Just some facts before you read this article.
Cheryl Johnson of Johnson Realty
*101 Listings Sold in 2007
*95.29% (Actual Sale Price versus Listing Price)
*76.82 Average Days on Market
Gillian Nero of Dielmann Sotheby’s International Realty
*9 listings Sold in 2007
*90.60% (Actual Sale Price versus Listing Price)
*100.5 Average Days on Market
* Source MARIS (St. Louis MLS)
Not only do our listings sell FASTER, but they sell for MORE! AND- that doesn’t include the nearly $1,000,000 in commissions we save our clients.
Friday, February 1, 2008
St. Louis real estate agents compete on fees, levels of service
St. Louis Business Journal – by Matt Berkley
Cheryl Johnson charges a flat fee of $500 for MLS listings, plus .34 percent commission at closing.
Cheryl Johnson has no problem confessing what she sees as one of her profession’s dirtiest little secrets: “If a real estate agent really knows what they’re doing, they don’t need to charge as much, because what we do truly isn’t that much work.”
Johnson, broker and owner of Town & Country-based Johnson Realty, is one of the new breed of real estate agents who has chosen to abandon the industry standard of charging 6 percent commission fees. The standard fee is a practice some agents and consumers feel has become antiquated due to ever-increasing technology and access to information.
Fueling the fire against conventional agents are Web site operators such as For Sale By Owner, Help-U-Sell Real Estate and Redfin, which offer a variety of services a la carte, with flat-fee MLS (multiple listing service) listings starting as low as $49.50. Lynn Wagner, flat-fee specialist for soldbyme.com, has seen the local do-it-yourself market rise dramatically in the past two years.
Although flat-fee-service companies still make up only about 2 percent of the St. Louis market, according to Wagner, they have grown to more than triple that in larger metropolitan areas. A 2007 National Association of Realtors profile of home buyers and sellers showed that 81 percent of sellers use full-service brokerages, 9 percent choose limited services and 9 percent use minimal services, such as simply listing a property on an MLS.
“Real estate agents are more of a support team now,” Wagner said. “In the St. Louis area, people are more educated and don’t need help with the paperwork. Those are the people going towards the flat fee.”
With offices in Westport, St. Charles and Chesterfield, Soldbyme offers a basic flat-fee MLS listing of $399, listing around 200 St. Louis clients at any given time. Although companies like hers do offer counsel, Wagner said all the basic work — inspections, open houses, negotiations — falls entirely on the homeowner.
On average, Johnson of Johnson Realty spends only about four hours total for filing, listing, contract negotiation and bringing a home to close. “That’s no different than what any other agent would spend, but a lot will try to make the process seem so hard because they have to justify a high price,” she said. Rather than indulge in her share of the commission, which she said still bounces around 6 percent in the St. Louis market, Johnson charges a flat fee of $500 for MLS listings, plus 0.34 percent commission at closing. In 2007, her second year in St. Louis, Johnson sold 101 homes.
According to Johnson, it’s important to draw the distinction between full-service firms and full-commission firms. She offers comprehensive services, but she said the title “discount company” infers certain limitations.
Bob Mitchell, president of Florissant-based ValueList Real Estate Services Inc., St. Louis’ largest discount/full-service real estate and mortgage company, quickly dismisses any notion of limited services.
“The only thing we generally won’t do is newspaper advertising; it’s ungodly expensive and it just doesn’t work,” Mitchell said. Instead, Mitchell has found better results for his clients through heavy online exposure.
ValueList, founded by Mitchell in 1994, charges a flat fee for the listing, with bracketed prices from around $1,500 for a $100,000 home, up to $2,500 for a $250,000 home and so on.
Mitchell said that in the event that another agency brings in the buyer, all the client has to pay is ValueList’s flat fee plus what would normally be the buyer’s agent’s commission, generally between 2.7 percent and 3.15 percent. Add those two charges and compare them to a normal 6 percent commission, Mitchell said, and consumers could see savings anywhere from 35 percent to 85 percent.
Gillian Noero, an associate with Dielmann Sotheby’s International Realty in Clayton, believes it’s a myth that traditional real estate agents hold a vendetta against discount brokers. “A lot of discount brokers feel that way because their listings don’t get shown,” she said. “They aren’t shown because the person isn’t paying them enough to get it marketed.
“As far as I can tell, a discount broker doesn’t give an opinion of price,” Noero said. “Some of their listings are overpriced by $60,000 to $70,000, and that’s also why they aren’t selling.”
Mitchell said the flat-fee MLS firms, or “no-services companies” as he put it, experience more prejudice than discount companies like his. Although homes listed as “for sale by owner” aren’t entirely dismissed by agents, Mitchell said those homes rarely are a priority for them when they show homes. Similarly, agents are likely to move listings that pay 2.7 percent up their list at the expense of discounters who offer 2.25 percent, he said.
John Williams, president of the St. Louis Association of Realtors, is quick to recognize the impact of the Internet and how it has empowered consumers. He’s also adamant that despite any criticism, full-service agents will always serve a critical purpose.
“Our service value is on-the-ground knowledge,” Williams said. “It’s one thing to read about how you can buy a house, but it’s another thing to know how to buy a house on a certain street. Information is everywhere now, but there will always be an agent or someone in a position to interpret that data.”
In order to compete with the do-it-yourself market, Noero believes agents need to continue to work on adding service value for buyers and sellers.
“If you can give them good information and be thorough and diligent, you become more than just something that just gets printed off the Internet,” she said. “But if you’re a human version of an Internet printout, then why would anybody bother to think you have any value?”
Matt Berkley is a St. Louis freelance writer.
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