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Chris Oliver is a spokesman for Hauseit, a website that lists homes of FSBO sellers on real estate websites and local broker databases at a discounted commission.
New York City real estate brokers have long touted the uniqueness of the local real estate market as a reason why for sale by owner (FSBO) home sales have never gained in popularity versus the rest of the country.
At first glance, they appear to be right. There were 22,745 for sale by agent listings versus 939 FSBO listings in NYC as of July 15, according to Zillow, meaning FSBO properties make up around 4 percent of the total number of listings in the city.
However, this statistic fails to account for the dramatic rise in agent-managed FSBO sales, in which sellers list with a traditional, full-service listing agent yet avoid paying real estate commission.
In an agent-managed FSBO, the owner pays a flat fee to list their home on a local inter-brokerage database (like the Real Estate Board of New York Listing Service for NYC sellers) and a handful of popular real estate search websites.
In contrast to a traditional FSBO seller, agent-managed FSBO sellers benefit from having an exclusive listing broker shield them from much of the solicitation and harassment that traditional FSBO sellers experience from other agents.
Why hasn’t this been done yet?
Real estate is known in Silicon Valley as a startup graveyard due to the large number of half-baked ideas by outsiders who believe the simple solution to lower real estate commissions is an eBay for homes.
A variety of discount brokers have received hundreds of millions of dollars of capital funding over the past several decades yet have struggled to gain traction, because they have attacked the problem head-on against the largest salesforce in the world. There are over 50,000 licensed real estate agents in NYC alone, and because 90 percent of its transactions are closed between two agents representing the buyer and the seller, a listing agent needs the cooperation of other agents to succeed.
Some companies have instead taken a softer approach to changing the nature of real estate commissions. The company I work for, Hauseit, has amassed a network of traditional REBNY-member firms that have agreed to reduce commissions for both homebuyers and sellers. The company reduces commissions for sellers by offering both the agent-managed FSBO option as well as a 1 percent full-service listing option.
Sellers aren’t the only ones who can benefit from reduced commissions. Buyers can also save money on their home purchase through the recently legalized buyer’s agent commission rebate, whereby a buyer’s agent rebates a percentage of the commission back to the buyer. For both buyers and sellers, Hauseit maintains that it’s a win-win situation for both parties, as the brokers don’t tarnish their reputations from openly discounting their services, and are able to increase their reputations by having a greater presence in the market.
Have real estate commissions in NYC finally started crumbling from the 6 percent of the home sale price? It’s an interesting story of game theory.
Sooner or later, homeowners won’t stand for paying $180,000 (6 percent of the average $2 million NYC sale price) to sell their home, but to openly discount commissions brings the fear of damage to one’s reputation and the chance of missing out on another 6 percent commission check for a future deal.