Creative Real Estate Selling Strategy

[Mr. Paul]

I live in an area where it is very difficult to sell vacant land. Resale homes are still selling for a fraction of what new construction costs, so not too many folks are looking for land to build on. I have had the property listed with two agents for two years each and nada.

This is a very small town, with all the action being handled by a handful of real estate offices. Instead of listing with one agent, I would like to entice an agent, ANY agent, to sell this property by offering a nice buyer's agent commission, say 9 - 10% (value of the land is just over 100K). Does this sound feasible? Should I list it FSBO and visit each agent with a flyer? Should I just use a local lawyer to handle the sale on my behalf? Is this a potential conflict with a buyer's agent working a sale with an unusually high commission ... i.e., is this something a buyer's agent would need to disclose to his customer?

Any thoughts appreciated.

 

[Another Reader]

If you have listed the property for a total of four years with two different agents and it did not sell, the property was overpriced. What a property is worth is what a buyer is willing to pay. If you think the property is "worth" $100,000 and a buyer thinks it's worth $30,000 because improved property values have gone down, paying an agent 10 percent to find a buyer won't get the property sold.

If you want to sell the property, look at similar land sales over the last year or two. Price the property at that point and it should sell. Price it at the lower end at market value and offer an enhanced commission, and it will be among the first to sell.

 

[trouthog]

Great comments
Have you considered a 1031 exchange as a enticement?

 

[pb4uski]

When we were having trouble selling our house I considered offering an agent a contract where they would get x% of the selling price over a certain amount as an incentive for them to try to maximize the selling price.

IOW, let's say the low end of the range of value was $350k and the high end was $400k. So my thinking was anyone who can just breathe could sell the property for $300k but you would need a go-getter to sell it for $400k.

So I would offer to pay the agent 40% of the selling price over $300k. If they sell it for $350 (the mid point of the $300-400k range they) they get $20k (5.7% of the selling price). If they sell for $400k, they get $40k (10.0% of the selling price) so they have a nice incentive to maximize the selling price.

In any event, DW put an ad out on craigslist just before we were about to list it and a young couple responded and bought it so the whole thing became a moot point, but it was an interesting concept to think about. I'm not even sure if an agent could legally enter into such an arrangement as I never got past the thinking stage on it.

 

[Mr. Paul]

Not interested in a 1031 exchange.

The listing price of the property in the previous two listings reflected me buying the story of the prospective agents who both inflated what they thought the property could bring. It was overpriced in a slow market and attracted no interest. The price of the next listing will be realistic and priced to sell. Still, there are very few 35 acre properties selling. I am hoping to combine a buyer's agent friendly listing strategy with an attractive price this next go round.

 

[heeyy_joe]

Could you apply for a zoning change?

 

[Mr. Paul]

Could you apply for a zoning change?

Strictly residential.

Does anyone have any thoughts on the enhanced commission question?

 

[LandlordInvestor]

Offer owner financing..

 

[Another Reader]

If you price the property at market value, yes, there could be a benefit to offering an enhanced commission. FSBO is difficult in your situation, because there is little demand for 35 acre lots in your area. Listing the property at an attractive price will maximize exposure.

In your shoes, I would have fired the last two agents after a few months. Sign a much shorter listing agreement this time. Like 90 days. That has a way of motivating the listing agent, as long as the property is priced correctly.

 

[kcowan]

Unless there are dedicated buyers agents specializing in acreages, you would be hard pressed to motivate an agent with commission. Most concentrate to their own listings because they can double up.

 

[ERD50]

I've often thought that RE commissions should be on a sliding scale. But then, games would be played and there would be downward pressure on what the 'right' sale price should be. I think it would be a tough thing to do with the inertia in the market.

But it would be interesting to send a note to a bunch of local realtors, and say "I've done my own comps (or maybe obtained them from realtors?), and here is the commission schedule I will offer." That schedule would be at par at the comp price, and drop below, and rise sharply above (like $.50 on the dollar). I'd be happy to give the realtor $5,000 if he/she pulled in $10,000 above the ask. Why not?

The Freakonomics guys did a study to show that the incentives are misplaced with a flat rate. Realtors left their own homes on the market longer, and got a higher selling price (relative to the list price), than they got for their customers.


-ERD50

 

[Mr. Paul]

But it would be interesting to send a note to a bunch of local realtors, and say "I've done my own comps (or maybe obtained them from realtors?), and here is the commission schedule I will offer." That schedule would be at par at the comp price, and drop below, and rise sharply above (like $.50 on the dollar). I'd be happy to give the realtor $5,000 if he/she pulled in $10,000 above the ask. Why not?
-ERD50

Thanks everyone for their comments.

The above addresses a main question I have. The agent representing the buyer is working for them, not me. Isn't this some sort of conflict if this agent is trying to get his customer to pay a higher price to enhance their own commission on the deal?

 

[pb4uski]

Generally, the agent is representing the party who is paying their commission. Around here, most agents represent the seller, not the buyer. Even when you are buying and have an agent searching for a home for you and showing you homes and negotiating with the listing agent, they are representing the seller and not the buyer.

While some areas of the US have buyer's agents, where the agent is paid buy the buyer and not the seller, it is rare where I live.

 

[tryan]

If you're set on the price (which the activity - lack of - tells you is too high) then you need to over owner financing.

 

[Mr. Paul]

Thanks again. If I offer owner financing, what % down payment should I look for on a 100K property? The financing agreement is something a lawyer can draw up for me?

 

[MRG]

Thanks again. If I offer owner financing, what % down payment should I look for on a 100K property? The financing agreement is something a lawyer can draw up for me?

Vacant land is tough to get a bank to finance(from our experience). I'd call around and see what the local banks want, 20%? You can probably get a fairly good interest rate as well.

My FIL moved every few years, he always found buyers that were new to the area, little established credit history, he'd owner finance a 5-10 year balloon, get a better rate than banks were paying him on CDs.

Yes, I think any competent lawyer could draw up the paperwork.
MRG

 

[RetireAge50]

We sold 20 acres of raw land for 60% cash and 40% owner financing. The 60% was lots and the 40% was open space for future development.

Long story short it would have been better for us to just sell the entire parcel for the market price at the time.

We will likely have to foreclose on the open space. This stuff just hangs on forever and is in the back of your mind.

In my opinion the extra potential cash does not outweigh the complexity and lack of liquidity the notes bring.

 

[Katsmeow]

Generally, the agent is representing the party who is paying their commission. Around here, most agents represent the seller, not the buyer. Even when you are buying and have an agent searching for a home for you and showing you homes and negotiating with the listing agent, they are representing the seller and not the buyer.

Not if you have a buyer's agreement with them that provides otherwise. It is pretty common where I am that buyers sign a buyer's agreement with the buyer's agent that spells out that the buyer's agent is representing the buyer, but is being compensated from a share of the commission paid by the seller on the house.

To the OP -- I usually look at the full listing on houses I'm interested in as a buyer. That full listing sets forth the commission and how it will be split to a buyer's agent. So, there is no mystery there.

I am frankly skeptical that offering a big commission will make a difference for unique properties such as those with high acreage. That is, if you imagine someone buying a tract home that is a dime a dozen and there are many to choose from, maybe an agent could possibly steer a customer to one over another. But, with large acreage properties I wouldn't think that to be the case. I mean, no one is going to buy a 35 acre property just because the agent suggests it.

When we were buying our last house, we knew that we wanted something between 1 and 5 acres and we were picky as to the features we wanted. There was no way the agent could have gotten us interested in a house we wouldn't have been interested in.

Further, the agent didn't really find any houses for us. We gave her search parameters for what we were looking for and she set up the search which was updated daily. Then we picked what we wanted to see. There really wasn't any place there for her to suggest something to me that wasn't already on the list.

And I don't really recommend trying to sell without being on MLS unless you are in a really hot market (which you aren't). Tons of people search on their own with no buyer's agent, particularly people who may be thinking of moving to an area. They don't even find an agent until they have already found properties they are interested in seeing. If you aren't on MLS, they won't even find you.

 

[tryan]

When I owner finance I ask for at least 2% more than the banks ... last deal was 2.5% higher.

You want them to be motivated to refi .... and compensate for your risk (your due diligence is nothing like the banks approval process). But keep them in the deal.

 

[Looking4Ward]

If your comment about 35 acres wasn't simply hypothetical, than that certainly is a large chunk of land that wouldn't be of much interest to most residential homeowners in an area where new construction is outstripping existing homes.

Have you considered offering the property to developers thru a land management company rather than residential real estate agents? They've got much broader exposure and contacts in the industry.

 

[pb4uski]

Generally, the agent is representing the party who is paying their commission. Around here, most agents represent the seller, not the buyer. Even when you are buying and have an agent searching for a home for you and showing you homes and negotiating with the listing agent, they are representing the seller and not the buyer....

Not if you have a buyer's agreement with them that provides otherwise. It is pretty common where I am that buyers sign a buyer's agreement with the buyer's agent that spells out that the buyer's agent is representing the buyer, but is being compensated from a share of the commission paid by the seller on the house.....

Nothing like that around here that I am aware of. It would seem to conflict with the listing agent's listing contract where the agent represents the seller and in our area the selling agent is essentially a subcontractor. It must be that listing agreements in your area probably provide for the arrangement explained in your post.

 

[Katsmeow]

Nothing like that around here that I am aware of. It would seem to conflict with the listing agent's listing contract where the agent represents the seller and in our area the selling agent is essentially a subcontractor. It must be that listing agreements in your area probably provide for the arrangement explained in your post.

I think you misunderstand. A buyer's agent is not the same person as the seller's agent. The seller has an agent who represents the seller. A buyer's agent is a different person from that agent and represents the buyer per written agreement. It is common in my experience that listing agreements typically provide for the selling agent to split commission with any buyer's agent.

I don't know what state you are in but I would be surprised if buyer's agent don't exist in your state as they are very common.

 

[pb4uski]

I didn't misunderstand. I never said the listing agent and selling agent were the same person - they can be where a listing agent sells one of their own listings, but in most cases the selling agent is different from the listing agent.

A common buyer misunderstanding is because a buyer asks a real estate agent to assist them in obtaining a property, the Agent is representing the buyer and their interests. Unless the buyer and the real estate agent have contracted for representation by both signing a Buyer-Client Service Agreement, the real estate agent is representing the seller.

The agent who is showing homes to the buyer shows homes where the agent is also the listing agent and homes listed by other agents. If a home sells, the listing agent gets 1/2 the commission and the selling agent gets the other 1/2.

Around here, typically both agents represent the seller. Many buyers have the misconception that because they have developed a relationship with an agent and the agent has shown them houses that the agent represents the buyer. Buyer agency agreements are provided for in the law but are rare in our area.

Also see REALTOR.com: Who Represents You?

 

[Katsmeow]

I didn't misunderstand. I never said the listing agent and selling agent were the same person - they can be where a listing agent sells one of their own listings, but in most cases the selling agent is different from the listing agent.



The agent who is showing homes to the buyer shows homes where the agent is also the listing agent and homes listed by other agents. If a home sells, the listing agent gets 1/2 the commission and the selling agent gets the other 1/2.

Around here, typically both agents represent the seller. Many buyers have the misconception that because they have developed a relationship with an agent and the agent has shown them houses that the agent represents the buyer. Buyer agency agreements are provided for in the law but are rare in our area.

Also see REALTOR.com: Who Represents You?

I agree that buyers may have a misconception if they don't have a written agreement. I was talking solely about written buyer agency agreements. They did not use to be common but have become very common in recent years. I am not talking at all about the situation where someone doesn't have a written buyer's agreement providing that the agent is the agent for the buyer, not the seller.