"Sell By Owner" Misguided Information from One Inside the Industry

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Education & Training with @properties
I know that I am veering away from my second installment of Web 2.0 statistics but after reading this post (http://www.inman.com/blog/2008/05/2/take-it-agent-sell-owner) on Inman yesterday, I decided I needed to comment. In fact I URGE everyone and anyone of the real estate community to read this article, forward it, and make sure it is recognized what generalizations are made. In the post entitled, "Take it from an agent -- sell by owner", foreclosure and investment specialist Dr. Danielle Babb lays blame to Realtors and their commissions, for hindering the recovery of the real estate market. Babb has also written a post on her own blog (http://findingforeclosures.entrepreneur.com/2008/04/30/real-estate-agents-hinder-real-estate-recovery/) going further into depth with her theories and findings. As you would expect on both her blog and Inman, this posting has issued a peppering of posts from Realtors and discount brokerages alike condemning and praising Dr. Babb. In her article, "Real Estate Agents Hinder Real Estate Recovery" Dr. Dani starts the article by leading in with the following: But I have to say that agents-while protecting some home buyers and sellers-are adding an incredible amount of extra work and effort to the real estate recovery. Their added fees are creating inflated home prices, keeping sellers and buyers from reaching deals.

"(Realtors) are adding unnecessary work, rules and negotiation to an otherwise easy process. In addition, sellers, knowing they have to pay 6 percent to an agent (5 percent if they're lucky), simply add this to the price so they still get their ultimate bottom line out of the house. This means the buyer actually ends up paying, even though the documentation shows that the seller is paying the agent's commission. Therefore, we could have a faster home recovery without agency fees!

On top of all this, the agent adds to the process wasted energy and time, which could be spent house hunting, financing or moving."

Babb then goes on simplify the home buying process into a sugar-coated journey through cyberspace to find their dream home, (although she is good enough to stress the fact that this is how the process SHOULD WORK).

  1. A buyer goes online
  2. They find their dream home and submit an offer
  3. They come to terms on price (or not... where they simply walk away)
  4. They sign contracts, assign escrow, and find a title company
  5. If anything goes wrong, they call in their lawyers.
  6. Happily ever after

She then goes on to talk about how an agent complicates the process (or hinders it by playing tag-along). I'm serious... EVERYONE has to read her play by play with regards to how an agent simply focuses on the money throughout and only slows the process moving forward. Babb, goes so far as stating the following:

  1. Buyer has to find an agent to represent him or her, or buyer gets "dual representation" from seller's agent (thereby increasing seller agent's commission for doing little to no extra work, but adding 2 percent to 3 percent to the purchase price).
  2. Buyer still looks at the same houses he/she would look at it with or without an agent.
  3. Seller's agent has to take offer to the seller, present it, "mull it over," discuss it, decide how much can be squeezed from buyer and present a counter offer to the buyer's agent.
  4. Buyer's agent presents counter offer to buyer. Buyer tells agent what he or she wants to counter with, and steps 4 to 6 repeat until everything in the situation without the agent is finished-the same process that could have been done in one hour with the seller and buyer together.
  5. Seller's agent and buyer's agent "stay in touch" throughout escrow to make sure they get paid.
  6. No direct communication exists between seller and buyer, so anything the buyer or seller needs must go through an intermediary, thereby justifying ridiculous commissions and inflating home prices.

She then ends this wonderful post by stating that unless you have an overly complicated situation, you're better off selling by-owner. So... I don't know about what market Dr. Babb was selling in, or if this is a representation of how she treated her clients, but working in the Chicago Market for the second largest company in market share, I know for a fact that there are glaring holes in this "Simple" equation.

Pricing - How does someone come up with a price? Zillow? (82% of their home appraisals fall within 20% of sales price here in Chicago) http://www.zillow.com/howto/DataCoverageZestimateAccuracy.htm

More Money? - According to the 2006 NAR study on FSBO's, not only did over 80% of all FSBO's end up listing with an agent, but those that initially listed sold on the average of 32% higher than those that sold By Owner. http://www.realtor.org/research/research/fsbofacts (Yes, I know from her past posts that Dr. Babb blasts all NAR research, but I will honestly say that no one has spent more money on the subject)

Finding the Dream Home - So, say your dream home is a 2 bed 2 bath condo in Chicago for under $350K. Log in to Realtor.com and prepare for some homework. ONLY 13,000 matches! Take into consideration schools, transportation, hi-rise, mid-rise, parking, pets, pets under a weight limit, proximity to lake, assessments, etc, etc...

Attractive Offer - So you want to make a strong offer but only have a fixed amount of money to spend? Well take into consideration things like home sale & mortgage contingencies, closing date, money down, and a number of other things that I'm sure are in Babb's book, can help your case.

I could go on and on with this topic, but I think we get the point. I refuse to blast Dr. Babb's post any more than to point out some glaring loopholes. I'm sure she has helped countless individuals build wealth and succeed through her many ventures. But DON'T... I repeat DON'T reduce the real estate community to money hungry peddlers. You're casting stones to those that have helped millions of Americans achieve the goal of home ownership or home sales and simplified their lives.

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Rainer
218,543
Lisa Friedman
Alliance Realtors - Bedminster, NJ
Central New Jersey Real Estate
Yes, if only sellers could realize all of the wasted time and also money that they lose in a declining market.
May 06, 2008 03:33 AM #1
Rainer
13,120
Matt Dollinger
@properties - Chicago, IL

I totally agreee Lisa.  Where Dr. Dani blasts NAR statistics, the findings from the 2006 FSBO study showed that those that list with a Realtor actually make 32% MORE than those listing By Owner.  (They also go on to state that over 80% of all FSBO's will eventually end up listing with an agent.)  Thanks for the comments!

 

May 06, 2008 04:50 AM #2
Rainmaker
490,543
Lorraine or Loretta Kratz
Crescent Moon Realty, Inc. & Land N Sea Auctions. - San Marcos, CA
Certified Negotiation Consultants

Matthew:

These articles do make it challenging for an agent. It is sad that she does not respect the code of honor that agents are to observe. Then lets talk about her ethic's. I do not know what profession she is currently in --- I do wonder if the shoe where on the other foot how she would fee about a colleague speak in terms of her not being worth her fee's.  

May 06, 2008 05:03 AM #3
Rainer
13,120
Matt Dollinger
@properties - Chicago, IL

Currently, she works a website focusing on making money off of foreclosures as well as selling books.  The biggest thing that I cannot understand is that she actually COACHES AGENTS, pitching the flat-rate realty model! Dani also speaks in her article about how she has recently done a transaction like this herself... well... doesn't this totally go against her thoughts on By Owner?  Her being a Realtor and all?  Again, I urge anyone who reads this to comment, forward and comment some more on this type of anti-Realtor behavior!

 

May 06, 2008 05:11 AM #4
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Rainer
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Matt Dollinger

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