Return to the Buying and Selling Homes Forum | Post a Follow-Up

 o
FSBO vs Agent

Posted by roseabbey (My Page) on
Tue, Jun 26, 12 at 18:38

We tried to sell our flip FSBO for over 60 days. We were on the MLS system, offered commission to agents with buyers, advertised in our local paper, we received no offers. We listed with an agent, the price remained the same. We received two offers in the second week, we accepted one of those offers, our house is sold. Explain that!


Follow-Up Postings:

 o
RE: FSBO vs Agent

Of course I have no idea why your particular house sold so quickly with an agent while you had no luck with your FSBO approach. But from my own experience, I can say that when I was house hunting I chose not to even look at any FSBO homes, because I had a preconceived notion that the owners would be more difficult to deal with. True or not, I wonder if other serious buyers have the same feelings. I can say that in our area, anyway, most FSBO homes end up sitting on the market and eventually being listed through an agent.


 o
RE: FSBO vs Agent

I wonder how long it will take for those preconceived notions to go away.

Just because it is an FSBO does not mean it is a problem seller.


 o
RE: FSBO vs Agent

No, but I also tended to avoid FSBOs for a couple of reasons when I was looking.

In many cases it was true that they were doing a FSBO because they wanted an unrealistic amount of money out of the sale. Also, it was kind of embarrassing to look at homes with the owners there proudly pointing out all the items that would have been the first things to get ripped out if I had bought. You can look an agent in the eye and say, "The fact that this furniture is included is not an advantage, " but you can't say that to the owner.

It may not always mean a problem seller, but around here it usually does mean an unrealistically high asking price with little inclination to negotiate.

Having said that, in the complex where my neighbor has been looking, a FSBO recently sold for quite a bit over market (although it took them a while), so you never know.


 o
RE: FSBO vs Agent

"Just because it is an FSBO does not mean it is a problem seller. "

Maybe not a "problem seller" but all to often overpriced based on what the owner spent on fix up.


 o
RE: FSBO vs Agent

"Just because it is an FSBO does not mean it is a problem seller."

Well- we know that.
But that does not mean that the perception does not exist within the general population.

From my point of view I do not want to deal with the people who are emotionally invested in the home. They bring a whole host of issues to the process that I don't need to spend my time on or wonder if they have done correctly.
Buying a home is scary and most people want things to move along swiftly and correctly. Dealing with professionals makes many people feel more comfortable with the process.

I have looked at a few FSBO homes both in my own shopping and more recently helping a relative look at homes and I can tell you that they were difficult to reach, difficult to schedule viewing with, difficult to tour the home with all of which lead me to believe that they would be difficult to negotiate with and purchase from. Every little thing would be an issue they either had no idea to handle or had to make three phone calls to figure out and even longer to get back to me.

I am not saying this is the case.
I'm saying this is how I an many other folks think it would be.

Perception is everything.


 o
RE: FSBO vs Agent

Reasons why I think FSBOs normally do not succeed.

1. Because most FSBOs are not on the MLS, and a lot of people have no idea the house even exists unless they were to drive through that neighborhood.

2. Because a lot of owners do not have access to comps, and they incorrectly base their price on other houses they see for sale. They are priced too high and don't realize it.

3. Because the general public has been brainwashed into believing they NEED an agent to buy a house. In reality, all you really need is the title attorney, and you can deal with the home inspectors, pest control people, water testing people, etc. yourself. All the paperwork involved with the deal can be provided by the attorney.

4. Because buyers are uncomfortable directly dealing with the seller. For some people, I think part of the "fun" of looking at a house is being with the realtor and saying, "look how ugly this is or how terrible that is". With the owner showing the house, people need to be a lot more polite, and that is part of what makes them uncomfortable.

5. Because some sellers are not very good sales people. They have never been trained as a sales person, do not have good "people skills", etc.

6. Because realtors protect each other and will black list FSBOs. Sure, the realtor who sells a FSBO to their client makes a buyer's commission, but they also know they just cheated one of their fellow realtors out of a seller's commission. There are plenty of other "legitimate" houses on the market to keep them busy - they will focus on those houses and steer their clients towards them to keep everyone happy. Then when the FSBO finally "comes to their senses" and lists their house w/an agent, they are more than happy to show it - and they were probably watching the house all along just waiting to pounce on it once it became a "legitimate" listing.


 o
RE: FSBO vs Agent

If you're flat fee listed in the MLS, my understanding is that you don't look any different from a full-price listing to any realtor who's looking.

I'm listed with an out-of-town MLS, which gets me on realtor.com. Interestingly, my state requires that due to that listing relationship, all offers from agents have to be submitted through them to me.


 o
RE: FSBO vs Agent

Because agents love to boycott FSBOs.
Buyers don't want to look at FSBO properties. They feel they owe the seller an explanation why they really hate it, and it could be awkward.
Buyers see most sellers as unreasonable in price asking and dealing with.

If th buyers know their market and sellers are reasonable, BOTH parties can win.

Getting your property on the MLS is a must, whether it's through full commissioned realtors or the for fee ones.


 o
RE: FSBO vs Agent

And when a purchaser asks for even the name of a mortgage broker they get a blank look.

An experienced purchaser likely can deal with a FSBO better than a novice, but I long ago stopped even looking at FSBOs after wasting time with process out of touch with value and the market.

Maybe there are some FSBOs around that are not like that, but in 30+ years I have yet to find one so I no longer waste time.

Even for my personal residence I will no longer waste time with FSBOs.

Their attempt to squeeze every dime from the deal makes it not even pleasant for my personal house, let alone an investment house.


 o
RE: FSBO vs Agent

Price was not an issue here as we received above asking.


 o
RE: FSBO vs Agent

As a buyer, I actually preferred FSBOs. I never had to tell the seller what I thought about the place and they weren't panting for an answer on feedback either.

I did have a lot of trouble getting a buyer's disclosure form from a Realtor listed home that I was very serious about. I probably would have made an offer but the realtor could not get the buyer to fill out the form.

As a seller, I sold a few FSBOs without any issues or roadblocks in the selling, inspection or closing process.


 o
RE: FSBO vs Agent

I bought an FSBO house advertised on Craigslist. Probably my biggest CL purchase. :)

Our agent was impressed at how easy these sellers were. Certainly easier than working with another agent. They had everything ready (their bags were packed, too). One was retiring from a title company and knew exactly what was needed, and then some. Every inspection and disclosure imaginable, copies of permits, receipts, etc. We even ended up using the mortgage broker they recommended, twice.


 o
RE: FSBO vs Agent

"general public has been brainwashed into believing they NEED an agent"

Has anyone heard from the couple who put up $100,000 "earnest money" with a builder so the builder wouldn't have to borrow so much on his construction loan?


 o
RE: FSBO vs Agent

We have been looking at homes, 'forever' in Florida and have run into a few FSBO's. Weedy is correct, those listings looked like normal listings on MLS and our agent didn't realize they were FSBO.

We avoid FSBO for all the reasons given above. Every one was overpriced, really overpriced. We find it very uncomfortable viewing a house with the owners present.

There was one house we considered making an offer, but after trying to get disclosures, and information on permits and insurance, we walked away. Both owners worked. They refused to put a lockbox on the door so you could only see the house on the weekends. It was such a hassle reaching them. They would not return any phone calls until they got home from work.

Its not worth dealing with this and I think sellers are hurting their chances to sell by not listing with a Realtor.

Jane


 o
RE: FSBO vs Agent

"$100000 earnest money"...she is still on the boards. Do you need to email her? I am sure she is available by email. They just accepted an offer on their townhouse that was also posted on this board.


 o
RE: FSBO vs Agent

jane's experience is exactly why many people prefer not to deal with FSBOs when listings are plentiful. There are simply too many other listings out there without the perceived hassle of dealing with a FSBO seller to make them a buyer's first choice.


 o
RE: FSBO vs Agent

I bought a FSBO advertised with a "make-me-move" price on Zillow. DH and I had just sold our previous house and had made offers on 3 other houses (losing out in multiple offer situations) so were comfortable with the process. The seller retained a real estate attorney to review the contract and disclosures. There were no contractual issues. It was an all cash, no contingency offer.

DH and I had all comps handy and explained how we came up with our offer price, which was lower than the make-me-move price. The seller countered at a level we thought was reasonable, so we signed the deal and everything went smoothly from that point on.

In our case it was an advantage that the house wasn't on the MLS, otherwise there would have been a bidding war. I think the seller could have gotten a much higher price, but the advantage to her was an as-is sale, no fixing up the house, no staging costs, and a certain amount of privacy regarding the transaction.


 o
RE: FSBO vs Agent

My experience is the same as the OP. We concluded that serious buyers, qualified buyers, deal with a realtor.

We wasted a couple of months showing and negotiating with people who were either just entertaining themselves with homebuying daydreams, and/or didn't have the financing.

Once we listed with a realtor, the home was sold in a week, because the realtor had a list of people who were seriously looking. And we got our price.

Realtors screen buyers for you. They ask about their price range. They ask about their pre-qualifying with a lender.

I also think sellers should consider the dangers of letting strangers into their homes.


 o
RE: FSBO vs Agent

The only FSBO houses we looked at were over-customized with both professional and DIY projects. I don't know if I am being very clear about that, but it seemed like EVERYTHING in the house had been changed to suit some peculiarity of the owners. Counter heights for short or tall people, non-skid finish on patios, extra shelving in a weird place in the bathroom or kitchen to be handy for that particular cook, etc. It seemed these people put so much time and energy into customizing their home that they showcased these projects more than the basic features of the home (bedrooms, baths, square footage, etc.) And they had ALWAYS added the saved commission to the purchase price.

That said, we sold a house FSBO by purchasing a three month MLS listing through a company that does that. I think it was about $300. We offered the full split percentage to any buyers' agent and sold it pretty quickly in a down market, but it was priced to sell.

I was never home during a showing and the flyer I made for the house was comprehensive to a fault, so we never had any questions, either.


 o
RE: FSBO vs Agent

I would never discourage anyone from at least trying FSBO. With the market coming to a slow crawl, we sold our home for %4000 less than the asking price in May of 2007 in 3 days. The very first person who came to look at it told us they were buying it the first day on the market, but it took 2 more days to get the contract together.

Our home was beautifully kept and one of the largest ones in our subdivision (2500 sq. ft.), ... BUT!...we didn't have all the upgrades; we had laminate countertops in the kitchen, no wood flooring, (did have Berber carpet throughout and beautiful tile, but still..) and no fence even though we had a very spacious back yard.

What also helped to sell our home is that the woman's best friend lived within a few houses of ours - so the moral of the story is, you never ever know what will sell your home, who will just "happen across it" and decide to buy.


 o
RE: FSBO vs Agent

Sorry that should read "$4000.00 less..."


 o
RE: FSBO vs Agent

>>And they had ALWAYS added the saved commission to the purchase price.<<

Am I missing something, here? I mean, why they hell shouldn't they? Isn't that why they went FSBO to begin with.

Why do you feel that they should give that away to you (the buyers). If I were a FSBO home seller I would not plan on giving that away. Defeats the whole purpose.


Sea


 o
RE: FSBO vs Agent

You've pretty much made my point, Seashell.


 o
RE: FSBO vs Agent

So how is a FSBO "adding the commission to the price" any more evil than a realtor-listed house "adding the commission to the price"?

In fact, houses will sell for what buyers are willing to pay. I don't know any buyers that are willing to pay more because it's listed with an agent.


 o
RE: FSBO vs Agent

If you look at FSBO ads in the paper, MANY say things like, "save $$$ on realtor fees," or "cut out the middleman and buy directly from owner," etc.

They either imply, or actually come right out and say, that the price reflects the FSBO status. That's the way it sounds in my neck of the woods. Add that to the fact that most FSBO sellers overprice their homes to begin with, and you have a house that sits because it is not really competitive with others in its subdivision or area.


 o
RE: FSBO vs Agent

"If you look at FSBO ads in the paper, MANY say things like, "save $$$ on realtor fees," or "cut out the middleman and buy directly from owner," etc. "

That makes no sense to advertise that. The seller pays the realtor. How can I buyer save $$$ on realtor fees by buying FSBO? The seller does.

When we sold FSBO, I encouraged buyer's to use a raaltor. I put flyers in front the house that had my number but said "Call any Realtor to view". We were on the MLS and the buyer's agent would get 3% from us.

I only had one problem. A guy called me demanding to see the house "now", as he was sitting in the driveway. I explained that he could call any realtor to see the house, and that I was 5 hours away. He rudely said "Do you want to sell the house or not?". Even if we lived there, I don't think people should pull up to a house and expect to see it "right now".


 o
RE: FSBO vs Agent

I am currently in the process of working on a rental house and getting it ready for sale. I'd like to try FSBO and am researching the subject online.

Unlike the FSBOs that certain posters keep complaining about above, I would like to price the house to sell - which I presume would be a bit below comparable houses. My lawyer found a local realtor that will do a CMA for a fee of $100 with no strings attached. Do you think a CMA (or 2) would be a good gauge for fair market value or should I get an appraisal?


 o
RE: FSBO vs Agent

I haven't been very impressed with the CMAs I've seen. Most realtors are sales types, not math geeks. I'd go with an appraisal. That's what we did.


 o
RE: FSBO vs Agent

If the seller gets their own appraisal then prices the house accordingly, can the buyer use that appraisal for a mortgage?


 o
RE: FSBO vs Agent

"If the seller gets their own appraisal then prices the house accordingly, can the buyer use that appraisal for a mortgage?"

Pretty much no.

The banks are required to order appraisals in an 'arms length' manner and no longer have any say on the actual appraisers chosen form an approved list.

A seller's appraisal is of no value to anyone but the seller trying to get an idea of market price.


 o
RE: FSBO vs Agent

Barbcollins, the fsbo sellers were advertising that their list price had been lowered because they didn't have to pay those realtor fees. Sorry, I thought that was clear.


 o
RE: FSBO vs Agent

Just HAD to jump in and state that the last property (10 acre tract of land) I sold was FSBO. .

But here's my point: contrary to the notion that I was trying to save commission money, the REAL reason was that I fed up with realtor incompetence!

Prior to taking matters into my own hands, I had it listed for over a year with 2 different brokers. The first realtor never called me during their 6 month listing......not even to tell me that she had nothing to tell me. Lousy business practice, for sure.

The second realtor not only didn't call me within that 6 month period (just to touch bases), but never spent a dime in advertising or simple promotion. In short, she took the listing, sat on it, and hoped a buyer might magically appear.

So I finally said " What the hell, I'll list it my self." It couldn't be any worse than the treatment I had already received through so-called professionals. Well, the land was listed via a flat fee agency for $199 for 6 months, appeared on the local MLS, Realtor.com. and on all the other popular realty sites. Also, I was able to cut the listing price by $10,000 to reflect potential commission savings.

Any interested parties were given my phone number, and then appointments were made to personally show the property. The entire process couldn't have been more seamless. Sold within 4 months.

Oh, and for all those who think that FSBO listings are over-priced, I am living proof that this is not always the case. In fact, my buyers were delighted that I had listed the land at such a competitive price. Also, the buyers enjoyed working with me rather than with a realtor since I was able to immediately answer any of their questions.

But you know, the best part of selling this property on my own was knowing that I was not being manipulated by an indifferent realtor who promised performance, and delivered nothing.

Footnote: not one realtor called me during the time I was on the MLS. Blacklisted? Maybe. But in the long run, I didn't need their help since 80% of all real estate searches begin on the internet. Sorry, but I believe the realtor will eventually go the way of the travel agent. Buh-bye.


 o
RE: FSBO vs Agent

I agree if/when housing improves RE agents will exist for new residents or new arrivals to a neighborhood but if/when portal sites offer a good mix of navigation and highlight the process. The value of an agent in the day of internet will be pointless.
I worked in travel when I debated at length future generations of travelers and good algorithms will eliminate the purpose for a travel agent as people are smarter.


 o
RE: FSBO vs Agent

What would REALLY shake up the system was if buyers had to pay their agent's fees themselves instead of the seller doing so. Right now many/most buyers use agents because they're free, and that keeps most purchases in-house with MLS, because those are the houses they show.

If buyers had to pay, plenty of people would continue to use buyers agents, but many would not, and would start shopping on their own. That would increase the demand/need for aggregators of non-MLS properties for sale, which would break the monopoly and drive down the commission to something more market-based, probably about half what it is now.


 o
RE: FSBO vs Agent

I agree on the fees.
Foxton tried an alternate web selling methodology in my state during the boom. I think the formula requires:
Seller only pays for a representative to show the home (if they don't wish to) - that representative gets a flat fee (may open up job opportunities for stay at home).
Buyer only pays if they want a tour of neighborhood or help with contracts (but they should seek an attorney).
Buyer puts down a deposit/fee which gives them 30 days of listings and ability to open houses. Next month they pay again (if they need the service).
Seller pays for picture, advice on showing and website display/listing.

I think you reduce cost and for the regular knowledgable transaction as think of all the transactions via EBAY without a middle man.

There will be an exception (especially new foreign buyers to the neighborhood) who need the hand-holding of a RE agent but if we parallel it to purchasing a car, airline travel or even banking - what previously require a face to face & scheduling can all be set up online.

I think the RE/Realtor industry will fight hard and put out advertisement to pooh pooh the concept of working without them but no one can give a full proof reason why a knowledgeable buyer/seller can't execute a transaction without a middle man.


 o
RE: FSBO vs Agent

I don't think buyers and sellers will ever pay anything up front to an agent, since success is not guaranteed.
Saying there is a correlation to how travel agents became irrelevant is not understanding how buying and selling real estate works.
The fees charged are earned only when there is a sale and in my experience, the cost to be an agent, running their own business, are in line with any self employed business person, except it carries a higher risk of failure.


 o
RE: FSBO vs Agent

I suppose some buyers and sellers would prefer the "commission only if transaction is completed" model. But those would be the buyers and sellers that aren't as serious. For those sellers who are going to keep their house listed until it sells, and those buyers who are going to keep looking until they buy, there's virtually no benefit to paying only upon closing, except for the timing of the payment.


 o
RE: FSBO vs Agent

Roosevelt wrote:

"no one can give a full proof reason why a knowledgeable buyer/seller can't execute a transaction without a middle man"

There is no reason, and it happens all the time... it is called a FSBO. The limiting factor that you and others seem to diminish is the "knowledgeable buyer/seller" part. Most buyers and sellers are not knowledgeable enough regarding contract law, marketing and lead generation. And even if they are, most do not have the time to do it successfully. Another facet of a RE agent's job is to be a diplomatic buffer between the parties. I just closed on a home this morning where the angst between the sellers and the buyers was so intense, that we had to separate the parties at closing. There were many times throughout this deal where emotions ran so high that each party verbally told their agent that the deal was off. The buffering diplomacy that was bought to the table from the two agents was what kept this deal together. If the two parties were doing this alone, not only would the deal never have happened, but it might have come to physical blows.
I keep hearing posters say that the day of the agent is coming to an end, because finding listings on the net is easy to do these days. And that the only buyers needing a RE agent in the future are the out of town buyers. But, taxiing people around town is the least important of what I do for my clients. Negotiating and facilitating and processing a fair, legal and sucessful deal is where my value lies.


 o
RE: FSBO vs Agent

>>Negotiating and facilitating and processing a fair, legal and sucessful deal is where my value lies.<<

I COMPLETELY agree with this. My real estate agent in my recent deal did NOTHING toward finding my house. I ran searches online and found things I was interested in myself. All I did was given him a list of the houses I wanted to see and he set up the times and took me to the ones that were not already under contract. But I could not have done it without him because of all the other elements!


 o
RE: FSBO vs Agent

A "fair, legal and successful deal" may be facilitated through attorneys, as well.

e.g. When I sold my FSBO property, a "fair" price was determined between myself and the buyer. Next, my lawyer contacted their lawyer, a contract was drawn (implemented swiftly via email), approved and signed by both parties, a deposit was submitted to be held in my lawyers escrow account, and finally, after six weeks, the closing took place. So much for the "legal and successful" aspects of the deal.

And the cost for my attorney's services? $600.00. Had I sold through a realtor, I would have had to pay a 5% commission. i.e. $10,000. Hmmmm......


 o
RE: FSBO vs Agent

Morenema,
Good for you! Not every one needs to hire a RE agent, just like not everyone needs to hire an auto mechanic, or a tax advisor or even a GC to build their home. But most will.


 o
RE: FSBO vs Agent


Actually, because of today's ever-expanding communication technologies, most will NOT have to hire a RE agent in the not too distant future. The younger generation,, especially, is so connected via smart phones, for example, that information may be rapidly disseminated and business conducted without a middle-man. i.e. the anachronistic realtor.

If the real estate industry hopes to survive, it must re-think its current practices. Rather than charging hefty commissions based on a sales price, sellers should be able to select a la carte services. e.g. flat fees for listing, marketing, conducting open houses, etc. For set rates, both buyers and sellers could pick and choose the level of assistance they need. Rather simple and non-monopolistic.

By the way, Guy, bastardizing my moniker is infantile at best. Not funny, and not becoming of a "professional."




 o
RE: FSBO vs Agent

Maremma,
Your post that I replied to came across to me as a little snobby and denegrating, hence my humor at the expense of your moniker. If I never interjected humor from time to time into this forum, I would be unable to stay around here for long.
Let's just hang around here for another 10 years and and see what the future brings us. Either way, I'll be fine and so will you.


 o
RE: FSBO vs Agent

"Sorry, but I believe the realtor will eventually go the way of the travel agent. Buh-bye."

Ummm....perhaps you should read the news a bit more closely. The travel agency industry is actually on the upswing, and much of the business is Gen Y (late 20's). While simple airline tix and overnight U.S. hotel reservations are often made through the popular travel websites, travel agent bookings for more complex business trips and vacations are on the rise - likely to save time and money due to their expertise, as many specialize in, for example, biking tours through Tuscany or religious pilgrimages to Mecca or scuba diving in the Keys. Also, everyone I know that travels for business, the arrangements are all made through a travel agency (including the military - their own agency of course).

In the same way, a Realtor can help a buyer weed through the information overload that is the internet. His/her expertise will be useful, as in my personal example, when that waterfront short sale listing with the gorgeous pictures turns out to actually be swamp-front in a marginal neighborhood (someone was just murdered two blocks away last week) and the worst school zone. (My compliments to the photographer - really knew how to flatter this particular home.)

Let's reiterate that most of the folks who are regulars on this forum are above- to well-above average in RE knowledge.
There are just as many who will look at the TIL disclosure at closing and freak out when they see APR 5.43% when they thought their loan rate was 5%.
Or closed-sealed-delivered short sellers who are shocked when their banks sue them for $200K breach of contract 6 months later because they read all about short sales on the internet that turns out was written by some Realtor in California (a non-recourse state), but the short sellers live in Florida (a recourse state).
Or buyers who dismiss a home because they don't have $20K extra cash to remodel the kitchen that was lost in a fire in an otherwise perfect home, because nobody told them to look at the possibility of an FHA 203(k) loan.

The buying and selling of RE just isn't "simple".


 o
RE: FSBO vs Agent

In my 3 home purchases FSBO - both parties had lawyers and contracts were uneventful.
In my purchase with RE Agents - it is awful and the seller's agent refused to talk to me. I kept having to relay information via my agent to get to there agent. At one point, I called the seller directly who had to correct the date on a document I refused to sign because their agent refused to pay attention to the details.

I will NOT claim every agent is incompetent because many are stellar but in a divorce proceeding we should realize if you put the two parties in a room and not allow them to exit until they checklist 3-4 agreements - it will probably get done. You add lawyers (parallel the real estate agent here) and it becomes an ongoing self-serving task/negotiation.

Another example - it seems agents introduce bidding wars more often vs. FSBO whereas with EBay model - you get a bid and check over the authenticity of the buyer and you sell or you don't.

I will end on - I agree the younger generation which doesn't require human contact to do their job only need to find a way to inspect/tour the home on their own and I think they can take care of everything else without an agent. I hear it isn't the same as travel but I recall travel agents in the 90s claiming no one will travel blindly to a foreign destination/hotel without an agent coaching them but realize tripadvisor.com & seatguru.com and other forums eliminated that expert opinion.


 o
RE: FSBO vs Agent

The fact that the RE industry needs to change to match the needs and habits of today doesn't mean that RE agents don't offer anything of value. It just means that their business model doesn't match today's market, it's overpriced, and they are reticent to change, preferring instead to preserve and defend their 6% utopia. You can't blame them for wanting to, but eventually market forces will force a change. Flat fee MLS is a big enabler of this change (and I'm still bummed it's not available in my market).

I agree with the comments above about the a la carte menu of services, for both buyers and sellers being the economically efficient way to transact real estate purchases. That, and buyers having to pay their agents directly. Sigh, someday.....


 o
RE: FSBO vs Agent

"It just means that their business model doesn't match today's market, it's overpriced,..."

The median income for a Real Estate agent in the US is $37,270. In my location the income is even less.
For the a la carte or discount companies the income of their agents is less all around, the only way to make a living is to provide less service and increase the transactions.
The saying that 20% of the agents do 80% of the business holds true. They are the top producers with a staff that needs to be paid.
RE agents don't make as much money as the public believes.


 o
RE: FSBO vs Agent

Bernie:
I don't judge the price of something by what a person's take home pay is, I judge it by whether the price I pay offers me good value. What someone actually makes depends on many things, like how many hours they work, how well they keep their costs in check, and how efficient they are. That's all their individual business.


 o
RE: FSBO vs Agent

I think the issue that people have is that the percent commission model has no correlation with the amount of service performed. It does not take twice the amount of resources to sell a $300k house versus a $600k house. It's like saying that since you drive a Mercedes, the cost of fuel for you will be $8/gallon, and for the other person in the Toyota it's $4/gallon. There is no basis for it. It's simply not fair.

On top of that, depending on the sales price it can be expensive. For a $300k house, assuming a 6% commission rate, that's $9,000 to the listing office, which is only half of the commission. Even though the agents are risking their time and resources, it still is a lot of money for sellers who are comfortable going in it themselves and paying a la carte for any extra help or service they may need.


 o
RE: FSBO vs Agent

In theory, selling an expensive house would take longer than a cheaper one. A smaller buyer pool would require longer marketing, more advertising and bigger selling effort.

I never understand the statement of "it costs buyer nothing going through a realtor, since seller pays the commission". Isn't the commission built in the selling price, so buyer pays it indirectly?

What is the shortcoming for realtors to provide a la carte menu of services? It seems they would get paid for each type of service/effort they provide, instead of being taken advantage by some buyers or other realtors.


 o
RE: FSBO vs Agent

"I never understand the statement of "it costs buyer nothing going through a realtor, since seller pays the commission". Isn't the commission built in the selling price, so buyer pays it indirectly"

I don't. I list our properties for what I think is a selling price, whether it is by a realtor or not.


 o
RE: FSBO vs Agent

azmom: Fair point. Realtors often tell sellers that houses listed with realtors sell for more than houses listed FSBO. You don't hear them pointing that out to buyers. Instead they say that using an agent to buy is free. Yes, there's a contradiction there.

And there's a flaw in their numbers anyway. If they're looking at "average selling price" for realtor-listed houses vs. for FSBOs, the latter could be less just because FSBOs tend to be houses on the lower end of the market. I don't think there's a way to come up with a meaningful number unless a bunch of houses are sold FSBO and then soon thereafter sold MLS, and the prices compared. There's no real way to do a controlled experiment.

One more point: NC rightly pointed out earlier in the thread that a 3% (or 6%) commission on a $10,000 house didn't make it worth the realtor's effort, so they had a floor of $2000. That same logic applies at the top end: at higher prices, a 6% commission is as outrageously high as a 6% commission is outrageously low on a cheap property. It makes more sense to do a flat fee, or at least put floors and caps on things.


 o
RE: FSBO vs Agent

While I agree that RE business needs adjusting, I also know that its regional. There are parts in this country where realtors rule (lol). People in some states need realtors to hold their hands when buying or selling RE.

I agree that its high time to eliminate the middle man BROKER, and make all agents brokers. Make RE services ala carte. The RE mafia needs to be disbanded. People are complaining about the commissions, but what they don't realize is that the commissions feed SO MANY layers of chiefs on the top that its not funny. The sales agent does not make that much.

In my experience, most realtors are NOT that good, and cannot negotiate their way out of a paper bag. Many are lazy or get an attitude after some bad experiences with buyers/sellers. It works both ways. However, IF you find a good negotiator, they are worth a bundle. Many attornies do not have negotiating skills, either.

Basically, the RE industry needs to be cleaned up and staffed with more competent, paid ala carte, knowledgeable agents.


 o
RE: FSBO vs Agent

I agree that its high time to eliminate the middle man BROKER, and make all agents brokers.

In Oregon, technically all agents ARE brokers. In practice though, a one agent operation is very difficult to make work. A big consideration is Errors and Omissions insurance, which is carried by the broker and covers the agents that work under him/her. I believe that there is also protection for the consumer having that other layer of supervision over the agents. Do you really want a newly licensed agent with no experience to be set loose on the public with no supervision?


 o
RE: FSBO vs Agent

Posted by terriks (My Page) on Sat, Jul 28, 12 at 21:39

I agree that its high time to eliminate the middle man BROKER, and make all agents brokers.
In Oregon, technically all agents ARE brokers. In practice though, a one agent operation is very difficult to make work. A big consideration is Errors and Omissions insurance, which is carried by the broker and covers the agents that work under him/her. I believe that there is also protection for the consumer having that other layer of supervision over the agents. Do you really want a newly licensed agent with no experience to be set loose on the public with no supervision?

____________________________________________

There are way too many problems with the way the RE industry is set up. It is a HUGE rip-off machine. Errors and omissions?....maybe people in the RE business should be more competent. RE agents should NOT be practicisng law. It should be a role of a negotiator/mediator/facilitator and NOTHING more!

Proper training should weed out the stupid ones, so the broker would be unnecessary. I know that realtors have to go thru a lot of RE law this and that. I think cutting thru the chase, giving the RE industry some respect with competent people earning their pay for EVERY service would be much better than the role they play now- used car salespeople ;)
The 5-6% commission brings out the worst in people. There is too much emphasis on stupid busy work in the RE business. Years ago it was simple, you had the MLS book, NO errors and ommission insurance, no being busy 24/7 and NOT getting paid. Now the Re industry exploded. Too many grubby hands in the pot, and it became an adversarial situation where people do not trust realtors, use them and disrespect them. The realtors want a quick buck....it's NOT working. The system is broken. Technology is eliminating many jobs. Time for a change.


 o
RE: FSBO vs Agent

Notto, you brought up a good point about trust.

To compound real estate trust issues, here in NJ there's such a thing as "dual agency," in which one realtor represents both buyer and seller. Instead of honoring a fiduciary responsibility to the buyer from whom the commission derives, the listing agent shares allegiance with both parties. I feel that this sort of relationship is illegal, or at least unethical, and gives rise to all sorts of falsehoods by omission.




 o
RE: FSBO vs Agent

"As a buyer, I actually preferred FSBOs. I never had to tell the seller what I thought about the place and they weren't panting for an answer on feedback either."

I prefer FSBOs as well. The seller of our house had a realtor but he was at many of the open houses so we were able to speak to him directly instead of having to go through his 'interpreter'.

In fact, if he hadn't been as hands on as he was, we would have told his realtor to shove it for all the tricks they played during the process.

I'd never use a realtor to buy, but would to sell. And I'd make sure the house was empty (and staged w/non of our stuff) before I let strangers in.


 o
RE: FSBO vs Agent

"Errors and omissions?....maybe people in the RE business should be more competent. RE agents should NOT be practicisng law."

Everything we do is because of the laws in our state. Most of them are there to protect people like yourself.
Just go through the attached real estate manual and see what it's all about.
When I started in RE in 1990, we had a contract of 2 pages, now we have 17 pages.
Here, we are all brokers also and pay our own E&O, remember, each state has their own laws to comply with and some have more than others. Read part of the Conway-Bogue decision below, or Google it for a full version:

Chapter 5:

Landmark Case Law and Opinions
An * in the left margin indicates a change in the statute, rule or text since the last publication of the manual.

I. Supreme Court Decision on Practice of Law by Brokers

The Colorado broker is privileged to render services to his/her client in greater degree than are brokers in other states. The practicing real estate broker, of necessity, must work closely with practicing lawyers. Each practitioner zealously guards the legal field of his or her endeavor. In Colorado the real estate broker renders service to his/her client beyond that of merely procuring a buyer. Colorado brokers should familiarize themselves with the decision of the Colorado Supreme Court in the cases of (1) Conway-Bogue Realty Investment Co. v. Denver Bar Ass�n, (2) Title Guaranty Co. v. Denver Bar Ass�n, and (3) Record Abstract & Title Co. v. Denver Bar Ass�n.


Here is a link that might be useful: Abridged Real Estate Manual


 o
RE: FSBO vs Agent

Oops! Just realized that I should have written "fiduciary responsibility to SELLER, not buyer," several posts ago.

As a point of interest, 50 years ago, a NJ realtor was permitted to play several roles: salesperson, home inspector, mortgage broker, title searcher, and legal adviser. Talk about conflict of interest!

RE laws have changed dramatically since that time, but I often question if that change was for the protection of buyers/sellers or for the protection of the RE agencies.


 o
RE: FSBO vs Agent

""Errors and omissions?....maybe people in the RE business should be more competent."

Pretty common insurance for many licensed professions providing ANY type of service.

Claims are not that common against many professionals, so the insurance is not all that expensive, but it beats putting your personal assets on the line.

In many cases the mere presence of E&O insurance puts a halt to frivolous claims.
Instead of spending YOUR time dealing with a supposed problem the insurance company deals with it.

In the states I am familiar with every licensed RE sales person must work for a licensed RE broker.

The broker test is harder, and acting as a broker comes with more liabilities, especially if they employ others as sales people.

In many states RE agents assist in drawing up purchase offers that then become purchase contracts.

Some states go so far as to require a state 'standard contract' while in many others the local board of realtors, or local association of realtors supply 'standard' contracts that can be used as a starting point.

You can often find 'Poor's Standard Forms' at a large public library with a legal room.
That is what most of the attorneys start with.
No point in reinventing the wheel.

Even commercial contracts usually have pages of standardized 'boilerplate' followed by more pages of specific items the attorneys on each side add.

A FEW places (NY) have a different setup.
RE agents make intros, show houses, and then in come the attorneys to write a contract.

What portion of each of those contracts do you think is actually 'new'?


 o
RE: FSBO vs Agent

Berniek,
I will NEVER agree with you, and your sticking up for the way the RE system is set up, so deal with it. It's a scam!
Yes, the agents have to go thru stupid training and are supposed to abide by the RE laws and rules, but few remember them. Many choose to ignore them just to make a buck. LMAO. In fact, it's the stupid RE agents, but with great sales tactics, who are the top producers in the RE offices. The ones who have alot of info and are genuinely trying to list/sell don't have the skills to entice clients. The ditzy ones, who can talk up a storm , but don't have 2 brain cells to rub together get most of the clients. These are two different types of skills. Rarely, people are born with both. Just sayin.

Brickeye,
I am not necessarily attacking RE agents, because some are very smart and are worth a decent paycheck. However, the ENTIRE RE business exploded, demanding the 5-6% commission, because it needs the money. Most of that money goes to the administration and lobbying in Washington. It's BS. Stupid busy work (like Berniek is quoting) is set up for the realtors as though they are Lawyers. But they are NOT!!! Writing up a contract or an option to a contract should not and is NOT rocket science! I've done many contracts ;)

My point is to have RE agents be versed on sales and broker laws, set up offices like Accountants/lawyers, and work on their own. BS with all the red tape and dumb RE laws as Berniek "so eloquently" portrays on this website. Just do the right and proper paperwork thing.

Just common sense representation/mediation/ negotiation until turned over to the RE lawyer would be sufficient. RE agents should get paid for their hard work, and keep ALL of their hard earned money-the good ones, anyway. the check and balance system would be strictly between the realtor and the attorney. The buyers and sellers would have to assume a bit more responsibility, UNLESS they want to pay ala carte for a lot of service. This way nobody would have a reason to complain. You pay as you go. You get paid for what you do. Give the buyers/sellers/ RE agents a choice, instead of working in the RE Mafia.


 o
RE: FSBO vs Agent

Another thing- RE agents can specialize in different areas of RE. One can be a negotiator, another can be a contract specialist, yet another can be a mediator, a facilitator, a property presentor and area specialist. Each can have a fee for their service. The people can choose what they need...

Ironically, ALL the people on my street (new neighborhood)have complaints about their former realtors. If you have the system split up they can have a problem with the ones who stink in there area of specialty, not ALL realtors in general.

If I were listing, I would love to employ a mediator. I can take care of everything else, but despise dealing with buyers or sellers if a problem arises. If I didn't want to show the property myself, I would employ "a property presenter" with paying a certain amount for each showing. At times, I may want to show it myself. See where I'm going with this?


 o
RE: FSBO vs Agent

I think the real estate bust helped RE Agents as it was directly after the .com high! Agents fostered bidding, etc. and made an industry which should evaporate fuel itself further. Now, the economy tanked so no one has interest to lose money building alternates to the status quo. I think once pricing go up it may be possible to introduce the
. property presenter
. attorney or notary
. legal aide to draft/execute contract
. inspector/appraiser.

I would even argue there should be a home buyer consultant role who takes care of everyone on behalf of buyer for a fee (they aren't not commissioned and charge a flat fee). The seller has one and rates depend on the requirements in the area.

I do agree with prior posters a RE contract is no big deal. Outside of addendum it is a simple document based on state laws and mortgage conditions. I guess RE agents think everyone is an idiot/stupid so they add value?


 o
RE: FSBO vs Agent

"Another thing- RE agents can specialize in different areas of RE."

I do, my specialty is right of way and eminent domain, also called The Uniform Act of 1970.

However, I'm always amazed at some of the screwy ideas people have of how the RE business should be run, when it is obvious that the majority of buyers and sellers don't have a problem with it.
There are many other alternatives that have been tried over the years, but most of them don't make it in difficult markets.


 o
RE: FSBO vs Agent

"However, I'm always amazed at some of the screwy ideas people have of how the RE business should be run, when it is obvious that the majority of buyers and sellers don't have a problem with it. "

This is the key.

At least for first time buyers, hand holding is often required.

"Writing up a contract or an option to a contract should not and is NOT rocket science! I've done many contracts"

I end up writing them about every other month for engineering services work.

While not rocket science, even attorneys start with a 'standard' form (often from Poor's) and then add tailoring.

A certain amount is boilerplate, but omitting it can result in nasty legal fights and court cases.

Is the seller required to convey 'clear title'?
A phrase used in many jurisdictions, and not the same as simply 'conveying title.'

Are you going to require a 'general warranty deed'?

Is a 'special warranty deed' acceptable?

Or would you get suckered with a 'quit claim deed'?

I will be glad to quit claim you the Brooklyn Bridge if you want it.
It is a bargain at only $100,000.

What can see, like very standard language in a contract often has a VERY specific meaning, especially for real property.


 o
RE: FSBO vs Agent

Berniek stated that most alternatives to traditional RE practices "don't make it in difficult markets." I am willing to concede that for now the majority of buyers/sellers will follow the straight and narrow path by seeking the services of a realtor.
I emphasize "for now."

I would like to know, Berniek, what your feelings are about these rogue brokers who set up flat fee agencies. In doing a search of my town's MLS 68 listings, I found 4 which were through a flat fee company. Still a small percentage, but a growing trend from a year ago. Do brick and mortar realtors feel threatened? Or do they see the opportunity to revamp their business model by starting to offer non-traditional services? Just askin'...


 o
RE: FSBO vs Agent

I don't understand how posters here can say there is a monopoly on the way the agents charge fees or offer services. A seller can FSBO, they can do a flat fee, or they can hire an agent to represent their best interests. Sounds like plenty of choices out there for a seller.
So what's your point again?


 o
RE: FSBO vs Agent

"I would like to know, Berniek, what your feelings are about these rogue brokers who set up flat fee agencies. In doing a search of my town's MLS 68 listings, I found 4 which were through a flat fee company. Still a small percentage, but a growing trend from a year ago. Do brick and mortar realtors feel threatened? Or do they see the opportunity to revamp their business model by starting to offer non-traditional services? Just askin'..."

I've been in the RE biz since 1990 and will retire end of this year, I don't care what other agents/companies charge.
The ones I have seen and co-operated with over the years many of them have come and gone, from traditional to a la carte to discount service companies. To make money in this business, regardless of business model, is difficult at best.
One agent I spoke with from N.Y. had a $250 discount system, bragging she had 200 listings, within a year she disappeared.
A C-21 company I worked for many years ago with several offices here and a CBanker, all are gone.
I would not call agents with different business models "rogue brokers". They all want to make money by using new technologies and methods, nothing wrong with that if they succeed, however, most will find out that RE is a people business and technology might make communication and the paperwork more efficient, but does not replace the face to face inter reaction.
Traditional companies are supplementing their income by providing other services such as mortgage lending, property management etc. Staging and cleaning and fix-up services at times are offered as free additional services to buyers and sellers.
In short, I don't think traditional companies feel threatened by discount service companies, usually they do not take much business away from them. One brief exception locally was a discount company that did very well, however, it only lasted about 5 years before they changed back to a traditional way of doing business.


 o Post a Follow-Up

Please Note: Only registered members are able to post messages to this forum.

    If you are a member, please log in.

    If you aren't yet a member, join now!


Return to the Buying and Selling Homes Forum

Information about Posting

  • You must be logged in to post a message. Once you are logged in, a posting window will appear at the bottom of the messages. If you are not a member, please register for an account.
  • Please review our Rules of Play before posting.
  • Posting is a two-step process. Once you have composed your message, you will be taken to the preview page. You will then have a chance to review your post, make changes and upload photos.
  • After posting your message, you may need to refresh the forum page in order to see it.
  • Before posting copyrighted material, please read about Copyright and Fair Use.
  • We have a strict no-advertising policy!
  • If you would like to practice posting or uploading photos, please visit our Test forum.
  • If you need assistance, please Contact Us and we will be happy to help.


Learn more about in-text links on this page here