A Home Inspector’s Weblog by Frank Schulte-Ladbeck

exploring homes and the lives in them around Houston

Decisions: Using a Realtor or Going it Alone

My son and I were in a pizza parlor last week, where I saw a magazine from For Sale By Owner.com. I was intrigued, since I was giving some thought to how people approach buying and selling homes, so I picked up a copy. Being in the profession, I always look at homes that are for sale. I know that the time a house spends on market is increasing, and I am aware that selling your own home has been obtaining more press recently, as well as the real estate industry in general. I thought that I would use my interests to focus in on three homes that I see on a daily basis to see how they fair, and hopefully give you some insights into this decision.

The homes are divided into three categories: realtor handled; owner selling alone; and owner using a service to help sell alone. All three have been on the market roughly the same amount of time, and I think they will provide some perspective on what is going on during the selling process. I want to start by giving some background on Realtors and the selling process. I also want to take a look at these agencies which assist you in selling your home.

I have noticed from my years in management and working in different environments, that employees fall into some basic groups: those who excel at their job; those who just do their job; those who feel that their employers owe them something and do not do their job well; and those looking to get ahead by any means. Most employees just do their job. They are neither bad or great. Many Realtors fall into this category. I have never met a Realtor who is not doing their job at all, but I did have a story about one. There are a good many Realtors who excel at their profession. Probably due to the nature of the business, I find many Realtors in this niche. The Realtors who are trying to get ahead are the ones you most often see or are mentioned. Because there are differences in the service you will receive, your first step will be to decide which Realtor is right for you. Realtor associations have web sites that can give you a starting point. They will list a Realtor who speaks a certain language or specializes in a certain culture. The site could list Realtors who focus on certain areas. Friends, family, co-workers can provide leads. Once you have a list, start conducting phone interviews. If you are selling a home, you could be spending up to ten months with this person, and if you are buying, you could be spending a month with them. Engage them in a conversation, seeing if you are comfortable with them, so pick topics that are important to you, and that demonstrate their knowledge. Topics might include advice on mortgages, neighborhoods, homeowners associations, or something more along the lines of a hobby like gardening. A good Realtor will also be evaluating you, so be prepared to answer some questions. I would make note of the questions that they are asking, for this will give you an insight to their concerns. If they are not asking you anything, I would be concerned. When I bought my current house, I contacted a Realtor that I heard a lot about in the neighborhood. His first question to me was about my finances. He wanted to know if I have bee pre-approved for a loan. I had been to the bank on that day, but I was unaware of my approval status. He ended our conversation with a request to call him back, once I had that information. He is one of the top money making agents in Houston, but he lost my business. Since then, I have seen him in action on several occasions, and he is abrupt with clients, looking only to his bottom line. Realtors will behave in different ways when working, so judge them by what assistance they are giving to you.

To let you know about a Realtor’s compensation. Most Realtors work for a commission, which they receive during closing. The Realtor share of the sale price is around 6%, so if there is a buyer’s and seller’s Realtor, they would be splitting that 6%. Out of their share, usually around half goes to covering expenses and to their brokerage. I prefer the salary method to commission, and there are some brokerages that have adopted this idea for compensating their agents. In general, agents working for a salary work better with customers, since they do not have the drive to make the sale. Their drive is better customer service, so they can get that raise. You should know how your Realtor is being compensated, because situations could arise due to their concerns for payment. My Realtor and lender had a fight over when the closing date should be, because the Realtor wanted his payment, before a trip that he was taking. My only complaint about my Realtor was that I had to go running around town dealing with paperwork, because he wanted his commission on a certain date, and I did not know it. You may be able to negotiate with your Realtor on their commission, but do not expect a lot of give on this number. For some more depth on understanding Relators, Elaine Reese has written a post on Reese’s Pieces about becoming a Realtor, and there is a series of posts on dual agency on the Buyer’s Edge blog.

In my next post under this heading, I will give my initial impressions on selling a home yourself, with some comparisons to using a Realtor.

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2 Comments»

  Elaine Reese wrote @

Frank, thanks for the mention. Regarding the salary-based agents, not all states have this type of brokerage, so your readers may find this to not be an option.

We don’t have that type of brokerage here (in Ohio), so I don’t have first-hand knowledge. I’m not sure that it would necessarily mean better customer service. If an agent is assured of earning a salary regardless of whether a home sells or not, that would seem to be a dis-incentive. An agent on commission works hard for the client because we want a happy, satisfied client who will recommend us to others and/or use us again on their future transactions. I think the level of service a client gets really depends on the agent themselves rather than on how they are paid.

Sorry about your experience regarding the closing date, but again, here in Ohio, the closing date is something that is agreed to between the seller and buyer in a Contract. Any urgency on an agent’s part is to make sure the due dates of the Contract are met to ensure the client doesn’t breach the Contract. The only consideration for the lender’s timing would be upfront before the Offer was written and would deal with the required time to process the various stages of loan approval and appraisals. Maybe Texas handles it differently.

Regarding the article of mine that you referenced, it’s important to keep in mind that State laws regarding licensing, and what an agent is permitted or expected to do, vary greatly.

Again, thanks for reference!

  frankschulteladbeck wrote @

My comments about salary versus commission are based on my experience as a manager in different firms. I simply saw many who were willing to fudge data or practices to obtain a commission (or bonus). My feeling for why salary based is better comes from the idea of total quality management by Dr. Demming. I also base my thoughts on the book Freakonomics. In general, I have seen people work better under a pure salary system. However, there are many great people working under a commission system.

I think that my situation with my Realtor was due to a lack of communication. To complete the closing, there were papers that needed to be completed, which the lender was planning for a week later, but the Realtor had to leave town by a certain date. I spent a couple of days late into the night picking up and filling out paperwork, and I would have come away with a more pleasant feeling had I understood what was happening. I would still suggest my Realtor to others though.

Lastly, I am not a Realtor, and I am taking a local perspective, so remember laws governing real estate practices do differ from state to state, and I do recommend Ms. Reese’s site, because I think it gives a great view of the profession. If you are buying or selling a home, you should check out different sites for information.


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