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Discounters are alive and well
Full-service real estate brokers continue their efforts to secure their turf. But discounters' business is booming.
By Stephen Gandel, Money Magazine senior writer

NEW YORK (Money) -- If realtors are trying to put Randy Calhoun out of business, he has yet to feel the heat.

Calhoun, who runs a service that helps homeowners sell without a full-service real estate agent says listings and revenue for his company have risen 40 percent in the past year. "Our business is up everywhere," says Calhoun, who operates FSBOadvertisingservice.com in 42 states.

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Calhoun has plenty of company. Across the country, discounters are multiplying and thriving.

And they're doing so despite an ever more forceful resistance from realtors, who have stepped up their lobbying for local rules and state laws that would significantly curtail the effectiveness of listing your home without a full-service agent.

At the heart of the issue is a fight over how much individuals should have to pay to sell a house. Full-service agents charge sellers a 6-percent commission, and those fees can run well into the thousands of dollars. That buys a home seller everything from listings to open houses to help with negotiations at closing time. Those are useful services.

But some sellers might just want help posting a listing, for example. For them, discounters offer "limited service" and might charge just a few hundred dollars. The real estate establishment has long maintained that traditional brokers can find a buyer more quickly and secure a higher price than a seller could on his own.

In July, the Federal Trade Commission charged the Austin Board of Realtors with violating anti-trust laws by blocking the distribution of some discounters' listings onto public Web sites such as Realtor.com. Since many homebuyers start their search at such sites, brokers who can't post listings there are at a big disadvantage, the FTC argued.

The Austin Board of Realtors rescinded the rule, but there are about a dozen local real estate boards that have similar restrictions on their books, including ones in Colorado, Indiana, Michigan, Wisconsin and Utah.

Even in those states, however, the discounters seem to be maintaining brisk business by charging home sellers maybe a few hundred dollars for selected services rather than thousands for full-service.

For example, listings at BuyHomes.com in the Milwaukee area, have doubled in the past year.

Aaron Farmer, who runs Texas Discount Realty, says he saw no slowdown in business following the initial rule change in Austin, which other parts of the state have adopted as well. His business is up as much as 10 percent from a year ago.

Albert Hepp, lead broker of FlatfeeMLSlisting.com, which operates in Michigan, Minnesota and Missouri, says overall his business in up 40 percent this year.

Deni Niethammer, who owns FSBO-Colorado.com, which lists houses in Denver and Boulder, says, "Business is booming. We are doing very, very well."

One of the reasons the discounters are not being affected is that the Austin rule and ones like it are easy to get around, say real estate agents.

Farmer in Texas charges a commission at closing and then automatically rebates the commission to the client. No money changes hands. The addition of that slight-of-hand in his contract is enough for Farmer to call his listing "exclusive-right-to-sell," a category of homes that do get listed on Realtor.com.

Some brokers are charging customers $0.25 when they close on their house sale and calling that fee a commission, which is often a requirement for "exclusive right-to-sell" listings. And others have taken to listing their clients' homes in two MLSs - their local one and the one without rules that block listings from Realtor.com.

Niethammer in Colorado has had to raise her prices by $100 to ensure her clients make it onto Realtor.com. But the $399 she now charges is still a relative bargain next to what full-service agents charge -- 6 percent commissions that run into the thousands of dollars.

"The public wants to save money," says Glenn Wallace, who runs Mydogtess.com, a fee-for-service real estate firm in North Carolina. "So people are going to come to us no matter what."

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Brokers in the hot seat on the Hill

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