Kevin Hunt - The Bottom Line
The Bottom Line
July 6, 2013
The Greater Hartford real-estate market is showing some life, though the inventory of for-sale houses still lags as potential sellers remain spooked by the economy and uncertain market prices.
If you're selling, The Bottom Line recommends a local realtor as the safest strategy, but daredevil do-it-yourselfers can save big money on the traditional 6 percent commissions. Colby Sambrotto, a founder and former chief operating officer of one of the best-known DIY real-estate sites, ForSaleByOwner.com, formally launched his latest home-selling tool, USRealty.com, last month. It promises no-charge use of local muiltple-listing services and no payment until the consumer sells the house or a flat $99-a-month MLS fee and no commission.
Here's a recent conversation (edited for space) with Sombrotto.
Q: What's the difference between ForSaleByOwner.com and USRealty.com?
A: This is a chance for me to build a company that solves some problems I noticed at ForSaleByOwner.com. [The company was sold in 2006.] When I was COO there, we did all this hard work in acquiring all these home sellers from across the nation and after a few weeks those home sellers would leave the service and be off to Century 21 or ReMax. That was frustrating.
Q: It looks as if US Realty ends up with 1 percent commission when a house is sold. Is that right?
A: That's correct. In some cases it will end up 3 percent. It depends on if there's a buyer's agent [who would get 2 percent] involved on the other side.
Q: ForSaleByOwner.com lists houses with MLS, the major real-estate listing service used by realtors, as does USRealty.com. Where's the distinction?
A: ForSaleByOwner.com gets all its revenue up front. You pay at the time you list the property. Then that's it. There will be commissions to agents in some cases if there's a buyer's agent and a listing agent, but it doesn't go to ForSaleByOwner.
USRealty is completely success based. We don't charge the consumer any money up front if they don't want to pay any money up front. Everything can be paid on the back end if and when the home sells. Our interests are really aligned with the seller in that sense. We only get paid if they get paid.
If there's a buyer's agent, we give 2 percent to the buyer's agent and keep 1 percent. If there's no buyer's agent, we keep all 3 percent.
Q: I assume the realtor business, which gets up to 6 percent per sale, does not like this.
A: I think it's true there are probably a lot of people in the industry who are threatened by this. The industry has evolved to the point where they understand that this an important part of the industry. There are people who need this service. This service appeals to people who might have otherwise gone the no-commission route altogether. So net-net, it ends up being a pretty big benefit to the agent community — agents and licensed brokers.
Q: Are you seeing more buyers? The market seems to be coming back, but sellers see 6 percent as a big hit.
A: Yes, the industry is coming back. Look, one of the things that frustrates me is the industry isn't more flexible on commissions. A lot of people in the industry still act like it's 2006, that it's business as usual. But we had a traumatic event in this country, the massive destruction in homeowners' equity — 35 percent, 40 percent in some markets. So this idea that we can go back to business as usual just doesn't work.
Q: Why should someone use your site instead of one of the established DIY sites?
A: You can get success rates approaching those of traditional agents because we're utilizing the agent community and we're incentivizing buyers' agents. The buyers' agents seem to be showing the properties enthusiastically and that means a much higher sell-through rate. We're going to sell your house and take half of what is normally paid. It's a new model.
Q: Let's say I want to sell my house. How much work will I have to do?
A: With our method, there are three things people have to keep in mind. They're going to have to price their property. There are a whole host of options on the Web available to them to help them do that. The second thing, and probably the biggest, is they're going to have to show that property. We help them schedule the showings, but they're gonig to have to be there to show the property. . . .
Q: That can be a little awkward.
A: It can be awkward, but I think buyers and sellers can work pretty seamlessly together. The sellers tend to really know the property. And it makes negotiating a little faster because you talk directly to each other without a third party intervening. But I agree; sometimes sellers want unvarnished opinions they might get from an agent.
Q: And signs?
A: We provide the signage. The third thing sellers get hung up on is what happens with the paperwork. With that, a title company or a real estate attorney will have to help them with the closing.
Q: Sometimes you just have to have an agent, right? That seems to be the lesson after a property in New York you tried to sell yourself a couple years ago finally needed a broker with a 6 percent commission.
A: I certainly took a lot of flak over it. I don't know if it was necessarily fair. Sometimes you need an agent. I've always advocated that some flexibility is required. At that place, at that time, I thought I needed an agent. But I guess a lot of people disagreed with me. I really thought that would endear me to agents, but I don't know.
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