There's more than one way to sell

Published: March 27, 1999

By Kim Palmer; Staff Writer   

Selling a la carte // Full-service listings are by far the most common way to sell a house, but there's a full menu of alternatives.

Jim Quinn sold his three-bedroom Golden Valley rambler earlier this month. He didn't list it. He didn't advertise it. He didn't even have a sign. He merely told a few people that he was planning to sell by owner and that he'd pay a 2.5 percent commission to an agent who brought him a buyer.

"This is a high-demand area," Quinn said of his neighborhood in north Tyrol Hills. "I knew it would sell within days."

Julia Classen, the Coldwell Banker Burnet agent who also helped Quinn buy his new home, showed the house to a potential buyer who ended up making an offer close to Quinn's asking price, he said.

One-time showing arrangements are used in only a small fraction of transactions, but they may be slightly more common in a hot seller's market, such as this one. The inventory of houses for sale is low and houses are moving so quickly, that some houses sell before they've even been listed.

Classen said she has sold three houses on a one-time-showing basis so far this year. "I have just been lucky enough to know people who are about to sell. The houses weren't officially on the market." In Quinn's case, he was planning to put it on the market as a for sale by owner, she said. "I told him, `I have some [potential] buyers. Can I bring them?' "

The 2.5 percent commission she agreed to with Quinn is "probably the lowest one I've done," Classen said. "The reason I was willing to do it was because I had a buyer [so there was no need to split the commission] and I had no time or money invested in marketing [the property]."

Even in a hot market, sellers should think twice about one-time showing arrangements, said Mark Allen, chief executive officer of the Minneapolis Area Association of Realtors. Just because a house sells quickly doesn't mean that it sold for as much as it could have.

"Pricing is far more an art than a science, and prices are growing virtually overnight," Allen said. "Past comps [comparable properties] may not be accurate."

"An agent who is active and working the market on a day-to-day basis can best assess where the market is," said Kevin Ries, president of the Minneapolis Area Association of Realtors and an agent with Edina Realty.

"I have done one-time showings," said Margaret Brevik, an agent with Coldwell Banker Burnet. "I might meet somebody and realize I have a match." Sometimes the house isn't on the market or the owners want to keep it secret. In that case, "I'll say, `Yes, if that's your wish. But if you want top dollar, you want to throw it into the big fish pond.'

"In today's market, you don't want to sell with a one-time showing," she said. "You'll never know how well you could have done."

Houses listed on the Multiple Listing Service (MLS) have a greater chance of attracting multiple offers, agents say, which helps drive up the sales prices. "It's very easy these days to justify a full commission," Classen said. "People will do a one-time showing for the ease and convenience, not always for the bottom line."

Menu of options

One-time showings are one of the options available to sellers seeking a level of service - and commission - somewhere between doing everything themselves and signing a full-service listing agreement.

The vast majority of the market still prefers to engage a full-service agent, said George Karvel, holder of the University of St. Thomas' distinguished chair in real estate studies. "But there are a number of options available, each serving a need for a certain part of the market."

Smaller brokerages, in particular, often offer pricing alternatives, Karvel said. "Some offer a menu of services - you can choose on an a la carte basis what part of the service you want."

Even companies that focus on helping owners sell their homes themselves offer different levels of service.

The For Sale by Owner Shoppe in St. Louis Park, for example, offers several packages: One includes signs, plus installation, resource materials, 25 color brochures and an Internet listing for $349. For $599, sellers get those services plus an MLS listing. Services are also available on an a la carte basis: $45 per month for the sign, plus $25 to install it, $249 per month for an MLS listing, etc.

Many owner/sellers offer a 3 or 3.5 percent one-time showing commission to the agent who delivers a buyer, said Greg Lawrence, owner of the For Sale by Owner Shoppe. "That's the average our people are willing to pay out." Owners offering one-time showing commissions represent "a very big portion of our business," Lawrence said.

Some agents don't like the fact that for-sale-by-owner properties can be listed on the MLS, Lawrence said. "But it's an advantage to them [agents], too. Before we started doing this, they had no idea who was willing to pay a commission."

Lawrence estimated that 30 to 40 percent of his for-sale-by-owner clients opt to list with the MLS, although he has noticed a slight drop lately. The market is so strong that "they don't think they need MLS and they don't want to pay any commission," he said.

Lawrence does think it's to a seller's advantage to list a house on the MLS. "The MLS speeds up the process; you're likely to get an offer faster.

Full-commission agents say they bring important skills that sellers sometimes overlook when comparing commissions. "Some people may pay a low commission but may end up spending more" than with a full commission because advertising or other services aren't included, said Fran Davis, president elect of the Minneapolis Area Association of Realtors and an agent with Coldwell Banker Burnet. "In most cases, you do get what you pay for."

Karvel agreed that commission rates aren't everything. "If it was all about price, the lowest price would always win, but it doesn't," he said. "As a group, [discount brokers] haven't been gaining significant market share."

Nevertheless, at full-service brokerages, "the topic of cut-rate companies is very explosive," Brevik said. "Full-service [companies and agents] are constantly having to substantiate and justify their fee."

She believes that agents' skills are sometimes undervalued. "I've worked really hard to amass the knowledge and expertise that I have," she said. "I can help people get the very most for their house . . . If you sell by owner, there's nobody who cares about you. Whoever sells you the sign will go home and sleep soundly. In my office you're No. 1.

"The public has an incorrect perception because a lot of our work is done silently," Brevik said. "They minimize the work. What happens if there's a low appraisal? A problem with the buyer's financing? There are hours of conversations and decisions. I'm an educator . . . and I'm continually answering questions."

The role of the Internet

The emergence of the Internet as a tool for buying and selling houses may prompt more alternatives to traditional full-service brokerages. Or it may not, depending on who you ask. Everyone agrees the Internet will have an impact, but there's little agreement about what that impact will be.

"Nobody knows where it's going," Brevik said. "We're all on the raft, waiting."

The Internet's role is significant, Karvel said. "It's a lot easier to sit at home and look at houses on your computer than with an agent. A lot of questions are being asked about whether the traditional MLS system is viable. Theoretically, someone could start an extracurricular MLS, a different listing service for a fee."

Stephen Brobeck, executive director of the Consumer Federation of America, thinks that day is still well in the distance. "Consumers are going to be attracted to a critical mass of listings. You'd have to cross that threshold of at least half of all listings" before a rival MLS would become viable. "It's hard to reach that point."

Even if the MLS system changes, there will still be a need for full-service real estate agents, Allen said. "Technology gives access to information but you still need a professional to have it make sense."

Even if buyers find a house online, "they'll still want to look with an agent rather than going directly to the listing agent," Byrd of Eagle Realty said. "There's still a feeling of wanting representation."