Foreclosure in 07021>Question Details

Owner, Home Seller in 07021

Placing home in Essex Fells on the mkt - ads in Star Ledger - FSOB-

Asked by Owner, 07021 Sun Nov 18, 2007

If I was to deal with a buyer's broker, should i expect having to give them a 2.5% commish or can I set the the terms (a sliding scale based on price, for example)?

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Marc Paolella, Relo Director’s answer
One other thing to keep in mind. The Internet has made most buyers smarter than ever. They know that you are not paying a commission. So they are going to chop 5% right off their offering price. It is the buyers who really pay the commission. And it always has been. Only now they know it.

It is highly unlikely you are not going to pay a commission. You will pay it explicitly if a Realtor is involved of course. But you are also going to pay it implicitly even if you never see or hear of a Realtor during the entire transaction. I mean if you were a buyer, wouldn't YOU discount the commission if you were going to make an offer on a FSBO?
3 votes Thank Flag Link Sun Nov 18, 2007
Make no mistake- JR et all- I think the best of your profession are just going to get a bigger piece of this shrinking pie. That you are here debating and learning and providing information is awesome- appreciated- and shows why folks like you will WIN as this industry, like others, continues to change, fast, during the information revolution.
1 vote Thank Flag Link Tue Jan 8, 2008
I said this before and I'll repeat it again:

I am confident that that the proliferation of free, accessable information in the real estate industry is having the save effect as decimilization has had on wall street- changing and eliminating whole classes of jobs. Real Estate agents will become more like service providers - the protective barriers around the access to the other side of a transaction like the mls will continue to crumble (craigslist, zillow, google), comissions will continue to shrink, the real estate agent will become more specialized, typcially serving only the highest priced or weak supply and demand markets where the need for an intermediary, house sitter, etc is stronger...

..And do underdstand that i think a great real estate agent can be super for the right kind of home/situation (not as much for homes in strong markets with favorable supply/demand characteristics) - but I also know they are very few and far between - like great recruiters are - the barriers to entry in the profession are simply far too low.
1 vote Thank Flag Link Tue Jan 8, 2008
This discussion is getting just silly. It doesnt matter if someone has a real estate agent or not, I'm going to try to get the best price on a house I'm buying. And I'd much rather buy an FSBO house than one one offered by a realtor - as would most buyers - any discount would then come from the the owner not the owner plus the absurd amount he had to pay a lister.
1 vote Thank Flag Link Tue Jan 8, 2008
JR - yes, the challenge that FSBOs have is getting the buyers to their doorstep, I agree with you on that and that's a much better argument against going FSBO. However, the biggest advantage FSBOs have is flexibility on pricing and the ability to offer a better value price for their home while keeping the same bottom line.

My entire argument against Marc is the bad math and "Marc Value" argument - that part of the value of the house is how much money was spent on marketing it. I'm a bit concerned that I'm the only person who has challenged the "As a buyer you are not going to want to overpay for marketing that didn't happen." comment.

And don't forget - many realtors represent overpirced homes too so your last example can happen even with a realtor!
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I doubt you've spoken to as many FSBOs as I have, and I can tell you that MOST are overpriced so much that all their flexibility is for nothing. Very few know can distance themselves from their homes enough to be critical enough to price them right. Many get offers I would take in a NY minute and turn them down or hamhandedly "negotiate". As for the overpriced homes listed with Realtors, I don't take those kinds of listings, and I don't bring buyers to them either. Those Realtors are doing a disservice to their clients. Your comments are not about Realtors taking over priced lisings though, they're about FSBOs getting more money.
1 vote Thank Flag Link Sun Jan 6, 2008
JR - yes, the challenge that FSBOs have is getting the buyers to their doorstep, I agree with you on that and that's a much better argument against going FSBO. However, the biggest advantage FSBOs have is flexibility on pricing and the ability to offer a better value price for their home while keeping the same bottom line.

My entire argument against Marc is the bad math and "Marc Value" argument - that part of the value of the house is how much money was spent on marketing it. I'm a bit concerned that I'm the only person who has challenged the "As a buyer you are not going to want to overpay for marketing that didn't happen." comment.

And don't forget - many realtors represent overpirced homes too so your last example can happen even with a realtor!
1 vote Thank Flag Link Sun Jan 6, 2008
[[William: So the answer to your question why they shouldn't pay the extra 2.5% and get the full monty on a $300,000 home is : $7500 ... and if they find a buyer without at realtor, the potential for: $15,000. For most people, those are life-changing amounts.]]

Marc answered: Yes, but the only way they get the $15,000 is if they find someone to overpay. That CAN happen, so sometimes someone who is not all that motivated to sell CAN roll the dice and get lucky. But usually it DOESN'T happen. Buyers are much smarter now. Some buyers will get smarter as a result of reading this dialogue. They will smartly expect to pay a fair price for a FSBO if they run into one that they like. The fair price will be the standard price for similar comparable homes MINUS the commission they are not paying.
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JR: And you're both discussing a house for 285,000, which doesn't exist where I am. Try finding a buyer who is who can spend almost a million (and is stupid) who makes an offer on an overpriced 900,000 house and then has an appraisal that comes in at 825,000. See how much money THAT seller makes without a realtor: probably $0 because appraisals can kill deals as much as sellers and buyers who communicate directly and become adversarial.
1 vote Thank Flag Link Sun Jan 6, 2008
In my experience I've only had one discount property that I showed by request of a customer. The owner followed us around and disclosed much too much about his financial situation. I did not select the property again when i showed properties as it was overpriced.
1 vote Thank Flag Link Sat Jan 5, 2008
Marc - and there goes the moving target - I was talking about the pricing advantage FSBOs can have, not buyer pool (but since you went there, FSBOs can easily get on the MLS and Realtor.com - even for *free* at http://www.iggyshouse.com/, and the Internet and print are open for all to use and get local, regional, national, and international exposure. Stop with the realtor mysticism about how homes are advertsied already!)

Are you really trying to tell me that, as a buyer, I'm going to search for weeks, find the home of my dream, put a bid in, and not budge because I care that a realtor didn't market the house? As a realtor, would you encourage a client to put a deal in jeapardy ... on a home that's priced well ... on the basis that they didn't pay one of your own to market it? Please. Enough about buyer plottings and gyrations. Buyers don't give a hoot about your commissions - they care about price and value (price is everything, right?) and no sane buyer is gonna pass on their dream home if they can get it at the right price.

There are much better anti-FSBO arguments. This one rates right at about the same level as "Oooo - you'll be letting strangers in your house!"

BTW I did say "3% or whatever is typical in your area" so if it's 2.5% let's use that.

So the answer to your question why they shouldn't pay the extra 2.5% and get the full monty on a $300,000 home is : $7500 ... and if they find a buyer without at realtor, the potential for: $15,000. For most people, those are life-changing amounts. You wouldn't be arguing against FSBOs so hard if it wasn't a meaningful amount of money!

I'm not anti-realtor Marc, there are lots of legitimate positives to using a realtor, but keep the arguments fair and don't cheat on your math :)
1 vote Thank Flag Link Sat Jan 5, 2008
Thanks and good luck with selling. 3% is a better incentive IMO and you'll still be getting a good deal. Let us know how it goes.
1 vote Thank Flag Link Wed Jan 2, 2008
In NJ commissions are all negotiable, but keep this in mind. Agents have clients and clients that trust them to get the job done right and in a timely fashion. If you are serious about selling your home you want to ensure that the maximum exposure is available and that includes offering a competitive compensation so that your home gets the attention it deserves.

Good Luck

John Davis Jr., Realtor
RE/MAX Village Square
Direct: 973-944-5038
Office: 973-509-2222 x174

http://www.njpads.com

Get Your Customized Market Snapshot
http://market.njpads.com
1 vote Thank Flag Link Tue Jan 1, 2008
You can negotiate the commission on any real estate transaction. As far as your follow up post goes: Agents do have buyers. Consumers do not have to sign up with us for us to work with them. Most work with us because we have the knowledge to get the job done for them, saving them time, effort, and money along the way. Those are the same reasons most buyers choose NOT to go solo.
Web Reference: http://www.dianeglander.com
1 vote Thank Flag Link Fri Nov 23, 2007
If you set your compensation too low you might find the agent's compensation written into the offer. Although I am sure, as another poster said, some agents ask to preview your home as a "thinly veiled attempt" to give you a sales pitch, there are many realtors who would like to see it because we try to preview ALL available homes. How else would we KNOW if a particular customer would be interested in seeing it.
1 vote Thank Flag Link Sun Nov 18, 2007
Hi Owner,

Your commission rate is completely negotiable, whatever you and a buyers agent decide. There are many ways to actually get agents working for you without actually listing your house.

Once you are on the market, many agents will contact you. One of the favorite strategies is for an agent to call you and tell you they have "possible buyers" for your home, and may they come and "preview" it? This is a thinly veiled attempt to gain access to you to so they can give you a good old fashioned sales pitch.

What I would tell such an agent is this: If you have a specific and interested buyer, just bring him and I'll pay you an agreed-upon commission. You can then sign a "single buyer" listing. Meaning, you agree to pay the Realtor the agreed-upon commission if the showing to the specific buyer produces a sale.

I am a Realtor, so of course I want to list everything in the universe, but many people have legitimate reasons for wanting, or having, to go it alone. So good luck in your marketing effort.

If you would like more tips on getting agents to show your house, WITHOUT listing it, just contact me through my website. I have really good ideas and suggestions for you, and they won't cost you a dime.
Web Reference: http://www.marcpaolella.com
1 vote Thank Flag Link Sun Nov 18, 2007
Yup. Depends on the market - and the zipcode and street, etc. But sometimes, FSBO makes sense. And the real estate agents like MArc that went out of their way to be helpful in the process will be rewarded -by this owner and others.
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We're used to not being paid for much of the work we do. That's why I prefer to list.
0 votes Thank Flag Link Sat Feb 9, 2008
Yup. Depends on the market - and the zipcode and street, etc. But sometimes, FSBO makes sense. And the real estate agents like MArc that went out of their way to be helpful in the process will be rewarded -by this owner and others.
0 votes Thank Flag Link Sat Feb 9, 2008
Hi All-

Just a heads-up. This seller went flat fee and has a pending offer.

-Marc
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Oh that's so nice! Isn't it great that there's so much useful information for free on this website, and so many agents willing to help out.
0 votes Thank Flag Link Sat Feb 9, 2008
Thanks for the update Marc!! The information was much appreciated! Nice to hear that the seller has an offer too - keeping the real estate moving in West Essex is a plus!!

Gina
0 votes Thank Flag Link Sat Feb 9, 2008
Hi All-

Just a heads-up. This seller went flat fee and has a pending offer.

-Marc
Web Reference: http://www.marcpaolella.com
0 votes Thank Flag Link Sat Feb 9, 2008
In response to JR's response, yes, there are some agents who are truly looking in the best interest of their buyer and agents who preview all homes in their area regardless of whether they are listed with an agent or fsbo however....the red flag will go up once you start getting the sales pitch talk...
It wasn't my intention to mislead FSBO's to think all agents didn't have real buyers but as we all know....agents trying to convert FSBO's use that same ploy day after day....I am not an agent who goes after FSBO's and although I know many agents do and are VERY successful in converting for sale by owners - it's not my source for acquiring listings.
0 votes Thank Flag Link Sat Feb 9, 2008
0 votes Thank Flag Link Sat Feb 9, 2008
I use the term "real buyer" in quotes because as Marc stated...a lot of agents will use that ploy to get in and then try to get you to list with them.
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I'm sure some do. But when I bring a "real buyer" to someone's FSBO, I can't guarantee that buyer is going to buy THAT home. So let's not start accusing other agents of unethical behavior which might lead some FSBOs to conclude that just because an agent brought someone to their house and they didn't buy, it wasn't a "real" buyer.
0 votes Thank Flag Link Sat Feb 9, 2008
Boy has your question escalated into a big discussion amongst the responders!

Straight to the point - if an agent produces a "real" buyer for your home - they will in fact ask you to sign a one-time commission agreement specifically for that buyer only. What you pay that realtor producing the "real buyer" is between you and them. With that being said, I have seen some FSBO ads stating that they will pay a flat fee of 2%, 2.5% or 3% to a buyer's agent.

I use the term "real buyer" in quotes because as Marc stated...a lot of agents will use that ploy to get in and then try to get you to list with them.

My office is in Caldwell so if you have any questions, reach out to me - there are no strings attached or obligations or ploys ....I would be happy to send you some useful tools and valuable information for you to review and use and ultimately assist you in selling your home on your own for the highest price possible is always my goal. West Essex is where I work and live and I pride myself in being a realtor in the West Essex community. Best of luck to you! Feel free to contact me anytime.
Gina Chirico, Sales Associate
PNJP-Caldwell
(973) 228-1000 ext 132
GinaChirico@PruNewJersey.com
0 votes Thank Flag Link Sat Feb 9, 2008
No real estate agent is allowed to discuss commission rates publicly, otherwise, they are violating the federal and state antitrust laws. Sorry!
0 votes Thank Flag Link Fri Feb 8, 2008
JR - so what you're saying is that your buyers know ... without any prompting or coaching from you ... to start bidding at 3% less on FSBO and limited service listings? Buyers approach you with this strategy, and they know the discount number to use is 3%?.

Or are you saying that you don't have enough meaningful experience with these situations to really comment on how they play out real world scenario? (this isn't a negative, I just can't figure out from your posts whether you work with these types of situations or not.)
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I have enough meaningful experience with buyers and potential buyers to know that most people are aware that if it's a FSBO, the owner is not paying commission, so they will take that into account. And no, buyers don't know what commission the seller is saving. Most people assume they will be saving 6%.
0 votes Thank Flag Link Tue Jan 8, 2008
JR - so what you're saying is that your buyers know ... without any prompting or coaching from you ... to start bidding at 3% less on FSBO and limited service listings? Buyers approach you with this strategy, and they know the discount number to use is 3%?.

Or are you saying that you don't have enough meaningful experience with these situations to really comment on how they play out real world scenario? (this isn't a negative, I just can't figure out from your posts whether you work with these types of situations or not.)
0 votes Thank Flag Link Tue Jan 8, 2008
William: JR - I know you don't give buyers that much credit, many aren't even aware of commissions!

JR: What?! Buyers unaware that there is some sort of fee involved when there is an agent involved? Are these buyers from a foreign country or distant planet? I know you don't think buyers are that unaware, William. I haven't found a buyer yet who was UNAWARE there was a commission for an agent sale and no commission for a FSBO. I will grant you that most buyers are totally oblivious to how we are paid, though, and both buyers and sellers are mostly ignorant of how that fee is split. Many people think we are on salary. Which is why we don't like to give out addresses to buyers without having me them and explained real estate process to them. Because when they see a sign in front of a house that says "exclusive", a whole lot of them think they have to go thru that agent to buy the house! Even after I've worked with people, if I've said "this is not one of our listings", they ask, "then how can you show it to us" and I have to go over the process again.

William: Besides, what about flat fee listings? The buyer would have no way of knowing that it was a flat fee (no sellers commission) unless you told them. Do you advise these buyers that they should bid 3% less on flat fee listings?

JR: Many buyers know an agency called "C21clickit.com" or "HelpUSell" is a flat fee agency. You know William, they don't tumble off the turnip truck in front of my office. I have shown a flat fee listing to a buyer once in the past 2 years. That isn't a very prevalant method of listing where I am. I am only aware of a handful of flat fee listings. They are all (all the ones I know, not every one in the world) overpriced, and the owners are unmotivated, which I know because I have spoken to them when their listings have expired. I would inform a buyer client of that non motivation when discussing such a listing. The one time in the past 2 years I have shown a flat fee listing, it was to a buyer customer who asked the owner why he was moving, causing the owner to spew forth a stream of diahrea of the mouth about his own financial condition that solidified my mindset of not having ANY SELLER CLIENT OF MINE present during a showing.
0 votes Thank Flag Link Tue Jan 8, 2008
JR - I know you don't give buyers that much credit, many aren't even aware of commissions!

Besides, what about flat fee listings? The buyer would have no way of knowing that it was a flat fee (no sellers commission) unless you told them. Do you advise these buyers that they should bid 3% less on flat fee listings?
0 votes Thank Flag Link Tue Jan 8, 2008
First of all, FSBOs are getting off easy as far as commission goes if someone comes along with a buyer's agent. In the past, before we had buyers agency (this is a new concept in my area), I wuold have asked for a one-shot commission agreement with a FSBO, and it would have been for full commission.

You ask if I would advise a buyer to lower their bid taking into account the (in this example) 3% savings? William, I don't have to make that particular suggestion to a buyer. Most of them tell me right off that when they approach a FSBO on their own they take the fact that there is no commission into account. They do the same thing when I find the FSBO for them, or if they ask me to present the offer to the FSBO. With a buyer client I do much the same thing I do when I price a house for a potential seller: tell them what comparable homes have sold for and in the best case, let them draw their own conclusion based on data I have given them about prices and what the market is doing (and how much they want the house). It's a much more complicated discussion process than you make it out to be. At least with me it is. I want to cover all the bases: I don't want to tell them to "hey this guy paid 10,000 for it 35 years ago, go in with a real lowball number, he's 97 years old and won't be spending much money in the future! ha ha ha, and don't forget to take out an extra 3% because he's onlyl paying me, not a listing agent, too". I tell them a nearby home sold for "this", explain how it compares to the home they want (no AC, bigger yard, whatever), how many homes have sold or gone UC in the area in the past 3 months, how many are for sale now, etc etc etc. Then I present the same data to the seller when I present the offer. Many of the questions in this forum reduce real estate to a very simple process: there's a lot more to every step than many questions cover.
0 votes Thank Flag Link Tue Jan 8, 2008
JR - Just curious, all other arguments aside, do you agree with Marc that a downside to FSBO and limited service brokers is that agents will just advise their buyers to bid the "standard" buyers commission of 3% lower on the house so there's no difference? Do you advise your buyers in this way also?

(let's assume it's the 1 in a million FSBO who might actualy be savvy enough to market their home right and price it right to keep the focus on this specific issue...) Would love to know your thoughts.
0 votes Thank Flag Link Mon Jan 7, 2008
Oh well we can agree to disagree. If everyone agreed on everything, life would be a total bore.

Just a few quickies to clarify:

5% was an example. It is not the "right" commission. There is no "right" commission. All commissions are completely negotiable.

Quoting you: "All buyers care about is the amount they write on that check at the closing table."
Now you're getting it! Buyers want to pay fair market value (or less). Since the fair market value is pretty much set by homes that sell through real estate agencies, it is necessary to deduct the commission that is NOT paid on homes that are not selling by an agency. It's really common sense William. And I know you know it. And if you were a FSBO buyer, you would knock that commission off your purchase offer quicker than a Realtor leaving an open house...

As far as hazing FSBO's, not true at all. I don't care how well an owner markets his own home, he did not pay a commission, his neighbors did, so his correct value has to be adjusted by subtracting the prevailing commission rate. It's not hazing, it's just economic honesty. It's called "cash equivalency".

Anyhow, it's 1:20 AM, I have 2 open houses tomorrow so it's time to get some sleep. Tomorrow I will return to being your docile and friendly neighborhood Realtor. I usually only get feisty like this about once a month.
Web Reference: http://www.marcpaolella.com
0 votes Thank Flag Link Sat Jan 5, 2008
You're dancing now Marc! Overpay for marketing that didn't happen? On a home I don't own? That's priceless. What else are you going to price into the "Marc Value" of the home - should buyers ask for a disclosure of sellers marketing expenses to figure out their bid? Different agents spend different amounts on marketing their home - since you say buyers are purchasing the marketing, price should be based on what the agent actually spent also, right? Wow.

Do you start off helping your buyer decide a bid price by subtracting buyer and seller commission percentages from that magic 5% build the bid from there? Do you do the same with limited service listings? And listings that offer any amount less than that 5%? What if the listing offers more than 5% - do you ADD money onto the bid for the extra services?

All buyers care about if the amount they write on that check at the closing table. For tapdancing chrissake they're not shopping how well the home was marketed before they owned it!

Bottom line is this. Exact same homes. If a seller wants to put $285K in his pocket. With a realtor, they have to sell at $300,000 to pocket the $285K. As a FSBO (assuming they'll pay 2.5% to buyers agent) they can sell at $295,000 and still end up ahead. Who is the buyer going to choose?

You say the buyer should choose to pay the $300K, not the $295K, because they have gotten $7500 of marketing services on the home they don't own yet... Marc - it's an absurd argument. Value of home for a buyer has NOTHING to do with commissions paid by the seller and you know it.

Ok, enough with the bad math.

Marc, you say that you're not anti-FSBO but you advocate hazing of FSBOs based on the fact that they were not represented by a realtor (and thus could not possibly have marketed their home properly.) You hold the hard line at a 5% commission being the "right" amount of commission, and make efforts to enforce sellers paying that amount regardless. You tote the NAR rhetoric and take the potshots. Hmmm... In any case I appreciate your clever and sarcasm ... it's your commercial, I'm just along for some fun...

Ha last one - shouldn't you hire somebody else to take those pictures?
0 votes Thank Flag Link Sat Jan 5, 2008
[[William: Are you really trying to tell me that, as a buyer, I'm going to search for weeks, find the home of my dream, put a bid in, and not budge because I care that a realtor didn't market the house?]]

That is correct. As a buyer you are not going to want to overpay for marketing that didn't happen. If similar homes all sold for $300,000 through Realtors, then you are going to pay $285,000 max for the FSBO. If you pay more, you ripped yourself off.

The Internet is changing the real estate landscape, both for Realtors AND participants. Buyers are smarter now and know that it is economically correct to discount their offer to a FSBO when compared with homes that sold through Realtors. Again, the fair market price for a FSBO is the market value of Realtor sold homes minus the prevailing commission.

By the way, if $7,500 is, as you put it, a "life-changing" amount, then how much is $15,000? If it's wrong to pay the final 2.5% ($7,500 in our example) and get correct marketing and full service, then isn't it more wrong to pay $15,000 over market for a FSBO?

[[William: As a realtor, would you encourage a client to put a deal in jeapardy ... on a home that's priced well ... on the basis that they didn't pay one of your own to market it? ]]

That's the point. It's NOT priced well. If the asking price of the FSBO is $300,000 and my client can get it for the proper price ($285,000), then full steam ahead. Priced well = minus commission. A deal "in jeopardy" because a buyer refuses to overpay is a deal that BELONGS in jeopardy.

[[William: Buyers don't give a hoot about your commissions - they care about price and value (price is everything, right?) and no sane buyer is gonna pass on their dream home if they can get it at the right price.]]

Correct. The right price. The right price is $285,000. The wrong price is $300,000, because everyone else who got $300,000 REALLY GOT $285,000. Doesn't that make sense?

[[William: So the answer to your question why they shouldn't pay the extra 2.5% and get the full monty on a $300,000 home is : $7500 ... and if they find a buyer without at realtor, the potential for: $15,000. For most people, those are life-changing amounts.]]

Yes, but the only way they get the $15,000 is if they find someone to overpay. That CAN happen, so sometimes someone who is not all that motivated to sell CAN roll the dice and get lucky. But usually it DOESN'T happen. Buyers are much smarter now. Some buyers will get smarter as a result of reading this dialogue. They will smartly expect to pay a fair price for a FSBO if they run into one that they like. The fair price will be the standard price for similar comparable homes MINUS the commission they are not paying.

[[William: I'm not anti-realtor Marc, there are lots of legitimate positives to using a realtor, but keep the arguments fair and don't cheat on your math :)]]

And I am not anti-FSBO. I have helped many FSBO's sell on their own. A certain percentage become frustrated and list with me at some point. I've kept a few out of foreclosure by finding the buyer they couldn't. I am working with one couple right now who I am sure will NEVER list with me. They just are set on going it alone. But, they DID give me a huge box of Godiva chocolates for doing a website for their house. Had to cost $75, and it lasted me for about 10 movies...

Finally, Realtor.com and the MLS are just the tip of the iceberg. There are literally thousands of sites where my homes get listed. And it is not only WHERE you list. It is also HOW you list. If you look on the Net, how many listings look unappealing because of lousy photography, incomplete or poorly written descriptions, incorrect factual data, lack of compelling presentation (video, virtual tours, etc), bad staging, poor showability, etc. There's a lot more to marketing than mere appearence on the MLS and Realtor.com. I have $20,000 invested in high end cameras and software to make my listings look good. Not to mention the hair I've had to pull out to learn how to use it all. Not complaining, it's a lot of fun really.

-Marc
0 votes Thank Flag Link Sat Jan 5, 2008
Thanks- great discourse. Was curious if the pros saw much if any of alternative fee arrangements. In any event, placed home on mls ($400) and promising the standard 2.5% to a buyer's agent for our area. FSBO the way to go for my situation - in a diferent house in a neighborhood with dif. dynamics and in a dif.zip code, despite my background and experience, I indeed might go with a listing agent. But probably would never buy such a house/location where I'd have to...
0 votes Thank Flag Link Sat Jan 5, 2008
William, you Crack Me Up! Keep it real and keeping us honest! Love it! Any agent who thinks that there is no place for FSBO's is being intellectually dishonest - there are plenty of folks out there with the experience, time and intelligence to sell their homes themselves. That being said, some of the most grateful and loyal clients are those who tried it on their own and have called me in frustration. When I can help them meet their goals, they know I worked hard and accomplished something they couldn't.

To Owner, in case someone else has not already said it - consult your local Association of Realtors - how agents are paid and what types of fees they can accept is often regulated differently state to state. Stacey
0 votes Thank Flag Link Sat Jan 5, 2008
Oh and one more thing (I'm feeling feisty this afternoon...). If you advocate that Owner ups his commission to 3%, then it really makes no sense NOT to pay the extra 2% and just get the full monty. To not pay the last 2% and do all your own advertising, and sit home for weekend after weekend waiting for buyers who don't show up, and not have professional pricing and representation when the deal gets tough after the home inspection finds issues, which it always does, ultimately makes no sense. By the way, in this area, the 2.5% is perfectly adequate compensation for a buyer's agent. Upping it to 3% will not make any difference.
Web Reference: http://www.marcpaolella.com
0 votes Thank Flag Link Sat Jan 5, 2008
Hi William,

Continuing with our example, so let's say the FSBO next door lists for $291,000. Does he have an edge because of the lower price? Only if the same buyer pool were available to both homes. Which it definitely will not be. As a FSBO, the home will not receive the local, national, or even international exposure it will receive through a competent Realtor. And it's not close. My listings appear on literally thousands of websites, most of which a FSBO has no access to and will never know about. That translates to tens of millions of potential buyers who will know about my listing, but not about the FSBO next door. To get the highest price, you need the highest amount of potential buyers to potentially compete with each other for the home in question. A FSBO simply cannot reach that quantity of buyers, no matter what his effort.

And even more important, it's not only about the QUANTITY of buyers you attract. It's also about the QUALITY of the buyer you attract. Once the Realtor community is involved in bringing buyers, you have a much better chance of landing a buyer who can actually follow through and close the deal. Most of us do not work with unqualified buyers. We make sure they can carry through before spending valuable time showing them homes.

And in my opinion, the marketing effort of a FSBO will NOT be rewarded by the typical buyer. The typical buyer will simply observe that the Realtor-sold home NETTED $285,000, the true cash value of the house after commission. He or she will want to pay $285,000 MAX to the FSBO. It's just simple math and simple buyer psychology.

In fact, there is the additional FSBO factor of desperation. Most buyers feel the FSBO cannot afford the commission, and could be in some difficulty of one kind or another. Which attracts even lower offers. I've seen this a lot. Buyers who specifically target FSBO's are usually trying to find a hot deal. They figure since the FSBO is not paying a commission, they can get get the house for less. Maybe a LOT less.

Can it be argued that a FSBO worked hard and his marketing effort should be valued by a potential buyer? Yes you can argue it, but you'd lose. The typical buyer wants to pay the lowest price, period. He has no way of knowing what effort the FSBO undertook. Some FSBO's just put up a yard sign and wait. Is THAT effort to be valued the same as mine as a professional? Not a chance.

In the final analysis, it is a free country and everyone should sell what they want, to whom they want, with assistance, or without assistance, according to their personal circumstance and preference.

Oh and by the way, if I were buying your house and you told me YOU finished the basement, I would DEFINITELY value it less than if it were done by professionals. Now if you showed me your qualifications and you were in fact a professional in the field of construction and renovation, I'd be OK with it. But if you were the typical Joe Blow Home Depot amateur carpenter, I'd be running to the town to make sure you pulled permits and your work was inspected by a professional.

-Marc
Web Reference: http://www.marcpaolella.com
0 votes Thank Flag Link Sat Jan 5, 2008
Owner - be prepared for plenty of spins on advantages and disadvantages if you're going FSBO. It is *alot* of work to do it right, but if you're smart you *can* be successful.

To answer your question - I would suggest that you offer buyers agents the full 3% (or whatever is typical in your area) - get them on your side and motivated to sell your home, you will have enough obstacles to overcome, make it easy for buyers agents to get behind you.

I will agree with Deb - probably in most cases, sellers won't do the job well enough. But if you're up for doing the work and using the elbow grease and using your smarts, there are plenty of great advantages. And there are scenarios when you can come out way ahead.

Marc - there are a million reasons you can argue against FSBO, but I have to say the "Math" argument doesn't make much sense.

The biggest advantage a FSBO has is flexibility in price. Who cares if the house sells for less if the bottom line (what the buyer puts in their pocket after commissions) is more? The other options FSBOs have is to price their home that 3% lower and still walk away with the same amount of money after commissions.

For your example of the exact same homes, the realtor listed one would list for $300,000 and the FSBO could list for $291,000. Bottom line would be the same for both sellers. All things being equal, the more competatively priced home will get the buyers attention. When it comes to pricing, FSBOs can have the advantage because they have alot more money to play with!

And what if the FSBO manages to attract a buyer who does not have a realtor? That's a potential for an additional $9,000 in their pocket.

I've heard "expect the buyer to bid lower because you save $x in services" too many times. It makes no sense. Many FSBOs put in as much work as realtors and more to sell their home, it's insulting to people who work hard to market their own home to suggest that there is no value in the work they do, the services they provided for themselves.

I finished the basement in my last home myself. I did a great job. Buyers didn't expect to pay less for the home because I didn't pay a carpenter $15,000 for the work. They paid the same price they would for any other home with a finished basement.

The only way a buyer with an agent would decide to reduce offer based on no sellers commission is if the agent suggests it. I consider this anti-FSBO hazing and realtor agenda, not a fair or reasonable way to set bidding (over an initial attempt to justify a lowball offer.) Any realtor who encourages a buyer to hardline on this issue - to set bid expectations on "whether the seller" had a realtor and not the value of the home - is promoting their own agenda, not advising a buyer in their best interest.
0 votes Thank Flag Link Sat Jan 5, 2008
The mere fact that you are FSBO automatically reduces your selling price. FSBO shoppers know you are not paying a commission. FSBO shoppers automatically reduce their offer by the typical commission rate. You really don't gain anything at all by going it alone.

The overall price level of housing reflects the reality that most homes in the market sell through Realtors. If you choose not to use one that's fine, but you are implicitly lowering your price, not to mention vastly reducing your pool of potential buyers.

If you disagree, think about this:

You are a buyer. 2 houses sidy by side identical in all respects. One sold last month for $300,000 through a Realtor with a 5% commission. The other is on the market for a $310,000 asking price, but is FSBO. As a buyer, what's your offer? If I'm the buyer, I want to pay $285,000. I'm not paying $300,000 because it included $15,000 in services. I'm going to make a $265,000 offer with the ultimate goal of paying $285,000 which is a fair price without the marketing services. Why should I pay $15,000 for nothing?
Web Reference: http://www.marcpaolella.com
0 votes Thank Flag Link Sat Jan 5, 2008
Hi Owner,

I absolutely respect your right to go it alone. I share the following for your consideration when making your decisions.

The following list is in order of size of potential buyer pool.

FSBO - No MLS
FSBO - MLS - Flat Fee
Listed w/ Realtor - Limited Services
Listed w/ Realtor - Full Service - Realtor Marketing/Representation Skills - Fair
Listed w/ Realtor - Full Service - Realtor Marketing/Representation Skills - Average
Listed w/ Realtor - Full Service - Realtor Marketing/Representation Skills - Above Average
Listed w/ Realtor - Full Service - Realtor Marketing/Representation Skills - Excellent

The greater your potential pool of buyers who have an opportunity to purchase your home, the more likely you are in selling your home at a higher price and better terms.

If you believe you can accomplish the same net results without a Realtor, then you are probably better off selling on your own. I do believe that in almost all cases, sellers fare better with representation. It is important that you believe that representation and marketing yields you benefit.

Good Luck.
0 votes Thank Flag Link Sat Jan 5, 2008
Deborah Madey, Real Estate Pro in Red Bank, NJ
MVP'08
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Hope 2008 is a good year for you JR. Elected to offer 2.5 % to any agent that brings us a buyer we have yet to contact. That's pretty much the status quo for this market. All the best, Owner.
0 votes Thank Flag Link Wed Jan 2, 2008
This Owner is probably long gone, but the question has popped up because someone answered it. I think owner should go it on their own! Of course, I mean totally on their own. That includes figuring out how r.e. works on their own too, with no free help at their fingertips.
0 votes Thank Flag Link Wed Jan 2, 2008
The only reason I see to work with a real estate agent is access to target buyers that (foolishly) signed an agreement to work with one. As a buyer- best to go solo so if there is a listing agent can get his full 5% - if there isnt the owner would rather work with someone without one so as to not have to pay commish.
0 votes Thank Flag Link Sun Nov 18, 2007
Owner
You as the owner can negotiate any type of fee scale you want.
A few things to bear in mind:
1. I don't know your market, so this is a general comment - most markets are buyer's markets, meaning there is more inventory than buyers. Many markets are declining (meaning due to the recent changes in lending requirements there are fewer qualified buyers now than prior to September. So less demand, increasing inventory, what happens to price?
2. According to the California Association of Realtors Buyer survey for 2007, 90% of the time the buyer sees the home they purchase with an agent. Why is that statistic important to you? By selling the home by owner, without professional representation, you effectively exclude 90% of the buyers.
3. Assuming your market is as stated, that means that if if LISTED homes are having a hard time selling, a home sold by owner is less likely to sell. So if the market is declining, it is likely your home will be worth less in the future. So "testing the waters" as an unrepresented seller may cost you more than you think.
4. Over 85% of owners selling without professional represenation eventually list with an agent.
5. According to the National Association of Realtors 2006 Seller Survey, " the typical FSBO home sold for $187,200 compared to $247,000 for agent-assisted home sales"

So, to sell your home on your own is up to you. Less than 10% of homes sold in the US are sold "directly". However, if that means making less NET profit, why on earth would you sell on your own? I suggest interviewing some Realtors, look at your NET, after expenses of selling, and then you make the call.
0 votes Thank Flag Link Sun Nov 18, 2007
Keith Sorem, Real Estate Pro in Glendale, CA
MVP'08
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