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By-owner home seller is no match for a skilled listing agent

This is me in Friday’s Arizona Republic (permanent link):

 
By-owner home seller is no match for a skilled listing agent

We’re about to list a home for sale in a fairly pricey neighborhood, so we are very aware of our competition.

We knew a similar home was ready to go on the market, but we were convinced it would be marketed as “for sale by owner,” so we didn’t feel threatened.

Why not? Because a by-owner seller is no match for a skilled listing agent.

I’m willing to concede that there are some unskilled listing agents, but that doesn’t matter to us. We compete against professionals, not amateurs.

In fact, the seller instead went with a limited-service listing, which is slightly — but only slightly — more likely to succeed.

By now, go-it-alone sellers are thin on the ground. You can get a true MLS listing at a range of discount prices, from $3,000 down to $99.

So why is a limited-service listing unlikely to succeed? In this market, a home must be marketed perfectly from Day 1 or it will sell slowly and at a deep discount, if at all.

Except for the MLS listing itself, the home will be offered by owner in every respect: priced wrong, prepared wrong and inaccessible to buyers and agents.

This is not a necessary consequence, but it is very common.

In the case of our newly listed competition, the home is offered at $200,000 over its market value. It will not be a threat to our listing.

But it wouldn’t be a threat even if priced right. A professional home marketer will bring too many weapons into battle for an amateur, no matter how dedicated, to compete.

Even worse, a limited-service listing shouts out a warning to buyers’ agents to stay away.

Why? Because it is being marketed by an amateur. The seller will have no one to turn to for advice, exposing the buyer’s agent to double the legal liability in the transaction.

There’s nothing wrong with negotiating the best price you can get for a full-service listing. But in our opinion, limited-service listings are a false economy in this market.

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  • 10 comments

    10 Comments so far

    1. Chris July 29th, 2007 3:36 pm

      Recently I have been showing homes a bit out of my normal area, and as a result I have gotten my first taste of dealing with discount and fly by night brokers. My usual area is mostly Re/Max, Prudential, Coldwell Banker, and Century 21 with a handful of Sotheby’s listings thrown in. There is a small but dedicated fringe as well. Anyway the city that my buyers are interested in is further north and out of my usual area, and it’s dominated by a company that I will not name here. I honestly do not know how they get so many listings up there, but I can only guess some people working for them must be pretty good. Or that it’s such a small market that the big players have ignored it. After showing a bunch of there listings I this is what I have run into:

      Most of the agents are part time, great; good luck trying to show a house. Most don’t return calls, and most of the time the numbers they give you are there home numbers so the kids answer, oh how professional! Part time agents, part time results!! So if you want actualy get your buyers in one of their listings call at least 24 hours in advance if not 48. If the agent is on vacation you are SOL.

      Secondly they are supposedly not a discount brokerage firm, but they act like they are. Most of there listings seem to be at 4% or less. I guess no one bothers to fight for their commision…

      Lastly most of there stuff is priced like its a FSBO, way more then its worth. I beleive they will just take a listing at any price…

      So as a result I really don’t want to show any of there stuff. How does that help there clients?

      I really hate dealing with amateurs!

    2. Scott August 2nd, 2007 7:11 pm

      “There’s nothing wrong with negotiating the best price you can get for a full-service listing. But in our opinion, limited-service listings are a false economy in this market.”

      I must say I agree whole heartedly with this statement, with one caveat: it’s a false economy in *any* market.

      A quick confession-when we started out, our little company created a limited service, list it in MLS only plan to attract the sellers that thought our 3.5% plan was ‘too expensive’. That was a mistake.

      We signed 5 sellers on the MLS only plan and even though three of them were priced right for the market, not one of them sold. Why? Well, from not answering their phones to never returning paperwork, to flat refusing to negotiate at all with agents who did go through the hoops to show the homes, none of the sellers were actually prepared to do what it takes to get a home sold in this market-or any market for that matter.

      As the agents taking the calls from angry Realtors&174; about the MLS only listings, it was an exercise in frustration that helped no one.

      It was an enlightening experience for us. People are paying us for our expertise, not the MLS. The MLS is a tool that will help advertise the home, but it’s us…the Realtors&174; behind the advertisement that actually sell the home. We can charge what ever we want for our expertise, but charging for just the tool without the expertise to use it correctly helps no one.

      We deleted the program details from our website, dumped all advertising that mentioned the plan, and patiently waited for all of the limited service listings to quietly expire – which they all did.

      I’d rather deal with a brand new agent or a 30 year veteran that sells one home a year than another limited service seller. In fact, I think I’d rather chew my own hand off than deal with another limited service listing. They were *that* fun.

    3. Hohochi August 25th, 2007 7:11 pm

      Not so fast.

      “We knew a similar home was ready to go on the market, but we were convinced it would be marketed as “for sale by owner,” so we didn’t feel threatened.”
      “Why not? Because a by-owner seller is no match for a skilled listing agent.”

      You should be threatened, and very afraid.

      I sold my house FSBO. There were 6 properties on the block for sale including mine. I was the only FSBO. The others are still rotting on the MLS with the big name, professional listing agents that are worried stiff. The other 5 houses have all dropped in price close to 4% below what I sold for and my house was not the best one on the block.

      What I found in listing agents was a variety of slick presentation, but no substance.

      The MLS/yard sign and hefty commission is about all an agent really has over a motivated seller.

      Now days, sellers are not the clumsy stupid amateur Greg would have you believe. They are out front of the market willing to price the home correctly. They are armed with internet based research which puts the ability to price the home correctly at their fingertips. They have access to the MLS for a fraction of the cost. Signage and flyers are professionally accessible. A variety of WebPages are inexpensive to place ads in or free.

      The same advantages a savvy FSBO seller has is duplicated by savvy buyers who know how to find FSBO properties.

      The bottom line is that while homes are deflating in price, in most cases only an FSBO seller can afford to lower his price enough by avoiding tens of thousands of dollars paid out in unnecessary commissions to agents to affect a sale. The advantages simply outweigh the glib, we are not threatened by FSBOs tagline.

      “ The seller will have no one to turn to for advice, exposing the buyer’s agent to double the legal liability in the transaction.”

      My discount MLS listing had options to purchase the advice you are speaking about for an extra 200.00 if I had the need.

      In the end, I sold the house without any pesky listing agent, to an intelligent buyer who also had no need to waste his time with a buyer’s agent.

      If you are selling your property and have had it listed with the proverbial PRO listing agent, and its been on the market for over 6 months, you owe it to yourself to get educated, get out in front of the marked and get is sold on your terms and fire the listing agent.

    4. J. Ferris August 25th, 2007 9:31 pm

      I don’t doubt Hohochi is telling the truth but the one thing you are choosing to omit is the fact that many, many home sellers are unwilling or unable to learn the real estate market, marketing and then handle marketing, negotiating, dealing with deal breakers etc. The only thing that puzzles me is why you paid for a discount MLS listing if you wound up finding an unrepresented buyer for the house. Real estate agents, the good ones anyway, are consultants who handle the entire transaction and marketing from start to finish. Using the logic you’ve presented you could also get rid of mechanics, contractors, car salespeople, software salespeople, account managers, stock brokers, retail stores and the list goes on yet they all continue to exist. I applaud your efforts on selling your home on your own but realize that you are a rare exception. 99% of homeowners do not know the first thing about how to sell their home and I don’t think they particularly care to know.

    5. hohochi August 27th, 2007 10:53 am

      “The one thing you are choosing to omit is the fact that many, many home sellers are unwilling or unable to learn the real estate market, marketing and then handle marketing, negotiating, dealing with deal breakers etc.”

      The glib article omitted that FSBO sellers are willing and quite able to learn real estate transaction. The notion that they are no competition is under estimating a growing segment of sellers. Real estate transactions are not something to be afraid of or necessarily fraught with pitfalls. I did have an option with my discount MLS broker to handle any transaction I got over my head on.

      The home was immaculate, completely remodeled, landscaped and painted. The sale was clean, the buyer was pre-qualified, the home was inspected, I followed correct protocol, the appraisal came in higher than what I was asking for, I had a good checklist of documents that needed to be filled out, I had a great title company that looked out for both parties.

      This current real estate market has taught us that sellers have to be realistic in pricing; unrealistic and elevated asking prices are not the sole domain of the FSBO but quite bluntly a consequence of the real estate industry.

      Now that prices are beyond the ability for normal people to purchase without toxic loans or 50 year mortgages, the best weapon a seller has is to go FSBO and lower the asking price by the commission an agent would have gotten.

      “The only thing that puzzles me is why you paid for a discount MLS listing if you wound up finding an unrepresented buyer for the house.”

      Wouldn’t it be stupid not to Market to the widest possible demographic and opening the sale up to buyers agents. Only the MLS does that. I offered 3% to a buyer’s agent. The same deal they would get if I had a listing agent. I would have been happy to go that route. You would be surprised how many people look for properties that have no agent to infect the sale and muddle up the process.

      The funny thing is that this house was on the market for less than 2 months, I held open houses every weekend, Saturday and Sunday. I had a steady flow of lookers but very few buyers agents bothered to bring prospective clients by. The ones that did come by had a defeatist attitude and seemed very weary. Seems like the market had taken its toll on them.

      “Real estate agents, the good ones anyway, are consultants who handle the entire transaction and marketing from start to finish.”

      That’s the same line listing agent after listing agent fed me. As I watched the other agent represented properties on the block deteriorate and languish on the market, I wasn’t fooled by those statements. What is more likely is that the listing agent has a slick presentation, gets you to commit, puts up a yard sign and a lock box, enters an MLS listing and then goes on vacation. Once they have you, it doesn’t matter how long it takes to sell, they will get their commission.

      “Using the logic you’ve presented you could also get rid of mechanics, contractors, car salespeople, software salespeople, account managers, stock brokers, retail stores and the list goes on yet they all continue to exist.”

      I do my own mechanical repairs, I have been the general contractor on many home remodeling projects, I have purchased cars without salespeople, I build my own computers and day trade and rarely buy anything retail.

      Sure those businesses still exist because as you say, people do not have the time or inclination to do things for themselves anymore.

      But as the market continues to flounder, people are waking up and are being forced to confront their situation. When they do, they get off their duff, get educated in real estate transactions, fire their listing agent and market the home out front of the market and affect a sale or put thousands of dollars in their pocket through reduced commission.

    6. Greg Swann August 27th, 2007 11:26 am

      Not to rain on your parade, but the house cited in the article listed for 135% of its market value. It will languish fro months while the seller contrives ever more elaborate conspiracy theories.

      I have written about how to succeed as a by-owner seller. But the reality is that most FSBOs make every amateur mistake in the book. I don’t lose a minute’s sleep over them.

    7. J. Ferris August 27th, 2007 3:15 pm

      I don’t disagree with what you write. You are a very hands-on DIYer which is great but as you’ve acknowledged the fact remains: Most sellers do not want to put the work into selling their home. See Scott’s experience as proof that even with guidance there seems to be a disconnect between wanting to sell and actually selling their home. I’m not feeding you lines at all and I agree with you — most real estate agents suck. A lot. I would guess that we could lose 94% of Realtors out there today and the industry would benefit tremendously. The issue remains that while you are a great jack of all trades 99% of America is not. If anything I would think that as Realtors we have to prove our value and if the value can’t be seen to add more services to it to the point where the difference in using an agent and doing it yourself is clear.

      Not that I’m trying to dog any of the older folks in the business but I have a feeling that the old school way of doing things is what miffed hohochi in the first place. This is a classic case of why I am at odds with my business partner over how to handle home buyers: I want to offer a full presentation and include a number of services to assist while buying a home (5 years in) and he is satisfied simply saying “We introduced the buyer to the builder and that’s good enough to earn the commission.” (30 years in). Different schools of thought!

    8. hohochi August 27th, 2007 4:50 pm

      What I am amazed at is the notion put forth that an FSBO is no competition and will make stupid mistakes.

      When in fact as you indicate, 94% of real estate agents could leave thereby improving the field. While agents pat themselves on the back for being so smart, FSBO’s are beginning to take hold using discount services that offer the same options at a fraction of the cost.

      As time goes by, prices will have to drop for homes to become affordable again or income will have to rise drastically. I do not see a big increase in salaries coming soon. Do you?

      The best weapon a seller has is to get off their lazy butt and confront what it will take to avoid paying out that hefty commission and getting their price out in front of the market. That means taking the time to get educated and then going FSBO.

      I would put my money on the educated sharp motivated individual seller over a listing agent any day. Buyers are beginning to put their money that way too.

    9. J. Ferris August 27th, 2007 5:29 pm

      Don’t mix the two, Greg and I do not share the same view on the subject.

    10. Ann Arbor Real Estate July 15th, 2008 5:10 am

      There will always be do it your selfers out there that insist they can do it better than anybody else. And when someone is stubborn (tenacious), determined, fairly talented in marketing, has a lot of common sense, they can get the job of selling a house done by themselves.

      However, I am sure that a GOOD professional real estate agent – one that sells properties all day everyday is going to be better at it and in the end net you more money with less missed opportunity.

      I have a million examples – here is just one: A FSBO seller determined to get their price, held out for nearly 10 months (may have been longer) while many similar homes around them sold. They finally got the deal done and moved from Ann Arbor MI where prices were falling, to Florida where prices were on a tear. they got less for the house in MI where prices were coming down and probably paid 10 to 30 percent more in Florida where prices were increasing daily (2005).

      I know there is no way to compare results since Realtor vs FSBO in an individual instance. But I am pretty sure in in this instance the seller came out worse off.

      Andy