Featured article excerpted from the Milwaukee Journal-Sentinel
More owners selling, saving on their own
Listings bypass usual commissions, but mainstream brokers say beware
By MICHELE DERUS – July 24, 2003
Milwaukeean Matt Towne’s duplex, on and off the market in a week, didn’t exactly sell itself. He paid a $500 realty fee.
That price – about $10,000 lower than he would have paid under the industry’s standard commission – placed his 10-room, $170,000 east side home in the Multiple Listing Service databank.
For a flat fee, Towne bought MLS access from Corey Scholtka of BuyHomes.Com in Wauwatosa, one of several fast-growing Internet-based companies that cater to consumer rebellion against agent-based realty transactions and their standard 6% sales commission.
Realtors own and control MLS, a marketing base that covers an estimated 85% of all property listings. In the past, for-sale-by-owner sellers were denied access to the MLS. Now, for a fee, access is available.
“The buyers saw my sign out front and called me up,” said Towne, who accepted the offer July 17. “Because there were no addendums and no contingencies and the offer was standard form, I didn’t even get an attorney.”
Scholtka said that a $500,000 house takes about as much work to sell as one costing far less.
“And if your home is only on the market one week, you may ask, ‘Why pay a huge fee, the same fee paid by someone whose house was on the market six months?’ ” Scholtka said. “There are inequities in the traditional realty system. My service levels the playing field.”
Home-seller Towne considers himself part of a new breed of FSBOs (pronounced fizz-bows), as for-sale-by-owner sellers are nicknamed.
With no realty experience but considerable research and personal involvement with prospective buyers, Towne quickly and inexpensively sold two homes this summer. The closings on both sales are pending.
“We sold my girlfriend’s home in a day – three offers by 5 o’clock – and mine in a week,” Towne said. Wendy Durski’s five-room south side house fetched more than her $142,000 asking price, he said, and his duplex sold for less than his $170,000 asking price.
In return for the MLS listing, Durski and Towne agreed to pay 2.4% of the sales price to any MLS member except Scholtka who provided their buyer.
That 2.4% represents metropolitan Milwaukee’s typical commission to the agent who supplies a buyer; the agent who lists the home typically gets 3.6% or up to the traditional 6% when they also find the buyer.
These buyer agent commissions, which vary around the country, are not mandatory but are advisable in today’s busy market. Scholtka does not collect the ‘co-broke’ percentage commission if he supplies a listing customer’s buyer.
“I represent the seller exclusively and have no other sales agents, so when the buyer comes to me and the seller assists me with showing the home, I am able to waive the 2.4% because this is a Variable Commission” Scholtka said. “However the seller may be liable for 2.4% if the buyer misrepresents, so I stongly advise all sellers to have a real estate attorney”.
Though Durski wound up paying a 2.4% commission, Towne said there was no 2.4% commission for his sale. The beauty of this arrangement is that it bridges two longtime antagonists – Realtors and FSBOs, Scholtka said.
“I’m a hybrid company. I’m bringing FSBOs into the system. They should love me for that.” said Scholtka, whose family has been in the realty business for three generations. Scholtka is a former Re/Max agent with a background in Buyer Brokerage. Corey traveled the country examining new business models before settling on the Flat Fee MLS model in lieu of a career in technology consulting.
“Some mainstream brokers who charge 6% have been in the industry a long time do not really appreciate what I am doing for consumers because now they may only get 2.4%.” Scholtka said.
Mainstream brokers resent operations like Scholtka’s, which typically include MLS access, house signs and a personalized Web site with photos and/or virtual tours. Traditional brokers note that a real estate deal is a complex process with legal and financial pitfalls and say such bare-bones home listing services unfairly shift the deal’s workload to them.
“These limited-services companies say, ‘I’ll put your listing on MLS for $500’ and consumers think, ‘Oh, cool, I want that,’ ” said Mike Ruzicka, president of the Greater Milwaukee Association of Realtors.
“But then these guys take off, leaving the seller wondering, ‘How do I go to closing, get an inspection?’ ”
Caught in the middle of the tension between the traditional agents and the FSBOs are people like Peter Shuttleworth, who runs the Wauwatosa-based Multiple Listing Service databank serving southeastern Wisconsin.
The National Association of Realtors, whose members feed and own the MLS information network, has ruled that flat-fee MLS access brokers have a right to the network. But should their listings be described differently to reflect that it’s a by-owner sale?
“How do we notify a broker what to expect?” Shuttleworth asked rhetorically. Such listings may be flagged online as “unserviced” or “limited service,” he said.
“Variable commission” and “exclusive agency” type listings may be something the MLS legal counsel looks at in the future. Scholtka Said.
Shuttleworth’s MLS office is reviewing how to apply National Association of Realtors rules on the matter. “It hasn’t been resolved yet,” Shuttleworth said.
His counterpart in Madison, the South Central Multiple Listing Service, settled on listing these enterprises as “limited service,” said Bob Weber, board chairman of the Wisconsin Realtors Association.
“That doesn’t mean there’s no controversy anymore. Brokers are still frustrated,” Weber said. “This is a version of For-Sale-By-Owner, and it can be a nuisance. But there’s always been a FSBO” or a discount brokerage “group out there and there probably always will be.”