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The Honolulu Advertiser
Posted on: Sunday, October 9, 2005

Brokers criticize flat-fee services

 •  Selling your home sans the high fees

By Andrew Gomes
Advertiser Staff Writer

Much of the savings from discount and flat-fee real estate agent services involves selling homes to buyers who are not represented by brokers.

Some buyers search for and buy homes without a broker while others agree to work with a broker who assists them through the buying process and collects a commission when the sale is completed.

Buyers' brokers customarily earn a 3 percent commission, which usually comes out of the seller's profit. On a $615,000 home, the seller would typically pay the buyer's broker $18,450.

Flat-fee brokerages like Help-U-Sell and Assist-2-Sell said they sell about half their homes to buyers not represented by brokers.

The companies typically inform clients that they are obligated to offer a buyer's agent commission — it could be 3 percent or less — if their property is listed on the Multiple Listing Service, or MLS.

The MLS is a central source for information on properties for sale. Brokers list their properties with the MLS to reach a wider audience of potential buyers. Brokers using the MLS typically agree to share commissions.

If a seller wants to keep their property off the MLS, they may be able to find a buyer not represented by an agent.

The strategy upsets full-price brokers who complain that discounters are using a loophole in local Realtor association rules to avoid sharing home listings and potential commissions with other brokers.

Brokers pay a flat annual fee to use the MLS, and MLS members, who include discounters, are required to input information on every home they agree to sell for clients.

The Honolulu Board of Realtors, which operates O'ahu's MLS, can fine members for not posting new home listings on the system, but not if a client requests that their property be excluded.

"If a client says they don't want their property on the MLS, you can't hold the broker's feet to the fire," said Rochelle Lee Gregson, executive director of the Realtor Board.

Discounters say they are only providing clients a choice by explaining that a seller's savings potentially increases if they can sell their home without listing it on the MLS.

"Pretty much everyone else has one program, take it or leave it," said Lyle Martin, a Realtor who co-founded Nevada-based Assist-2-Sell in 1987.

Martin said roughly 80 percent of clients initially choose to exclude their property from the MLS, though about 50 percent of homes the company sells end up on the MLS.

"It's a very useful way to sell your home, but it is also a very expensive way to market your home," he said.

Bill Chee, president of Honolulu-based Prudential Locations, said the MLS is the best way to sell a home because it maximizes the potential sale price by exposing property to more prospective buyers through brokers.

"The more people you expose it to, the higher the price," he said. "It's the law of economics. It happens to be the law of real estate. That hasn't changed."

Reach Andrew Gomes at agomes@honoluluadvertiser.com.