I’m really not thrilled at the commission issue. Tell me your For Sale by Owner story…the joys and pitfalls. Please.
I have never sold a house, ever, so this is just what I have heard from friends who are Realtors and people who have done the ‘for sale by owner’ thing.
If you sell your house yourself, you save having to pay commission to the selling Realtor, but you will have to pay commission to the buying Realtor.
In Las Vegas, the standard commission is 6% split between the buying and selling Realtors. (Unless you are friends with a Realtor who is willing to not charge you their full share of their commission.)
If you don’t offer a commission to the buyers Realtor, you would be lucky to get a single Realtor to bring anyone to look at your house.
I sold my house myself in Texas this past summer. I highly recommend it.
The story is a little more complicated than that…I listed it with a realtor, but specified a couple I knew who had expressed interest in the house as an exclusion on the contract with the realtor. That is, if I sold it to them, he would get no commission.
The realtor brought me no offers for months (and I listed it at a lower price than he initially suggested), while this couple slowly went through the process of checking out the house, checking other houses, putting their financing together, and making up their minds.
When it came time to strike a deal we exchanged a few phone calls and emails, printed out the standard Texas real estate contract and disclosure forms (the same ones that the realtors are required to use) and then got together over the kitchen table and filled out the forms in less than a half-hour. We basically split the commission that would have gone to the respective realtors. They got a deal on the house and I got more money than I would have if the realtor had been able to bring me an offer. Plus there was just simply no hassle. It really was very easy. We sent all the paper work to a title company (shopped around a little via phone to get a better deal on the closing fees) and closed with no fanfare right on time. It was beautiful.
I had been told for years (by realtors of course) that it would be CRAZY!!! to try to sell your home by yourself. Think of all the things that could go wrong!!! Well, you can deal with them when they come up, but I sure don’t see any good reason to agree to pay in advance to an “experienced” realtor on the chance that something does go wrong. Since I had this experience I’ve found out that three people in my own family have sold-by-owner in the past and had no problems. From my observations listing realtors essentially tell you to put your stuff away, bullshit you on the listing price (tell you they’ll list it high to get the listing) then later tell you you’re not getting offers because your house is listed at too high a price, print out some color flyers, spend 20 minutes listing it on MLS, then send a lackey over to run an open house or two while they are playing golf. Buyer’s realtors spend a few hours on a few afternoons driving people around to look at houses. Then the two of them spend the half hour over the contract and each expect 3% of your selling price. They don’t do anything special in the vast majority of cases, in my observation.
I say go for it. Tell everyone you know that your house is for sale. Tell all the people in your neighborhood in case their sister wants to buy a house nearby. Go to one of the FSBO places to get listed on the MLS. I know the realtors will be in here shortly to try to scare you into ignorance, but I hope you’ll hear other success stories like mine. Good luck.
There is an attorney local to me who will get together with you and make sure all the necessary paperwork is in order before you enter into a contract. He knows all the disclosures and all that, and will sit down with you and the buyer when its time to sign the purchase agreement.
He charges $500 and credits that back to you if you use his services for the settlement.
Win - Win for every one.
My previous house (my first), we bought it as a FSBO and also sold it as a FSBO. It was relatively painless, but I’m not sure I’d recommend it now, particularly depending on where in the country you are.
The biggest issue is attracting serious buyers, and screening through potentially large numbers of inquirers. What realtors put forward as their role in the whole affair is “knowing the market” (setting the right asking price that will attract bids while not leaving money on the table) and having the right channels to tap into a pool of serious buyers (i.e., MLS listings, or as is somewhat common in NYC, if they’re a realtor well known to be associated with a particular neighborhood and actually have lists of people who have signed up on notification waitlists for homes matching a given description, price range and area).
Doing a FSBO (For Sale By Owner) is easiest and most attractive in a hot housing market, where you can count on your house “selling itself” with people knocking on your door, and where it’s easy to gauge the market price because so many similar houses are selling all the time. In a slow market, where few houses are selling and prices are falling (which is the case for much of the country now), calling the wrong price, or not having the one or two people who might be buying your house not even know your house is listed, is probably too great a risk counted against the commission rate. The traditional commission is 6% of the sale price, but in many areas has come down to 3-4%, especially with Foxton’s charging a standard 3% commission.
Now, for the personal lessons learned. The housing market in my area (Northeast Queens, a semi-suburban borough of NYC) when we bought the house was VERY hot (late 1999). When we sold it (July-Aug 2007) we were starting to see listings start to pile up and take longer to sell, but generally prices for houses in good condition were not down much more than 3% or so from the all-time highs set in 2006, and ours was an “higher end entry level” house for the neighborhood, which we figured would be the ideal interest point.
The people we bought the house from had been FSBO’ing it for 6 weeks and had JUST signed on to use a realtor. We saw their house listed in the newspaper (asking 319K), and were literally the last people they showed it to as a FSBO. The net effect was that we got a 3% discount on our offers against the people bidding through the realtor, who listed it at 325K. Even so we had to up our offer a total of 5% from our first bid to win – all the way up to 317K, close to their originally listed asking price. Which means that the realtor-based bidders were bidding slightly HIGHER than asking price.
In talking it over with the sellers after closing the deal, we asked why they ended up listing with a realtor when they had been trying to (and ultimately did) sell it as a FSBO. They said that they got a lot of calls and conducted several open houses in those six weeks, but only got a few lowball offers – all around 20% under asking price, with little followup bidding. In other words, curiosity seekers (neighbors who wanted to take a gander), market makers (realtors or other FSBOers checking out the market competition) and bargain hunters looking for a steal. We were the only “serious buyers” they had seen in six weeks of FBSOing, but in one week of realtor listing they got multiple highly interested buyers. The realtor (well known locally) had been asking for a just-under 3% commission.
Our own experience was very similar. We decided to give FSBOing a try for 4-6 weeks just like the former owners. We listed at 595K, had four open houses, put out ads in local papers and flyers around the neighborhood. We got lots of viewers, a lot of compliments on our house, but only two bids of 550K, one of which was retracted the next day. We had several realtors come and offer to sell our house as well, at a 2.85% commission, all of who said they could get us 590-600K bids, but of course they would say that.
Just as we were giving up we found buyers who bid 575K, which was our actual target sale price all along. We liked them so we closed the deal at that price.
Note that 575K is more or less the same as 595K less a 2.85% commission. And in looking at Zillow.com, other, similar houses on our very street did sell for around 600K through realtors in the same timeframe.
So in two directly personal cases of selling a good house in a relatively hot market, selling FBSO versus realtor did not net any more money in the seller’s pocket. In a less hot market, I’d be even more wary of trying to set my own price or finding real buyers.
One more obvious followup: why not list on MLS yourself (without going through a realtor)? The listing only costs a flat fee of around $350. True, but most users of MLS are realtors – not many buyers are individuals scanning MLS listings directly. Plus realtors are free to post or forward MLS listings themselves. And if someone buys your house through a realtor-shown MLS listing, they (the realtors), by law they still get their 2-3% commission for bringing them in – it still counts as brokering the deal.
If your local realtors charge a 6% fee then it would make sense to list MLS directly yourself, to save yourself 3%. But when the realtors in my area were all already charging 2.85%, it was basically a wash.
I’ve bought 2 houses and sold 1, never dealt with a realtor.
The first house I bought was a nightmare, but that was only because the lady I bought from was incompetent and at least partially insane. The others were a piece of cake.
I used my father’s lawyer, who asked simple questions with simple answers to both myself and the buyer of my house and filled out the paperwork appropriately. I signed, so did he… he used those documents to get financing, and then we closed at the lawyer’s office and I gave him my keys. It was really a piece of cake that left me wondering why in the world people would EVER use a realtor. I imagine the realtor doing exactly what the lawyer did… asking basic questions, filling out a rather generic form, then making me sign it.
I highly recommend at least trying to sell your house yourself. I don’t see myself ever using a realtor to be honest. In my (granted, limited) experience, selling a house is a piece of cake. The only ones who pretend that its difficult are the realtors.
A certain percentage of the houses sold in my area are to people relocating from another part of the country (I don’t know the exact percentage, but it is not insignificant). Buyers like that typically come in for a weekend, hook up with a realtor and find a house. They are unlikely to be looking at FSBOs, just because they don’t have time.
When I was last looking at houses (in 96-97, the end of a long bear market in real estate), I stopped looking at FSBOs because they seemed to be overpriced.
Having said that, in the hot market from 2000-2005 I know several people who did quite well by going this route. In a slow market I think you want as many eyes as possible to see your house. This might be easier now with all the real estate web sites like zillow where you can list your house.
I bought my first house without a realtor, and it was for sale by owner. The whole transaction was smooth as can be (minor snaffu with the paperwork the first time we sat down with the closing attorneys, quickly straightened out by the bank). The little old lady who sold it to us with the help of her son was so pleasant to deal with! She gave us our hand money back at closing to help cover paint and carpet. We sent her flowers as a thank you, she sent us a charming thank you letter for the flowers. People involved: Seller, closing attorney (secured by seller), bank, our attorney (just a quick consult to review the contract), us.
This past year we sold the house. It was hell.
We started with a realtor - he was less than useless. Didn’t bother to do more than the bare minimum, and actually refused to be bothered to sell the house one time, which led us to fire him (the story’s on the board here somewhere). The person he refused to deal with ended up making an offer on the house to us. Which was fine. Then she got HER agent involved after the fact, and the whole thing turned into a nasty argumentative battle of awfulness the likes of which I’d rather not ever repeat as long as I live. But we did manage to sell the house.
I very much doubt any of it would have been any easier had we still had an agent. No, scratch that. If we had a GOOD agent, I wouldn’t have had to do the nasty bickering part myself - my agent would have been paid nicely for the service. If we had kept the useless agent we started with, however, he likely would have just mucked things up even more than they already were. I am glad we didn’t end up having to pay him anything, and if we had to pay our own agent as well as the buyer’s agent (she got the standard 3%), we wouldn’t have been able to accept the price we did for the house.
If I had it to do over again, I would still sell by owner, or I would get an agent that I knew for certain was really really good and worth his/her commission. But I’d try by owner first.