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Buying or selling a home? Forget the traditional realtor

Web takes on roles once filled by real estate agents

By Rebecca Jones, Special to the Rocky

Published December 17, 2007 at 12:05 a.m.

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Newlyweds Samantha and Walker Hennington stand in front of the house in Golden they'll move into in January. He conducted an online search to find the home he wanted.

Photo by Linda McConnell / Special To The Rocky

Newlyweds Samantha and Walker Hennington stand in front of the house in Golden they'll move into in January. He conducted an online search to find the home he wanted.

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The first time Walker Hennington bought a home, in 1999, he figured he wasted a lot of time being driven around by his real estate agent to view houses that weren't what he wanted in neighborhoods that were all wrong.

The last time Hennington went shopping for a home, earlier this year, he went with his agent to exactly one house. Which he bought. And, because he'd saved countless hours of his Realtor's time, not to mention his own, his agent rebated him two-thirds of his sales commission - just over $8,000.

This time around, Hennington did what an estimated 80 percent of home buyers do these days: He started his quest on the Internet, looking at online descriptions and photos of houses, narrowing down his search until he saw something worth visiting in person.

"To be painfully honest, I don't see a lot of value in using a traditional Realtor anymore," said Hennington, 36, a recruiter for IT services, whose new home is in Golden. "Every person has as much access to information as only the Realtors used to. Anybody who is self-motivated, which I am, can do 75 percent of the legwork of buying a house right from their desk. You don't have to physically look at 20 properties to narrow it down to five."

The Internet is increasingly taking on the duties once performed by real estate agents. And while no one - yet - is suggesting that it's a good idea to buy a house over the Internet sight unseen, a new business model is emerging that takes advantage of the convenience of Internet shopping.

Denver Realtor Bob Connors launched his firm, Real-a-Save, in January, touting it as Colorado's first online real estate agency.

Prospective buyers conduct their own online house hunts and do their own drive-bys. Once they've narrowed things to a few houses they really like, only then do they schedule a two-hour meeting with a real estate agent, who can show them through the homes they've chosen. Afterward, all the paperwork is conducted by e-mail. The client won't see the agent again until the closing.

"After closing, we rebate buyers two-thirds of our commission," Connors says. "The reason we can rebate so much is because we've whittled out all the inefficiencies. The whole process from contract to closing is handled over the phone and e-mail. Everything that the normal, traditional Realtor might get in the car and make a trip to do, most people don't need. They need phone calls and e-mails. By streamlining, we save ourselves a ton of time and save our clients an average of $7,000 per transaction."

Other local companies are trying similar business strategies and finding them popular with the public.

"It's definitely a tough real estate market, but we've seen our sales volume grow and grow," said Kirk Lautensleger, co-founder of Re- Logic, an Internet-based Denver real estate site that went online in May, offering 25 percent rebates to buyers.

"Rather than giving our clients a fruit basket when they close on a house, we give them a check for several thousand dollars."

Lautensleger's business partner, Daniel Diaz, said the company is registering an average of 500 new users a month.

For sellers, the process is a bit different. Rather than charging a percentage of the sales price, Real-a-Save, for example, charges a set $2,500. And the agency doesn't host open houses.

"That's the only major difference between what we do and what traditional Realtors do," Connors says. "We do complete online marketing. We put your house on MLS and realtor.com. We pay for a professional photographer to shoot film and create professional fliers for the property. We provide the yard sign, the lock box, and we'll show the house. We just ask the seller to keep the box in their yard sign full of fliers."

That's how Jim Stelzer sold his Boulder home, after twice unsuccessfully listing it with traditional agents.

"The way Bob's service worked, I think it was more appealing to the buyer," Stelzer, 41, said. "My wife found Real-a-Save online. I work in Internet marketing, and she's in high tech. We're fairly savvy online. So I called Bob and talked to him. Actually, I never met him until the closing. We did everything via e-mail. I liked that."

But such e-mail- and telephone-driven relationships aren't to everyone's liking. Shoppers who aren't comfortable doing business over the Internet probably won't want to buy a house that way.

Traditional real estate agents who spend hours driving around with clients say that's still a valuable service, not to be discounted as merely a costly luxury.

"There's a lot of knowledge that a traditional broker can bring to that driving-around process," says broker John Skrabec, who owns Live Urban Real Estate, a company that specializes in central Denver neighborhoods. "That's how you get to know a neighborhood. You get knowledge you'd never get online.

"When I take a buyer out, I drive them around, I'll show them where this house is in relation to the local coffee shop, or point out a great restaurant. I can share something about the schools because I'm a parent of a DPS student. These are things you have to experience. We take pride in knowing our part of town, and we're the best to explain what the things are about the neighborhood. That's valuable, and it's worth compensation. I have clients tell me all the time, 'I'm so glad you turned me on to this neighborhood because I didn't know about it.' "

As for selling through an online-only company, Skrabec understands the appeal of the low-cost commission but questions whether a buyer's market like the current one is really the place for sellers to pinch pennies.

"We're in a challenging market right now, and the last thing a seller wants to do is cut corners on how they're going to market their house," he said.

In addition, the whole concept of rebating sales commissions can get dicey. Critics argue that rebates can tempt consumers into buying property that's not necessarily in their best interests to buy. Such rebates are illegal in a number of states but are permitted in Colorado.

As with any kind of costly transaction, buyers should beware, Connors says.

"Checking references is absolutely key," he says.

Otherwise, an online Realtor is just a voice on the phone.

"And make sure you get everything in writing, and make sure there's a person available to review your documents with you," Skrabec said.

Lautensleger predicts that all real estate brokers will expand their Internet-based services in the future, though not all will abandon the traditional types of services brokers offer.

"If you look at financial services, what e-trades have done, they didn't put Merrill Lynch out of business," he said. "People still require full-service advice. I look at ReLogic as the Charles Schwab of the real estate world. We really put the power in the hands of the consumer. If they need us for anything, they can call us on the phone.

"We're more of a 'click and mortar' business. We won't put the traditional Realtor out of business, but we're here for the consumer who wants to be in the driver's seat."

Online savings

Buyers and sellers can save thousands on sales commissions and through rebates using online real estate agencies, such as Real-a-Save:

FOR A BUYER

* Home sales price: $300,000

* Traditional 2.8% buyer's agent commission: $8,400

* 66% Rebate Real-a-Save clients would receive: $5,400

FOR A SELLER

* Home sales price: $300,000

* Typical 3.2% sales commission: $9,600

* Real-a-Save's standard sales commission: $2,500

* Savings: $7,100.

Sites to help buyers and sellers

Online real estate brokerages:

* Real-a-Save.com

* relogic.com

* redfin.com (Company does not do business in Colorado.)

Comments

  • December 17, 2007

    12:52 a.m.

    Suggest removal

    augustwest writes:

    What about price? who do you trust to price the property correctly? the most valuable thing a selling agent does is price the property. especially, in the current market, the initial price is key. does the internet broker really "know" the neighborhood? it's not all on the mls. if you price it too high you may stigmatize the property-in the least the risk is a later price drop needs to go lower than if you'd priced it correctly in the first place. also, a buying agent makes his money by spotting the best values and understanding the correct buying price relative to that point in time in the market.

    Similarly, in colorado real estate many of the professionasl don't understand the "time value of money" ie if the seller has to make 3 more mortgage payments but doesn't drop the price does he/she win in the end?

  • December 17, 2007

    7:54 a.m.

    Suggest removal

    hunterskis writes:

    One important thing this article did not mention is the 2 week lag that new listings have before they show up on public MLS online searches like RE Colorado. This wasn't hard to figure out when our broker was showing us stuff that we did not see online. If you do negotiate a lower rate with your broker, make sure they are providing you with the latest listings every couple of days if not daily from their MLS searh database. Even in today's market, hot properties, either very desirable or aggressivley priced, are scooped up quick.

  • December 17, 2007

    8:49 a.m.

    Suggest removal

    RealEstateZealot writes:

    Rebecca- Nice article, only a couple years late. Most net-savvy people are well aware that there is a whole population of brokers that are non-traditional, or perhaps the word is "Entrepreneurs". On a national level companies like http://www.Redfin.com, http://www.rebatereps.com/,http://www... have been on this model for over three years. On a local level there are companies like http//:www.ehomerebate.com as well as many real estate brokers that work on "per hour" fees and provide the difference back to the buyer at closing. So the only thing new is that fact that you wrote an article. Real-a-save is nothing more than a copy-cat on hundreds of excising rebate/refund models. The only thing traditional is your continued thinking that sellers are paying 3.2% (6%) to list their home and buyers assuming that the brokerage coop fee is 2.8%. Anyone with an IQ over say, 120, has not paid 6% to list their home for the last 5 years. Likewise, on the buy side, offering people 75% of a listed Coop fee (2.8%)...is a poor business model because anyone in the "Know", knows that Bank REOs and many brokers are offing coop fees of 1.0% or 2.0% and not 2.8%. This is far more common place outside Metro Denver, but this is changing every day. What will Mr. Real-a-save do when there are no coops offered by brokers on listings? As I always advise my brokers...there is no COOP BOX offered on Zillow.com. Brokers are going to have to learn to work with buyers and sellers on a per hour, time and materials platform. It' not all that complicated or even revolutionary. But an uninformed press is not helping the general public.. As always, you are too little, too late! If you want the real scoop http://www.realestatezealot.com and http://www.brokerIPTV.com will give you some street knowledge.

  • December 17, 2007

    8:56 a.m.

    Suggest removal

    American100 writes:

    The majority of real estate related lawsuits are "for sale by owner" or fsbo suits. Brokers also know their area and the in's and outs of the legalities involved.

  • December 17, 2007

    9:18 a.m.

    Suggest removal

    jon writes:

    This ia a joke. You are paying less because you are getting little or no service from realtors who will not have your best interests in mind. They will need to move on quickly to the next person to make up for the very little income they make from you. You will think you have saved money but in reality these type of realtors have very little time for you and no negotiating skills!

    Be very carefull of this type of service! Find a realtor you know will have your best interest in mind and really work hard for you...

  • December 17, 2007

    9:53 a.m.

    Suggest removal

    Oh_Wise_One writes:

    RealEstateZealot- Rebecca is real proud of her hard work in putting this article together albeit 2 years late. Just like her cohorts in the Dinosaur media, they don't know their journalism degree is being replaced by online news just like some realtors are being replaced by websites.
    Rebecca, have you discovered 'Google' yet? Maybe you could write something about that next. /sarcasm

  • December 17, 2007

    10 a.m.

    Suggest removal

    BF1414 writes:

    This is a just another example of getting what you pay for. Consumers are so focused on the commissions that they lose sight of the bigger picture, which is the service your broker provides you (granted a good one, not every broker does) can save you time, money and effort that are much greater and valuable than the fee itself. If you hire a lawyer at $150 / hour, or hire one at $300 / hour, who is going to give you the best service? This is no different in the real estate world. It especially baffles me in the case of buyer representation, when the seller pays the commission. It doesn't even come out of the pocket of the buyer and they still want a piece of it.

  • December 17, 2007

    10:04 a.m.

    Suggest removal

    realestatecoloradonet writes:

    I really wish some who be a little more responsible when it comes to reporting. The Article: "Buying or selling a home? Forget the traditional Realtor" By Rebecca Jones, Special to the Rocky Mountain News December 17, 2007 states.

    "Denver Realtor Bob Connors launched his firm, Real-a-Save, in January, touting it as Colorado's first online real estate agency".

    RealEstateColorado.net has been an internet based full service brokerage firm since it first hit the search engines back in 1998. Ranked #1 in Google for Denver Colorado Homes and Denver Colorado Homes it receives over 3,000 unique visitors daily and in 2006 received over 26,000,000 hits. It features hundreds of articles on real estate related content, hundreds of articles on Denver neighborhoods and even a 8 minute on-line video tour highlighting the benefits of living in the greater Denver area.

    http://www.realestatecolorado.net

    http://www.realestatecolorado.net/rea...

    This is not a new concept for the consumers as the article suggest.

  • December 17, 2007

    10:39 a.m.

    Suggest removal

    Newsman writes:

    Uhhh, Rocky Mt Newz. You guys need some real reporters. Not only is this old news but the trend has reversed itself and now people are looking towards traditional brokerage firms. You should try out that new thing called google and research the demise of the discount brokerage. It really works. Do you really report on real estate or is this a hobby for you? Get with the times. Very poor reporting.

  • December 17, 2007

    11:21 a.m.

    Suggest removal

    sirabbaco writes:

    Why can't Real Estate Brokers every put their bias aside? It is clear to see that a commission of 6.8% (Buyer and Seller) was designed for when properties cost less than $100,000. Can a broker honestly believe that if they sell a million dollar home that the commissions should be nearly $70K? Many Real Estate professionals work 20-30 hours per week and make six figures which is out of whack with most of society.

    Both Real Estate and the Mortgage Industries need reform and this is the beginning of that reform. Like it or not, this is the beginning of a great movement towards sanity. Brokers are not that smart and working out real estate deals is not that hard. I'd like to try to see them understand how good software works.....oh, they can't. Lol.

  • December 17, 2007

    11:34 a.m.

    Suggest removal

    ResidentRealty writes:

    www.ResidentRealty.com , a Colorado corporation, has been offering full service listings to Colorado home sellers for as low as $995 since 2000. We are an Internet based company with agents from Colorado Springs to the Wyoming border. We have saved Colorado home owners millions of dollars in listing commission since our launch.

    The President of Colorado Real Estate Online, Inc. a company that was purchased by your parent company, EW Scripps in 1999, founded Resident Realty in the year 2000.

    We are also the pioneers of a completely different listing commission structure, which can be viewed at http://www.ownersrealty.com

    Thank you for the forum.

  • December 17, 2007

    11:55 a.m.

    Ryman writes:

    (This comment was removed by the site staff.)

  • December 17, 2007

    noon

    Suggest removal

    wakeup writes:

    The old excuses that you hear like "you get what you pay for" "discount means less service" and "what about pricing your home" just don't hold up. The reality is, that you don't get what you pay for with full priced brokers. The amount of work they do on a typical deal translates into a rate of hundreds of dollars an hour. Maybe we should use the term "fair priced" instead of "discount" since "discount" seems to have a negative connotation. Just because a broker is a "discounter" doesn't mean s/he is not a seasoned professional, and I'll guarantee they have access to the same tools as traditional brokers. As a buyer, if I can do my homework and some leg work, that payback offered is well worth my time. As a seller, why should I pay thousands and thousands more for the same kind of MLS presence and market advertising? I’ve used a “discounter” to both buy and sell on complex deals. The service and representation have been excellent, pricing advice was right on target and I’ve saved thousands of dollars. So tell me, who’s getting what they pay for? sirabbaco is right, the industry needs reform and these are the initial steps. Even if the article is late in internet terms, it’s still valuable for consumers who don’t spend their time in the real estate biz day in and day out.

  • December 17, 2007

    2:09 p.m.

    Suggest removal

    CORox writes:

    I would have never found the property I bought on my own. I relocated here and my broker was invaluable. I looked online for a Certified residential specialist and an Accredited Buyers Representative, and someone with more than 5 years of experience. I read posts on the forum at www.city-data.com. I emailed 5 Realtors. Then, I looked up their license status on the real estate commission website and chose to spend two hours with two of them.

    With my choice made, I picked the houses to see from the internet, based on google earth and Zillow. And honestly, based on my feed back, she picked two more to see. I bought the second.

    She did everything I couldn't. She asked what was important to me. She listened. She took photos of the house and the neighborhood, the pool, the library, and posted the photos online for my family and friends to see. She attended the inspection, helped negotiate a terrific deal, she kept me calm when things weren't progressing as fast as I wanted them too. We did close on time. I relied on her. She did her job and more. I could text her, call her or email her, and she responded quickly.

    I love my house, and I love my Realtor for finding this for me, and getting in at a good price. She says "Buy right going in." "Begin with the end in mind."

    I don't care if she was from a full service, or a less than full service realty company. What I needed was taken care of; responsibly, accurately and timely.

    The business model doesn't matter if you get what you want and what you need.

  • December 17, 2007

    4:59 p.m.

    Suggest removal

    randybrown writes:

    Very interesting.
    I looked this house up on the internet, or at least tried to. I can't find it at all. Is it in Golden? It looks like Harriman Park. What don't they know about this purchase? PLENTY!
    Someone who buys a home without a qualified and knowledgeable broker is a fool. There are far too many problems to discover on your own. What you do not know will hurt you.
    Go ahead and make a $300,000 mistake. You will learn.
    Oh, that's right, e-bay will reimburse you for your losses.
    What's that, it isn't through e-bay. Whoops.
    This article read like an ad for the e-real estate companies. Would you like to know the other side?

    randy

  • December 18, 2007

    8:32 a.m.

    Suggest removal

    smartguy writes:

    The discount/internet brokerage model is NOT new and NOT thriving. The basic premise of these sorts of companies is that Americans want everything at a discount. While that may hold true when shopping for household commodities where the risk of loss is low, it is not true when it comes to professional services.

    Although professional Real Estate Brokers can provide a significant level of assistance in locating property that an untrained buyer may not locate, the true value of a broker is in the role of a trusted advisor who provides experience, judgment, expertise, and guidance to buyers and sellers in what is arguably the single biggest financial transaction most of us will ever encounter. This is something that technology and discounters can NEVER provide or afford to provide at a high level.

    Despite advertising claims to the contrary, the Internet is not an experienced real estate professional. It cannot consult, counsel, advise, apply knowledge of local real estate laws and market conditions, make judgments, own the result, or most importantly, understand your individual goals and needs and care about you as a client. Furthermore, while the Internet can provide information, it cannot interpret it. Discount brokers business model is based on volume and therefore simply cannot afford to take the time to provide the patient time consuming counseling approach that brokers do.

    The consumer clearly wants choices. But the choices should be in their being able to choose the quality services they want and need and how they can pay for them, not choosing by price. Most consumers don't know the value that a professional providing expert judgment and guidance can provide. They don't know the difference between gathering data and interpreting what it means.

    Ask anyone you know if they ever made a bad decision picking a product or professional service based on the cheapest price and then were later disappointed, or worse yet, lost a significant amount of money or time based on that decision. The answer for most people is a resounding YES.

    While some folks are savvy enough, have time to burn, and are willing to deal with the associated brain damage, complexities, and surprises that go along with a “do it yourself” Real Estate transaction (or divorce, or lawsuit, etc), most people don’t want anything to do with it. If you ask the average busy, middle and upper class Americans if they’d pick their doctor, lawyer, CPA, Real Estate Broker, or other professional based on price the vast majority would say NO. That’s why the discount brokerage/internet concept is doomed to failure on a mass level. The premise is wrong. The model says people always want the cheapest. While it may be true with toothpaste or paper towel, it is NOT true when it comes to big financial transactions where the risk is not measured in a few pennies but in tens of thousands of dollars.