Real Estate For Sale by Owner

[NgineER]

Our home is currently under contract. The real estate commission in our case (6%) is based on Realtor obtaining a full price offer. Anything less than full price leaves the commission open to negotiation.

Sounds like a good plan to ensure getting the full price. I'm interested in how you plan to negotiate.

 

[SumDay]

Ever been in a real estate law suit? Dude, get a realtor.

Indeed, what he said. I will NEVER try to sell another house without a realtor. They earn their money, and then some.

 

[mrfeh]

Indeed, what he said. I will NEVER try to sell another house without a realtor. They earn their money, and then some.

The legal aspects of the transaction can be handled by a lawyer. No realtor necessary.

 

[daylatedollarshort]

I've never bought a house from a realtor who worked "for" us. We just use the seller's realtor, negotiate some money off the price of the house and paid a real estate attorney by the hour to review the contracts and help work our any sticking points. I guess we used mrfehs methodology on the buy side.

I am not sure what we will do when we sell. I think at minimum I'd at least use Redfin or some kind of flat rate or discount realtor. With everything about a house and all the crime and school district info listed I don't think in expensive housing markets what full price realtors do is worth ~$40+K for a median priced tract home that will sell in a week or so after a single open house, especially when MLS listings only cost a few hundred dollars.

Do non-investors buyers these days really home shop from any place other than sites like Zillow and Trulia anyway? Can realtors really bring in more sellers or for higher amounts than the Internet alone can provide?

Just like the Internet diminished the use of mortgage brokers I am surprised there isn't more downward pressure on realtor fees for home selling and buying. It seems like the Internet should be able to cut out middle man fees more than it has to date.

 

[mrfeh]

Do non-investors buyers these days really home shop from any place other than sites like Zillow and Trulia anyway? Can realtors really bring in more sellers or for higher amounts than the Internet alone can provide?

Just like the Internet diminished the use of mortgage brokers I am surprised there isn't more downward pressure on realtor fees for home selling and buying. It seems like the Internet should be able to cut out middle man fees more than it has to date.

I agree. I see real estate being one of those industries where the middle man is gonna get squeezed out. They just aren't worth the cost.

Anybody been to a record store lately?

 

[wolf]

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.

Agree. This is my area. Homes sell in a couple of days with multiple offers. Average homes, in Palo Alto, 2-3 million. Homes in neighboring
cities, Santa Clara, Cupertino, easy 1+ million.

This is Silicon Valley, home to Facebook, Twitter, Google, etc.
Also, Stanford, Berkley, San Jose State, Santa Clara University, etc.

Back to the point, I can't see paying 6% on a 2 million sale. (120K). When
the house sells within a week of listing.

Being a Landlord in the Bay Area, I've used a Realtor in the Past. Lots of
paperwork, but really not that complicated.

In the past, home prices were in the low, 100K's, so 6%, no big deal.

Today, especially in this area, I would consider doing a FSBO, next time.

Again, You have to live in a "hot" spot, to make it worth while....

 

[rodi]

I bought my house without a realtor. But then again I was buying from my father. We did hire a title/escrow service to make sure it was all done right (and to handle the escrow/funding from my mortgage company.)

I would love to see a fee-for-service model (similar to fee-only financial advisors). You could pick and choose the realtor and what services to take. If you wanted full service, the fee would be higher. The fees would not be based on AUM/home value - they'd be based on the actual value of the services.

I live in a pricey neighborhood. My home in one of the San Diego inland counties would be worth 1/3 of the current value. My home in a non-urban mid-west setting would be worth 1/5 of the current value. But it takes the same tasks to get it sold... Why does the pricey neighborhood warrant a higher commission?

 

[savory]

Wisconsin, the Milwaukee area, has a choice of programs. The one I like, was a flat rate for the listing Realtor based on a menu of services. This is paid if you sell the house or not but if I remember the high end program is $1,000. The minimum about $500. The seller sets the commission for the selling broker. This can be anything but the recommendation is to set a percentage, high enough to compete in the 3% commission range. I think I set 2.5%. You still market the house yourself as home buyers and Realtors call you for showings. If you sell the house yourself, then no seller commission. However, since buyers pay no commissions in WI, they often get a Realtor to help them with their search and do not call you directly. So a commission will be paid. The key to me was the MLS listing which came with the the listing fee and the encouragement of Realtors; Offering them the lowest level commission which would gain their interest.

 

[daylatedollarshort]

Thinking of the Freakonomics incentive models, I was thinking about paying the fee to get in MLS, pay an hourly real estate attorney to do the paperwork, setting the price fairly high yet within the standard deviation of price ranges and offering 3.5% to the "buyers" realtors.

Which house are the realtors going to tell their customers is the better house for them to purchase? The one offering 3% or the one selling for $50K more offering 3.5%?

 

[savory]

Thinking of the Freakonomics incentive models, I was thinking about paying the fee to get in MLS, pay an hourly real estate attorney to do the paperwork, setting the price fairly high yet within the standard deviation of price ranges and offering 3.5% to the "buyers" realtors.

Which house are the realtors going to tell their customers is the better house for them to purchase? The one offering 3% or the one selling for $50K more offering 3.5%?

I do not totally disagree but I find it interesting that we think about Realtor pay in percentage. I translated it to dollars and thought a person would have had a hard time turning down the dollars. It was a good payday for the Realtor even with the lower %.

 

[45th Birthday]

We faced the Realtor incentive issues with the last home we sold. One wanted to price it low. She had lots of listings and apparently did a good volume. Her listings sold fast. She was obviously under-pricing.

We chose a Realtor who lived in our neighborhood, had a lot of experience but not tons of listings. She agreed to do an extensive marketing program including fancy brochures, and online (then in its infancy). We eventually sold for about $70,000 more than the other agent's suggested list price, and actually a bit sooner than we expected.

Towards the end of the process, the buyer offered X and we wanted several (don't remember how many) thousand $ more. The Realtor really pressed us to take their price and not counter. It was, of course only a few hundred $ to her versus a busted deal. To us, it was worth much more. We knew they loved the house and wanted to get the family moved in before school. We held firm and closed at our number.

We will still used Realtors in the future. Just like investing, you have to understand how things work, risks/rewards, etc.

Clever commission structures are interesting, but we've always found the Realtors who sell higher priced stuff seem to be smarter and more polished and really know that end of the market. It truly is different from the low end.

The two insurmountable problems with FSBO: it dramatically reduces the number of people looking, and those that do tend to low-ball and negotiate for the commission savings.

 

[Fishingmn]

Do non-investors buyers these days really home shop from any place other than sites like Zillow and Trulia anyway? Can realtors really bring in more sellers or for higher amounts than the Internet alone can provide?

Just like the Internet diminished the use of mortgage brokers I am surprised there isn't more downward pressure on realtor fees for home selling and buying. It seems like the Internet should be able to cut out middle man fees more than it has to date.

This is certainly something that is debated inside Realtor circles.

They kind of let the cat out of the bag with the syndication of MLS information. You do see some real estate companies like Edina Realty fighting back and refusing to share their listings on the national sites. Unless the rest of the competition does the same it just hurts them right now. Keep in mind that at any time the other brokerages could decide that it's a good idea to stop sharing with Zillow & Trulia who would take a massive hit if there were no listings to show and no Realtors to squeeze for marketing dollars.

But the other extreme could be just as bad. The only way that there is order in real estate is because of MLS which provides all the regulated data to sites like Zillow & Trulia. Your scenario of squeezing out the middle man means squeezing out MLS - since MLS is paid for by Realtors who pay a quarterly fee to access it. If there's no uniform database of housing information and no controls over the content in the database (which MLS requires with an iron fist) then the housing market is very negatively impacted.

 

[daylatedollarshort]

Clever commission structures are interesting, but we've always found the Realtors who sell higher priced stuff seem to be smarter and more polished and really know that end of the market. It truly is different from the low end.

I can see paying a high commission of you have a truly high end home with a limited buying market, but for areas with expensive housing costs in general like coastal California or New York, the percent of commission structure is a rip off to buyers and sellers who might just be buying and selling middle class 3/2 single family homes or 2/2 condos.

Between Prop 13's limited transferability and the high cost to sell a house, it makes moving a huge, almost irreversible decision, like choosing between an annuity or lump sum on a pension plan. So people like us often just stay put or look around for the next house for years, which adds to the housing shortage for families with kids who need decent public schools and access to jobs.

 

[45th Birthday]

I can see paying a high commission of you have a truly high end home with a limited buying market, but for areas with expensive housing costs in general like coastal California or New York, the percent of commission structure is a rip off to buyers and sellers who might just be buying and selling middle class 3/2 single family homes or 2/2 condos.

Between Prop 13's limited transferability and the high cost to sell a house, it makes moving a huge, almost irreversible decision, like choosing between an annuity or lump sum on a pension plan. So people like us often just stay put or look around for the next house for years, which adds to the housing shortage for families with kids who need decent public schools and access to jobs.

In those markets, the "high end" that I mean would be much higher priced.

The high cost to sell you refer to is high in dollar terms, but the same as a percent of the total. Just larger numbers.

 

[Ronstar]

I've sold 2 houses. I inherited my parents house in 1992, remodeled it, and sold it myself when I received an asking price cash offer within hours of putting up the sign. Then we sold our first house in 1994 through a realtor. Next time I'll probably go through a realtor again.

 

[urn2bfree]

In those markets, the "high end" that I mean would be much higher priced.

The high cost to sell you refer to is high in dollar terms, but the same as a percent of the total. Just larger numbers.

That sounds like the hogwash financial planners peddle when they tell you that they charge you "less" as your portfolio grows because they take a smaller percent of AUM the more your portfolio grows...

less percent but it is still more and more of MY money.
There is simply no justification I have yet seen explaining the connection between the work of a a realtor entitling him or her to a flat percentage of the value of my house's sale price no matter how high or low that price is...


Sent from my iPad using Early Retirement Forum

 

[Free_at_49]

I sold my house in the Berkshires without a realtor. It was at the peak of the real estate bubble, I had buyers knocking on my door because it's a desirable neighborhood. The trick is to price it right so you don't leave money on the table. It's like stocks, buy low, sell high.

 

[Brat]

Agree. This is my area. Homes sell in a couple of days with multiple offers. Average homes, in Palo Alto, 2-3 million. Homes in neighboring
cities, Santa Clara, Cupertino, easy 1+ million.

This is Silicon Valley, home to Facebook, Twitter, Google, etc.
Also, Stanford, Berkley, San Jose State, Santa Clara University, etc.

Back to the point, I can't see paying 6% on a 2 million sale. (120K). When
the house sells within a week of listing.

Being a Landlord in the Bay Area, I've used a Realtor in the Past. Lots of
paperwork, but really not that complicated.

In the past, home prices were in the low, 100K's, so 6%, no big deal.

Today, especially in this area, I would consider doing a FSBO, next time.

Again, You have to live in a "hot" spot, to make it worth while....

My DD lives in Los Altos. I agree with you. It is a VERY hot market.

Why sellers in that area don't just hire a real estate attorney to take care of the transaction, put their stuff in storage, bring in cleaners, have the house inspected (the practice in the area) with results laid out for all to see (maybe a link to a pdf copy on the internet), stage the house, have pictures taken for marketing on 3-4 real estate websites, hire a couple eagle eyes who know nothing to be present during 5 days of open houses. Tell everyone that bids would be opened in 10 days at XYZ address (the lawyer's address). If the successful bidder has a realtor they pay that person's fee.

No lockbox on the door, nothing much to steal in the house.

In that area the home on the property is there to keep the lender happy until the buyer can rebuild or remodel. There is so much cash floating around the Silicon Valley many homes are purchased without a mortgage.

 

[eta2020]

What suprises me abot this thread is number of LBYMs who swear by having Realtor to sell their house.

Why guys who do not look rich, drive Honda Civics want to give 6% of their house to high spender types in fancy suites driving BMWs or Audis?

I as LBYM find typical realtor to be exact opposite of what I value and respect and I don't earn 6% of my house in 20-40 hours work.

 

[photoguy]

What suprises me abot this thread is number of LBYMs who swear by having Realtor to sell their house.

Why guys who do not look rich, drive Honda Civics want to give 6% of their house to high spender types in fancy suites driving BMWs or Audis?

I agree with you that the fees to sell your house can be outrageous in expensive areas like the bay area.

That said, we used a realtor to sell our house in San Jose. The main issue is time and convenience -- when you are working long hours / need to travel it's very difficult to find time to prepare the house. The realtor can do much of this.

We also found that the realtor could get better bids on contracting work.

We paid 4.5% commission. I doubt most home sellers are paying much more than that and I suspect those with 2M turnkey homes would be paying even less than that. At most, going FSBO we would save 2% since we would still have to offer a commission to the selling agent (who represents the buyer).

If we had to sell again (while working) we would still use an agent. However, now that we are fired I would definitely looking into FSBO as we wouldn't have the time pressure.

 

[daylatedollarshort]

I suspect if you don't offer the 3% to the buyer's agent and it limits the number of buyers / offers it could cost you more in the long run. I don't like the idea but for our house the typical buyer is most likely going to be a two income family with kids willing to commute for good schools, so they won't have a lot of free time to house hunt and make negotiations without the help of a realtor.

People on this forum might think twice about using a realtor to buy and instead negotiate part of the 3% potential commission off the house price but that is not going to be the majority of buyers out there. Plus most of the people here are going to be better at negotiating and bargain hunting than the average home buyer so we are actually not the ideal kinds of buyers we want to sell our homes to.

Realtor commissions are just one more reason tiny houses seem attractive to me. Then I could say, sure sell my tiny house for 6% commission and don't spend your $1.2K commission fee all in one place.

 

[45th Birthday]

I don't earn 6% of my house in 20-40 hours work.

I hope you realize there are many out there who do and are willing to hire a professional.

I think you also have to realize that in addition to the difference in time and effort as the seller, FSBO vs. Realtor will likely not result in as high a selling price or as short a time on the market.

 

[Brat]

I do agree with photoguy on the amount of time and energy required to sell a house, even in a hot market. Many executives and engineers in the Silicon Valley don't have the time to do that.

I disagree with the claim that a seller will receive more going through a Realtor in this area as almost all are sold through bids, many of those for cash and rarely are they on the market for more than 2 weeks. It is a very hot real estate market, unique.

 

[eta2020]

I hope you realize there are many out there who do and are willing to hire a professional.

If they make 6% of their house in 20 hours then those people can buy entire house with 2 month pay check. I suppose Mark Zuckerberg will manage to do that....but not many us will....

 

[sengsational]

You should be able to find someone to list your house in the MLS for $300 or so. At that point, you specify what percent the agent who brings the buyer will get (hint: there is no rule that says you MUST put 3%). If you reduce the rate too much, agents will pass you by, BUT...in the world as it is today, once you are in the MLS, buyers will find your house on the internet and ask the agent "how come we haven't seen this one?". So since yours can be priced lower, since you've eliminated overhead, the agent might not be able to fight them off. Your listing can also sneak enough data through so the buyers can come by on their own (on the web, the address is not provided, typically). I sold a house this way, and I was not well recieved by the agents, but I wasn't in the business of making new buddies...I just wanted to reduce the transaction costs.