Sandra and Milton Logan couldn't bear the thought of once again paying a real estate a 6 percent commission. So when they put their Reno, Nev., home on the market last year, they chose to work with a reduced-commission brokerage, Reno-based Assist-2-Sell.
Assist-2-Sell charged the Logans $4,995 to sell their home. For this fee, the company provided a real estate agent who did nearly everything a traditional agent would do: He placed ads in local newspapers, stuck a "For Sale" sign in the Logan's front yard, scheduled showings, negotiated a final sales price and handled reams of paperwork.
He didn't list the Logan's home on the Multiple Listing Service, the online database of homes for sale through licensed real estate agents. That was so Assist-2-Sell would not have to share the commission with another agency. The house may have been exposed to fewer potential buyers; but in many of today's hot real estate markets, that's not a factor.
After three months on the market, the Logans' home sold for $322,500. If they had paid a standard 6 percent commission, the couple would have spent $19,350, so they saved $14,355. The Logans were thrilled.
"We had been using the same Realtor in Reno for a lot of years. But working with him took such a big chunk out of our equity every time we sold. We saved a lot of money by going this route," Sandra Logan said.
The Logans aren't the only sellers who have balked at paying agents the traditional 6 percent of their home's sales price as a commission, and Assist-2-Sell is far from the only reduced-commission brokerage that has risen up to serve such clients. Companies such as Foxtons, ZipRealty and Help-U-Sell each offer their own versions of discount service.
Some, such as Assist-2-Sell's most popular program, charges sellers $2,995 for homes that sell for up to $200,000 and an additional $1,000 for each $100,000 increase in sales price. Others, such as Foxtons, charge sellers a commission of 2 percent of the final sales price, while ZipRealty agents charge a commission that is 1 percent lower than the standard commission in a given area.
It is unclear how many sellers work with discount or reduced-commission brokerages. The National Association of Realtors -- of which discount brokerages are usually members -- doesn't ask brokerages any questions about their commission structures, says Walter Molony, a spokesman for the organization.
Reduced-commission brokerages are gaining strength. Help-U-Sell now runs 750 franchises across the country. ZipRealty notched revenues of $62.3 million last year, while handling 8,500 transactions. Assist-2-Sell is on track to earn $8.3 million in gross income this year.
Is a reduced-commission brokerage right for every seller? It depends on how much service a seller wants.
"There are a lot of things that we do that people don't realize," said Stephen Baird, president and chief executive officer of Baird & Warner, a traditional real estate brokerage based in Chicago. He points to the paperwork sellers face as one example: Full-service brokerages help sellers fill out disclosure agreements and other forms required by law. They also qualify potential buyers, help sellers set a fair price for their home and handle the often-unpleasant negotiation process, Mr. Baird says.
"You need someone advising you on what the market is," he says. "Is this a good price? People often give away thousands of dollars in their sales price just to save a few thousand dollars in commissions."
Proponents of discount brokerages say that enough reduced-commission brokerages now exist so that consumers can easily find ones that offer the right amount of service. For instance, ZipRealty of Emeryville, Calif., places sellers' homes on the Multiple Listing Service. Assist-2-Sell offers one level of service that includes the Multiple Listing Service, a second tier that excludes just the listing service and a third level at which they merely handle the paperwork for clients who are otherwise selling their homes on their own.
Help-U-Sell excludes the listing service but does list its clients' homes on its own Web site. Proponents of reduced-commission brokerages say that the real estate industry for too long has been resistant to change. Discounters, they say, offer a key alternative in an industry that desperately needs new business models.