Editor’s note: In this three-part series, Inman News uncovered the different real estate business models through the eyes of consumers. We sought out their experiences with full-service versus flat-fee discount brokerages and for-sale-by-owner to see how they stacked up. (See Part 1: Going it alone: The FSBO experience first-hand and Part 3: Traditional home sale hinges on good agent.)
Joan Murakami first noticed ZipRealty while visiting the Weather.com Web site.
“I had seen their little logo for quite awhile,” she said. The logo appeared in an advertisement at the online weather site.
When it was time to sell her condo in Walnut Creek, Calif., in search of a home closer to work, she decided to do some research on her own. Murakami, a scientist for a biotechnology company in Fremont, purchased “Home Buying For Dummies” and “House Selling for Dummies.”
She decided to look for comparable home sales in her area using an online tool at the ZipRealty.com site. She registered at the site. There would undoubtedly be follow-up e-mail correspondence from the company related to the registration, but, she thought, “I’ll kind of ignore what’s coming in.” She later decided to give the company a try. She didn’t know anyone else at the time who had used ZipRealty.
ZipRealty, which launched in 1999 and went public in November, tweaked the traditional real estate business model. The company pays its agents a salary and offers them benefits, and agents work from home. Consumers who work with a Zip agent realize savings through a commission structure that is slightly lower than the traditional commission. The company uses a technology platform to gather Internet-based leads and to match its agents with prospective customers.
Zip is a full-service real estate brokerage company that operates in a dozen metropolitan areas and has a sales force of more than 900 agents.
Murakami corresponded with a ZipRealty agent who works in the San Francisco East Bay area. Murakami met with the agent at her condo, and she requested that the agent provide her with a list of properties that she worked with in the past year.
Murakami then picked three properties on that list that her agent had worked to sell, and she contacted the sellers. “I got just absolutely glowing reviews from all three individuals,” she said. The agent provided her with information on comparable properties, and with other information relating to the sale.
She was also attracted by the commission savings over traditional real estate business models, she said. While real estate agents would traditionally take a commission of about 3 percent to list a home or to find a home for a buyer, Zip offers savings of up to 20 percent to 25 percent over traditional commissions.
Murakami communicated mostly through e-mail and phone messages with her agent. “We did a lot of phone-tag,” she said, while she often received very quick responses to e-mails that she sent to her agent. “I figure she must’ve had her laptop with her at all times.”
There weren’t any formal open houses at her condo, though there were several walkthroughs that the agent conducted, Murakami said. While she has heard that sellers working with other real estate companies are sometimes told that they should make themselves scarce when prospective buyers are touring the property, Murakami said she was present for many of the walkthroughs.
She met the eventual buyers of the property during their walkthrough. “They loved the location. I got a really good feel from them,” she said.
Her condo sold within about two weeks. The buyer was working with a ZipRealty agent, too, and the buyer’s agent helped out with the sale process when Murakami’s agent was on vacation. “When my agent went on vacation for the last week or so, the buyer’s agent was keeping me and (the buyer) in the loop,” she said.
“I was pretty sure that this was going to be a relatively uncomplicated sale. Walnut Creek is a really good location, and condominiums are the last holdout of anything affordable in this area,” she said.
“I’ve heard of (sales) where they are pounding the sign into the front lawn and it sells. I know someone who sold just because someone drove by their lot and knocked on their door and said, ‘What do you want for it.'” The house had not been listed for sale.
Murakami said she now realizes how much easier it can be to sell a house in a hot market than it can be to buy a house. A relocation company was involved in her home purchase, she said, and an agent from a Keller Williams brokerage was selected to work with her in that transaction.
Another emerging alternative real estate business is the flat-fee model, in which companies charge home sellers a predetermined fee to sell their home instead of a percentage of the sale price.
Elizabeth McKinney was drawn to flat-fee brokerage SellSmart Real Estate by its advertised low fees.
SellSmart is a flat-fee real estate discount company based in San Diego. The company offers listing services for a fee as low as $2,950 for homes priced at $300,000 or less, with fees increasing by $1,000 for every $100,000 in selling price above $300,000.
If the listing agent finds the buyer or if another agent finds the buyer, the seller pays a higher fee. The company offers standard commission rates to outside buyer’s agents.
Founded in 1999 by real estate brokers John H. Cook and Lynda Cook, SellSmart has 49 offices and operates in California, Nevada, Florida and Washington, D.C.
McKinney said her first contact with the agent was by telephone, and she met with the agent in person two days later. It was her first experience selling a home.
It took about a month to sell the property, and McKinney said this seemed longer than average for homes selling in her neighborhood at the time.
“The agent put it in the (multiple listing service) and put a sign out front,” she said. She was in contact with her agent every other day, on average, throughout the process, and sometimes every day, she said. She communicated mostly by telephone with her agent.
McKinney said she would’ve rather the agent was more actively involved in selling the home. If the housing market in the area hadn’t been so hot, she said that the home might not have sold using the same technique, “or it would have been a much lesser price.”
She said the most important role that the real estate company played in the transaction was in handling the paperwork, and the least important role the company played was in advertising her home.
McKinney said that the next time she sells a home she would seek out an agent who works with a full-service real estate brokerage.
“It may cost a bit more, but use someone who really wants to sell your home and is working for you, not their commission,” she said. McKinney said that her experience taught her a lesson: “If you don’t want to pay much, you aren’t going to get much.”
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