A decade ago in 2003, we bought our first house of $315K. We knew very little about home purchase back then, and listing information on the internet is a scarce resource. Through some luck, we managed to find an real estate agent who was willing to give us a 20% rebate of her 3% commission, a rarity at that time. We benefitted a lot from her expertise throughout our first home purchase experience, and of course, the rebate, amounting to $1,890 ($315K x 3% x 20%), as well. After all, the $2K-shy bounty was 1.5% of our net worth back then. And our share of the realtor commission ended up being $7,560 ($315K x 3% x 80%) -- even though technically the seller paid the commission, it's still coming from our money. I estimated the agent probably spent 30 hours on our case, yielding a hefty $250 hourly rate.
Fast forward to late 2005, we chose to sell our house before my job assignment to Asia. Being more comfortable with the details of real estate transactions, I decided to sell it myself instead of through an agent (a.k.a. FSBO, or for sale by owner). I guess we were lucky -- it was a seller's market and it didn't take much talent to orchestrate a bidding war. We ended up selling the property at $420K with buyer paying the 3% commission due for his agent outside of the price. Except for $300 which I paid a real estate lawyer to review the selling contract, I pocketed the entire 3% commission for seller's agent, or $13,500 -- a rewarding 3.4% of our net worth back in 2005.
So, when we decided to move back to the States and were back to the real estate market in November 2012, we faced several choices. We knew we wanted to buy a property around a million dollars, and we had a pressing timeline -- we didn't want to make do in a temporary housing apartment for many months, and the workload from my new job was coming up quickly.
I thought about making the purchase without the agent, but finally decided against it -- I figured real estate transactions at million dollar level were a different ball game compared to my buying and selling experience with an entry-level house. I wanted to get some peace of mind with a professional on my side, although I didn't want to pay for the full commission -- an estimated $30K in this case -- for the convenience.
This time, the proliferation of real estate information on the internet was several generations ahead of what it was back in 2003.
My wife and I were sitting in the couch of our China home and browse the numerous listings in our desired neighborhoods via Redfin. In a matter of hours, we were able to shortlist a dozen properties. All we need was an agent to show us these houses during our house hunting trip and represent us in the transaction. And we wanted to see a big commission rebate!
Yes, the value of a traditional realtor is on the wane. Online establishments like Redfin is offering 1.5% commission rebate. But even better, we were able to find WALAW, a local firm with a flat-fee schedule. The firm will only charge $4,995 ($2,000 more for properties above $1M) for all the essential components of a home purchase -- property tour, competitive market analysis, offer write-up, negotiation and coordinating everything toward the final closing. Even better, the firm owner, Marc Holmes, is both a real estate broker and lawyer, and all the legal review and guidance are included in the package. (Disclosure: This post is not a paid advertisement. Instead, it is a review from a happy customer.)
Marc was a pleasure to work with. After a phone call and several emails, Marc was able to arrange a full-day tour of 10 properties in the first day of our house hunting tour. And luckily, my wife and I reached the same conclusion on which was our dream property quickly and we made an offer the following evening.
As we returned to China to pack, Marc was able to negotiate on behalf of us, and finally landed in $85K reduction for us compared to the listing price. Over the following few weeks, we put his legal and real estate expertise to good use, helping us to sort out one trouble after another. We finally closed the property at $1.065M and only paid a tad above $7,000 as commission. In fact, this is even smaller than the $7,560 our agent in our first house earned back in 2003 on the paltry $315K property. Needless to say, we were ecstatic at the result of over $20K commission savings and a trouble-free deal to land in our dream house.
A word of caution, Marc's package doesn't include researching for potential properties (who needs it when you can use Redfin, Trulia and Zillow?), and the property tour is capped to 20 hours before hourly charge applies, so it doesn't fit those who are reluctant to do window shopping at internet or cannot make fast decisions. You also have to pay $500 upfront and need to pay the full $4,995 if you still haven't bought a house in 6 months (Marc will still help you beyond the 6th month though). But it does work for us :-)
Very likely we will hire Marc again when we will sell our house down the road -- Marc's firm also offers flat-fee package for sellers as well, starting at $4,995.
Now, we only hope our second act in homeownership will land in the same 6-figure appreciation we received from our first property!
What's your experience with realtor these days? Have you used flat fee realtor in real estate transactions?