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Ask the Broker: Has going FSBO lost its fizz?

This came in over the transom. I’m not answering the whole question. To say the truth, I feel as if I’m being shopped with every conceivable infraction in the HUD handbook. So, you, too, please do also exercise restraint on the subject of commissions. For all of me, the FSBO question is more interesting, anyway.

From my interlocutor:

We are selling our home in a very upscale part of Atlanta. We want to do it “by owner” using one of several services advertised on line. Who pays the buyer’s agent and what percentage? We’ve been told its negotiable but too little and no one will show it. The home will sell in the $400,000 range if that makes a difference.

I start here: I want to know more about “one of several services advertised on line.”

I don’t know the real estate market in Atlanta, but this strikes me as being a very poor time to sell without the MLS. If the “services advertised” are limited service MLS listings — which is as far as anyone should go, in my opinion, down the “by owner” road — then those listing agents can address the commission questions.

The seller will definitely be paying the buyer’s agent, of course: If you’re not paying for the product, you are the product — an idea that never seems to occur to home buyers.

But I think it would be a huge marketing disadvantage to forego the MLS. In the age of the internet, an MLS listing is more valuable than ever before. (I think this has come up lately in the Dipshit Broker News, but I stopped following that crap years ago.)

But even more than that, I think the right full-service listing agent can more than repay his marginal cost. The house is unlikely to attract a lot of attention if it is not listed in the MLS system, but, even then, if it is not marketed to its fullest advantage, it will sell more slowly and for less money than it could have.

My take is that most listing agents aren’t worth a damn, but the right agent will bring home more money than he costs with a lot less aggravation, a double profit. For Sale By Owner as a business model has made less and less sense to me in this seemingly endless downturn. By now, paying a buyer’s agent but not a marketing agent just seems like a colossal error to me.

That argument is probably an easy sell in this crowd, but I’m interested in hearing about if I’ve gone wrong.

Related posts:
  • Has real estate reality taken all the fizz out of FSBOs?
  • How to sell every house in the neighborhood — except your own…
  • The FSBO and BUBBA variety hour: How to make the buyer’s agents dance . . .

  • 16 comments

    16 Comments so far

    1. Jeff Brown February 21st, 2012 6:22 pm

      Seems several markets, Phoenix among them, are in transition. Don’t know about Atlanta. But since you guys are now dealing with multiple offers, the FSBO seller might actually come out OK.

      I just told a Redondo Beach couple (clients) that selling the fourplex in which they live might be possible going the FSBO route. They know what it’s worth from experience. I advised them to go it alone for no more than 2-3 weeks or so. We’ll see.

      The ‘average’ seller? Probably not — we’re pretty much on the same page there.

    2. Jim Klein February 21st, 2012 7:48 pm

      I thought it was axiomatic that the buyer is paying for everything.

      Still, FSBO seems crazy in this market. I’m sure there are exceptions like Jeff notes, but I doubt many sellers could possibly have a grasp on a lot of the details, from pricing to marketing to closing. Lawyers ain’t cheap either. OTOH, my experience lately (away from here!) tells me a lot of agents don’t have such a great grasp themselves, not to mention being focused on their own motivations instead of the client’s.

      If I were selling this moment, and given the realistic options, I think I’d go FSBO. But I also think I’m one of those exceptions.

    3. Greg Swann February 21st, 2012 8:54 pm

      > Seems several markets, Phoenix among them, are in transition.

      Check. But $400,000 still sells quite a bit slower than $100,000.

      > But since you guys are now dealing with multiple offers, the FSBO seller might actually come out OK.

      Hmm… My job on the buyers’ side is getting listing agents to bite on offers I would advise passing on, were I representing the sellers and not the buyers. This is the second place where a great listing agent can make a world of difference, knowing which offers are most likely to make it to the closing table.

      Experienced sellers can usually hold their own hands. But even that implies a role for a somewhat-less-limited limited-service listing.

    4. Greg Swann February 22nd, 2012 6:41 am

      > I thought it was axiomatic that the buyer is paying for everything.

      That’s true, but the buyers themselves do not believe it. Meanwhile, the seller’s imagined pile of money is reduced by the amount of the sales commissions, and most sellers can’t ever forget that. Certainly, in the instant matter, the seller’s proceeds will be reduced by the amount of the buyer’s agent’s commission.

      > I doubt many sellers could possibly have a grasp on a lot of the details, from pricing to marketing to closing.

      As I mentioned to Jeff, this is my second argument in favor of a good lister — taking account that most listing agents couldn’t market free refills on beer. Everything in Phoenix right now is ninth-inning baseball, and the best value I bring to the table is knowing what to do, when and how. Very few sellers are going to know what I know. I make my living as a buyer’s agent, banging my head against a dozen other offers at a time, by figuring out what the sellers want and giving them that instead of money.

      I can offer a good example of an exception to that rule, though: Another long-time friend of BloodhoundBlog, Richard Riccelli is selling an historic condominium in Charleston by-owner. He’s sold FSBO before, and he’s good at it. But I can think of only one other by-owner seller that I have seen, over the years, who was not making multiple obvious profit-killing mistakes.

      > a lot of agents don’t have such a great grasp themselves

      Bingo.

      > not to mention being focused on their own motivations instead of the client’s

      I’ll go you one worse. I wrote this in email last night to Teri: In the age of HGTV, sellers can get a lot of stuff right, but still most of them don’t. The first time I negotiated a price for a buyer that I thought was inappropriately low, I began to wonder if some of what sellers are buying from listing agents is absolution for not doing the things they should be doing.

      I think the right listing agent will be able to market a high-end home better — price, preparation, presentation — and a real pro will be hands-down better than a normal homeowner at playing chess with buyers and their agents.

      I’m with Teri, though. You should get your real estate license. I don’t doubt you could do better selling by-owner than your local listing agents could do for you. But that means you could kick their asses selling other people’s homes.

    5. Jim Klein February 22nd, 2012 7:55 am

      “I began to wonder if some of what sellers are buying from listing agents is absolution for not doing the things they should be doing.”

      Ha, that’s a mouthful. There’s a strong case that this is what’s going on most of the time for most of the people in most of their actions. Oh yeah, you made that case…

      http://splendorquest.com/?p=257

      I kept thinking of that essay reading Jeff’s latest motivational rant…and all the people who think it’s just words and not for them. I picture their eyes glazing over and taking it as inspirational bunk. Yet somehow Russell and the other commenters get what it means, and that it can apply for anyone. Not a one of them think they’re any better than anyone else. They just do it.

      Meanwhile everyone else is getting their absolution for not doing it, by instead doing precisely what you say…enslaving themselves. Sick stuff in the wide view, while everyone wonders why the world’s most productive society is going down the tubes.

    6. Jeff Brown February 22nd, 2012 9:20 am

      ” . . . most listing agents couldn’t market free refills on beer.” Makes my day.

      “Yet somehow Russell and the other commenters get what it means, and that it can apply for anyone. Not a one of them think they’re any better than anyone else. They just do it.”

      The essence of that quote is the subject of my next post. I’ve met so many truly special men and women in real estate. Some are salt of the earth types, some jerks, most of ‘em in the middle, tending towards ‘regular folk’. The next prolific producer I meet who’s a rock star will be the first. I wish all of you could’ve known Clyde Neal, the ‘poster agent’ for superstar under the radar.

    7. Johnny Brooks February 22nd, 2012 2:38 pm

      It’s been proven over time that using the services of a professional will garner a higher price than a FSBO. I might suggest a seller try this for a few weeks, they usually get frustrated and list with a professional.

    8. Scott Grace February 23rd, 2012 9:30 am

      Our market is great here in Canada and a listing agent is still a must in order to get top dollar. The most recent stats I saw was that REALTOR assisted homes SOLD on average for 30% more than FSBO homes in 2011. That’s counter productive to “saving” commissions isn’t it? :S

    9. Tina Dehart February 23rd, 2012 12:00 pm

      Haha, you’re right about this post being an easy sell with this crowd.
      It amazes me how those who go the FSBO route are oblivious to the importance of internet marketing and the MLS. With roughly 85% of all home sales beginning online, using the MLS is a must. Home sellers would be wise to heed your advice and realize they can make more money and sell their home faster by using the right agent. For all those reading this, whatever your real estate plans may be, hear this: in a market where so much is driven by the click of the mouse, you can’t afford to have an FSBO sign in your front yard. Don’t forgo the MLS!

    10. Michael Cook February 24th, 2012 2:20 pm

      I think we are speaking about the subject to loosely. Lets put some numbers behind it:

      $400,000 base valuation

      3% commission savings

      $12,000

      Now, lets consider the FSBO costs. Assume the “FSBO service” will charge $500 – $1000

      Then there is the cost of the time and effort you have to put in to get the transaction closed. Lets assume 20 good hours, more of less with showing and things you would not normally show up to. Lets value our time at $100 / hr – $2,000

      You should pay a lawyer to review the contracts. Lets add $1,000.

      Add $1,000 for marketing in the local papers, etc.

      That totals your actual costs to $5,000. A buyer could potentially net a $7,000 save based on rough math.

      The question you then have to ask yourself is can a realtor increase my price from $400k to $407k or better (~2%).

      I personally think if you interview 3 – 5 brokers, you should be able find one that can do that and save you a ton of unneccesary headache. And worst of all, sellers remorse.

      I dont like the current system, but your home needs to be worth $800k plus to make doing it yourself worth it. And even then, the downside is too great. Since the realtors have a stranglehold on the MLS for now, it pays to go their way.

    11. Louis Cammarosano February 25th, 2012 8:19 am

      Greg
      HomeGain did a survey of over 1000 FSBO sellers and sellers using Realtors-we asked them to rate their experiences.

      Here are the findings:

      http://blog.homegain.com/homegain/homegain-survey-finds-home-sellers-fare-50-better-in-getting-their-homes-sold-using-a-realtor%C2%AE-than-selling-on-their-own/

    12. Minerva February 25th, 2012 10:44 pm

      I think MLS listing is really important if you want to sell your own home. The link above by Louis about HomeGain’s survey is really useful if we must check.

    13. Johnny Brooks February 27th, 2012 1:31 pm

      The simple question I ask FSBO, would you represent yourself in a lawsuit or hire an attorney. There’s a reason our profession has been around as long as real estate has been bought and sold, we keep clients out of court. It’s also a fact that a realtor can garner more value for a home than a FSBO.

    14. John Rampton February 28th, 2012 9:40 pm

      I understand the FSBO market. We do a lot with FSBO people getting them to all the possible places possible but you’ll never get as much exposure as with a real estate agent. Hence 50% of the people that use our service end up finding an agent

    15. Jillian Cariola March 1st, 2012 1:55 am

      Using a real estate agent is definitely the way to go if you want to sell fast, while still getting a great deal. Many sellers who go FSBO don’t know the first thing about reaching the market in this day and age. It’s no longer enough to just post a want ad; I hardly ever hear of any buyer who looks at want ads anymore. It might take them a while to realize that they need help from an agent, but they better catch on soon.

    16. Michael Cook March 2nd, 2012 1:01 pm

      I think the HomeGain stuff is very poorly done. They dont ask the right questions and they dont present the data in a intellectully honest way.

      I would be interested in better understanding why people feel like they need to go FSBO in the first place. Is it because they feel like realtors add little value?

      Not sure how it is other places, but here in New York City, realtors simply hold the keys to the MLS and maybe show you a few houses. Closings are done by lawyers. Ironically, the lawyer, who does the real work makes a set fee of $2k or so, while the realtor, who literally does a little more than punch up a few key strokes on the computer gets 3%.

      I personally think realtors would do better understanding why people are going FSBO and more importantly if that trend is growing, than simply patting themselves on the back. Their MLS monopoly is quickly shrinking and 95% of them add very little value.