Housing Rumble: Do You Need an Agent? (Day 4)

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


Welcome to Day 4 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:

Healy, you're up:

From Greg Healy, vice president of operations at ForSaleByOwner.com:

If Jay wants to argue that the average commission is 5.12% and not 6%, that's fine by me, because paying more than $15,000 in commission to sell a $300,000 home is too much. There's been a dramatic rise in commission costs over the past 10 years because of huge home price increases, even with recent price decreases.

For example, the average price for a home in 2000 was $178,500 and in 2007 it was $267,700—a whopping 50 percent increase. Because of this, the average commission increased dramatically, going from $9,300 to $14,000. Inflation and the consumer price index haven't grown anywhere near that pace.

It doesn't matter to the seller who gets the commission and how it's split between the listing and selling agents. The bottom line is that sellers are losing a significant chunk of home value—for work they can do themselves.

Jay notes that many ForSaleByOwner.com customers are willing to pay a commission if an agent brings them a buyer. He is referring to a package we offer that puts a home on the MLS and Realtor.com, and people want that additional exposure. It's true that they might have to pay a 2.5 percent commission, but only if a buyer is working with an agent. All homeowners should have the right to choose whether they are willing to pay a commission.

While we provide sellers with such options, agents don't. Agents have most clients sign an "exclusive listing agreement" that binds them to paying a commission, no matter how a buyer is found. Imagine writing an agent a $16,000 commission check when you, the seller, mentioned at the monthly PTA meeting that your home is for sale and that landed you a buyer. What did the agent do to earn that $16,000?

It's an important topic, and perhaps Jay can explain why agents don't allow their clients to sell through an agent and simultaneously sell "for sale by owner." It isn't fair and is another reason to skip the agent.

On the other side of the transaction, homebuyers don't need agents either, and many don't want to use an agent because they want to deal directly with homeowners. A real estate attorney can handle all of the contracts needed to complete a sale. These buyers can get a better deal on homes, as they can negotiate the commission savings into a lower offer and sales price.

Tomorrow, it's back to you, Thompson.