| The Real Estate “Revolution” The Real Estate Business is Changing |
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Help-U-Sell Real Estate/Sacramento Metro Master and the Central Valley Region
While home sales are projected to continue at a healthy pace throughout 2004, anticipated mortgage rate increases and escalated selling prices may be cause for concern for consumers who have been enjoying a record-high sellers market but a boon for realtors who understand the changing marketplace.
According to NAR (National Association of REALTORS®), the median existing-home price rose about eight percent in 2003 with another 4.6 percent increase expected for 2004. And, as with the escalated home sale prices, mortgage rates are also to continue its rise with a 30-year fixed-rate mortgage projected to hit 6.5 percent this year, up from a generational low of 5.8 percent in 2003 (Realty Times, 2004).
This anticipated rise in pricing, experts say, could have a dramatic effect on the way real estate is sold as sellers (and buyers) are scrambling to hold on to as much of their homes’ equity as they can.
Now, more than ever, the trend toward alternative service models is expected to reach an all-time-high as consumers are beginning to realize that while they can’t control price and mortgage increases, they can, thanks to today’s variety of options, choose the way in which they participate in the real estate process.
Alternative Real Estate…What is it and What are the Differences?
Until recently, the traditional route of selling a home involved listing the home with a real estate agency and paying a commission (usually about six percent) to the agency at settlement. However alternatives are now available that allow consumers to keep more of the equity in their homes—a good idea, especially if they do have to lower the price to attract buyers. But, with so many new real estate business models popping up, consumers seem confused as to what each does and if they really are beneficial to them in the long run.
FSBOs (For Sale By Owner)…Economical Yet Risky
Some sellers are choosing to go the do-it-yourself route or the FSBO (For Sale By Owner) approach. While this approach sounds great as sellers get to keep all of their equity, it can be risky because of the legalities that govern residential real estate sales.
Few sellers, although they may be highly educated in most areas of the real estate process, know how to dot every “i” and cross every “t,” such as pricing the property correctly, proper disclosure, removal of liens, etc. And it’s these intricacies that can, too often, can get sellers into trouble.
Discounting…Cost Efficient Commissions, But Limited Service
Another alternative is discounting. Discounting should not be confused with the alternative that is emerging as the leader across the country — the fee-for-service real estate alternative where sellers can literally choose from a menu of service options, paying only for the services they want.
With discounting, sellers usually pay a very reduced commission (say 2% as opposed to a 5 or 6%) yet there is virtually no professional guidance behind the transaction—leaving sellers to their own devices.
Fee-for-Service…Cost Efficient with Complete Support
Fee-for-service, on the other hand, allows homeowners to chose from a menu of services and pay only for the services they want. With fee-for service, sellers take an active role in the sales process by showing their own homes but benefit from having the market analysis, advertising, paperwork and details handled by professionals right through settlement. This alternative real estate approach is consumer driven and consumer centric, and appears to be the method to which home sellers are gravitating not only in Arizona but nationwide. They seem to like being able to keep more of the equity in their homes while benefiting from the professional guidance of licensed real estate agents.
The real estate industry recognizes the benefits of the fee-for-service approach to home sales. According to a 2003 report released by The National Association of REALTORS®, the fee-for-service model is expected to be one of top real estate models in the country by 2005.
Reports like the Gomez Report (the real estate industry’s leading research survey) support NAR’s survey — alternative models like the fee-for-service are being fueled by the desire to save money as well as by the emergence of the Internet and other technological advances. According to the latest Gomez Report, the real estate industry’s leading indicator states that only 49 percent of home sellers said they would ever use a traditional real estate agent again. However, it also reported that the majority of these respondents were not willing to go through the entire process without any assistance at all. This is the biggest reason that the fee-for-service alternative seems to be taking the lead and a significant indicator that realtors should change the way they’re doing business.
While the real estate industry will always fluctuate, if consumers continue to seek out options and take advantage of the latest technological advances, real estate offices that offer them what they want become a very viable business opportunity.
Maurine Grisso is regional director for the Sacramento Metro Master and the Central Valley Region for Help-U-Sell Real Estate. Grisso has been the recipient of Help-U-Sell Real Estate’s“President’s Club Award” six years running. Her region has ranked in the top of Help-U-Sell Real Estate offices in dollar value for the last six years. Help-U-Sell Real has been named by Entrepreneur magazine as one of the top 100 “Fastest Growing Franchises” for the past six years. California is the largest and fastest growing region with 230 Help-U-Sell Real Estate franchises, a 125 percent growth over 2002.
