Do-It-Yourself Real Estate Source: CNBC / Gomez ©2001- Nick Karris and Natalie Engler Buying and selling a home can be among the most stressful transactions you'll encounter. But if you're willing to take some initiative, it doesn't have to be the most expensive. Thanks largely to the Web, the traditional 5% to 7% real estate agent commission -- once the foundation of the industry -- is beginning to crack. In its place, online real estate agencies and aggregators are erecting new compensation models that let you pick and choose from a menu of services and pay a professional a flat fee, hourly rate, or discounted commission to complete the specific tasks you need. Unlike the old model, in which realtors controlled all the information, the Internet allows consumers to do everything from researching neighborhoods to listing their properties with the Multiple Listing Service (MLS), the database most brokers and customers turn to for a description of available properties homes in their area. Moreover, the Internet provides tools online for preparing a comparative market analysis (CMA), scheduling inspections, and getting pre-qualified for a mortgage. Now, with a little extra legwork, consumers can reap the financial rewards of these efforts. Not surprisingly, a growing number of homebuyers and sellers are looking for just such an opportunity. Since February 2000, 18 million new consumers are using the Internet to shop for real estate information, according to Gomez research. Moreover, 75% of the 10,000 online homebuyers and sellers we surveyed want at least 80% control over their next transaction; the same percentage that said they would like a non-traditional agent compensation relationship. Moreover, 39% would like to try to sell their home directly on the MLS. This number jibes with industry figures that predict that within 10 years 40% of property sales will be for-sale-by-owner (FSBOs). Slowly, the industry is beginning to take note. Seventy-eight percent of agents believe it is at least somewhat likely that standard commission rates will drop over the next few years, while 50% believe that consumer demand for alternative services will grow. A bold few are stepping up to meet that demand. The most recent Gomez Online Home Buying scorecard (Gomez tracks over 300 online real estate sites and listing aggregators) revealed that the top three firms for independent homebuyers and home sellers provide a wide range of services and alternative pricing. Owners.com, HomeFox.com, and ZipRealty.com all offer discounted fees and present opportunities for buyers and sellers to get more involved in leading their transactions. At the same time, a growing number of real estate professionals smell the change in the air. Rather than fight the trend, they are developing the skills to offer their services "a la carte," according to Julie Garton-Good, an international speaker, author, and real estate educator whose sixth book on real estate, "Real Estate Services a la Carte: Selecting The Services You Need, Paying What They're Worth" (Dearborn, Chicago) will be published in April. To help teach real estate professionals make the leap, she launched a course that awards the designation of "Consumer-Certified Real Estate Consultant." By 2002, she says, 1,000 professionals will have completed the program, instituted by the National Association of Real Estate Consultants (NAREC). But how does do-it-yourself home buying and selling work? Most often, you simply go to an online real estate site, pay a fee and fill out an online registration form. The site then provides access to databases, tools and calculators for doing everything from finding a home to ordering inspections. At most online agencies, live real estate professionals are on hand to help you set a price, negotiate, or provide any other counseling you need. If they are familiar with the laws and intricacies of your locality, you're in luck. Otherwise, you can opt to find a real estate consultant on your own, by searching the Internet, visiting the C-CREC Web site, or using old fashioned word-of-mouth. One home seller in Arlington, Va. saved $16,000 by listing his $550,000 home on Homebytes (an affiliate of Owners.com), thus eliminating the 3% he would have had to pay a listing agent. For a $499 flat fee he was able to view comparable sales data, get help price his home, create a brochure (for advertising open houses), list his home in the local MLS and Owners.com Web site, and build a sales contract. His biggest concern - that he would pay the fee but be unable to reach an agent on the telephone to answer questions - proved unfounded. "I got in touch with someone every time I called," he says. His advice: "If you get the price right and you're willing to take calls from prospective buyers and real estate agents, the process isn't that daunting." In fact, it took him less than three days. Sellers aren't the only ones who benefit from this model. In August, Steve Morrow, an accountant in Richmond, Va. bought a home listed on Homebytes. He said he was able to knock $24,000 off the price of the $360,000 home, largely because the seller could shave 3% off the listing fee. Besides saving money he found the transaction more "personal," he says. "In the past, the home buying process has been similar to buying a car, which to me is almost as bad as getting a tooth pulled," he recalls after having bought and sold three homes the traditional way. "You sit down with [a real estate broker] and they write down a number and you haggle." With this fourth transaction, he negotiated his offer via e-mail. Other discussions took place over the telephone directly with the homeowners. "We liked the couple selling the house," he says. "And they gave their work [phone] numbers so we could get our questions answered more readily than we would have by going through the realtor." Furthermore, homeowners are more likely than realtors to know about things like a home's irrigation system and whom to call to get the house winterized. HomeFox, another online real estate agency, acts almost like a buyers' broker, promising to save buyers money by giving them a cut of the agent commission (typically 3% of the selling price). One plan offers full broker representation and results in a 25% rebate from the agent commission; a second plan requires that you find your own home and results in a 33% rebate from the agent commission; and the third plan covers for-sale-by-owner transactions for a flat fee of $1,495. The reason some progressive brokers like these new models is because it allows them to focus on the high-end value added services, like negotiating, and coordinating the closing. They use technology to automate the process so they don't have to spend their time driving people around the neighborhoods and telling them about the school systems. Still, these alternative services are not for everyone. The seller in Arlington, for example, sold his home in a hot real estate market, it was his fourth time through the process, and as a salesman he was comfortable talking on the phone, hosting an open house, and negotiating. He doesn't recommend the process to shrinking violets. Meanwhile Morrow encountered some resistance from real estate agents who felt threatened by the Web. Several buyers said their brokers refused to take them to see his property, mistakenly believing they would receive no commission because it was listed through an online service. Others tried to get his listing - not realizing that Homebytes was acting as his listing agent. Are you a good candidate for do-it-yourself real estate transactions? To find out, ask yourself the following questions: Are you a driver or a passenger? The alternative buyer/seller model asks a consumers if they are ready to take at least 50% control over the transaction. If you're content handing over the steering wheel to a professional, by all means do so. It's much simpler. Are you as comfortable with people as you are on the Internet? Home buyers and sellers need to be confident handling a number of steps, both online and off. As a buyer, these may include researching communities, identifying properties for sale, touring properties, determining which home to buy, selecting the right lender, hiring and working with a home inspector, making an offer, and negotiating a final offer. As a seller, your tasks may include soliciting bids from agents, pricing your home, posting your listing directly onto the MLS, advertising your property, showing your home to potential buyers, and potentially finalizing the closing. For perspective, consider that 80% of homebuyers Gomez surveyed said they feel comfortable researching different communities, yet less than 30% feel comfortable making an offer and negotiating a final price. The same is true for most sellers, with 43% willing to show their homes and less than 35% willing to negotiate offers. Thus, these unwanted tasks make good candidates for real estate services "a la carte." Do you have time? Real estate consultants estimate that it takes a median time of 69 hours from beginning to end to purchase a house, while buyers estimate the time required as 43 hours, says Garton-Good (the reality probably lies somewhere in between). Meanwhile, real estate consultants figure it takes an average time of 83 hours to sell a house, while consumers estimate that it takes 54 hours. No matter how you slice it, it's a big commitment. Morrow had to host four open houses before he got an offer on a home he sold through Homebytes. Says Garton-Good, some spouses are quitting their jobs to devote themselves to this undertaking? Saving a commission of 3% or 6% of the sale price of a property is certainly an attractive proposition. But we encourage consumers to do their homework before they make a decision. The Gomez Internet Home Buying and Gomez Internet Mortgage Scorecards are good places to start. Natalie Engler is a Gomez senior editor; Nick Karris is Gomez's senior retail analyst.