Twenty-five years ago, the high-tech tool utilized in real estate transactions was the fax machine.
How times have changed.
The process of buying and selling homes is now immersed in technology — from website listings and real-time texts and video chats to 3-D virtual reality tours and electronic signatures — which raises this question: Why hire a real estate agent or broker at all?
In 2017, 13 percent of buyers and 8 percent of sellers didn’t use a real estate agent when purchasing or selling their homes, according to the National Association of Realtors. That’s up from 11 percent for buyers five years ago, but down from 9 percent of sellers. The numbers, however, don’t tell the whole story. New services that provide flat-fee or a la carte brokerage services are on the rise.
A big motivating factor for those going without agents or with limited-service brokers is not wanting to pay a hefty fee or contribute to a 6 percent commission that can add up to tens of thousands of dollars.
But those in the industry argue, effectively for most buyers and sellers so far, that their negotiating skills, knowledge of the market, local connections and willingness to work long hours for clients, makes their services well worth the price.
Going it alone
Scott Cardwell had a heck of a time trying to sell his family’s home in Erie’s Vista Ridge neighborhood.
In the spring of 2015, Cardwell and his wife went the traditional route, listing the home with a real estate agency. In the four months that the couple’s property was on the market, they played spectators to a parade of tire-kickers.
“We probably had 60 showings … and not a single offer,” Cardwell said of the 3,599-square-foot, four-bedroom, three-bathroom home, which was listed for $450,000.
The majority of the lookie-loos, he said, were uninformed. Some potential buyers strolled in wanting a ranch home, expecting more windows and desiring the ability to put in a 6-foot privacy fence — all aspects that the multistory home, adjacent to a golf course, could not deliver.
On several instances, agents were absent for their scheduled showings.
“We just really experienced a fairly low level of professionalism from real estate professionals,” said Cardwell, 50.
The Cardwells pulled their home from the market and regrouped. The following spring, Cardwell took the reins himself.
Cardwell used the “Make Me Move” feature on Zillow; visited Redfin and Realtor.com to find comparable sales; and subscribed to real estate Facebook pages to determine days on market, list prices, sale prices and number of homes in the area that were for sale. Residential real estate appraisers also provided a list of comps for a small fee, he said.
He listed the home for $435,000 and visited the Colorado Department of Regulatory Agencies site for real estate forms and contracts.
“The most important thing I did was qualify buyers,” he said.
That included a pre-showing call to get a full picture of the buyer’s situation, what they were looking for and how much they could afford, and to provide a full disclosure of the property, including its HOA fees, oil and gas activity, and utility bills.
Cardwell conducted the showings himself, required higher-than-normal earnest money, required agents to be a transaction broker rather than a buyer’s agent, and accepted backup offers. Cardwell made buyers aware that he’d be willing to pay their side’s agent commission.
He had a solid offer in fewer than five buyers, reduced the price by $10,000 to account for the unrepresented buyer and sold the house for $425,000 in March 2016. It was on the market for about 45 days.
The process was a little tedious at times, but Cardwell, now living in Tucson, estimates he saved $15,000 in not hiring an agent.
Hiring an agent
Most people don’t want to do all that work. And they’re willing to pay for the services of a professional on what is probably among the biggest financial transactions of their lives.
“In any market, buyers and sellers prefer to have an expert help them not to do something dumb,” said veteran mortgage banker Lou Barnes, a senior loan officer with Premier Mortgage Group in Boulder.
An agent will help buyers understand how to satisfy their own wants and needs, said Barnes, who started as a real estate broker in 1978 and has been licensed ever since.
“You are looking for a new business suit, which are in stock in plain sight in dozens of stores,” he said. “Would you spend $500,000 on one without asking an expert how it’s made, whether it fits, what else might be available, and how much to pay? Appraisers go to school and then years of apprenticeship just to learn what a comparable sale is, and even then, adjusting a comp properly to infer a value for the subject is a form of art and deep experience.”
Listing agents, Barnes said, deliver three valuable assets: staging, helping decide what offers to accept and, perhaps most importantly, setting the best asking price.
“The principal pro/con, buyer or seller: Only experts understand value and price, two different things,” he said. “No two homes are the same, which lies at the heart of the value/price problem for civilians. Right behind that: consumer emotion. Good brokers are dispassionate.”
Kelly Moye, a Realtor with Re/Max Alliance in Broomfield, has been a broker in Colorado for 27 years. She has ridden the undulations of the Front Range real estate market and witnessed the evolution of technology.
“The buyers can get information online, and that’s wonderful, but it stops right there,” Moye said.
From that point forward, the success of that purchase will depend on whether professionals are involved, she said.
“It’s quite hard to actually get the property, if you’re not working with a Realtor who’s experienced in negotiating and contract writing,” she said.
People get pretty excited about saving money, but Moye cautions that they should take the time to do the math when going with a discount or flat-fee broker. If offerings such as signage, listings, website presence, negotiations are made a la carte, those might add up to be similarly priced or more expensive than a full-service brokerage, she said.
Additionally, Moye noted that a Realtor is a licensed real estate agent who also must uphold the code of ethics and standards for the national Association of Realtors and is required to complete continuing education courses on a recurring basis. In Colorado, real estate agents are licensed as brokers.
Colorado Association of Realtors says 26,011 active Realtors are among the 38,626 active brokers licensed by the Colorado Division of Real Estate.
Foremost, it comes down to experience, relationships and that personal connection, Moye said. The trust built over the years with sellers’ agents have gotten many buyers in the door and contracts inked, she said.
“It’s an intangible,” Moye said. “It’s something that is so important because that is actually how we get those deals done.”
A hybrid model
Some businesses have cropped up to offer a hybrid approach: help from an agent without the big-ticket costs.
Denver-based Trelora positions itself as a “disruptor” to the traditional, full-service real estate agency. Buyers and sellers pay a flat fee of $2,500 for Trelora’s agents, who are salaried. The biggest in the market for reduced-commission brokerages is Seattle-based Redfin.
“This is your most prized possession,” said Dave Workman, Trelora’s co-founder and chief operating officer. “We truly believe that you need that personal touch.”
Technology is critical, he said, as is the assistance of an agent — because this isn’t something done everyday. A hybrid model such as Trelora’s gives sellers and buyers real-time access to data and updates throughout the process while having agents at the ready for help and questions along the way.
And the hybrid approach serves to save money along the way, he said.
“Buyers should understand what they’re paying for,” he said, tossing out the math of a 7 percent commission on a $500,000 home. “What did I get for that $35,000?”
Trelora’s business model includes publishing the commissions that a home seller is willing to pay a buyer’s agent. The company is banking on technology playing an increasing role in real estate.
“It’s not a matter of ‘Is the shift coming?’ It’s ‘The shift is here, it’s in process,’ ” he said. “Now how are the current players going to adapt and change to the market, and what are the new players going to do when they come in?”