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Like it? It's from my agent

Money-saving alternatives to paying a regular commission benefit buyers and sellers.

September 26, 2004|T.J. Sullivan | Special to The Times

When buying a house, the word "surprise" tends to conjure up negative images, like fractured foundations and termite infestations.

But the surprise Steve Brown received at the close of escrow on his $349,000, four-bedroom house in Redlands was positive -- a rebate check for $2,500 from his agent, Wayne Womack.

Womack, co-owner of Pacific Shore Properties in Huntington Beach, gifted about a third of his commission back to Brown, on top of covering $800 in fees for the appraisal and inspection.

"Once I found out about the rebate, I started telling everybody about it," said Brown, a firefighter for the city of San Bernardino Fire Department. Brown didn't realize he would receive a rebate until the deal was in escrow. "I was able to go out and buy new furniture for the new house."

It's a bonus most buyers and sellers don't get. But an increasing number of agents and brokers are competing with one another by experimenting with rebates, hourly rates and flat fees as alternatives to the 5% to 6% commission typically charged.

As home prices have shot up, so have the payouts to agents -- an increase that is not linked to a comparable increase in labor. In fact, some agents admit that their jobs are easier because more buyers and sellers are educating themselves on the Internet before stepping into the market.

Commissions, the most common form of compensation in real estate transactions, have always been negotiable and optional. California law does not require any particular compensation method, only that agents and brokers collect after services have been rendered. In addition, the National Assn. of Realtors has no preference, though it stresses that, to be legal, rebates must come out of the agent's pocket and not from financing for the home. So the possibilities are abundant, though full-sized commissions are not likely to go the way of travel agents just yet.

Rebates, for example, work off the traditional commission structure and can benefit sellers and buyers. Discount brokers still charge a commission to list a home, albeit a reduced one that hovers around 1.5%. And then there are consumers who value the bells and whistles of home marketing offered by standard-commission agents. Some have their own forms of incentives, such as the cruise tickets that Troop Real Estate in Simi Valley is dangling before buyers.

Flat-rate brokers appear to offer the most significant savings, at some sacrifice. Help-U-Sell, for example, is set up so that sellers wishing to realize the maximum savings must give up more than just those day trips to the cinema while an agent holds their open house.

In addition to baby-sitting their home all weekend and guiding prospective buyers from room to room, sellers often are urged to forgo listing their property on the multiple listing service, because to attract attention a property must offer the buyer's agent a commission of at least 2%. Instead, sellers are encouraged to save thousands by opting for the franchise's in-house marketing.

It's a gamble that the franchise branding, its Internet marketing and other forms of advertising are powerful enough to pull in buyers who will also let the franchise represent them, eliminating the need to compensate a second agent.

Withholding a property from the listing service can save money, some agents say, but it limits the exposure to buyers who might be willing to pay more, sort of like the difference between trying to sell a car on a busy street corner or a well-known dealer's lot.

Nonetheless, it's hard to deny that some of the alternatives can help sellers save significantly.

"Some realize that they can buy a Lexus with what they save by doing it themselves," said Julie Garton-Good, the Idaho-based author of "Real Estate a la Carte," and founder and president of the 4-year-old National Assn. of Real Estate Consultants, based in Orlando, Fla. The trick, however, is finding those agents and brokers.

Garton-Good says her association has about 1,300 members in three countries, but she only knows of one agent in the Los Angeles area who bills by the hour, an approach that some say works best in low-maintenance sales situations, such as when friends or relatives are buying property from each other.

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No-brainer hourly fees

Hal Feiger, a broker with Realty Advocates in Oakland, offers an hourly rate of $120, including a $675 package that provides consulting services, signs, a key box and a listing.

Feiger said he recently was employed at a flat rate of $2,200 on a $500,000 property sale. The buyer and seller had found each other on their own and agreed to a purchase price, but they required assistance with the paperwork. A different agent had quoted a 4% commission, or $20,000.

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