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Online Brokers Vie for Buyers and Sellers

Self-motivated homebuyers or sellers may want to explore online brokerage services.

Is the tech-savvy consumer ready for buying or selling a home online? You bet, say online brokerages, and these companies are tempting consumers with lower commissions than traditional brokerages. It's a strategy that challenges the conventional wisdom that to get adequate service, your real estate agent has to be constantly on location to serve you. Traditional brokerages are scoffing at these upstart firms that currently handle just about 1 percent of all residential real estate transactions. It's also a trend that could favor the consumer.  But make sure you're comfortable with what you're getting.

What do you get from an online firm? Some of the services occur online and over the phone. In fact, instead of providing an agent to weed through listings, many brokerages expect you to do most of your house hunting yourself. They provide you with listings online, you peruse the listings and identify the most promising homes, and call an agent when you're ready to go see them. The downside is, you may not have quick access to as much information as a seasoned real estate agent could get by spending time on the Multiple Listing Service. But for homebuyers who feel comfortable doing their own research, this approach can pay off. Some online brokerages offer a 1 percent rebate off the broker's commission or discounts on escrow and title fees.

For sellers, the automated approach results in less contact in person with your broker and more conversation via e-mail and the phone. But there's a big financial incentive to go online. Many electronic brokerages charge only 4.5 percent versus the standard 6 percent in commission, not a price difference you can afford to ignore. On a $200,000 home, for example, that translates into saving $3,000 on your commission. Plus the buyer could save up to $2,000 if he or she qualifies for a rebate.

The whole debate over online brokerages has, of course, resulted in a "Us versus Them" debate between traditional real estate agencies and online firms. The National Association of Realtors says that consumers don't get the personal service they deserve and receive from a local, experienced agent. You get what you pay for. Not true, says the online side. In fact, in addition to charging less than the standard 6 percent, many firms pay their agents by salary instead of commission. That's a good thing, they say, because agents provide their undivided attention instead of having to worry about the next sale.

Self-motivated sellers might be happy with the online approach. You get a local agent who lists your home and provides advice about preparing it and showing it to potential buyers. Apart from these usual services and the marketing of your home, you pick up some things normally handled by the broker, such as reviewing certain documents and doing some research online. And your broker won't be coming over for coffee just to chat. Maybe that's not a big deal if you're just concerned with the bottom line, and your proceeds on the sale could be higher by saving that 1.5 percent in commission costs.

Sources used to create this article include Jennifer Hieger and the Orange County Register.