Editor’s note: This special four-part series will explore who controls the average real estate transaction, who or what is challenging and changing that central role and how it impacts the industry and consumers. (See Part 1: Realtors have the power, Part 2: Battle is on for real estate consumer and Part 4: Lenders woo and sidestep real estate agents for customers.)
Home sellers can log onto IsoldMyHouse.com and advertise their house for sale in just a few mouse clicks. Their prospective buyers can browse through homes, check interest rates, get home buying tips and apply for a mortgage without ever leaving the site.
And it all happens without a real estate broker or agent. In fact, the front page of IsoldMyHouse.com features this message in big red letters: “Sorry, this site is not for use by Realtors or real estate agents!”
For more than a century, real estate agents have been at the center of the average transaction. The biggest threat to that position may be the Internet as for-sale-by-owner Web sites, lenders, brokers and online companies reach out directly to the consumer for the first point of contact. Many of these Web sites are driven by mortgage lenders, making it easier for buyers and sellers to get together without a real estate brokerage between them.
Who controls the average real estate transaction? Take a survey.
IsoldMyHouse.com isn’t a typical FSBO Web site. It’s actually a mortgage bank called East/West Mortgage with an aggressive strategy to get closer to home purchase loan customers. The company poured millions into radio, television and print advertising to drum up business and makes its money on loans made to buyers.
The message to sellers is a commission-free home sale without ever being contacted by a real estate broker. Radio ads for the Web site get right to the point. “Not paying real estate commission is the way to go,” one ad states.
That message seems to have paid off. The company estimates 300-400 houses per week are selling through IsoldMyHouse.com with no real estate broker involved.
The concept has caught on with other lenders and mortgage brokerage companies. TheYellowSign.com, operated by Allied Home Mortgage, also is a national FSBO listing Web site.
For Allied, the site gives its branches direct access to purchase mortgage leads as well as sellers who will likely become buyers once their homes are sold. For-sale ads on TheYellowSign.com link interested buyers directly to an online mortgage application that is sent to an Allied loan officer. Some ads include direct contact information for local Allied loan officers.
Prospective buyers also can sign up to get pre-qualified for a mortgage. And home sellers can check their property’s market value for a $2 to $30 fee through a partnership the Web site has with Factual Data Corp.
TheYellowSign.com isn’t limited to home buyers and sellers. Builders and real estate agents can use the service for a fee.
The Internet has enabled FSBOs to grow well beyond the sign in the front yard. Web sites today offer listing services for one-time flat fees, three-dimensional virtual tours, buyer prequalification and dozens of other services. The Web offers up the FSBO companies right alongside full-service realty brokerages on Yahoo! Real Estate, MonsterMoving.com and Google searches, to name a few.
Tammy Rahn listed her Santa Cruz, Calif., home on a number of FSBO Web sites, including ForSaleByOwner.com, Owners.com and the real estate section of Craigslist.org, a local Internet classified site. She decided not to use a brokerage because she wanted to maximize the amount of money she’d get from the deal.
After being on the FSBO sites for a week with no offers, she paid $399 to 2BuyHomes.net to appear in the local Multiple Listing Service. She received an offer one day later.
“That’s been the most strategic thing for us so far…that was the most expedient way to get noticed by the most amount of agents,” Rahn said.
She decided to go with the flat-fee listing because she’s willing to pay a commission to the buyer’s agent side of the deal. She plans to handle the negotiation and offer acceptance herself, though admittedly she’s somewhat afraid.
“That part is scary,” she said.
Rather than consult an attorney though, she said she’ll have her mother–a real estate agent in Southern California–look over the paperwork before closing.
Home sellers aren’t the only ones looking to represent themselves in a real estate transaction. Joyce Prasad, a resident of Palo Alto, Calif., is a prospective home buyer who’s searching specifically for FSBO properties on the Web. She’s been shopping for a home in the San Francisco Bay Area for almost nine months.
Prasad recently placed an ad on the real estate section of Craigslist.org in search of a FSBO home. The ad specifically asks that real estate agents and brokers not contact her because she prefers to work directly with sellers.
Recent experiences she’s had with agents have caused her and her husband to attempt home buying alone. Agents too often tried to impose homes on them that they weren’t interested in buying, she said. Agents also encouraged the couple to always bid above the seller’s asking price.
“We have had no luck with these Realtors…I will just deal with a private party,” she said.
Tomorrow: What lenders are doing to get closer to the center of home purchase transactions.
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