When Alexandria homeowners Michael and Mary Johnson decided to sell their three-bedroom rambler this summer, they searched the Yellow Pages for a real estate company. The Johnsons weren't looking for a traditional agent, however.
They wanted the help of one of the alternative firms that offer services at a discount - for commissions as low as 1 percent. These realty offices, which have grown here from a handful several years ago to upwards of 20, offer advice on how to advertise, show, sell and finance a house. They often provide the "For Sale" signs and a negotiable amount of service.
The demand for these lower-cost services has grown here and elsewhere, apparently in response to escalating house prices and the growing sophistication of sellers in many markets, discount brokers say.
The Johnsons, who are moving to North Carolina, found a purchaser for their home in three weeks. And because their agent charged a 1 percent commission for the $78,500 sale - rather than the 6 percent typically charged by realtors here - the Johnsons said they saved more than $4,000. That saving will help pay for her husband's law school tuition, Mary Johnson said.
"We didn't like the idea of spending 6 percent of our equity for services we didn't feel we needed," she said. "I could be at home during the day, so we didn't need to pay someone to bring (potential purchasers) in."
A trade group representing discount brokers, the National Association of Real Estate Service Agencies, was set up three years ago in West Palm Beach, Fla., to encourage the use of such firms. John Little, the executive vice president, says there are at least 400 independent companies across the country - some with a number of franchises and branches - that offer discount or "flat-fee" services. The former charge sellers 1 to 4 percent of a sales price and the latter charge set fees.
The services vary greatly. Some firms don't advertise clients' homes. Some aren't members of the multiple listing services in their jurisdictions or the local boards of realtors.
Nearly all say they leave the actual showing of the house to the seller, unlike the traditionally run firms. And, one official of an alternative company said, they often are considered the "dregs of society" by their full-commission counterparts.
Opinions on the effectiveness of low-cost firms vary just as much. Agents who are part of the new wave predict that their type of service will revolutionize the established real estate industry. While all realty sales commissions are supposed to be negotiable, the standard is generally 6 to 7 percent.
Some industry observers maintain, however, that high commissions may not be fair in overheated markets like Washington.
"In Philadelphia, where town houses sell for $10,000 or $15,000, no one objects to a 6 percent commission," said Peter G. Miller, who opened a discount brokerage in the District this past year. "But in Washington, D.C., where homes sell for $200,000, the commission is 12 grand....
"All inflation is not the fault of the brokerage industry, but part of it is, and we should recognize that. A variable fee makes a lot of sense."
Ralph Pritchard, president-elect of the National Association of Realtors and chairman of the board of the largest residential brokerage firm in the Chicago area, said more and more of the alternative firms are springing up across the country. He said this increase is a natural result of competition, particularly in areas - like Washington - that are considered sellers' markets.
Increasing numbers of agents are being licensed every year, all competing to sell homes with firms already established, Prichard said. He added, "We expect it to continue. It's a phenomenon of our rapidly emerging industry. There's room for a lot of different kinds of operations."
Homeowners always have had the option of selling their homes themselves, of course. Housing industry experts say they have no exact figures on how many people take the "for-sale-by-owner" route, but estimates range from about 10 percent to 15 percent of all homes sold a year.
Several realtors here, however, said they haven't noticed any increase in advertising by "for-sale-by-owner" sellers and maintain that the number may have leveled off.
Many people try to sell their homes for a couple of weeks on their own, become discouraged, and end up hiring the services of real estate professionals, traditional realtors say.
Housing industry experts say the person who sells his or her home usually is someone who is well-educated and willing to take the time to learn about the market.
One Takoma Park couple who decided to sell their three-bedroom brick home without the assistance of any real estate professional this summer said they spent weeks doing their homework. They researched the market, finding out about the houses that had sold in their area and learning more about the community so they could answer purchasers' questions. They also checked into such potential questions as mortgage availability.
"If you have a very good product, a very desirable place in a good location, then you could probably supplant many of the services a real estate agent provides," the husband said.
They advertised in the Sunday paper and told their neighbors, co-workers and community leaders that the house was for sale, the couple said. They said they had a contract on it within eight days - at a price that was lower than what they would have asked for had they used a full-commission real estate agent.
They said they agree with realtors, however, that not everyone is qualified to sell his or her own home. Discount realtors say they can bridge the gap for some of these sellers.
Traditional realtors contend for the most part that alternative companies are not making major inroads into their business.
"I've been around 20 years; I've seen a lot of these companies come and go," said Fred Spain, of the Holley, Hargett and Spain real estate firm in Northern Virginia. "I don't believe these companies that charge 1 or 2 percent are going to be in business long."
Spain and other realtors maintain that the commissions they get are reasonable in light of their rising expenses. In addition, they noted, they provide more services than the alternative companies.
"They (the alternative firms) do everything except what the owner wants: They don't sell the house," said Gordon Carey, senior vice president of the Colquitt-Carruthers real estate company.
"They don't bring customers to the home, sell the home, discuss compromises and trade-offs," he said. "There's no third party to represent the owner - that's the most important service we provide.... The bottom line is that homeowners get what they pay for. It's wonderful that in our society we have a choice."
James Banks, executive vice preisdent of the Washington Board of Realtors, said he has no indication that traditional brokers are being adversely alleged harrassment directed against alternative brokers, said Harvey Saferstein, regional director of the Los Angeles FTC office.
The investigation was begun in March 1978. Saferstein said the agency hopes to complete it in about six months. While it is a nationwide investigation, specific real estate markets have been targeted for study, he added. He would not say if Washington was a target.
According to a survey by the National Association of Realtors, the national median income of real estate brokers in 1977 was $28,000. The average full-time agent made about $14,300 that same year. Nearly one-fourth of all brokers earned more than $50,000 two years ago, however, and one-fourth of all the full-time agents made more than $25,000, their figures show.
In contrast, agents for some of the alternative firms said they have to get more listings than the regular agents just to keep even.
George M. Palmer, regional director for Home Sellers Center Inc., estimated that the average Home Sellers agent gets a $10,500 annual salary, plus bonuses based on performance. Home Sellers has been operating in the Washington area for about a year, Palmer said, and by next month will have seven offices in Maryland and Virginia. Nationally, Home Sellers has more than 200 offices in 35 states.
Home Sellers does no commission work, but charges a flat fee varying from $585 to $650.
Daland Webb, president of United Services Homeowners Association, said his company has been offering flat-fee real estate services in this area for 15 years.
United Services charges a flat fee of $575, Webb said, and his agents earn an average salary of $10,000 to $12,000 a year. CAPTION: Picture, Michael and Margaret Johnson sold their Alexandria house through a discount broker and saved $4,000. By Gerald Martineau, The Washington Post