How low? Discount house-traders opens
Last year, a new firm jolted the local real estate scene by promising to sell a house for a flat fee of $2,995. Now comes another shock to the system of six percent commissions: HomeSell Realty, which is offering to do the job for $1,500.
"We think that's fair whether it's a $200,000 or $300,000 house," says the man behind HomeSell. "It costs the same to market that home."
He is local entrepreneur Shane Bradley, and he senses a groundswell moving through real estate sales in Charlottesville.
"You drive through every neighborhood, and you see more for-sale-by-owner signs," he says.
Bradley promises that HomeSell's service to customers is the same as at traditional real estate firms. What's definitely different is how the realtors are paid and how much the customer pays.
When Bradley's wife worked as a realtor for another firm, it seemed to him as though agents, who were independent contractors, were taking all the risk in selling property only to have the company "whack 50 percent off the top" when they sold something. "I don't think that's right," he says.
The real estate agents at HomeSell are on salary, with benefits and paid vacations. Bradley declines to say how much they're making, but he describes all the agents there as "experienced real estate professionals."
Current real estate commissions in Charlottesville are six percent. When a house is sold, three percent goes to the listing firm. If the buyer also has an agent, he or she typically receives three percent.
Bradley believes that real estate can be profitably sold for a flat fee of $1,500 plus a three percent commission to the buyer's agent.
That's what they do for sellers. For buyers, HomeSell offers a sweet little rebate: They'll hand back one percent of the three percent commission a buyer's agent typically receives.
"What we're doing isn't new," says Bradley, "just new to this area.
Since the firm opened in April, he says, the response has been so overwhelming that he's hired another agent.
The last time a challenge to the standard six percent commission structure came was last fall with the opening of the local office of Assist-2-Sell. Assist-2-Sell's Anthony McGhee doesn't think HomeSell will be a major threat to his business, which, he says, has been taking an average of one listing a day. For one, Assist-2-Sell is a franchise that's been around for 10 years, while HomeSell is "charting new waters," he says.
And since the other discount firm opened, "We've noticed no change in our productivity," McGhee says. "It's gone up every month."
He also describes HomeSell's buyer's discount as a complicated formula. "Generally, a confused mind says no," warns McGhee.
Carolyn Shears, president of the Charlottesville Area Association of Realtors, doesn't think the latest discount brokerage is going to rock the traditional firms' world. She calls HomeSell a "niche" business model but concedes that some customers may prefer it. "I think consumers want choices," she says.
She notes that a number of traditional firms offer fees for services as opposed to a strict six percent commission.
And as for putting realtors on salary, "It doesn't work for me," she says. "The vast majority who are good realtors prefer to be in charge of their destinies. The better they do, the more they make."
Realtor Roger Voisinet has no plans to cut his commission in the face of the discount brokerages. "I learned decades ago, you should buy the best quality tools around, not the cheapest ones. That's the strategy a homeowner should take," he says.
Because real estate is a service profession, "If you really want good service or marketing," he says, "I don't think you can get it from a discount firm."
Shane Bradley remains convinced the future is in discount real estate brokerages. "I would rather be me than them," he says.