average of once every two years - they don't have enough equity in their homes to pay the (customary 7 per cent) commission," said O'Donnell.
By its very nature - the desire for economy - and by the obstacles put in its way, assisted selling has not yet proved too profitable a venture. In fact, many of those surveyed spoke of it almost as pro bono work. "I did volunteer work before I got into this," O'Donnell said, "so I'm used to working nights and weekends for low pay to help people."
O'Donnell says she is currently struggling along with 20 listings, and Whitfield acknowledges that business is running behind what he predicted. Webb concedes that a flat-fee of $575 is not self-sustaining, that his allied mortgage and title insurance companies make up the difference.
Still, marketers like McMahon firmly believe there is "a true revolution going on in the industry, a revolution more and more consumers are recognizing." CAPTION: Picture, Willis Bennett Jr. stands in front of the Springfield, Va., home he recently sold for $70,000 in four days with the aid of the United Services Homeowner Association, a realty service firm. Bennett paid $450 for the assistance. Conventional realtors usually charge 6 or 7 per cent of the sale price. By Harry Naltchayan - The Washington Post