The New York Times has a new article on selling by owner in its real estate section that I found particularly noteworthy. “The Lure of Cutting the Middleman” by Elsa Brenner talks of how more and more sellers who bought during the boom feel that they should cut the middleman (Realtor) out of the deal in order to preserve more cash from the sale of their home.

Studies by NAR have shown that selling by owner actually puts less money in the seller’s pocket not more. Studies Northwestern University an the University of Wisconsin dispute NAR’s results.

I was dubious about ALL the results, so when I noticed one particular brokerage that was using a flat fee listing service that was gaining in popularity, I decided to run their numbers against a major brokerage in my area. I deliberately picked a brokerage with a territory similar to that of the flat fee service and simply ran the numbers. My study did show that in this current environment (I did six months worth of sales) sellers did 7% better with a Realtor with a faster sale (about 60 days faster) than with the on-line service. Interestingly enough – these numbers came right down the middle between the NAR numbers and the academic studies.

Since the sellers were offering a half-commission to the agent who brought the buyer, sellers didn’t break even, they LOST money working on their own. Given a “typical” commission of 6% (although there is no such thing) the sellers came out 4% behind a full-service listing when you count the buyer agent fee and 1% behind without it. Also, those that failed to sell ended up listing the home themselves and having to pay twice. Once, for all the money they put into the initial listing and the publicity and again when a full service brokerage took over. LISTING YOURSELF IS NOT RISK-FREE.

These services make a great deal of sense for certain people. But being internet savvy is not enough. You need to understand real estate transactions and liability and you have to be able to understand the mentality of buyers. Understand that “interest” is a long way from an "offer" and that an “offer” is a long way from a “contract” and that a “contract” is a long way from a “sale.” It isn’t OVER until its over…and that means after the closing.

For those who missed the original blog, feel free to check out the numbers. Gary White also had a terrific blog on this topic a couple of months ago.