Housing Rumble: Do You Need an Agent? (Day 3)

A real estate agent and a “for sale by owner” executive square off.


Welcome to Day 3 of the Home Front's new Housing Rumble feature, a regular series that will match up opposing sides of an issue in an online debate format and let readers decide the winner.

The current Rumble features Jay Thompson, a blogger and real estate broker in Phoenix, and Greg Healy, vice president of operations at ForSaleByOwner.com—a Web-based company that markets the homes of independent sellers.

The subject: "Do you need a real estate agent to sell your home?"

Here's a recap of the action so far, if you're just tuning in:

Back to you, Thompson:

Jay Thompson, Day 2:

"...an agent charges an expensive commission equal to 6 percent of a home's purchase price." ...if hiring an agent is worth losing that 6 percent of home value..." ...which is just a fraction of the cost of an agent's 6 percent commission. "Since commissions cost another 6 percent..."

Four references to "6 percent commission" in my esteemed opponent's opening post—which are four incorrect and patently false statements.Don't get me wrong—I'm not saying Greg lied. I suspect Greg (as many) honestly believes that the commission rate for selling a home is 6 percent.The simple fact is all commissions are negotiable, period. "Six percent!" is often batted about by the FSBOs, the antiagent groups, and the "bubble bloggers" (those proclaiming a pending world economic collapse primarily due to money-grubbing real estate agents).

Statistics show the average real estate commission in the United States to be 5.12 percent in 2006. This is up slightly from 2005's 5.01 percent. The reason for the increase? Sellers being more willing to pay higher commissions because of deteriorating market conditions. (Source: here)

In addition to the misperception about the mystical 6 percent commission, there also appears to be a misunderstood fact about how commissions are paid.

The commission doesn't all go to the listing broker. Commissions are split between both the seller's agent and the buyer's agent—typically fifty-fifty, but that is negotiable, too. In fact, it's not at all uncommon to see buyer agent commission splits increasing in a distressed market.In fact, many of the FSBOs on Greg's own website indicate they are willing to pay a commission to a buyer agent. This is smart on these owners' part. They realize that the vast majority of home buyers work with agents and that agents can't work for free.

So if you are going to go it alone in selling your home, please don't mislead yourself into thinking that you'll be saving 6 percent in commissions. The odds are overwhelming you're going to have to pay a buyer's agent at least half that amount. Yes, 1 or 2 or 3 percent is still a significant amount of money. But you are fooling yourself if you believe you'll save 6 percent.And get ready to deal with buyers who also mistakenly think you're saving 6 percent—they'll want a piece of that, too.

Healy, you're up tomorrow.