NEW YORK (CNN/Money) -
The costs of selling a home have risen in lockstep with higher real estate prices in recent years. Americans now pay more than $70 billion a year in broker commissions.
As home prices ballooned, commissions rose with them even though commission rates have fallen a tad. Nationwide, the average dropped to just 5.1 percent in the last 10 years from about 6 percent.
A single family home in, say, Santa Monica that sold for $350,000 eight years ago generated $21,000 in commission. Now back on the market for $1.2 million, it will produce $60,000 in commissions at 5 percent.
"When the average house price was $75,000, maybe paying a 6 percent commission made sense," says Colby Sambrotto, chief operating officer of ForSaleByOwner.com. For many sellers, it no longer does.
As the stakes rise, more sellers are selling their homes themselves.
Modern technology helps. Owners.com, ForSaleBYOwner.com, Homekeys, and many other Web sites make it easier to market properties. "It's not like the old days where you just put a sign up on the lawn," says Sambrotto.
ForSaleByOwner.com, like other do-it-yourself Web sites, offers several levels of service. The least expensive costs just $89. That includes a month-long listing on the site with up to 2,000 words of description and six pictures.
The company offers other levels of service that cost up to $899. The deluxe plans include an entry on the multiple listing service (MLS), the industry's principle marketing tool, which is perused by some 10 million people a month.
Choosing that option could cost a 3 percent commission if a broker provides the buyer. If the sale is transacted strictly through the ForSaleByOwner, though, the seller pays zero commission.
Homekeys has a free option for listing a home on their site and they also offer a connection to the MLS listings.
Mario Villena, vice president of marketing for Homekeys, says that they advise their clients to negotiate a two percent commission with buyer's agents.
In the last few months, 19 clients have sold their homes that way. The sales averaged $365,000 and the average savings from the 6 percent rate was $14,646.
Keys to the sale
The three keys to selling your home, on or off line, says Sambrotto are: It must be priced and marketed correctly, and the title transfer has to go smoothly. Do-it-yourselfers have to be prepared to accomplish all three, although in many states, attorneys are required to handle closings.
In pricing, sellers don't want to leave too much money on the table by setting too low a price. On the other hand, overpricing can mean the house sits on the market, also a financial (and emotional) drain.
Many of the most motivated buyers will shop the house its first week or two on the market. Overprice it and many good potential buyers will never see it again. A well-priced house not only sells quicker, it may even get competing bids, driving up the final score beyond the originally asking price.
To set the right price, "you have to know the market, styles, square footage," says Elaine Jassey, a full-service broker from Stamford, Conn. "It's an inexact science."
Villena says clients are "very afraid of making a mistake in valuing their homes." Homekeys provides numerous tools, such as home-sales comparisons, to help them come to a realistic price.
Pros and cons
Marketing, perhaps the most complicated and important job that brokers do, can challenge sellers on their own.
Jassey markets homes in a variety of ways, including:
- Print. Home seekers still consult the newspaper classified ads.
- Internet. She has two of her own Web sites and also lists on Realtor.com.
- Relationships. According to a survey from Real Estate Companies of the World, the nation's largest network of independent residential real estate firms, personal referrals are the number one source of business for realtors. Agents like Jassey have built up relationships with other agents that enable them to put together buyers and sellers.
- Mailings. Snail mail can still get results.
- Relocation connection. Through her parent group, Prudential, Jassey has corporate clients that use her services when they are, for example, transferring an employee into her area.
Most sellers do not have all these marketing avenues open to them.
Another critical task a listing agent performs is to qualify the potential buyer early on and continuously. "You have to be very well informed on the buyer's financial conditions," says Jassey.
Time and money can be eaten up by accepting an offer from an unqualified buyer, leaving a house off the market for weeks before the seller finds out the deal is not going through.
"One of the jobs of a listing agent is qualifying a buyer," says Jassey. "As a seller, you can't qualify. The buyer's mortgage provider won't talk to you. His attorney won't talk to you."
The bottom line is that sellers have to balance commssion costs against the time and effort they want to put into the sale, how quickly they want to sell, and the comfort level they require. First-time sellers and others who don't wish to immerse themselves in the process may opt for a full-service broker.
Those sellers who want to fly solo can take heart from Sambrotto's claims of 65 percent successful sales within three months of listing on his web site. Keep in mind too, that this service is not a lifetime commitment; the low cost enables sellers to change their minds without taking a financial bath.
Unsure sellers can try to sell their house on their own for a month or two and see if they succeed. There's little to lose and if it doesn't work, they can always take it to a full-service broker.
It may soon get a little harder to sell your home. For more, click here.
Second homes are in big demand. Click here for that story.