Going for broker?

Should you try to sell your house without an agent? STEPHANIE HOO crunches the numbers in this week's installment of 'Your Two Cents.'

Is it worth it to try to sell your house without a real estate agent? Given that the typical broker's fee is 6 percent -- which, for a $300,000 house is $18,000 -- many a homeowner has at least considered doing it themselves.

For-sale-by-owner Web sites have made the process easier, though professional sellers argue that they provide security by prescreening potential buyers and help with legal paperwork.

"Selling without an agent is like representing yourself in court," says Walter Molony, spokesman for the National Association of Realtors.

That said, a new academic study has found that in Madison, Wis. - home of an especially active "for sale by owner" or FSBO site - do-it-yourselfers sell their homes for about the same price as those who use an agent, saving that whopping 6 percent commission.

"This study is saying that you have a way to get away without this 6 percent," says Igal Hendel, an economics professor at Northwestern University and one the study's authors.

There are caveats, though, he adds.

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TIME VS. MONEY

Broadly speaking, the study found that people who sold their homes using FSBOMadison.com weren't giving up much -- if anything -- by bypassing the real estate industry.

This was surprising, Hendel says, especially since the Realtors association has data saying agents sell homes for about 16 percent more. "The perception everywhere is that you save the commission but you don't know how much money you give up in terms of a lower price," he explains. But that perception, at least in the Madison market, was wrong, he adds.

Sale prices for homes sold by their owners or via an agent were about equal in Madison, suggesting that the market finds its own level -- in other words, when buyers comparison shop they equate the prices themselves.

One key drawback is that it can take longer to sell a house yourself, Hendel says. The study found that about 20 percent of home sellers who tried to sell on their own failed -- and ended up using a real estate agent anyway. This shift wasted an average of 68 days, which is a substantial chunk of time.

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WHY MADISON?

The study's authors were careful to stipulate that their findings apply only to Madison, which has earned national attention for the strength of its FSBO (pronounced "fizzbo") market.

Hendel hypothesizes that Madison, as a university town, benefits from a high percentage of people with Internet access. And as a smallish town, it benefits from not having a cluster of completing FSBO sites -- allowing FSBOMadison.com to attract a critical mass of houses for sale. Hendel has been on other FSBO sites in other cities that have as few as five homes listed, making them not worth the while.

But, there's no reason other cities can't duplicate Madison's success, he adds, suggesting that different FSBO sites in the same city use the same platform to pool their listings. A city government could even provide the FSBO platform at virtually no cost, he says.

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REALTORS STRIKE BACK

No one is predicting, though, that FSBO sites will drive real estate agents out of business any time soon.

Most home sales still go through an agent -- the Realtors association says only 12 percent of people who sold homes last year did so without an agent, and almost half of the do-it-yourselfers sold to people they already knew.

"Some people really dislike the process of showing their house," Hendel says. "There are some risks and unpleasant moments involved, and it's worth the 6 percent for them."

Molony puts it more bluntly. "Are (sellers) really willing to take the risk in dealing with unscreened people coming into their home?," he says. "Virtually anyone with any motivation can come through your door -- they might be a bona fide potential buyer, they might be curiosity seeker who is wasting your time, they might be casing your house."

Selling a home is for most people the biggest financial transaction they will make, and Realtors help check the financials of prospective buyers and weed out the looky-looks, he says.

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POSTSCRIPT

It'll be interesting to see if FSBO sites shake up the real estate industry into at least offering lower fees. At ForSaleByOwner.com, the user base has nearly doubled each year since it was founded in 1999, with nearly 2 million buyers now checking the site each month and 60,000 properties listed, says the site's COO Colby Sambrotto.

People really want to save that 6 percent commission, he says. "That's a lot of money for most Americans. ... When you're talking about enough money to help pay for a kid's education, help offset the cost of retirement, that kind of thing, it's a big deal for most people."

"We're not anti-Realtor, we're pro-consumer," he adds. "The fact of the matter is, nowadays the Internet does a great job of marketing the property."

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Stephanie Hoo is asap's business writer. "Your Two Cents" appears every Monday.

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