FSBO vs. paying a realtor $42,000 . . . Hmmm.

I do wish you luck in this market. I know that FSBO can be attractive because it could save you tons of money. Ultimately, in a down market, being a FSBO can cost you 10-15% before you hire an agent. I know. I've seen it happen. Take a home that could have sold for $350k. A year later in a down market that home is now worth $299k. The same can happen to sellers who go with the highest CMA. A year later they are still on the market and they are losing money.

I don't know your house or your market. Maybe the $700k implied by the $42k commission is a good price in a location highly sought out by buyers (like NYC). Maybe it's in a high traffic area where you are sure to find potential buyers. Maybe it's on a lake or oceanfront, or brand new. Or maybe it's not. Who will see your home? How are they going to pick your home from the rest?

The days of listing your home on Craigslist and maybe having an open house are over.

The selling agent doesn't get $42,000. Depending on several factors, they would wind up getting much closer to $10,500 (per side of the transaction). Commissions are split between buyer and seller agents, and between the agents and the office. It costs money to advertise and to run an office.

You are also buying the benefit of the network. Agents work with other agents for various reasons. Agents have a code of conduct that requires them to be honest. Anything said that was misleading will cost agents dearly (steep fines, loss of revenue, loss of license, and often court cases and judgments). For those reasons FSBO's have a very difficult time attracting agents, even when they offer 3% or more. Some agents ignore FSBOs altogether.

According to the National Association of Realtors the average seller who uses a Real Estate professional makes 16 percent more than do sellers who go on their own and do it. Also 87 percent of Sellers list with an agent within the first 60 days. You should save your money and go with a Realtor.

I'll make it pretty short....most people looking at FSBO's will demand to get the commission off of the price (they want the savings), so either way chances are you will end up with the same amount in your pocket. The benefit would be that you could offer your home at a discounted price, and the drawback being less exposure.

apparently, real estate agents think you need to use a real estate agent.  Looks like a no brainer. 

You can try list your house for fixed fee in MLS and offer %% to buyer's agent. That way you can discount your house for some % that you would pay listing agent and the price should attract the buyers. To be save in legal issues hire re lawyer for $500.

latrop

My Realtor got tired of me catching him in lies and basically delisted me while I was  out of town on vacation. He wouldn't do open houses, or get my house on a broker's tour. He also informed me that it was against the law to do my own open house. He would do nothing but put it on the MLS and wait. After asking him about a showcase listing, he informed me that Realtor. com showcases homes on a rotation basis and I would just have to be on their site at the right time to see mine done that way. He also stated that no one uses Realtor.com anyway. He was also despised by numerous other agents. I went FSBO. Went under contract in about 3 months including the holiday period. Scheduled to close Friday. If you decide on going FSBO see the thread attached to the link below.

FSBO info

"According to the National Association of Realtors the average seller who uses a Real Estate professional makes 16 percent more than do sellers who go on their own and do it."

It's been a long time since I heard someone quote stats taken from the NAR on this website.....I think this book by the NAR ex president (I can't remember exactly what position he held) pretty much destroyed it's credible for time imortal..

http://www.amazon.com/Real-Estate-Boom-Will-Bust/dp/0385514352

NAR Article (Remember 2006 was a seller's market)

From NAR's 2006 Profile of Home Buyers and Sellers

Eighteen percent of FSBO sellers indicated that preparing the home for sale was the most difficult task when selling without the assistance of an agent, followed closely by understanding and performing paperwork (16 percent) and selling within their desired time frame (15 percent).

As for profit — after all is said and done, FSBOs don’t always come out with fatter wallets. Again, the numbers tell the truth.

Homes sold with the help of a real estate professional in 2006 sold on average for 32 percent more than FSBO sales. The median FSBO selling price in 2006 was $187,200, compared with $247,000 for agent-assisted transactions.
 READ THE WHOLE ARTICLE:  http://www.realtor.org/research.nsf/pages/fsbofacts

By the way the 2005 Stats indicate Realtor assisted sales sold at 16% higher.  It would be interesting to see 2007 data.  Has anyone seen any 2007 stats for FSBO sales?

Here is a quote from March 07 Realtor Publication titled Unrepresented Sellers by Robert Freedman:

" To show sellers that they’re being penny-wise but dollar-foolish by focusing on the commission, Maloof says he relies on 2005 NAR data showing that homes sold by practitioners fetch 16 percent more than those sold by FSBOs. The 2006 data shows an even greater difference for those who start out with an agent "

“FSBOs often end up showing a home to such a small universe of buyers that they don’t realize how much more they could get if they exposed the property to all the interested buyers out there,” he says.

In putting a house up for sale, it seems sort of like it is a "Catch-22." We are told in this market to list it at the lowest price we can afford to sell , but when using an agent we have to add in the commission charge. If we are FSBO, we don't have to add in that 6%. Does price sell, or does an agent? I know the agents will state that probably you will still end up paying a buyer's agent, but there is always the chance for an unrepresented buyer to come along. The chance that you will sell to an unrepresented buyer is actually pretty good, given how many agents avoid FSBO's like the plague. However, if you choose to list without factoring in the commission charge as a FSBO, what happens if you have no luck. If then you decide on going with an agent, it will be very hard to adjust your price upward to accommodate the commission charge.

If I would have followed where my agent was leading me during the time I was listed with him, my net would be over 25k less after factoring in his commission, along with his recommended reduction.  I might add that this agent was the type of agent that gives all others a bad name. I am glad I found Zillow and discovered that there are many ethical and professional agents out there. However if I were to sell again, I still would give FSBO a shot first, and if that failed, do my research and choose an agent.

I think you met the agent from hell Rock :o

And I don't agree with NAR's studies that say houses sold with agents sell for that much more. I do believe on average agents net the sellers a bit more money than going FSBO. In general I don't think FSBO's that are going that route for monetary reasons will come out better than selling with an agent. Specially in this market where buyers demand and get what they want. They will all ask for the commission money to be taken off of their price. 

The median price quoted above is much to distorted in my opinion. It is impossible to compare medians on FSBO vs. homes being sold by agent. The majority of FSBO listings is low or mid end, with few in the higher end, so of course that FSBO median is going to be lower.

"The majority of FSBO listings is low or mid end, with few in the higher end, so of course that FSBO median is going to be lower."

Justyn

Great answer. Great post.

You're probably going to pay a co-broke either way, not always, but most the time. If you weren't represented and were buying a fsbo that was priced right at the comps, wouldn't you offer 6% less right off the top?

Look for a flat fee MLS company that's LOCAL and will give you 25 pics on Realtor.com, and offer a 3% cobroke. Avoid the "Hope-U-Sells," their business plan is dated and cosists mostly of advertising open houses. If you're comfortable doing all the paperwork and handling the transaction (as you'd have to be as a fsbo), then go that route.

If you want a "Full Service, Full Fee" agent, then don't worry about 5% or 6%, find the absolute best agents in the area, and ask a lot of questions about recent solds and their avg D.O.M. If the top agent charges 6% instead of 5%, and they're truly one of the best agent in the area, they'll make up for the 1% with better negotiating skills and less market time.

"You're probably going to pay a co-broke either way, not always, but most the time. If you weren't represented and were buying a fsbo that was priced right at the comps, wouldn't you offer 6% less right off the top?"

Chad

Obviously, the buyer can offer anything he wants. it doesn't mean the seller has to agree. 

Rockinblu - Absolutely, but the idea isn't to get a bunch of offers you're not going to accept. You need to be logical about the type of offer you're going to receive. If you're buying a home without an agent you should be pretty confident that you know the market and you know how to handle the transaction. If the potential client is comfortable enough to do all this on his/her own, they're probably educated enough to know that the seller's saving money on the commission and in a declining market it's the buyers that should (in their mind) reap the reward of that, not the seller. A lot of buyers in this market think they're almost doing the seller a favor by putting in an offer.

I never discourage people from going FSBO.  It's a hassle to sell your own home and I figure that people who do that earn their own commission.  I work also as a real estate consultant  as well as a listing agent and some people hire me to help them by the hour.

Whether they make more or less is hard to say.  I think sometimes they do come out ahead, but often they have to price it below the market to get it sold.  A savvy buyer has looked at quite a few homes and knows when they are getting a deal.

I never discourage people from going FSBO.  It's a hassle to sell your own home and I figure that people who do that earn their own commission.  I work also as a real estate consultant  as well as a listing agent and some people hire me to help them by the hour.

Whether they make more or less is hard to say.  I think sometimes they do come out ahead, but often they have to price it below the market to get it sold.  A savvy buyer has looked at quite a few homes and knows when they are getting a deal.

Chad

To me offers are in the same boat, only a step beyond showings. The more you get, the more chance you have of getting the right one. Price it realistically with very little wiggle room, and run with it. If you get a bunch of low ballers, so be it. There is still that somebody that will be serious.

These are some good replies - sharp group here!



Rockinblu: When I look at the economic incentives facing realtors, I wonder if there's not some flaw in the system that pushes them towards behaviors like your realtor exhibited. A realtor will make more money if he gets as many listings as he can, and turns them over as quickly as possible. This would mean that a realtor would feel pressed to spend most of the time searching for new listings (not spending time with existing clients) and would be more profitable if he can get his sellers to offer their homes at the low end to facilitate rapid turnover. Am I wrong in this? You mentioned that you're set to close Friday. Did you complete the whole process on your own, or did you end up paying some % in commission?



Everyone: I see postings that a person makes from 15% to 32% more if they list with a realtor . . . but those studies were done by realtors, not by disinterested parties. Like Callista posted, there's some question as to the validity. Does anyone know of a study done by someone that could be described as disinterested - meaning they have nothing to gain if the results fall one way or the other?



JustynKearney: You bring up an excellent point that I hadn't considered. Buyers wanting the 6% off since I'm not paying it had not occurred to me. Incidentally, it sounds from your post like fewer homes in the 700k range go the FSBO route - is that so? Is it much harder to sell a home in that price range on my own?



Marty: you sound about as impartial as they come. I realize you're an agent, but since you wouldn't be my agent anyway, I feel you can give a fair judgment. Which way do you think would yield more for someone in my situation?



Thanks again for all the replies.

latrop

Your conclusion on my agent is dead on, but in my opinion he had character flaws as well.

I got the services of a RE attorney ($500) to draw up the contract after the buyer and I had negotiated the sale/puchase. Contacted a title company and set up a closing date.

Forgot to state, that there was no agent involvement whatsoever in the sale.

There was a belated secondary offer through an agent that I rejected, because I had a handshake agreement with my buyer before the actual contract signing.

Well generally the higer the price, the fewer buyers. Doesn't matter if its listed by an agent or FSBO, there just simply is fewer buyers the higer the price.

So generally, yes it is harder to sell a high end listing than a low end. Furthermore from my experience there are fewer high end FSBO's simply because they generally have more money to work with and better finances ( ok, not all of course and I don't mean to offend anyone), so they choose to list with an agent. I think the same goes for buyers , the higher priced homes they are looking for, the more likely they are to use an agent.

If you go FSBO, you need to make sure you market your home to the agents in your area and offer them a co broke. And even then you will have some that will not show your home because they don't work with FSBO's. Trying to sell your home without offering a co broke to agents is going to be tricky in this market.

And I agree with you, I don't believe the studies mentioned above are accurate, and I don't know of another study done on the topic sorry

"According to the National Association of Realtors the average seller who uses a Real Estate professional makes 16 percent more than do sellers who go on their own and do it."

1.  "According to the National Association of Realtors"  stop right there, you know what follows is b.s.

2.  Why would they possibly want to make FSBO into a stigma?  Hmmmmmm....

3.  Realtors charge WAY too much. 

I have used both.  For me its a no brainer.  I have made much more $$ going FSBO.  I have a huge advantage here in that we have a highly visable local FSBO company who aggressively markets properties.  I think FSBO's are the wave of the future, and hopefully more local FSBO companies will pop up and help home sellers, to sell their homes.  I pay a fee upfront, less than 1% and I am done paying.  I have found working with  buyers alone is a much more pleasant experience, than working with agents.  With buyers, its cut and dry, if they like the property, they will make an offer, they won't come at you with closing costs, new fixtures etc. 

Klarek

Selling FSBO is not a stigma. If a seller feels confident enough to sell FSBO then buy all means they should try it. 

But it is interesting that just about everyone who does sell FSBO is calling all there Realtor Friends for free advise and to help them with the process.   THERE MUST BE SOME VALUE IN OUR KNOWLEDGE OR THEY WOULD NOT BE SEEKING IT. If FSBOs are willing to let hordes of strangers, who may not be qualified to purchase, into there homes then let them.  Some will sell and it may be worth the effort to the seller. Others will eventually list their homes.  I am not threatened by FSBO's or Flat fee MLS Brokers.  There will always be the Klareks who feel confident that they can do all things as well as the professionals.

Going FSBO is like going to court without an attorney. Whatever happens in the end can't be blamed on anyone but the Seller.

Klarek

Selling FSBO is not a stigma. If a seller feels confident enough to sell FSBO then buy all means they should try it. 

But it is interesting that just about everyone who does sell FSBO is calling all there Realtor Friends for free advise and to help them with the process.   THERE MUST BE SOME VALUE IN OUR KNOWLEDGE OR THEY WOULD NOT BE SEEKING IT. If FSBOs are willing to let hordes of strangers, who may not be qualified to purchase, into there homes then let them.  Some will sell and it may be worth the effort to the seller. Others will eventually list their homes.  I am not threatened by FSBO's or Flat fee MLS Brokers.  There will always be the Klareks who feel confident that they can do all things as well as the professionals.

Going FSBO is like going to court without an attorney. Whatever happens in the end can't be blamed on anyone but the Seller.

"I am not threatened by FSBO's or Flat fee MLS Brokers.  There will always be the Klareks who feel confident that they can do all things as well as the professionals.

Going FSBO is like going to court without an attorney. Whatever happens in the end can't be blamed on anyone but the Seller."

Firstly, I never said I was confident that I could do FBSO.  Without having done it, that's as arrogant a statement to be made as you comparing an agent's job to an attorney's. 

Secondly, it's an overpaid service.  We pay a lot for lawyers because they spent the time and money going to school, learning the law, and passing the bar.  We pay a lot for realtors because they are banded together under an organization that essentially creates an embargo on the services.

"Secondly, it's an overpaid service. We pay a lot for lawyers because they spent the time and money going to school, learning the law, and passing the bar. We pay a lot for realtors because they are banded together under an organization that essentially creates an embargo on the services."

Klarek is on a roll today.  Get em tiger.  8)