Go FSBO! Save $20,000! Realtor Tells All!!
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 will hate me for it, but I think consumers deserve to know all the REAL options available. The inside scoop.
First the “facts.” 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…
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 st
caf 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 maybe 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!
- Option #1: 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?! So maybe this blog is meant to indirectly NOT help you! (all part of my master plan??) And you all thought Realtors were dumb!
- Option #2: $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? Dunno, but here are some things to consider:
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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?
Either
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 buyer audience are without Realtors and looking for bargains, they will not only expect the 6% off the top, they 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.
Fewer Prospects Lead to a 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.
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 a
ll 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).
Also Cathy (Frankly agent) taught me this analogy… If you take a Rolex to a flee market, no matter how nice that Rolex is, no matter how good you can negotiate, will you get anywhere near what is a “fair price?” Um, no.
Too extreme of an example? Ok, I gotcha, how about this… Selling a used car
? The dealer can get so much more for the same car than you can get on your own. They add some staging (It’s The Staging Stupid!!), better marketing, and a name to back it. I’m not saying to trade in your car, I’m just saying that we understand that a dealer sold used car will go for 5-10% more (in part because people buying a car by owner, they do it so that THE BUYER gets the saving) The buyer’s goal is to offer just a few hundred over what the seller might have received with a trade in. Sound familiar? If not, you’ve been speed reading. Go re-read.
So I got an idea!! Lets offer ONLY a commission to the buyer agents! They are the imp
ortant ones right? They bring the buyer right? On to the second main options for FSBOs.
- Option #3: 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 j ust 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 2 of the 3 hurdles above!
Ok, so maybe just pay the buyer agent! They have the buyers right? They are the only ones that really add value, r
ight? 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 themselves 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 to her. I know that it isn’t your fault and 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?
Yes, exactly.
Well, not really. Actually “no.” 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 then 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 be 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, go figure!
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 fo
r, 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 highest 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 did Frank find a GREAT agent outside of the DC area? 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 stager, that will find you 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?
Before I sign off, make sure you do two things.
- Sign up to get this blog via email using the “Subscribe me” on the right side of the page . Updated about once a week.
- Make sure you read the comments. The comments have more in depth debate and I encourage you to challenge anything and everything!
– Written by 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.
- 29
- April
- 2007
This post is soooooooooooooooooooooooo long! How about a 2-part piece next time?
This is the ‘War & Peace’ of blogs.
– Tchaka
Frank-It may be War & Peace but it is definitely worth the read.. you nailed every single argument and then some..
Mr Frank. a little long yes, but I appreciate your Humor, if we all cannot sometimes just step back and Laugh at ourselves, it would be down right boring you know, hey, what the heck did that guy say ??–Mega Dittos from California, keep up the great blogs, just abbreviate more–only kidding–RG
Hi Frank – Wow! What a long blog. However, I found it very interesting. I have sold a home as a FSBO. That was eight years ago on Long Island. At the time, it was a hot sellers market and houses were selling themselves (and getting full asking price and over)! All I did was comp the other houses in the neighborhood to mine, run an ad in a local paper (no lawn sign, tacky) and 2 days later my home was sold for 10,000 over my asking price!!!!!
Flash forward to last summer, I tried selling my home again. Now here on LI (as in most parts of the country) it is a total buyer’s market. I decided to use a realtor, because I knew it was a different market and figured it might be worth the fee to get the job done right. Well, turns out it was a disaster. The agent I had did nothing to market my home. She overpriced it and to top it off took a month’s long vacation and during that time, no one from her office made any effort to show my home. When the agent got back from her vacation, I told her how dissapointed I was with her efforts and she said, “oh well, houses just aren’t selling right now”. At that point I asked to be released from my listing agreement. I wrote a letter to her broker. He refused to release me and they also did nothing to sell my home. When my listing expired with them, I was thrilled! In the end, I took my house off the market, as I decided against moving at this time.
So the upshoot is this, people can sell their homes themselves if they educate themselves about market conditions, etc. Sellers must be realistic and objective about the property they are trying to sell. Also, before hiring a realtor, sellers must to their homework. Interview a few agents, don’t just go for the one who gives you the highest price for the home (they are just trying to get your listing, then they will continue to do price reductions). Just because I had a bad experience with my realtor, I do believe that the majority of realtors try to do a good job for their clients.
Hi Frank,
a True calling looms……. only 2 typos (i started to speed read after you told me i could) thankfully!
Dick Beals
Hey Maureen,
I know the blog was long as heck, but did you see the part about the bidding war days and how I got my clients $65,000 over what they would have taken. If a seller gets a GREAT Realtor, it doesn’t matter what the market is like, they can get you more. I would have turned your $10k over list into $30k. I didn’t even talk about the house that I got bid up from $499k to $601,000!!! And no, we didn’t underprice it to start with!
As for the Overpricing trick! You are dead right! Guess what? I don’t even offer up listing prices when I do a listing presentation, not even a range! Why go by the 30 minute CMA and pick the agent that gives you the highest price (my mom fell for that and I found out after becoming an agent that that is a trick to get listings, to just beat them down later)
Frank – I wish I hired you when I tried selling this past summer! It sounds like you are doing a great job.
I loved it long or not – I read War & Peace and shhh actually loved it. Frank I love the humor you put in your blogs
I Went into some FSBOS when I was shopping for my house
one of the people had the most cluttered house and no one to tell them to clean up
she had two teenage boys living in one small cramped room with paraphrenalia (hint hint) sitting out on a bookshelf…
so parents didn’t even comment on their kids’ recreational usage!
that was a house I felt would never sell!
Just the ability for an impartial person to come in and motivate you to get your house ready to sell should be worth something
but just like in my Mortgage Advisor post, there are many that think they’re smarter and more advanced than the industry itself
I love the line “So how do I find a GREAT agent? I went to a STAGER!” That actually makes a lot of sense
“You can lead a FSBO to water, but you can’t make ’em think.”
Too many people want the riches and solutions without the work – like diet pills that “melt” the fat away in your sleep. FSBOS are work for the seller – they have to decide if that’s what they really want.
I wish I had half your energy Frank. You are a very interesting person. Love how your brain works.
So I am a skimmer, but I read every word of your blog, every work. You make a lot good points. However most FSBO’s just do not get it.
Agreed, they don’t get it, but that is our fault (Realtors). We make half ass attempts to explain the process. Hence the war in peace novel above. And I left off the GREAT analogy to selling your Rolex at a pawn shop and how Used Car dealers always get more for cars than people selling by owner.
I’m glad I kept reading. I was getting upset thinking a Realtor was talking like that, but then realized where you were going. I really appreciated the blog and it will help me greatly. I have a seller who that he could sell his house for 5k total. I had to explain how the discount brokers work, and that he would still have to pay the selling side, and that you pay for different services on a sliding scale, depending on what services you want. I am still working on him. Thank you.
Hey Earl,
Watch out for saying that a discounter doesn’t offer as MANY services. I personally don’t believe in the battle of the long checklist of services.And many discounters have gotten good at making their list just as long as the next “full” guy. Instead focus on the “how good will he be at negotiating your commission, if he can’t even negotiate his own.”
Send them to this blog! Don’t worry, I don’t live near you, I won’t steal them. Also make sure you start using a stager for EVERYTHING.
Truth in everything you mention…. See the big picture. It’s the net that’s most important.
Any suggestions for the rehabber? Multiply that 15K by the 10-12 houses a year that I flip. Over 150K. HUGE chunk out of my profits. On my last flip I went the Flat Fee route for 4 months. I did the marketing myself, all the same things a realtor does (MLS posted, flyers, realtor lunches, staging, open houses, etc). I got two showings in four months. Listed last week with a Realtor – and three showings already! Can we really consider it ETHICAL to NOT show a house based on who listed it? That then brings up the ETHICAL question of whose interest is being served – the Realtor or the buyer? Makes one think…..this is one BIG game with only one predertermined winner. Legislation anyone?
Hey Deanne,
First of all, go get your Real Estate license (I don’t recommend that for 1 offs since newbies stink too).
Secondly, when you say you staged, I will assume you took the fsbo route and did it yourself. I would hire a stager with a great portfolio to do it.
Show me a listing. Send me the MLS#, I want to see it on Realtor.com and see how it looks. Do you have 20 great photos? All the lights on? Using the v570 camera? You skimping on the buyer agent fee? You using the wrong lockbox to save $100?
Deanne, as a rehabber you know that you MUST build in a 6% commission into your models when buying rehabs. You’re handcuffing yourself by not doing so. You should seriously consider getting a RE license so you can get on the MLS and cut that 6% down to 3%. It will be worth it to you.
Case in point: you talk about the $150k you’ll need to spend. Imagine if you 1) had your license, 2) took on a reliable stager, and 3) took advantage of the MLS and loaded it with pics from a wide-angle camera.
#1 cuts the $150k in half. The combination of #2 & #3 enhance the beauty of the home thus getting more potential buyers in sooner. What if you cut the holding time of each home by 2 months? That’s close to the remaining $75k right there. A $250k house staged/beautified might pull in an additional $10k. So now you’re ahead of where you would have been and possibly most important of all: less stress on you.
– Tchaka
Deanne,
I was thinking more about more about your question and my answer. I take it back. I could delete it my comment, but I’d rather keep it posted and officially take it back.
First of all your “special” margin excuse… throw that out the window or substitute it with the everyday, EVERYONE needs more money, such as “I have $200,000 in student loans, I need the money” or “This my last asset and I need it to survive on for the rest of my life” or, “my house is worth $20,000 less now, so I can’t afford the commission.” So, again, the point of the blog is that your NET matters and “saving” on the commission isn’t the way to do it, regardless of how much you NEED the money.
So I said to consider becoming a Realtor just to sell your homes. Well that was dumb of me. First of all, when you are a new Realtor you won’t be as good as an aggressive agent with deals under their belt (non fsbo deals). And if you DID sell all your listings… you might find… wow, this takes TIME to do it right. You might see that you would make MORE money, if you outsourced this component and focused on where you make the most money, which is on the fix and flip part.
So that brings you full circle into hiring a Realtor. No, hiring a non-sucky Realtor. Start with hiring a great stager and see who THEY recommend.
As for “price” you might be able to get a bundle discount if that listing agent sells multiple homes for you, BUT if they are any good, they might be able to, since that “discount” would lose them money. They might have a certain capacity. So by taking your deal #2 and #3 that might mean NOT taking another non-discounted deal, thus their net being lower.
Also you might consider a creative partnership where they are willing to hedge some of their commission based on the profit point that you want. So the commission goes UP in deals where they get you over a profit price point, but would flex down if they can’t get you the return you need. It would be more like a partnership, where they have more skin in the game (but that compensation shouldn’t just go one way, if they go down with you, they should also go up with a bonus).
Frank I work with a lot of FSBO’s – I always encourage them to work with an agent. I bookmarked this so I can refer back to it. Thanks for taking the time to write this epic blog. ;)
Hugely entertaining and informative! I love the way your mind works.
Frank – thank you so very much for allowing me to debate with you on your blog. I am passionate about good debate and you debate very well.
I am going to get my real estate licence, but ONLY to allow me a leg up in dealing with REO realtors. Being a Realtor is not my passion, rehabbing and staging homes is my passion and my expertise.
On my listing, I did not use a Kodak v570. I used a 6 megapixel digital Cannon EOS Rebel with a wide angle lens adjusting F-stops and aperture settings in conjunction with thee 300 watt tungsten lights. Photos were scanned into Photoshop and adjusted for colour, hue, and saturation levels with a few special effects (twinkling lights and window light enhancement). I did not have 20 photos – only 12 (house is only 1100 sg ft). I did stage the house myself; however I am a certified stager. :) I offered the full 3% buyers commission and yes I did buy the lock box from Home Depot. I did however use the Realtor standard called “showing solutions” to schedule all showings.
I went the flat fee route on this property as a social experiment. I will try this experiment again in a different part of the city. And I will continue trying this experiment until I prove or disprove my hypothesis. The hypothesis suggests that the concerns of the Realtor are the single most important factor a Realtor uses in selecting the homes they show prospective buyers. I have started aa nice little database to track the results – and am anxious to apply some algorithms to get some preliminary data (‘course that is about a year out)
As for the partnership idea – already done. And a very fine negotiation is was too!!
Frank – thank you so much for this timely blog – this was really fun!! When I am in Virginia next, would love to continue a debate over lunch!!
Keep blogging!! :)
Ok Deanne, but you will be paying for lunch!
Frank, great post. How do you think the divorcing of commissions would change your arguments in this post?
Divorcing of commissions? What the heck is that? I had to Google it and the results were zero.
You’re killing me. Your blog is great. If I didn’t know better, I’d think you were talking specifically to me. I went to this discussion and it’s scary how you walked right down my train of thought.
Okay, okay…You figured me out. I overpriced it. I tried to cut out realtors. I used Craigslist and militarybyowner.com. I offered to pay the buyers agents fees to meet the fsbo halfway. I know, I know!!!
Soooo…Help me sell my house oh mighty one:-)
John
Ha! Too funny.
Glad you liked it. I know your perspective because I LIVED IT FOR 10 YEARS. That is all my mother did (FSBO). But I got into real estate because I figured others were having the same problem with shady Realtors as my mother did (see blog on what my mom taught me).
But now that I am on the inside, I see the shadiness, but I also see a better way to describe the value that a Great Realtor can offer.
Just the other day I was telling her about my friend in Chicago that wanted to sell, and she went back to her “why not put it on the MLS and do the Quasi-FSBO route.” To which I had to send her to THIS blog to remember that a great agent can get you a higher NET.
Thanks John
LOL….Certainly. You may post my comments.
You definitely need to put this in book form. Chances are, there are thousands of people that are
waiting to read it. I can guarantee that your book would be a success because it’s like you were in my mind…and that is very, very, very scary!
Like this one (I’m paraphrasing): You said that there’s really no reason for a Realtor to work really hard for an extra $10K when all they are going to get is a few hundred bucks out of it. Basically, they’d have to work their tail off to get it. So their motive is to get as little as possible while making you feel like you got a “good deal.”
Man, that’s exactly what
I told my wife a few years ago when I sold our house by-owner.
Like I said, the only reason we “made out” on it was because the market was booming and it was in a high viz, high traffic, high desirable location. After
considering what you’ve told me, I probably lost-out of thousands of dollars going it alone.
Hey, I know what the house is worth. The supply and demand will determine the appropriate mix of price, incentives, and fees required to get the best net possible.
Hopefully, we can talk in person someday and I’ll do my impersonation of our last realtor. She made me sick :-p
Thanks again,
John
http://www.bloodhoundrealty.com/BloodhoundBlog/?p=1283
Thanks!
This blog persuaded me to list with a full service Realtor. I listed with with prudential (many states away from you).
We just need to get traffic and it will sell. I have reduced the price even further so it should be a matter of time.
Fred
By way of intro, I’m the doctor friend who almost made a large mistake listing Flat Fee [referenced in the blog].
I’m acquainted with all the arguments Frank outlined, and then some! By way of comment I’ll draw an analogy to my field: patients who use the internet prior to (or worse – instead of) seeing a physician.
I personally think it’s great for my patients to be as educated as possible about their symptoms, their diagnosis, possible treatments, side effects, etc… But there is literally NO substitute for 7+ years of post-graduate training and experience in managing someone’s health.
Unfortunately many folks feel that if the “do their research” (to borrow from Deanne) this somehow equips them to reach an accurate diagnosis and the correct treatment – very rarely the case. Even when they are partially right, believe me, they haven’t thought of everything. Same thing in real estate. It’s an agent’s JOB to do this all day, every day, and you’re paying for that expertise.
Now, just like in real estate, many people go to the internet for medical advice. Why? I submit that it’s because of bad experiences/perceptions of their doctor. How many of the following things are true for you? You can’t reach your doctor to ask questions; return calls take days; prescription refills require several prompting calls; when you’re in the office they seem rushed or busy; they’re not friendly; you have no way of evaluating their competence/experience; you feel like you’re just a number to them, one of tons of patients that day. Any of these sound familiar with regards to your perceptions of agents?
Just like you could have a mediocre doctor who doesn’t understand customer service, you can have an agent with all the same faults.
So how do you pick your doctor? Word of mouth referrals regarding their excellent expertise, bedside manner, office staff, track record, and reputation. Sound familiar?
And a final note – many people who’ve “done their research” and then come into see me are confrontational. They assume they already know the answer and want me to serve as a vending machine for what they want – as if I’m superfluous to the process. My impression is that that’s what FSBOs (flat fee or not) seem like t oagents – a possible marker of HASSLES (not always, just more likely).
In short – I still can’t believe that I almost did flat fee and made a costly mistake. I “knew” my market better than it’s possible for any lay person to know a market – I grew up where I live, followed the market religiously for comps for three years, etc… and still grossly underestimated my price. And finally, having a 3rd party go back and ask for more money from other agents is easier than doing it myself – delegate the awkwardness! Frank worked like a banshee for me and with tremendous integrity. I think in retrospect my considering flat fee was about not knowing a GREAT agent. My advice, spend the time/effort to find a great agent – totally worth it.
In summary, your argument is: “Realtors: Everybody is using them so you should too.”
Right now that statement is true, but its derivative with respect to time is a negative value.
When I see a FSBO I think, “Yeah, progress”.
Look, if your claim that sellers who use full comissioned real estate agains (vs FSBO) net greater (and that is after an additional 3% cost) then as a buyer if I see a FSBO I should expect better value for the same house. This is just the other side of the same coin.
I’m not claiming FSBO is for everybody but things are definately different now. Too bad about your $100 MLS site…
To find an agent like you (let’s assume you are really able to do what you say) in a market is a near impossibility.
The FSBO stuff about listing agents would hold water if every house that was listed with a listing agent was a gleaming gem, all prettied up, arranged, etc – that’s simply not the case. It’s more often NOT the case than it is the case in my experience.
Who knows your house better than you? A listing agent who never actually shows your house to someone? A buyers agent who “shows” your house but has never seen it before? I think the questions answer themselves.
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 then the hassle began. The MLS remarks said to call first…
So Mr. FSBO, you might be brilliant and savvy, but all those other idiots out there ruined your good name.
Same applies to real estate agents – all of the other idiots out there have ruined your good name. :)
[…] Rebates blog post, and for discount listings and For Sale By Owners go to my 2nd best post ever: Go FSBO! Save $20,000! Agent Tells […]
[…] for the Obama tax credit. People LOVE tax credits. Kinda like people love to “SAVE” by going FSBO, when it will likely actually NET them […]
While I was searching for falt fee mls listing discovered this. Like your physician friend ( I am one, too) I am convinced not do fsbo, at least not yet. Could you suggest a “great agent and stager” in central Virginia (Henrico county?
Thank you in advance.
[…] payment, you have to overcome those damn Realtor fees (sure you could sell it yourself, but read my “Save $20,000″ FSBO […]
Typo: “OK bearare with me.”
[…] Well kinda. That 5.4% average isn’t broken down. People like to assume it is half and half, but that is not likely. So if 5.4% was the average in Arlington, it would be 2.4% to the listing agent and 3% to the buyer agent. But the study is nationwide. And I don’t know what the rest of the USA charges or if they include FSBOs (see post on Saving $20k going FSBO). […]
Deanna says, “The hypothesis suggests that the concerns of the Realtor are the single most important factor a Realtor uses in selecting the homes they show prospective buyers.”
I am a buyer’s agent. This is the 21 century. My buyers do their own searches online. If they want to see a house, I show it to them regardless of the commmission or who listed it. If a Buyer wants to see a certain home – they will. If not thru me, they will use another Realtor if they are that determined to see your home. Your hypothesis is bogus.
Frank,
I’d like to see an update (to the 2007 article) and your spin on today’s market in the NOVA area (think DVCC in PW county). I am in “non-MLS” limbo right now and am considering the Flat Fee MLS avenue. After my last adventure with a realtor from a National chain not really chomping at the bit to get stuck like that again. Also would love to hear about hybrid strategies that incorporate the best of both worlds- if there is such a thing.
you can get me at my email.
oh- and thanks for tutoring me on your website
I don’t think the type of market matters.
When the market is HOT, people say… “oh you can just through it on the MLS and get it sold fast”
When the market is LOW, other people say “well you can’t afford the commission, so do it yourself”
So regardless of the market, people will find a reason to say that that route is suddenly better. As for the above, when I got a FSBO $101,000 over his asking price on a $500k house, the benefit of a Realtor was knowing how to get him more (he said he would have stopped at $535k).
And in a LOW market, a good Realtor will also help you net more, for the same reasons in the post.
So it all pretty much holds up true today.
As for the National Chain, that is a crapshoot. What did you do, call the front desk and take the desperate weekend warrior agent answering the phones or did you get the person that sent you 200 postcards, who spends $300,000 to GET your business, but then doesn’t care once they get it.
I find your blog post misleading. You only got them 65,000 more because you did not charge then the customary 6% (3% to you and 3% to the buyer agent) I’m confused, did the buyers have a buyer’s agent, or did you go dual-agency? If they didn’t have a buyer’s agent, did you pay them out of pocket or something? Considering you said the seller netted 65K more with you then the 430K they were willing to accept, that would mean there was either no buyer’s agent involved, or that you coughed up the 3% of 495,000.
Let me remind you that net refers to the takeaway after all other fees are subtracted. Perhaps you are using the word incorrectly.
Thanks of this very informative and educational blog. But this article and comments from other folks mostly discussed seller’s situation. I am a buyer and have the similar question about lowering my NET cost. What options I may have besides having a buyer’s agent represent me. Would not having a buyer agent lower my net cost, especially for a new house? Can I be more aggressive with my offer if I am self represented?
I would appreciate any options and their analysis.
Hello Ken,
As a buyer you have several options. For one you can find a rebate agent. A buyer agent that will rebate back to you a portion of their commission. I have written extensively about this on my blog. While it seems attractive at first, I maintain that “I used to rebate, then I got good.” I got good at helping buyers save more, win deals that require technology and speed, and do things that other agents don’t do (rebate agent or others).
Another option is being an “unrepresented buyer.” That is where it gets tricky. Many incorrectly assume that if there is no buyer agent, the buyer can miraculously gobble up the commission offered to the buyer agent. But the problem there is the listing agent has a contract with the seller to charge a total of X%. And IF, and only IF, there is a buyer agent, the buyer agent gets a portion. Many of these contracts default to giving the listing agent the entire commission if there is no buyer agent, and no, you can’t see the listing agent’s contract with the seller. Even if you put in your offer “I get x%” the seller could still be charged the full commission, because you as a buyer can not interfere with the contract between the seller and agent.
Also I don’t like dealing with unrepresented buyers. I would much prefer a client be represented. Just a couple of days ago a buyer tried to contact me directly and cut out their agent. I told them, they needed to have their agent contact me. I had no interest in cutting out the buyer agent and doing double the work, just for the buyer to flake. Buyers that are unrepresented try to reinvent the wheel. They are not reliable and they frequently feel ripped off. Just this morning an agent of mine said “an unrepresented buyer just requested a release from the contract.” And this was after my email that said “… ok, but watch out, those unrepresented buyers tend to flake because they feel ripped off.” Sure enough I was dead on. The buyer didn’t understand the marketplace. Was focused on some irrelevant short sales from 14 months ago and wouldn’t believe the listing agent that the market had skyrocketed since… So I would much rather have the unrepresented buyer go get an agent so they don’t feel ripped off and will be more likely to get through the entire deal.
Betty says: “I am a buyer’s agent. This is the 21 century. My buyers do their own searches online. If they want to see a house, I show it to them regardless of the commmission or who listed it. If a Buyer wants to see a certain home – they will. If not thru me, they will use another Realtor if they are that determined to see your home.”
Thank goodness someone FINALLY made this obvious point. We have reached a point at which it seems highly unlikely that a buyer’s agent could not show a property just because they’d rather avoid dealing with an owner using a flat fee MLS service. So many buyers now search for themselves online and tell their agent which homes they want to view. What’s the agent going to do… refuse? I’m not disagreeing with the points made in this article. However, in the 5+ years since it was written, I believe buyers finding properties themselves online is now a major factor which can not be ignored. Therefore, IF you have a home which is well decorated and kept in immaculate condition AND if you match the going rate for buyer’s agent commission (e.g. 3%) AND you are in the position of being able to truthfully claim in your listing that it’s always available for showings (e.g. because you work from home, eat at home, and are almost always there) then I see no valid reason why you can’t effectively go the flat fee MLS route. The only other factor is whether or not you are skilled at negotiating. If not then you may still end up ahead of the game by hiring a listing agent. But the problem is many of them are also not skilled at negotiating. Finding one who truly is can be, I’d suggest, extremely difficult.
Thanks for your comment.
I stand by this article, even years later. And yes it is hard to find agents that are good negotiators, but you have come to the right place!