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Do I
Really Need a Real Estate Agent?
If So, What Type?
reprinted with permission
from Welcome HOME.
by Mark A. Critelli, Critelli & Hubbard
Most real estate is bought and sold with the assistance
of a real estate agent or broker.
However, in the past ten years and with the onset of the
Internet, several different types of real estate agents and/or
agency relationships have developed in addition to the traditional
full-service brokerage: Internet-based services, limited-service
brokerage, flat- fee brokerage, buyer’s agency, and
sale-by-owner services, to name a few.
The level of service desired by the seller and/or buyer will
dictate what type of agent, if any, will be required and what
fee structure may be warranted.
Full-Service Brokerage. The traditional
method of buying and selling real estate employed the full-service
broker. Typically the seller would contract with a brokerage
firm to list the property for sale. Most metropolitan areas
have a multiple listing service (MLS) where properties are
listed and categorized for local brokers and/or agents to
gather information for potential buyers. In this traditional
arrangement the seller will normally agree to pay a percentage
of the sales price as a commission, normally six to seven
percent, which will be split between the listing and selling
brokers/agents. With a full-service agency, the seller should
expect the property to be aggressively advertised, marketed,
and listed on the MLS. Any advertising fees would be paid
for by the listing broker as a part of the anticipated commission.
Things get a little more murky if the seller wants less service
or wants to spend less than the typical six to seven percent
sales commission. The “unbundling” of real estate
services is a relatively new phenomenon that has taken off
in popularity in the last ten years. “Unbundling”
means offering specific fee-for-service items on an à
la carte basis.
I believe one of the primary reasons for this is the online
services and people utilizing and becoming comfortable with
the Internet. The Internet has significantly opened up the
choices for sellers and buyers of real estate because much
information is now online. This includes public records from
the treasurer’s and assessor’s offices as well
as the county recorder.
This new availability of previously obscure or difficult-to-obtain
information is allowing sellers and buyers to choose how much
or how little professional assistance they need and what cost
they’re willing to pay in selling or buying real estate.
Internet-Based Services. This type of service
focuses almost exclusively on listing the property with a
national Internet-based company. Many people attempting to
sell second-home or vacation properties use this type of service
to maximize exposure to non-local potential buyers.
Limited-Service Brokerage. This would typically
be a full-service brokerage firm that may contract or agree
to take less commission (four to five percent) when the seller
agrees to forego expensive advertising over and above a listing
on
the MLS.
Flat-Fee Brokerage. This service is exactly
what it says; the brokerage firm agrees to take a flat fee
instead of a specific percentage of the sales price. The seller
should expect to be more involved in the “showing”
process and/or actually talking with potential buyers; these
are typically the parts of the flat-fee service that differ
from a full-service brokerage operation. The seller may agree
to contract for additional services, showing the property,
for instance, at additional cost.
Buyer’s Agent. This service is offered
by agents that have made the decision to represent only buyers,
not sellers. A buyer’s agent aggressively represents
buyers; by definition, a buyer’s agent will not have
any conflict of interest or division of loyalty. The buyer’s
agent will typically split the sales commission with the listing
agent.
Sale-By-Owner Services. With the onset of
the Internet, many “sale-by-owner” service companies
have sprung up offering sellers and/or buyers a laundry list
of fee-for-service items, including forms, advertising packages,
marketing assistance, legal-service referrals, etc.
Many Choices. What it really boils down
to is how much involvement a seller wants to have with the
sale of a property. Normally, less involvement by the seller
means more services of a full-service broker and, hence, the
typical six to seven percent full-service brokerage fee or
commission. Sellers who are willing to shoulder many of the
typical responsibilities of a full-service broker (absorbing
advertising costs and showing the property and talking with
prospective buyers) may be able to get the job done with a
flat-fee broker, a limited-service broker, or actually selling
the property themselves, which may or may not require the
assistance of a for-sale-by-owner service company.
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