Real Estate Myth Busters

By
Real Estate Agent with sales representative : Keller Williams Experience Realty

Something relatively new to real estate in the past ten years is the private home selling company. The proposition of saving thousands of dollars is enough to catch the attention of anyone. The idea of listing a home for anywhere from $700 for a sign on the lawn and an ad on a website, to a couple thousand dollars if you want some of the additional services that a REALTOR typically provides such as setting your price, getting your house ready to sell, to assisting you in closing the deal is tempting and awakens the entrepreneur inside some of us.


The burning question private sale companies use as their hook is why would you give profits from your home sale to a REALTOR if you didn't have to?

 

The saying "if it looks too good to be true it probably is" was something I first  heard my father say to me as a boy, after ordering Sea Monkeys and X-ray specs  out of the back of  comic books with my paper route earnings. The magic and illusion those sage pitch men weaved into the ads was brilliance and had me waiting anxiously for the mail man every day for almost a month.

 

When they finally arrived I still remember my disappointment as I am sure millions of American and Canadian kids of the day do as well when they opened a cardboard mailing package and found a plastic cup and a little packet of brine shrimp eggs, or when the magical X-ray specs turned out to be nothing more than bendy plastic eyeglass frames with spiral patterned cardboard for lenses.

 

Even those hard learned boyhood lessons never kept me from falling for the occasional overly stated marketing promises in later years and no doubt there are more of them to come. Optimistic guys like me are a valuable component of commerce.


If you are trying to decide between giving that well spoken REALTOR thousands of your dollars or selling your home yourself because some do it yourself real estate company says its a snap then take a moment to learn some cold hard facts. 

 

There are salient reasons why more than 90% of home owners in Canada choose to use a REALTOR when they sell.  I'll share some facts and some myths with you but please don't just take my word here, do your own research and verify  what I am telling you for yourself.

 

Myth number one: Realtors will charge you a standard 6% commission to sell your house. 

Fact: Most for sale by owner companies base their selling pitch on the notion that REALTORs will charge you 6% to list and sell your home. In actual fact Real Estate sales is one of the most competitive industries there is. The choice of services and fee packages offered by REALTORs in your market is likely as varied as the number of REALTORs. The last word on commissions is set by you the seller and in my market if you can't come to an agreement on compensation with one REALTOR there are over 800 more you can approach. There is no such thing as a standard commission.

 

Myth number two: "Selling your house on your own isn't as difficult as most Joe Schmo agents make it out to be" (a direct quote from the website of the non licensed PropertyGuys.com)

Fact: Less than one in five homes listed privately actually sell privately. Whereas over 95% of homes listed with a REALTOR actually sell. Listing a home is as easy as banging a sign into the lawn but it is only a first step. Statistics show more than half of the people who choose to list private eventually end up using the resources of a licensed REALTOR to complete the task. If you have the time to, pick out 10 homes with for sale by owner signs in your area and watch them over the next year, at the end of the year you will see that more will have removed their sign or hired a REALTOR or are still trying to sell private than will have sold with the private company.

 

Myth number three: Selling privately will always save you money over using a REALTOR.

Fact: If you are listing privately in a sellers market and or have time to wait it out, eventually you should see offers coming your way. Every buyer that comes to you will also be looking at homes listed with Realtors or else they believe their is a financial advantage to be had in buying a private listing. Most buyers who hunt out private listings do so because they believe the seller is saving money in commissions and they can discount their offers accordingly, they assume they are dealing with someone who is not a professional negotiator of real property and chances are they know the area market better than most private sellers do.

Private sellers become quite familiar with and often weakened over time by this breed of buyer. The longer it lists, the better the chance to take advantage. If you have listed privately in the past you know what I am talking about. A good percentage of successful private purchases are from these buyers and often the difference between the original list and eventual sell price is greater than the commission costs the buyer believed they would be saving themselves.

 

Myth number four: Any money you can save on Real Estate commissions = money in your pocket. 

Fact: If the last myth bust wasn't convincing, then consider these facts: Advertising to the degree of most licensed REALTORs does not come cheap. Prepare to spend at least a bare minimum of $100 a week and resolve yourself to the fact that your advertising will be relegated to the classifieds along with the used bicycles and outdated computer  equipment where few serious home buyers will ever look, especially when there is a real estate section of coloured ads detailing properties for sale in the same weekend papers.

Also be prepared to have to advertise your home for a much longer period of time than a REALTOR would need to. Your most effective selling tool is going to be the sign on your lawn and the open houses you do, but keep in mind that of all properties sold through licensed REALTORs, about one in every ten is the result of a sign call. The other 9 out of ten come through buyers introduced to the property by their Realtor and through professional marketing efforts.

All closings require legal documentation, search of title, and transfer of funds, closing of existing mortgages and assignment of new mortgages just for starters. Proper documentation and legally acceptable contracts safeguard both the buyer and seller and without a REALTOR, you are the one who will be personally sued should complications arise, and litigation, lawyers charge by the hour. That documentation a REALTORs typically handles for your sale will be left to you and your lawyer and comes at a price.

REALTORs carry Errors & Omissions Insurance to protect sellers and buyers in the event of a mistake, misrepresentation or unforeseen discrepancies and deficiencies relating to the property. Individual home owners do not. An error in the square footage of the property or some other detail or event often leads to being sued by the buyer. When represented by a REALTOR it is they who would be sued and their insurance generally would cover any loss. A single mistake could end up costing you far more than a Real Estate commission. A REALTOR is a valued insurance policy when one needs it.

You can bet there will be responses to this post by those who will say this is fear mongering and they have never had a problem in all of their private sales. The ones who have had problems likely wont give you the benefit of their experiences here.

 

Other advice & things you need to consider as you make your decision to list privately are:

  • Make yourself available for the next few months -  Many showings are booked at the last minute and though often frustrating from my perspective as a REALTOR, we have to accommodate this. It’s kind of like being a fire fighter on call. Many will see you are listed private and just knock at your door expecting to be able to come in and view your house on the spot. With the number of listings available to see you want to be able to accommodate showing request or risk them crossing you off the list and moving on to the next home.
  • Good REALTORs screen buyers before taking them through a home. You may have to compromise precautions as your own agent but here is some valuable safety advice for private home sellers:

During open houses, take people’s names and phone numbers at the door before allowing them into your home. Write down their license number and type and color of vehicle.

Put away all pocket-able items of value before showing your home IE: jewellery, watches, and cash.

Check to see that all doors and windows are locked after each showing. Thieves are known to use open houses to scout out valuables in a home and possible points of entry then return when the home is empty.


Never do an open house or showing alone. Have your partner, a friend or neighbour at the house with you when strangers are coming to view the property.

Ask neighbours to keep an eye on your home while it is for sale and report any strangers on the property to you immediately. Otherwise neighbours might assume strangers on the property are there to view the home with your knowledge.


Take names and phone numbers when people call to book a viewing. Don't confirm a showing right away. Tell them you will call back to confirm. If they refuse to share name and number politely tell them they cannot view the home unless they do and end the conversation. Before calling back to confirm screen their name and phone number on the internet to verify legitimacy.


Always go with your gut feelings. If something seems odd don't book the showing and if they are at your door tell them it isn't a good time.


Always stay with potential buyers as they view the home and walk behind, not in front of them as you go through the house. Insist that they stay together as you show them through. If one person wanders off tell them you would like them to stay together.


Restrict all your showings to daylight hours. If someone calls or comes to the door during the evening get their information, check it out and call the back with appropriate times they can view the home.


If you have pets, have some one take them for a walk or at the very least put them in the back yard during showings. The incidence of allergies with buyer clients seems to go up every year and I have had many turn around and walk right back out if they sense there are dogs or cats in the home. The same goes for smoking. If the home is smoked in you are eliminating a large portion of potential buyers before you start.
 

In the end the convenience, exposure, negotiating skills, legal protections, personal safety and yes ability to market your home to the highest degree to the greatest number of people are the reasons more than 90% of the public choose to hire a professional over experimenting with selling private. Whatever choice you make, do your homework first and don't be taken in by anything offered by anyone you can't first verify for yourself.


Have a  look at this story about a private sale I personally witnessed by a neighbour who hoped to save a few bucks and ended up with far more than he bargained for. Click here to read

Posted by

 Mike Montague

  

Barrie Power of Sale Listings

Barrie home values

 

 
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Re-Blogged 16 times:

Re-Blogged By Re-Blogged At
  1. Chris Smith 06/19/2010 06:02 AM
  2. Tom Ramsey 06/19/2010 10:10 AM
  3. Gabe Sanders 06/20/2010 03:59 AM
  4. Gene Riemenschneider 06/20/2010 05:29 AM
  5. Ty Lacroix 06/20/2010 07:18 AM
  6. Hassan B. Halak 06/20/2010 04:15 PM
  7. Dana Wilkinson 06/21/2010 03:04 AM
  8. Joanne Gillet &The Edge Of The Beach Team ---- Pawleys Island, SC 06/21/2010 03:09 AM
  9. Agneza Vujkov 06/21/2010 03:11 AM
  10. Joe A. Maddox 06/21/2010 06:59 AM
  11. Dawnita Griffith 06/21/2010 07:45 AM
  12. Joy Carter & Jeff Booker Brother and Sister Team 06/21/2010 11:46 AM
  13. Lisa Kanter Giloti 06/22/2010 07:32 AM
  14. Michael Lissack 06/22/2010 07:34 AM
  15. Jean-Paul Peron 06/24/2010 01:15 AM
  16. Jan McNulty 01/04/2011 04:02 AM
  17. Peggy Lyn Speicher 01/06/2011 01:54 AM
Topic:
Home Selling
Location:
Ontario Simcoe County Barrie
Groups:
Realtors®
The Lounge at Active Rain
What's The Buzz In Ontario
Canada, eh
Ontario Real Estate and Information
Tags:
for sale by owner
selling your home
barrie real estate
fsbo
barrie for sale by owner

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Rainmaker
644,939
DeeDee Riley
Lyon Real Estate - El Dorado Hills CA - El Dorado Hills, CA
Realtor - El Dorado Hills & the Surrounding Areas

Well done Mike!  I'll be bookmarking for sure.

Jun 20, 2010 05:29 AM #27
Rainer
118,327
Ginger Moore
Wilkinson & Associates Realty - Gastonia, NC

great post! congrats on feature!!  can you tell me how you got your picture in the eyeball? I really enjoy photo editing, but cannot do that..thanks again!

Jun 20, 2010 05:30 AM #28
Rainmaker
1,431,110
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

I could not have said it better.  Very good post and I have reblogged it.

Jun 20, 2010 05:31 AM #29
Rainer
473,014
Kimo Jarrett
WikiWiki Realty - Huntington Beach, CA
Pro Lifestyle Solutions

A family member just listed his home with a Realtor and it sold the next day, less than 24 hours, so he calls me, knowing I'm a Realtor to complain that he just paid a $18k commission for less than one days work.

So, I asked him if the Realtor recommended the selling price and if he agreed that it was reasonable. He confirmed the Realtor priced the home and after more questioning agreed that 6% was also a fair commission to pay for selling his home.

His concern was the Realtor didn't earn the full 6% because it sold in less than 24 hours, so he felt he was being ripped off. He said he'll never hire a Realtor again to buy or sell his next home, he could have just listed and sold it himself.

Really, I said. So why didn't you sell your home yourself in the first place instead of hiring a Realtor? He responded that he didn't know it was so easy. Really, I said. So, your home sells in less than 24 hours because your Realtor has a list of ready, willing and financially qualified buyers to buy your home for $300k and you have a list of buyers too? Well, no, he didn't have a list of buyers nor did he have the capability of exposing his home to thousands of buyers and hundreds of qualified buyers.

Finally, I reminded him that whether the home sold in one day or 30 days, the Realtor did sell his home and wasn't that his primary goal?

Most FSBO's have had such experiences, yet can't comprehend nor would understand the value of a Realtor until they attempt and fail miserably to sell their home. So, he moves from Colorado to Kansas and immediately hires a Realtor to find a home to buy. Hmmmmm.

Jun 20, 2010 05:46 AM #30
Rainer
25,587
PHIL MCGREEVY
Chesapeake, VA

This is a Website that explains 'BY OWNER COMPANIES' deception about savings and myth about FSBO savings. It works as a calculator

http://www.realestateweblistings.com/fsbovsagent.htm

It addresses lost Interest and prepaids due to taking longer to sell for the obvious reasons

The cost if buying a new home IF rates go up  because of lenth of time to sell PRESENT HOME by FSBO.

When using; the only savings FSBO'S are trying to save is 3% listing side fee. All fsbo's have learned they must 'work with agents' to have any chance to sell and many are buying MLS packages at $500.00 and up.

It puts a moneatery value to their time.

I did research on 30 fsbo's who used MLS and paid 3% buyer agent fee vs Similar comparable Value homes sold by Agents. 30 IS All I could find as said here most FSBO'S end up using Realtor.

Agents sold an average of 7% higher; some as low as only 3% some over 10% but NOT ONCE did owner sell for more.

I back checked many FSBO'S who used Realtor and all got less that MARKET VALUE AT TIME OF ORIGINAL LISTING.

The biggest problem is GROSS OVERPRICING WHEN ENTERING MARKET.

This problem also is prevalent with Realtors whom are desperate and take grossly overpriced listings and give up 1 or 2% of their fee's these transactions always end badly for both owner and Agent.

Most eventually get quality agent worth their 6% total fee's with 3% going to buyer agent and get their home sold. But only after 9-12 months of frustration, numerous open houses and showings, hearing a multitude of excuses from agent who may be happy because he got a buyer of the sign and could care less if home sales he got a check from the listing. OK enough of my rant, Im done

Phil

AN EXAMPLE

DON'T LET THIS HAPPEN TO YOU

 05/10/10 Sold $ 280,500  150 days 1900 SMITH FARM CIR - Virginia Beach VA 23455-2612

 04/17/10 Pending $ 319,900  150 days 1900 SMITH FARM CIR - Virginia Beach VA 23455-2612

 04/12/10 Reduced $ 319,900 1900 SMITH FARM CIR - Virginia Beach VA 23455-2612

 03/27/10 Active $ 324,999  1900 SMITH FARM CIR - Virginia Beach VA 23455-2612

 03/19/10 Reduced $ 324,999  1900 SMITH FARM CIR - Virginia Beach VA 23455-2612

 02/25/10 Active $ 329, 1900 SMITH FARM CIR - Virginia Beach VA 23455-2612

 02/17/10 Reduced $ 329,999  1900 SMITH FARM CIR - Virginia Beach VA 23455-2612

  01/20/10 Active $ 334,000   1900 SMITH FARM CIR - Virginia Beach VA 23455-2612

 01/12/10 Reduced $ 334,000 1900 SMITH FARM CIR - Virginia Beach VA 23455-2612

 11/27/09 Active $ 339,000 1900 SMITH FARM CIR - Virginia Beach VA 23455-2612

11/19/09 New $ 339,000  1900 SMITH FARM CIR - Virginia Beach VA 23455-2612

This is property history report for home at 1900 Smith Farm Cir VB. On MLS. This began as FSBO BACK IN May 2009. Then after 6 MONTHS paid upfront MLS fee to Discount Broker.

When home sold they paid buyer agent 3% and Discount Broker 1%[paid 2%[5,600] LESS IN FEE'S MINUS  MLS package, advertising cost and hours of time and energy put in]

Listed at 340k as FSBO in May 2009[overpriced] then went with discount broker in November 2009 started at 339,000 and sold 6 months later[total time 1 yr] for 280,000!!!

Market Value in May 2009 WAS 320K if priced right to would have sold for at least 310k. market value in November 2009 was about 310k again if Discount Broker helped owner price accurately home would have sold for at least 300-305k

Owner paid 5k less in fees but sold 30k below market price[out of frustration and poor representation] also paid mortgage interest charges and advertising cost for 1 year and had to keep house showroom ready

Jun 20, 2010 05:46 AM #31
Rainmaker
219,077
Judy Orr
HomeSmart Realty Group - Orland Park, IL
SW & Near West Chicago suburbs

I've had hours of fun with my Sea Monkeys and will have to go out and buy some for my 7 yr. old granddaughter that lives with us (although she loves her stinky hamsters and will probably be bored with the shrimp).

I got into real estate by trying to sell FSBO.  I've had great success in converting FSBO's to list with me.  But in this market, there are few FSBO's around in my area compared to years past.  There are many more expired listings to work on.

Jun 20, 2010 06:26 AM #32
Rainmaker
1,517,403
Lyn Sims
RE/MAX Suburban - Schaumburg, IL
Schaumburg IL Real Estate

Good points, it's not as easy as putting a sign in the yard & waiting for a contract to fly in the window.

Jun 20, 2010 06:36 AM #33
Rainmaker
226,446
Tom Waite
Thomas Waite Real Estate Broker - Cypress, CA
So Cal-Apartment Bldg Investments

Mike:  Great work and excellent topic.

Jun 20, 2010 07:03 AM #34
Rainer
38,955
Karla Casey
Karla Casey (BIC), List Sotheby's International Realty, Hawaii - Honolulu, HI

Great post.  Great info.  Love reading the comments as well.

Karla Casey, Principal Broker

Casey & Associates, Hawaii

 

Jun 20, 2010 07:04 AM #35
Rainmaker
334,052
Ty Lacroix
Envelope Real Estate Brokerage Inc - London, ON

Mike:

Well done and truly relates the caveats some one will or can face if not selling through a Brokerage. I have re-blogged and added to my website. Thanks

Ty

Jun 20, 2010 07:15 AM #36
Rainmaker
100,721
Risa Liebster
Ramsey-Shilling Associates - Los Angeles, CA
Toluca Lake Real Estate

Mike, great post. Will bookmark and possibly use like Kent with your ok. The value a smart-working Realtor brings is infinite - just the paperwork alone should give an FSBO pause. When a consumer hires a Realtor both time and money are ultimately saved.

Jun 20, 2010 09:48 AM #37
Rainer
187,215
Dana Wilkinson
Connect Realty, The Woodlands, TX - The Woodlands, TX
Broker-Your TX agent for The Woodlands-Spring-Conr

Good post in pointing out the hazards that can happen with FSBOs or pricing too high from the get-go.  I would like to re-blog with your permission.

Jun 20, 2010 10:23 AM #38
Rainmaker
194,782
Mike Montague
sales representative : Keller Williams Experience Realty - Barrie, ON
"Who Moves You?"

Wow, lots of requests to re-blog. Please do. Hopefully it helps to convince some eager  sellers to take pause.

Jun 20, 2010 01:33 PM #39
Rainmaker
166,468
Tina Gleisner
Home Tips for Women - Portsmouth, NH
Home Tips for Women

Nice summary

Jun 20, 2010 02:46 PM #40
Rainmaker
143,894
Michele Sims
Affinity Real Estate, LLC - Alamogordo, NM

Great post, with excellent points.

Jun 20, 2010 04:29 PM #41
Anonymous
Dawnita Griffith

So good to read (and reread).  As REALTORS we need to remember all of these points and reiterate them to fsbos.  Most do not realize the extent of their time or worries. 

Fsbos you know or in your farm area ask them to keep names for you.  Easy to make follow up phone calls to see if they are truly buyers or just lookers.

Keep the information coming.

Jun 21, 2010 07:37 AM #43
Rainmaker
193,859
Joy Carter & Jeff Booker Brother and Sister Team
Keller Williams Parkland/Coral Springs Realty-GreatFloridaHomes Team - Coral Springs, FL
Trust Your Family's Move To Our Expertise!

Great post worthy of a re-blog!

We think selling a home is easy.  Getting it to close is an absolute nightmare these days.  Fortunately 25 years of experience allows us the ability to foresee the catastrophes before they take place.  Joy

Jun 21, 2010 11:43 AM #44
Rainer
389,322
Jean-Paul Peron
The Outer Banks Real Estate Copmpany - Corolla, NC
Carova Beach - Living & Working in 4-Wheel Drive

Mike,

 That was a great post, spelling out some of the pitfalls to selling privately.

 I feel a re-blog coming.

Jun 23, 2010 12:40 PM #46
Rainmaker
407,960
Navona Hart
Real Living Cornerstone - Farmville, VA
Selling the Best Properties in Central Virginia

Good advice for sellers.  Agents need to rehearse this information so that when given an objection they can give it out. 

Jan 02, 2011 10:15 PM #47
Rainer
207,230
Stacey Johnson-Cosby
Reece & Nichols Realtors-Kansas City - Kansas City, MO
Selling Kansas City-Real Estate & City Blog

Mike, you have motivated me to pull together a good piece to use with FSBOs in my market. One of the biggest lessons that I've learned in 2010 is not to take (or keep) a listing that is overpriced, or just simply not "right-priced". It's too time consuming and risky. If they are not willing to price it to sell, I will just walk away. So, thank you, Mike! Phil's FSBO calculator is great (#31). I love the thought of forcing someone to look at the transaction like a necessary business task. What a wonderful eye opener! Thanks, Phil!

Jan 03, 2011 02:13 AM #48
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Rainmaker
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Mike Montague

"Who Moves You?"
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