NELSON ZIDE
High costs play part
Following concerted efforts by Bay State Realtors to aggressively target homeowners who try to sell their home without the services of a real estate agent, the number of homeowners who sold their home on their own declined in the past year, a recent study shows.
For-sale-by-owner activity in Massachusetts fell from 9.7 percent to 5.9 percent, according to the 2004 Massachusetts Profile of Home Buyers & Sellers, compiled by the National Association of Realtors. Nationally, the for-sale-by-owner rate was much higher at 14 percent.
The 2004 profile surveyed more than 220 consumers in Massachusetts who purchased or sold a home from August 2003 to July 2004.
Some of the other survey highlights for the Bay State include:
• Some 93 percent of homebuyers used a real estate agent during the home search process, yet only 81 percent actually reported buying their home with the help of an agent.
• Of the homebuyers who did purchase a home with the help of an agent, only 47 percent reported using an agent who solely represented their interests – significantly lower than 64 percent of homebuyers nationally who chose buyer representation.
• The number of homebuyers who used a buyer’s agent to purchase a home actually declined to 47 percent during the latest survey period from 53 percent during the survey conducted immediately prior to it.
• About 65 percent of Bay State buyers used the Internet frequently as part of the home search, compared to 53 percent of all U.S. homebuyers.
• The number of minority homebuyers jumped to 12 percent from 7 percent.
Massachusetts Realtors welcomed the news of the drop in for-sale-by-owner transactions – commonly referred to as FSBOs in the industry.
Last year, the Massachusetts Association of Realtors, the statewide industry trade group, tried to address the issue by organizing a series of regional meetings to teach members how they can turn FSBOs into business for themselves.
Prompted by ads that essentially dismiss the value of using a Realtor in a home sale transaction and tout the thousands of dollars in real estate commissions that homeowners can save if they sell on their own, MAR leaders also urged the national Realtor trade association to more effectively target FSBOs in its multimillion-dollar ad campaign.
MAR also developed a “toolkit” on FSBOs that agents can use when talking with consumers about the benefits of working with a Realtor. This year, Realtors plan to step up efforts against FSBOs even more with new marketing materials, including a series of newspaper ads, a radio commercial, Web banner ads and a brochure for consumers.
Joseph Delaney, a Westwood real estate broker, said the shift in the real estate market may have contributed to the decline in FSBOs.
Unlike prior years when multiple purchase offers for homes were common and buyer demand far outstripped the supply of homes, last year’s market saw “some interruptions in the pace of things,” including an increase in the number of days it took to sell homes, according to Delaney.
Even though 2004 was still considered a seller’s market, “market conditions weren’t as rich for for-sale-by-owners,” said Delaney, a regional vice president for the Massachusetts Association of Realtors.
Traditionally, FSBO activity in Massachusetts has been lower than the level of similar transactions nationwide.
“We have a lot of professionals in Massachusetts Â… who recognize the value” of using a Realtor, said Maggie Tomkiewicz, MAR president.
Nelson Zide, senior executive vice president of the Milford-based ERA Key Realty Services, said the state’s lower FSBO rate may have to do with the higher housing costs compared to other parts of country.
“People are spending a lot of money to sell a big-ticket item,” Zide said. “If you got the higher-ticket item, you usually know you don’t have the expertise” to sell it.
Zide and other Bay State Realtors said that many home sellers who try to sell on their own ultimately end up using a real estate agent.
Gary Rogers, a Realtor with Re/Max First Realty in Waltham, said he worked with at least five different clients last year who first tried to sell their home through a heavily advertised Web site. “They went that route Â… and were hugely disappointed,” he said. “They were very sorry they wasted the time and money.”
According to the profile report, the typical homebuyer in Massachusetts was 37 years old, compared to 39 nationally, and earned a median household income of $81,900. In addition, the typical homebuyer in Massachusetts provided bigger down payment to purchase a home. Statewide, homebuyers made a down payment of a little more than 20 percent, compared to about 13 percent nationally.
Most homebuyers were married couples.
False Fears
A growing number of Bay State homebuyers are using real estate agents during their home searches. Ninety-three percent of home purchasers sought the services of a real estate agent, up from 90 percent in 2003. “Such a vast majority of buyers take advantage of professional assistance to find, evaluate and ultimately purchase a home,” said Rogers.
Still, almost 20 percent of respondents reported that they purchased the home without the help of an agent. Of all homebuyers, 7 percent reported buying directly from a homeowner that they knew, while 6.8 percent said they purchased from someone they didn’t know and 3 percent purchased directly from a builder.
Despite the growing popularity of buyer agency in Massachusetts and nationwide, the number of homebuyers who had buyer representation during the home purchase transaction actually slipped, bucking a nationwide trend toward greater buyer representation.
In Massachusetts, only 47 percent of buyers reported that they used a buyer’s agent to buy a home, compared to 64 percent nationally.
Bay State Realtors expect that trend to change after new agency legislation becomes effective later this year.
“The inability to get some clear definition on agency has made it harder for the buying public to understand the benefit of buyer brokerage,” said Delaney, the Westwood broker.
Agency legislation that goes into effect this year requires agents to get a seller’s permission for subagency to occur – a practice where agents bringing buyers to see a seller’s home are actually representing the seller’s interests. As a result, many companies, figuring that sellers will not sign off on the practice, are eliminating subagency altogether and instead offering buyer representation.
“As the consumer starts to understand that [new regulations] there will be more buyer representation,” said Tomkiewicz, broker owner of M. Macdonald Real Estate in Dartmouth.
Rogers, the Waltham Realtor who also serves as a regional vice president for MAR, agreed. “The number [of transactions involving buyer representation] will increase greatly over the next three or four years. The buyers that I work with know about buyer agency before they even walk in the door.”
The survey also showed that Massachusetts homebuyers are increasingly relying on the Internet to search for a home. Sixty-five percent said they frequently used the Internet in their home search, compared to 44 percent in 2003, and 53 percent nationally.
The increase comes as no surprise to Bay State Realtors.
“We have such a concentration of people who are in technology or work in industries that depend on technology use,” said Rogers.
And despite fears in the industry that the Internet and free flow of information would diminish the Realtor’s role in the real estate transaction, it appears that the Internet users responding to the survey also were more likely to seek out the services of a real estate broker.
The survey shows that “the Internet is to the broker’s favor. It’s not used as a bypass mechanism,” said Delaney. Instead, more consumers are using the Internet to get information about the housing market and when they are ready to make a move they contact a real estate agent, he said.
“The big fear that the Internet was going to move the Realtor out of the transaction, that’s proven to be false,” said Tomkiewicz.
Aglaia Pikounis may be reached at apikounis@thewarrengroup.com.
