You've seen the magazine headlines about selling For Sale By Owner and saving $20,000! Well I'm going to tell you exactly how to do it! Other Realtors may hate me for it, but I think consumers deserve to know all the REAL options available. The inside scoop.
Did you know that the National Association of Realtors, (NAR) the group that put out ads that say now is the time to buy and now is the time to sell (see blog) came out with a report that shows the average FSBO home sold for $180,000 and the average Realtor listed home sold for $230,000. DO the math, even after Realtor fees, they are implying that Realtors can get you 25% MORE for your home. This is BALONY. I don’t believe stats, that is why I tend to make up my own from the gut, and you can take it or leave it. I don’t believe in “facts” because it spells stcaf backwards and both mean nothing!
But before we go on, we need to perform one exercise...
When selling your home, what is your #1 goal (besides speed and sanity)?
Is it getting the highest possible net, or paying the lowest amount possible in commission?
If you answered "both"... WRONG. Stop, try again, you can only pick one.Yes, your NET is what matters. Ok, now you can continue...
Ok, so you want to sell your house yourself? Heck why not?
You're probably smarter than 90% of Realtors out there. Anybody can get a license in under two weeks right? And those damn Realtor fees are way too high! Can you say "Monopoly" and Mafia-style collusion! And in most places across the US, they even figured out a way to make TWO Realtors get paid, as if one getting a windfall wasn't enough! Maybe one day they will find a way to fit in a third agent. Maybe that agent can have a badge and represent the government to make sure the two parties act fairly. Oh and of course it will be "paid by the seller."
Ok, so let’s save some big bucks!
As many of you know, the process is called FOR SALE BY OWNER, aka FSBO.
Plain and simple... No Realtor fees, paid by nobody (I know that isn't proper English, but in my head with the "proper" rhythmic tone, it works). Just a grand or two paid to a closing company and you've saved $20,000! Go buy a 2004 Saab Convertible with the money (for those of you that follow the blog and read "I need a Buyer
agent for my car" I just finally bought a car, oh I wish I had a buyer agent! Ask me which.)
Actually there are a couple of ways to do "FSBO", I'll list them for the least to most "expensive!"
Options #1 + #2 pay 0%, ie. $0.00 in commission!
- For Under $10 Get A Yard Sign
Buy a Home Depot's red FSBO sign and stick it in the front yard. Your goal being to snag a passerby that happens to:
a) Not have an agent
b) Is ready to buy
c) Is willing to pay your price!
How great would that be! Can you read the headlines now... "House sells. Marketing maxes out at $8, seller saves $19,992." (Also note that Craigslist is free too, so maybe you can use that, but watch out, those damn Realtors will flood your inbox with spam, telling you how they can "help" you. Yeah "Help you" fail so you list with them!!
ADD inflicted side note: Realtor Trick Alert! Realtors know that some 50-75% of FSBOs will eventually turn to a Realtor. So don't trust that Realtor that offers to "help you" for free. They are helping you FAIL today so they can get your listing tomorrow. For example they might say "yeah you can get that price" and encourage a high price, which increases your chance of failure, thus increases their chance of getting your listing. Brilliant?! And you all thought Realtors were dumb!
- $100-$250 via ForSaleByOwner.com (avoid the $600 plans)
Starting at $100 you can buy a month on the website ForSaleByOwner.com or for $250 you can get the all-you-can-eat-leave -it-until-it-sells-plan (prices vary per region). On the site you will see higher upsell services (not counting MLS, I'll get to that, hold your horses!) that go up to $600 that claim to "feature" your listing or rebroadcast your listing to another 20 sites, that is all hogwash (opinions expressed here are that of the author, yet they are still right).
You don't need to be "featured" on this site since people buy with specific searches (price range and house size and area), they will find your listing. And this site is the powerhouse leader, probably with 95% FSBO traffic marketshare, so don't bother with any other FSBO site (except Craigslist and in some places MilitaryByOwner.com). If there is an option for more photos, I would max that and go buy the V570 and ask me to send you a link to a class featuring this super wide angle camera taught by a former National Geographc photographer (me)!
So it sounds too good to be true. Is it? Here are some things to consider:
1) Attention Kmart Blue Light Special Bargain Shoppers!
Put yourself into the shoes of a buyer. If you see a FSBO sign, what is the first thing that pops into your head?
a) I bet they overpriced it (which is why a buyer agent can help you, see Buyer Agency contracts, don't sign them)
or more likely
b) “Great! I can save on Realtor fees and get a bargain.” But wait a second, I thought the SELLER’s entire point of doing FSBO was for THEM to save the commissions?
Well if your main audience are without Realtors and looking for bargains, they will not only expect the 6% off the top, it will start even lower than that. Oh of course you can say “no,” but you get my point right? These type of buyers tend to be the bottom feeders and bargain shoppers.
2) Fewer Prospects Lead to Lower Price
Oh, ok, you got me again, “not always.” Heck you can do that for everything that I say and we’ll get nowhere. Instead, just allow for my biases and opinions, you filter them out and do as you please with the information.
So back to ECON 101. Supply and Demand.
Do you agree that by just putting a sign in the front yard, you probably only reach about 2-5% of the possible buyer audience? Ok maybe you live directly on one of those coveted main highway houses, but for the most part, I’d say 90% of buyers and their agents will use the MLS via the internet.
I always say it takes 4 interested parties to hopefully get 2 serious offers and that is what gets you the best price. But if only 2-10% of buyers see your home, getting the best price will rarely happen. I’d say your chance of getting top dollar and selling it are around 5% or 1 chance in 20 FSBOs that attempt it. I could show you stats, but I don’t believe in them, so just agree or disagree with my guess. We will go over later the pros and cons around “lets just try it, it can’t hurt” approach, which CAN hurt.
3) 90% of buyers have buyer agents.
Again a made up number, but I deem it more reliable than biases “stats” given by NAR, and we all know what that spells backwards!... Wow, cool, I didn’t even plan that. Racecar! Anyhow, this bullet point. So pretty much the same Econ 101 example detailed above. If you are FSBO offering 0% buyer agent commission, you pretty much exclude 90% of buyers, even if they did a find you. (Note that good Realtors, like us, will show you everything (read This blog).
So I got an idea!! Lets offer ONLY a commission to the buyer agents! They are the important ones right? They bring the buyer right? On to the second main options for FSBOs.
Option 2: Just pay the Buyer Agent! Cut out the Listing Agent! Save $10,000
Quasi FSBO "Flat Fee MLS" for $200-400 (let me know if you want a reference. And yes for full disclosure I will get a $100 cut from them, hell I just lost a $10,000 commission after writing this 3 hour blog. Wait! Maybe if sign 100 people up, I'll make up for the $10k! Oh wait, that means I'd have lost $100k, and therefore would have to refer 1000 sellers to make up for it... oh wait... MS Excel circular reference error.)
If you are going to offer money to a buyer agent, you’d be a fool to not spend another $200-400 to get your house on the MLS via a “Flat fee MLS” service. This service’s main goal is to get you on the MLS for a flat fee, regardless of whether you sell it or not. Meanwhile a commission is published for the buyer agent and you get on the MLS and you get the exposure! Therefore wiping out hurdle 2and 3 above!
Ok, so maybe just pay the buyer agent! They have the buyers right? They are the only ones that really add value, right? Oh and don't let the listing agent fool you with their Realtor Trick; ads that say: "I have buyers, let me list your house." That makes NO sense! If you have buyers, you are the buyer agent (the important one right?), so bring your buyer, why should you also get a listing fee?
So how much do you offer the buyer agent (it must be disclosed up front)? Do you go with the local standard rate (In Virginia it is 3%), or heck, that is a rip off! Why not just pay 2%?
Well I’ll go on record saying you are an idiot if you don’t offer what is the norm in the area. I don’t care if it is bidding war season and you can sell your house in 3 days. You will get MORE with a larger audience of buyers. I know it might initially seem like a rip off, and agent compensation is an entirely separate 3 page blog, but the average Realtor in the US makes $17,000 according to NAR (I can’t imagine they would want to make them seld look THIS bad, so it has to be true.
I know from your perspective, heck you could give them $5,000 or 1% of your $500,000 and all you saw them do is walk in with a client for 30 minutes. That is $10,000 an hour. Well I wish. You miss the 20 homes that Realtor was schlepping the client around to previously, or the broker fee which is as much as 55% (45% to the agent) and another 25-50% taken out for referral fees or mentoring fees. I saw one agent’s $10,000 commission literally result in a $2,200 check. I know that if your fault or you shouldn’t have to pay for the 19 homes they saw previously, but bottom line is your neighbors are all giving X, and if you give X divided by 2, you will disincentivize Realtors (I love these homes for my clients since I know nobody goes into them, we can get a better deal!! Hooray for idiots! Idiots= good deal, scratch that “better deal” see no good deals blog)
Ok so now you have mastered the above hurdles and you are all set with taking the flat fee option and paying $400 plus 3% to the buyer. I know the alluring $20,000 “savings” will now be cut down to $10,000, but heck that can buy you a nice 2 week vacation in St Thomas (insert vacation photo) and you might get much more traffic that will exceed the $10,000 that you saved and therefore NET you more.
Remember the goal is to get the highest NET.
So Frank, you are saying that Listing Agents are worthless, so just cut them out with Flat Fee MLS services?
Well, not really, I just wanted to say yes to throw you and speed readers off (I read slowly, so I have to mess with you skimmers and fast readers, leave the good stuff for the detail oriented).
Here are some problems with flat fee MLS
Realtors hate FSBOs. Quasi-FSBOs that are on the MLS aren’t AS bad as regular home depot FSBOs, but they tend to be a major pain. Why?
In part because they tend to not understand the process.
Now you can be the best FSBO and sharpest “getting it” person out there, but the problem is the buyer agent doesn’t know that. Instead they get a pit in their stomach and subconsciously and they hope the buyers don’t like your house.
True story: I was showing a client 5 homes in one community. One was a Quasi-FSBO. Initially I had no problem with it. But them the hassle began. The MLS remarks said to call first. There were 3 numbers. I called all 3. No answer and no messages about the house being available to see. And then there was a car in the driveway, so do I go in or wait? Then the lockbox was old and jammed. So before I get into the house where I wonder if I am going to walk in on somebody in the shower, I was already praying that my buyers wouldn’t like the place. I thought to myself that this seller doesn’t “get it” and will 10x the pain in the neck of a properly listed house with a listing agent. Sure enough the buyers also got frustrated before going inside and they didn’t like it. Oh and it was overpriced too!
So Mr. FSBO, you might be brilliant and savvy, but all those other idiots out there ruined your good name.
With no listing agent, the buyer agent does twice the work for the same pay. Given two identical homes at the same price, most agents will prefer to work with a listing agent.
I know you think all we do is push papers, but the job is about twice as hard without a middle man in the process. And not to mention, our liability triples. FSBOs who don’t get the process are more likely to sue and continue the headaches.
The buyer agent and the buyers will see that it is a Quasi FSBO and again (see above) the BUYER attempts to save the 3%. If I see a Quasi FSBO, the first thing that goes through my head is “this seller has already done the math and is thinking “if I get at least 97%, then I effectively have gotten full list since I saved by not getting a listing agent.” So my (and many agent’s) new baseline will be 3% lower and THEN the price drops (lower offers) start lower from that adjusted lower price.
My mother did flat fee MLS and Quasi FSBO and I saw the effects first hand. And she WAS one of those pain in the neck sellers that give all FSBOs a bad name!
Getting the highest NET is still out agreed #1 goal right? OK bear with me.
The best way to sell a home is to put your BEST effort forward all at once. Ever heard the expression, “You only have one chance to give a first impression?” well that applies to house selling as well. If all of your marketing and staging and amazing photos all hit at once, then you can get the 2-4 buyers interested at once and that is what gets you top dollar. If you half ass it with those techniques above because you wanted to “lets just see what happens” you become a stale listing. The magic is dead. (this is more about doing the Flat Fee MLS and less about the yard sign, since virtually nobody sees that anyway)
Ok, so what now???
I guess you could find a great discount agent. Nothing is wrong with that! Hell, read my blog on rebating. I was the rebate and discount king… until I got good…
True Story: An old friend that I hadn’t seen in 8 years told me he was about to use a Flat Fee service. He was a doctor. He was very smart. Smart is good. I felt so bad for him, that I said I wouldn’t let him do it, and since I had free time and was fairly new, I offered to put his house on the MLS for free and offer him “full service.” The reason I didn’t charge was I wanted to use this as a test case (so years later I could write about it) and that was the ONLY way that he could 100% believe that I was doing it for HIM and not to make money.
We looked over that price he planned to list for, and we decided to list $10,000 higher. I brought in an interior designer (actually my mom, she was great, but my professional stager takes it to another light years higher level). I took amazing photos that made this TINY place look gorgeous! This was during the bidding war days. We ended up getting 8 offers! After 10 hours straight, just dealing with these offers, I was able to get the bid up to $495,000. They told me they would have taken $430k on day one if it was offered. They offered to pay me after the fact, but I turned it down. They walked with $65,000 higher because they got an agent. Now this isn’t NAR’s 25% numbers (see above), but it isn’t bad!
And no I don’t do free deals any more, I’m too busy. But I don’t think it is a bad idea for a new agent to get one under his/her belt. Again, I know I can get the client more, but if a new agent can find a FSBO that thinks agents are worthless, why not?
Ok so now what? Maybe you would be willing to net a little more by adding a discount listing agent to the dough mix. That way the house a) gets maximum MLS exposure and b) you don’t scare off the buyer agents! It might cost a little more (1 or 2% more), but our goal is to get the highest NET possible.
Agreed. But not all discounted agents are created equal (see rebate buyer discount blog). You might get a great one, but if he was so great, wouldn’t he want to try to charge more in order to outpace the $17,000 average annual salary of a Realtor? One great line I heard once was “If they can’t negotiate their commissions well, how good will they be at negotiating and maintaining the list price?” I normally hate all “big company” pitches, but I like that one.
Ok, maybe the agent makes up for the lower commission on volume? Um, ok, sounds great, but when they are faced with a possible 2 week negotiation, is that agent going to take the extra time to fight to get you that last $10,000 for the client? They sure as hell don’t do it for the $100 or $200 extra commission.
Ok, so what about a “full service” non discounted agent? Is that the best route?
Oftentimes NO!! Sorry, but even many of those agents suck (see blog). And what I love is when a brand spanking new agent goes after a $500,000 listing and tries to get a “full” (as they call it), commission
REALTOR TRICK: One of the “big three” company training procedures is for the new agent to walk into the listing with the listing agreement pre-filled in with a 7%. They then dramatically slash the price and put 6%, as if you are getting a deal. What horse sh*t.
So how do you get the highest NET possible?
This exact question was raised to me by my best friend in Chicago. I couldn’t sell his house since I’m in Virginia. He called me saying how he needed the highest net for XYZ student loan reasons (EVERYONE has a sob story and NEEDS the money). He knew that I was the cheapest and non-rule abiding person that he knew. And as a Realtor, I would tell him how to “save” and do it himself.
I told him NOT to go FSBO for the reasons above. I then had to find him a great agent. I had him send me a couple of names of Realtors that he knew, so I could check them out. One I couldn’t find online, forget him. Another was a BS artist (include graphic). He had the add to the right, it made me feel nauseous.
So how do I find a GREAT agent? I went to a STAGER! An interior designer that helps Realtors sell for top dollar. I figured an agent that uses a stager, now he “gets it.” He knows that people buy on emotion and $500-$2000 or minor changes can help the seller get $5,000 to $15,000 more.
The stager recommended 3 agents. I grilled them and found a great one. Believe it or not I didn’t even try to bargain him down. This guy was great and deserved his commission.
They staged it, took amazing photos and it received 3 offers in the first weekend (another similar unit sat for 70 days!) He walked about with $10k-$15k NET higher than what he expected to get FSBO. And not to mention he is a doctor that wouldn’t have time to deal with everything as a FSBO.
My sister in Seattle is about to sell… guess what I’m going to tell her? Find a great agent, and net more.
So to recap, would you rather “save” $20,000 by bypassing fees, or would you rather NET $20,000 more and remove the hassle factor or doing it yourself?
Frank Borges LL0SA- Virginia Broker/ Owner FranklyRealty.com
Blog.FranklyRealty.com Featured in BusinessWeek, CNBC, WSJ etc.
P.s. Please tell me about any typos, I don't like looking dumb.
Subscribe to CommentsComment