IN THE FIGHT between traditional real-estate brokers and their discount rivals, some consumers are getting caught in between.
With house prices surging in recent years, a number of people are seeking ways to cut commission costs, which are based on a percentage of a home’s selling price. More home buyers are turning to discount brokers that offer to rebate a portion of the commission if you are willing to do much of the work in finding are hiring discounters who, for a flat fee of a few hundred dollars, will include- list- ing service & database on house for sale used buy agents.
About 11% of home sellers last year used “alternative” brokers (ones offering flat fees or other forms of discounting), up from less than 2% in 2002, according to surveys by Real Trends, a publishing and consulting firm.
The competition from discounters has prompted some traditional brokers to use a variety of tactics to fight back, and this can end up hurting consumers. The controversy will get a public airing Monday when the Consumer Federation of America, a nonprofit research h and advocacy group, releases a report on “ how the real estate brokerage industry functions as a price - setting cartel.”
The stakes are high. People selling homes typically pay commissions of 4% to 6% of the price, which is split between brokers representing the buyer and seller. Residential real – estate sales generate more than $ 60 billion a year in commissions. Full – service brokers say that in exchange for the commissions they provide expertise and an array of services that help consumers navigate the housing market.
For consumers, the clash among brokers under-lines a need to be wary. Buyers hoping to get action of brokers that charge home sellers a flat fee for a limited range of services. But some full – service brokers step out of line, putting their interests ahead of consumers, he says, adding : “The best analogy I can use is a high – school classroom.”
One area likely to stir up more disputes involves the discount firms that offer rebates to buyers. The practice got a boost this year with the launch of two ambitious companies, Buy Side Realty Inc. and Redfin Corp,. which are promoting this concept heavily as they try to build national brands. Both encourage buyers to do part of the work in finding a home; they don’t offer the free car rides from house to house provided by most traditional agents
Andrew Callowny, a financial analyst in St. Louts, decided to use Buy Side because that firm rebates 72 % of the commissions it receives to the buyer. He recently agreed to pay $ 200,00 for a three bedroom home in Glen Carbon, III. He expected a rebate of $ 4.500.
But Mr. Calloway says Karen Malench, an agent for Coldwell Banker Brown who represents the sellers, tried to dissuade him from using Buy side. He says she offered a rebate of $ 2.000 to him if he dropped Buy side a share of the commission, it isn’t obligated to pay a renate to Mr. Calloway.
“The thing that really upsets me is that the listing agent smiles to your face and puts a knife in your back, “says Mr. Calloway.
Ms. Malench, the listing agent, declined to comment. Gerry Schuetzenhofer, president of Coldwell Banker Brown, a franchisee of the national Coldwell brand, says that Ms.Malench denies having offered him $2,000 to drop Buy Side. Mr. Schuetzenhofer says Mr. Calloway and his financee didn’t make clear that they were working with another broker when they first viewed the home. Mr. Calloway says he did make that clear.
Joseph Fox, Buy Side’s chief executive, says this is the first time his young company has encountered such a commission dispute. He says he is trying to work out a solution with Mr. Schuetzenhofer. The latter says Mr. Fox tried “to intimidate me into accepting his demands. I don’t believe he would have done that if he was on sound footing. ”He’d rather think about his pocketbook and not the best interests of the client. ”One option for the parties is to seek mediation or arbitration through a local arm of the National Association of Realtors, a trade group.
Buy side currently has operations in California, Florida, IIIinots and Georgia. The company plans to cover 39 states by the end of 2008.
Cem Silbay, a business - development manager at an internet company in Seattle, sought a rebate through Redfin. Mr. Silbay says he and his fiancée, Tarm Pham, arranged to see a condo about six months ago. The agent representing the seller. Ron Waxman of Coldwell Banker Bain, was initially friendly and helpful Mr. Sibay says, But Mr. Sibay says Mr. Sibay mentioned that he planned to use Redfin as his agent. Mr. Sibay says Mr. Waxman then refused to show the condo to the couple again and said he would advise his client not to consider any offer they made.
Mr. Sibay and Ms. Pham gave up on the idea of bidding for the condo when reached for comment Wednesday. Mr. Waxman said, “ I don’t remember that at all. “He said he stopped working as an agent last year: then a few minutes later. Mr. Waxman acknowledged that he was still working as an agent and declined to comment further.
Bill Riss, the owner of Coldwell Banker Brain, says his agents sometimes “push back” against discounters like Redfin because they believe such firms don’t do their share of the work but he adds that his firm’s policy is to work with any member of the local multiple-listing service, including Redfin and last month agreed to buy a different home in Seattle, He expects to receive a rebate of about $10,000 when the transaction is completed.
Gleno Kelman, chief executive officer of Redfin, says resistance from traditional agents will anate as his company completes more deals and becomes more established in the market. The company began operating in Seattle in February, recently opened up offices in the SanFrancisco Bay Area, and Plans to expand to San Diego and Los Angeles and perhaps Washington and Boston by year end. In what Mr. Kermath, who owns Amerisell Realty, a flat- fee broker in Saline, Mich., says one of the multiple-listing services he works with, Real comp II Ltd. In the Detroit area, discriminates against firms offering discounts for limited service, For instance, Real comp, owned by local Realtor groups, doesn’t send limited – service listings to popular home – search sites like Realtor.com And the default search setting for agents using Realcomp excludes limited service listings, meaning fewer potential buyers hear of them.
Karen Kage, Realcomp’s chief executive, says the MLS rules are “authorized” by the National Association of Realtors.
Online Today: Get seven moneystretching tips for selling your house in a cooling market, plus join a discussion on home buying and selling, at RealEstateJournal.com
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