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retirementguy1 07-20-2014 11:13 PM

Real Estate For Sale by Owner
 
Hi everyone, I am looking down the road and wondering if it is worth it to avoid some real estate commissions and try to sell my primary residence myself. The house will be paid for by the time I sell. It seems like this idea is poo-poo'd in the public conscience but then again a lot people live paycheck to paycheck. Thoughts?

Animorph 07-20-2014 11:28 PM

If I were going to be moving a lot I'd learn how to do it myself. If I was only going to do it once it seems like a bit of work to learn what I should know to do a reasonable job.

Texas Proud 07-20-2014 11:46 PM

Unless you live in a place where real estate sells quickly.... and there is a lot of traffic going by your place... you will not get that many people looking at your place...

There are some places where you can pay a fee to get on the MLS listings... but I think you would still have to pay half the fee if the other person brought an agent (not sure on this... just throwing out my thought)...


To me, there are some things where it is more wise to pay a professional... this is one of them...

Rosie 07-21-2014 01:12 AM

I'll be house hunting in the not-too-distant future, and when I do I will avoid FSBOs like the plague.

urn2bfree 07-21-2014 01:19 AM

I agree there is considerable expertise a professional can bring--BUT like with financial planners, I have significant philosophical objection with the structure of compensation for real estate agents. I know that this is the way they have always done it, but that has never been a compelling reason to do anything compared to actual reason and logic. Does an agent really work 3 x as hard in the sale of a $900,000 house as compared to a $300,000 house?

Surely there has to be a realtor willing to charge some more rationally based fee related to the effort- not tied to the value of my home. In the past financial planners charged by commission or by AUM percentages but now FINALLY there are hourly fee based advisors. Change is POSSIBLE and this would be a way a savvy agent might distinguish him or herself in a competitive market, getting more listings, still earning a reasonable living based on their effort, but breaking the conspiracy of commissions that are so divorced from actual effort expended.

I am not sure how this might work, as strict hourly fees would not give them incentive to try to sell quickly. Maybe a flat fee plus a sliding scale of decreasing hourly reimbursement where they would get more per hour for the first 30 days and then ever declining hourly rates that get smaller towards ZERO for each added hour, and is only paid after the sale.

Has anyone seen any other models of real estate agent remuneration based on what THEY actually DO and not on what MY house is worth?


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retirementguy1 07-21-2014 01:39 AM

I agree that real estate agents are only slightly better than financial advisors. While I didn't pay a lot for my first home, 160k. People don't realize that the commission is included with the purchase price. My first tax year with the house, I paid 3k toward principle and 8k interest. My real estate commissions were 10k built into the loan. If you told the average home buyer that the first 3-5 years they were paying commission and interest to the bank (no equity) they would tell the establishment to go eff themselves.

Yet people poo-poo Sell by owner.

retirementguy1 07-21-2014 01:43 AM

I just realized that real estate is a front loaded mutual fund! WOW. WOW. WOW.

Standard real estate commission is 5-6%. But it's worse, you pay interest on the commission on a home because it's rolled into your loan!!

Lancelot 07-21-2014 04:36 AM

I've sold a couple of houses on my own- but we're talking 15 or so years ago and a different market environment. Have your home appraised, clean it up and make sure it has curb appeal. Being realistic doesn't hurt either, set a time line for throwing in the towel and hiring the pros. You can always ask for a discount on the fee :)

jerome len 07-21-2014 07:25 AM

Although the commissions are huge, RE agents work weekends, have endless paper work, set up appraisels, home condition reports, arrange financing, change titles, do the advertising, have lists of prospective buyers looking for new homes on the market.
I just sold a home with a great agent.....took 4 days and sold for $2000 over listing price and 50k over what I really expected. Why? Someone needed a home for their family immediately. A block away a home has been for sale for 60 days.....a "cheap" RE agent that doesn't advertise, hold open houses etc.......so I'd look for a RE Company that sells a lot of homes, I'd find out who their top agent is and pay the money for the results.....same is true of buying a car.....I look for the top salesperson.....usually that person does the best job taking care of the customer.....me!

Senator 07-21-2014 07:35 AM

Quote:

Originally Posted by retirementguy1 (Post 1473578)
Standard real estate commission is 5-6%.

Actually, they are often 7%, plus a broker administration fee of ~$300 or so. Plus many other selling expenses, including often a 3% buyers closing fee.


I am a license real estate agent, so here is what I think.

If you want a hands off approach, use a Realtor.

If you don't want to do doing showings and getting paperwork filled out, use a Realtor. You can negotiate the listing price/commission, so price should not be an issue. There are plenty of smaller firms out there that will put you in the MLS for next to nothing. And plenty of for sale by owner internet companies that will do the same.

Even my own broker has a program for $1,000 he will put you in the MLS. From there, you decide how much you pay the selling broker (there are two sides to the commission.). If it doesn't sell, you still pay $1,000.

A sign in front might work, you are paying for the MLS access and the selling agents commission.

Decide who/how you will do these items, and you will be on your way.
Put up sign(s)
List on MLS
Handle showings
Handle Offers and negotiations
Handle closing

eta2020 07-21-2014 07:37 AM

If you live in a place like Mountain View or Palo Alto CA I don't think you will have any problem selling via zillow.com. I don't see why you would waste money on realtor's commission in such location....

Things may be tougher for FSBO in Lincoln NE.

JOHNNIE36 07-21-2014 07:47 AM

Just my two cents worth. Having been a Realtor in the past, I'm sure I could do the job of selling our house by putting a "FOR SALE" sign in the front yard. However, with all the legalities today, I think it's better left to a professional. There are some areas where the legal disclosures could get you in trouble. As to the commission, in our area the going rate is 6% if the house sells at the listed price. If the buyer negotiates a lower price, the commission goes down also. I think $million homes go for a lower percentage.

pb4uski 07-21-2014 07:49 AM

Quote:

Originally Posted by retirementguy1 (Post 1473567)
Hi everyone, I am looking down the road and wondering if it is worth it to avoid some real estate commissions and try to sell my primary residence myself. The house will be paid for by the time I sell. It seems like this idea is poo-poo'd in the public conscience but then again a lot people live paycheck to paycheck. Thoughts?

We sold our house and a piece of land on our own (via craigslist) and it worked out well, but IMO it is very important to be well informed of the process of selling real estate. I had taken a real estate course in college, passed the real estate agent exam (but never practiced) and my dad and uncle were both brokers so I understand the process.

We sold one home via a broker but the principal reason was that we had already moved and lived over 150 miles away.

However, the fallacy is that you save the commission... I think in most cases since the buyer knows that you are saving the commission that they want a piece too so in the end you are sharing the commission that otherwise would have been paid with the buyer. IOW a buyer isn't likely to offer full price in FSBO situations and is going to discount their offer to get their "cut" of the commission savings.

davef 07-21-2014 08:24 AM

We sold our WI home using a 'discount' broker. There were various plans. It worked great for us. The representative from the discount broker was a former full service broker who provided us great guidance and advice along the way. We had an MLS listing, sign, etc. There were different levels of price/service. If i remember right, we paid a flat fee for the listing broker (I think $500) and about 2.5% for the selling broker. This seemed fair to me vs. the full service broker fees.

SomedaySoon 07-21-2014 08:47 AM

I sold my house in a couple of weeks last year using Zillow. I just set a reasonable "make me an offer" price, based on local comps. I built in 5% over what I wanted for negotiation room. I did live in a very desirable area of NY suburbs, so I'm sure that helped. Once we got to the handshake point, I handed everything over to a very competent/experienced real estate lawyer to make sure it went smoothly. No problems at all, but maybe I was just lucky....

Fishingmn 07-21-2014 08:50 AM

Disclosure - I'm a Realtor.

The main problem I see with FSBO is that 90%+ of the buyers out there are represented by an agent. Therefore, you still need to pay the buyer's agent commission (2.7% is typical in my market but 3% is also quite common). Either that or the buyer pays the buyer's agent themselves (reducing the amount they offer) or the agent steers them clear of your home. Therefore, you either miss out on 1/2 the commission savings or 90%+ of the buyers. The best way to get the most for your home is to expose it to the broadest set of interested buyers.

Getting full exposure gives you options like - MLS list only, Discount Broker, Full-Service Broker

MLS List only gets you on MLS to expose you home to all buyers. You still typically pay the standard buyer's commission but get very limited sales assistance. It's up to the seller to provide pictures, get house ready for sale, approve showings, guess at the correct pricing and handle all negotiations.

Discount Brokerage - Provides some more guidance to these items above but still requires seller to do most of the work but may help with doing a market analysis and some negotiation/paperwork assistance.

Full Service Brokerage (me) - Provides complete guidance along the way, hopefully including staging and things like professional photography as well as expanded marketing and regular communications.

Personally, I'm a big believer that one of the main values I can bring is staging the home well to increase the value perception to potential buyers and getting great professional pictures that get people in the door. I also do agree that the current pricing commission model is quite high. Keep in mind that one of the reasons that full service Realtors have to charge more is that it costs them quite a bit of money to take a listing and we only get paid if it closes. It costs me $400-500 up front which really hurts if it never closes. This covers photography, home staging consultant, sign installation and up front marketing.

I actually just started a new commission structure to try and address that and give sellers a choice -

5.5% traditional commission (2.7% to buyer's agent) payable upon closing or

4.7% commission (2.7% to buyer's agent) with $500 up front that's non refundable but credited at closing

That way I'm not out any money if the house never sells. By removing my downside I'm willing to reduce my commission. I also am willing to take less because there's now a huge incentive for the seller to sell their house, even if it means they need to reduce the price to meet what a willing buyer is willing to pay. It's probably not a good plan for a seller that insists on getting a certain price.

Try that argument with your local agent and see if they are willing to take less if you pay something up front that's non-refundable.

eta2020 07-21-2014 09:08 AM

American property: The great realtor rip-off | The Economist

RISP 07-21-2014 09:18 AM

I have dealt with real estate agents as a buyer, and the only thing they did was to unlock the door and hand over a poorly copied exposť, with partly incorrect information (like, the number of sqm of the house). They charged me (the buyer!) 10,000+ EUR for this "service", and the seller another 5,000+ EUR.
I live in an area where demand for quality real estate at reasonable prices currently far exceeds demand, so when we bought our house, I sold our apartment myself. It took me a few hours after work each night for one week (maybe 20 hours altogether), and I was able to sell to a nice family for 10,000 EUR over our asking price. Every single prospective buyer I spoke with told me that dealing with me was the most professional experience they ever had. I had the necessary paperwork available for everyone, I was punctual and friendly, and I KNEW the property I was selling. No realtor could ever have done a better job than me, professional or not.
The only thing realtors in this part of Germany do, is set up an online ad full of typos and wait for callers.
That being said, hiring someone might make sense if you live far away. But I would still consider taking a week off and doing it myself. The hourly rate is hard to beat.

Lakedog 07-21-2014 09:25 AM

I think a by owner sale works well in areas where the market is fairly hot, and the seller has time to deal with the work involved in listing/selling. If you don't agree to pay a buyer's agent commission, you really limit the exposure since most buyers tend to use realtors in their search.

As others have mentioned, commissions are negotiable since there are lots of realtors looking for new listings. When I sold my last house, the commission we agreed on was 5% (2.5% to buyer's agent) and that dropped to 4% total if the listing agent also sold the house.

Jay_Gatsby 07-21-2014 09:47 AM

Quote:

Originally Posted by jerome len (Post 1473599)
Although the commissions are huge, RE agents work weekends, have endless paper work, set up appraisals, home condition reports, arrange financing, change titles, do the advertising, have lists of prospective buyers looking for new homes on the market.
I just sold a home with a great agent.....took 4 days and sold for $2000 over listing price and 50k over what I really expected. Why? Someone needed a home for their family immediately. A block away a home has been for sale for 60 days.....a "cheap" RE agent that doesn't advertise, hold open houses etc.......so I'd look for a RE Company that sells a lot of homes, I'd find out who their top agent is and pay the money for the results.....same is true of buying a car.....I look for the top salesperson.....usually that person does the best job taking care of the customer.....me!

Agreed. In my neighborhood, there is a woman who has been selling people's houses for 30 years, almost as long as the neighborhood has existed. She moved into the neighborhood at that time, then started helping the initial owners sell their houses. She routinely gets list price (and she lists on the high end), with some houses going for above list price by upwards of $20-30k! If my wife and I were looking to sell (we're not), we would list with her in a heartbeat, since she would make her commission without any impact on our net proceeds. Some of our neighbors have listed with family members who are real estate agents or with "no-name" agents that have no knowledge of the neighborhood, comps, house models, etc... They have routinely lost out on $20-30k in their sale prices.


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