UnReal estate agents: why do we still buy, sell homes this way?

If you’re thinking about buying or selling your house, I’ve got bad news: you will probably spend more than you should to get help with the process.

You’ve probably booked plane tickets on your own, bought a car yourself and navigated doctors appointments solo. You’ve applied for jobs and decided whether to accept offers without hiring a professional negotiator.

Technology allows us to research and transact virtually any business worldwide while sitting on the couch in our shorts and t-shirt slurping cereal. That power, never more than a Google away, has upended whole industries.

So why are we Americans so fearful when it comes to buying and selling homes without the heavy involvement of a real estate agent?

Even some people in the real estate industry wonder how they’ve managed to survive so long without serious challenges to their business model.

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“There are a lot of smart people saying this can’t stay like this,” said Steve Murray, who runs an analysis firm called Real Trends. “They’ve been saying that for 15 or 20 years.”

There’s been no big wave of consumers doing without agents, at least according to the National Association of Realtors. Actually, the NAR says the percentage of both buyers and sellers who use real estate agents is up, not down, compared to 2001. Agents were used by 88 percent of both buyers and sellers last year, NAR surveys show.

Folks in the real estate world and homeowners alike shower me with reasons.

Buying a home is a massive purchase. Most homeowners don’t do it often enough to be comfortable with the process. They worry they’ll miss some paperwork or insight that will lead to financial calamity. Others think their emotions will hurt their ability to negotiate directly with potential buyers who want to tear down walls, yank out the roses and repaint the living room.

Things get messy

Josh Bolton-Rogers had a deal to sell his Grant Park home for nearly $500,000, enough for about $80,000 profit.

But then things got “messy,” Bolton-Rogers said, and he nearly dumped the deal because of a $300 disagreement over light fixtures. His real estate agent smoothed things out.

Bolton-Rogers is a part-time Realtor himself. And as convinced as he says he is about the need for real estate agents in the future, he still predicts their role will shrink and so will their pay.

Agents and brokers tell me most of their clients come in already having scoured real estate sites like Zillow and Trulia. They’ve already figured out what their home is likely to sell for, what areas they want to live in and what specific homes they want to see.

So we’re picking up lots more of the work agents used to do. Why are we still typically paying a 5 to 6 percent commission (split among both agents)?

Consumer advocate Clark Howard told me the commission structure “makes no sense at all. It is an antiquated thing.

He’s being too nice: The commission structure stinks.

The amount of work involved in selling a $400,000 home isn’t so much different from selling one priced at $200,000, real estate people tell me. But the commission is double.

Of course, plenty of real estate agents are dedicated, knowledgeable experts who work hard for their clients and have earned their commission. But in the face of a changing business model, some are trying other options.

Online management

A tiny outfit called Virgent Realty kicked off in Atlanta recently with the intention of handling almost every part of the real estate process online and replacing the selling agent fee for a flat $5,000.

Sellers get a personalized online dashboard to manage everything from showings to responses to purchase offers.

Co-founder Ben Kubic says Virgent agents will save time by generally not visiting sellers’ homes, though someone will come by to put up a sign and take photos of the house.

Other firms offer a menu of different services – such as a few hundred dollars for a listing on MLS — or more inclusive base packages with flat fees. The idea is that consumers could end up paying thousands of dollars less, depending on the deal.

“I think the model will definitely change for real estate. It will have to. The consumers will demand it,” said Mike Minihan, who launched an Atlanta agency called Terrace 24 Realty that offers a $3,500 base package, which is paid in phases up front.

Something has to change. Even under many of the discount and flat fee services to replace selling agent commissions, there’s still a strong expectation that sellers offer a 3 percent commission cut to the so-called “buyer’s agent.” Otherwise, I’m told, the agents won’t bring buyers to see your house or will trash talk it.

What an obvious conflict of interest, and proof that the label “buyer’s agent” is absurd. If we buyers want the help of an agent, shouldn’t we come up with some formula to just pay them ourselves so good properties don’t get blackballed?

Big money

There’s lots of local money tied up in this wacky, deeply flawed system.

About $940 million would have been spent last year on residential real estate commissions in metro Atlanta, if everyone who sold a local home through MLS paid a six percent commission, Minihan says.

That’s enticement for Realtors to keep the status quo, but also for innovators to give us alternatives.

In the meantime, here’s my short-term solution (which, by the way, I’ve used myself in the past): If you are in the market to buy or sell, at least explore handling much of it on your own. Don’t go for 5 or 6 percent commissions (unless you’re selling an inexpensive home). If you have a buying agent, scour online sites yourself to make sure you’re seeing great houses that may not offer them a commission. (Try offering your agent a flat fee for their services.)

Consumers are best off when they exercise the power they didn’t realize they had.

Matt Kempner’s email: mkempner@ajc.comFollow him on Twitter: @MattKempnerAnd Facebook: AJC Unofficial Business columnist Matt Kempner ( https://www.facebook.com/mattkempnercolumnist )

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