Look at the magnificent views from a $1.45 million condo in downtown KC
James Fleming thinks his “one-of-a-kind” College Hill home is worth $749,000 — and he is trying to sell it himself.
Now is the best time to sell the house without a real estate agent, he reasoned: The market is tight with houses selling in under three weeks, and more people can find his house online than ever.
It’s worth the extra work and headaches, he said, to keep an extra $22,500 to $45,000 he would normally pay in commissions.
He said he has sold eight houses in several states over the years and rarely felt happy with the value he got for the traditional 6 percent agent commission.
“It’s in archaic model, and it’s just as matter of time before it’s disrupted (by technology),” he said.
Middlemen, from stock brokerages to shoe stores, have been battered by innovative technologies that sell direct to the buyer.
But real estate agents and brokers have a good comeback: They provide a sense of safety and convenience during the biggest financial transactions in most people’s lives.
A house isn’t standardized and easy to manage, like a shirt or concert tickets. Houses are big, expensive, involve legal rights and are sometimes difficult to value accurately.
“It’s a complicated process; people want someone experienced to get them through,” said Jon Quincy of Penfed Realty and president of the Multiple Listing Service of South Central Kansas.
And most home sellers agree. Attempts to disrupt the way homes are sold have met with only limited success.
The trend is actually running against Fleming and those like him, says the National Association of Realtors (NAR). Just 8 percent of sales nationally are For Sale By Owner, according to the group’s 2016 survey results, down from 14 percent in 2004.
Although there are 27 listings on Zillow for houses For Sale By Owner in Wichita, that’s just a fraction of the 452 total listings on Zillow.
For Sale By Owner
Marketing is the single biggest reason that homebuyers list their homes with agents, according to a recent survey by the NAR.
But Fleming noted that the need for marketing is less than usual now because the market is tight. There is a shortage of homes for sale in Wichita, and nationally, which has led to swarms of buyers seeking showings and making multiple offers when houses come on the market.
The median number of days on market was just 20 in the Wichita area in April, according to the South Central Kansas Multiple Listing Service.
Fleming, of 301 N. Belmont, doesn’t think he will have any trouble marketing his home.
He has just put up a sign and expects to put it on Zillow’s For Sale By Owner listings.
Last year, he said, he sold a rental home without an agent through Zillow and got more than 3,000 views of the listing, 30 to 40 phone calls and two offers, he said.
It sold in six to eight weeks, he said, and saved him $8,000 on commission.
“Now, I can’t imagine doing it any other way,” he said.
Some of the For Sale By Owners are less expensive properties that may wind up going to landlords — in other words, experienced buyers with an intense interest in value — but most are regular homes aimed at regular buyers in a wide range of prices.
Michael Marler is selling his house, 728 N. Murray, for $149,000 and is hoping to keep at least $4,500 from the sale.
He said he has been part of a lot of home sales.
“I have been a Realtor before, so I’ve got experience selling houses,” he said. “I can write a contract. I know how the process works.”
But real estate agents do a lot for sellers, say real estate professionals.
“I can see that given the tight inventory you might think it would be fairly easy to sell your home,” said Adam DeSanctis, economic issues media manager at the NAR. “But what we are finding is that consumers want some assurances in getting their home out there.”
Real estate agents help the homeowner set the asking price based on the recent sales of comparable homes. They give the homeowner guidance on how to prepare the home for sale. They advertise the home in a variety of ways.
They host open houses and act as the contact for a buyer’s agent. They guide the homeowner during negotiations. They provide advice, or even coordinate, repairs required by the buyer and may assist the seller to the closing.
DeSanctis said there is evidence that For Sale By Owner homes typically sell for less than the market rate. But whether that is because of mispricing or because they were sold to relatives at a discount is unclear.
For their work, sellers’ agents and their agency typically split 3 percent of the purchase price. The buyer’s agent and agency typically split another 3 percent.
Anyone offering their home For Sale By Owner would have to pay their buyer’s agent, if there is one, so the benefit may really only be 3 percent discount, rather than 6 percent.
Agents work to gain wide exposure quickly. They place houses on proprietary local sites, such as those belonging to Coldwell Bankers or J.P. Weigand, as well as pay to list on national digital platforms from Zillow to Facebook.
That kind of wide exposure is critical to attracting the interest that leads to strong offers — and a more competitive price. Less interest tends to result in a lower price.
“The days of putting a sign in the yard and the house selling itself are over,” said John McKenzie, president of Coldwell Banker Plaza Real Estate.
Disrupting the real estate market has been tried before and wasn’t completely successful.
Seattle-based Redfin started as a real estate industry disruptor more than a decade ago. Buyers could use its platform to get information on houses for sale and then have Redfin place a bid on a house all without seeing an agent.
Initially, there was negative reaction from the industry, and the company over the years has tweaked its business model to become more of a hybrid.
Today, it has agents, or teams of agents, plus even more technology to help customers make decisions. It charges 1.5 percent to list and, if it represents a buyer, offers to rebate an average of $3,000 of its commission to the buyer.
However, Redfin isn’t in Wichita, and the buyer’s side rebate is illegal in Kansas, according to the company website.
A similar model comes from website Owners.com.
Owners.com offers a listing agent at 1.5 percent in some states, not including Kansas, but it also offers limited service packages where the home seller can have the house listed on local MLS, Zillow and Trulia for $295 or $495 for a more deluxe version.
Phil Karp, senior manager brokerage services with Owners.com, said the NAR’s 2016 numbers that show 89 percent of people hiring brokers is misleading. It includes all of the deals done by limited service brokerages, such as his, which offer limited specific services for a limited fee.
Karp said the service provided by Owners.com agents is a good choice for those who are comfortable making most of the decisions and doing most of the work. The agents are there to provide support.
Karp sees some opportunity for technology in the future. With further advances in home price valuation programs, such as Zillow’s Zestimate, people will come to rely less on the expertise of real estate agents for this.
He sees more technology and more varieties of options on how to sell as putting downward pressure on commissions in the coming years.
Yet, it’s been slow going for the discount brokerages. They tend to appeal mostly based on price, in a market where people appear to mostly want full service.
“It’s been a tough transition into somewhat of a new era, but technology is pushing it.” Karp said.
“As a consumer, ask yourself, ‘What am I getting for 3 percent that I can’t get for 1.5 or 2 percent? What am I doing that I can’t do for myself?’ ”