Real Estate Agents or Anyone in the Know

[TarpleyG]

I am planning to sell my house.  I DO NOT want an agent representing me.  I plan to sell by owner.  I want to list on MLS and can do so for a flat fee.  My question is this; if a buyer has their own agent (buyer's agent), who pays for that agent's fee (~2% - 5%), me or the buyer?  I have heard it explained either way and I need a clear answer so I can plan accordingly.  I simply cannot afford to pay that much, especially for someone who is not doing a damn thing on my behalf.  What's customary here?

Greg

[Art Eatman]

If you do not sign a listing agreement, you are not liable for any agent's fee unless state law provides otherwise.

If an agent brings you a form with an offer, there is space provided for terms and conditions.  Who pays for title insurance, survey, whether or not there has been a termite inspection, etc.  You can write in about who pays the realtor fee.

I suggest you talk to a realtor.  You don't have to sign an agreement, just because you sought information.

Art

[The Rabbi]

Well, look at it this way:
You are free not to pay a buyer's agent, but that agent has no incentive to show or sell your house.  And without incentive, he won't.  And if he won't, then why are you listing it on MLS in the first place?  
You are paying the buyer's agent to sell your house to his buyer.  That seems fair to me.
Most buyers have limited funds while most sellers have equity in their homes.  This is why sellers traditionally paid the fee.  I am all for selling it yourself and all.  But understand that agents (the miniscule number of good ones anyway) actually do work for that commission.

[cfabe]

Pretty much everyone who is in the market for houses also will be looking up the mls listings on realtor.com or similar websites. If you can get your house on there with info 'by owner, contact seller directly at ...' it may be benefitial to you. But, I've never seen such an ad on there. I imagine they don't allow it, since the MLS seems to be provided/sponsored by the NARI.

[Brad Johnson]

I am a full-time agent in Lubbock, TX. here's my two cents...

First, +1 to what Rabbi said. You are wanting dues-paying MLS agents to sell your house for you but you don't want to pay them for bringing you a buyer. It's an inherently self-defeating position.

If you are putting in on MLS through a service, be prepared to pay. Agents don't work for free, and buyers rarely agree to pay a buyer's agent fee. If you insist on the buyer paying their own fee, be prepared to be soundly ignored. There is no incentive for the agent to show your house when there are a couple dozen (or maybe even a couple hundred) other houses to choose from.

If you want to sell FSBO (for sale by owner) then sell by owner - take out the ads, do the open houses, and host the tours. If you want to be on the Multiple Listing Service, get the services of an agent and let them do the leg work for you.

Brad

p.s. - Asking for an agent's opinion in the subject line, then flatly stating that you don't want an agent to help in the first line of your post is not the best way to win friends and influence people....

[Art Eatman]

Brad, I think what he's asking is, if he does a FSBO and an agent with a client shows up, who pays that agent?  That is, the agent already has a client who's looking for a house.  I don't think Tarp is trying to stiff anybody; he's just trying to learn how the whole deal works.

Art

[TarpleyG]

Brad, I think what he's asking is, if he does a FSBO and an agent with a client shows up, who pays that agent?  That is, the agent already has a client who's looking for a house.  I don't think Tarp is trying to stiff anybody; he's just trying to learn how the whole deal works.

Art

I'm just trying to come out of this deal with some money left over and the shirt on my back.  3% alone of a $300,000 house is a crapload of money and if I have to have a listing agent AND a buyer's agent, it doubles.  I cannot afford nearly $20,000 to simply sell my house plus pay for title insurance, doc stamps, and the umpteen hundred other "fees" associated with this stuff (nearly $25,000 now + closing costs on the new house, another $5,000 = $30,000 out of my pocket).  I guess I can look at it this way; I am going to buy another house with the proceeds of this one and I will not have to pay an agent as a buyer so it's a wash.

A lot of people make it seem as though this is something a person does everyday and it's so simple to do when, in fact, it is a huge deal to me and my wife since the proceeds from this house dictate the size, location, and condition of the house we expect to spend the rest of our lives in.  I'm just asking for opinions here--not looking to screw anyone.  Maybe I need to be a realtor.  Seems lucrative.

That said, what's the going rate for a realtor fee now?  I hear 2% on the radio ads here but haven't checked into that.  I realize it can be market specific.  What about just negotiating a flat rate up front?  The more I learn about it, the more I might just try and sell it wholly myself to save that money.  Very daunting endeavor indeed.

Greg

[The Rabbi]

Brad, I think what he's asking is, if he does a FSBO and an agent with a client shows up, who pays that agent?  That is, the agent already has a client who's looking for a house.  I don't think Tarp is trying to stiff anybody; he's just trying to learn how the whole deal works.

Art

I can answer that.

The seller is never obligated to pay an agent unless he signs a sales contract stating that or a listing agreement stating that.
But people doing FSBO's either state "agents welcome" which means they will pay the agent's fee or the agent will call and ask "are you cooperating with agents" or somesuch language, which means the same thing.  If you say no, it's likely sayonara to that buyer.  If you say yes and then try to stiff the agent you can expect trouble.

[Brad Johnson]

Rabbi is right on the money (no pun intended).

If you go MLS, even with the $250 no-rep service you mentioned, you are likely going to have to sign a contract that you will pay X commission to the buyers' agent as part of the listing deal (anything going into MLS is a listing agreement whether you have representation or not).

If you go straight FSBO, don't be surprised if an agent calls as say, "I have someone that is interested in your house. Would you be willing to pay X commission if I brought you a buyer." If you say yes, they will show up on your doorstep with some kind of simplified commission or compensation form. The only caveat is to make sure you are obligated to pay them a commission for a specified buyer, not buyers in general. If the buyer is not specifically stated on the form then you are signing a blanket commission agreement with them. In other words, no matter who they bring you will be legally obligated to compensate them. Some shady agents use this tactic to cover any and everyone they meet. More honorable agents will have a specific buying party listed in the compensation agreement.

As Rabbi said, you are only obligated to pay a commission if you have specifically signed an agreement for compensation. Just understand that the agent is representing they buyer's interests, not yours.

I would be surprised if an agent just showed up with clients in tow. Any agent worth his paycheck will have done his homework (contacted you and gotten a signed commission agreement) before letting his clients know that your house even exists.

Now some reality checks...

I don't know what the market is like in Ft. Lauderdale, but 300K worth of house is not a pittance in anyone's book. Chances are the people with that kind of money don't have the time to drive around looking for a home that just happens to be for sale. In all probability they will call a real estate agent and say "Find me a home." As a FSBO you are cutting yourself completely out of the majority of the market unless you intend to pay some kind of buyer's agent commission.

There is a reason that the national average percentage of FSBO to MLS hovers in the 15-18% range. Money. Your money. As in the amount of money in your pocket when you leave the title company. The more people that know about your home the more chance of getting a price in line with comparable properties.

For example, in the Lubbock market MLS listed properties sell for an average of 4.5% more than comparable FSBO properties, and they do so in approximately half the time (45 days vs 90). The average home here hovers in the 120K range and tax, insurance, and interest expenses amount to roughly 3.5% per month. The math breaks down like this

MLS
Sale price - $120,000
Time on market - 45 days (1.5 months)
Our commission - 6%
Price                                                    $120,000
Less commission                                     -$7,200
Less 1.5 months tax/insurance/interest      -$1,300
                                                            -----------
Total Deposit to Hip National Bank          $111,500


FSBO
Sale price - $114,600
Time on market - 90 days (3 months)
Commission - 0$
Price                                                    $114,600
Less commission                                            -$0
Less 3 months tax/insurance/interest         -$2600
                                                            -----------
Total Deposit to Hip National Bank          $112,000

$500 difference.

Now the question become one of how much you expect to spend on marketing (ads, flyers, etc) and how much your time is worth (phone calls, tours, negotiations). There is also the aspect of how the time difference is going to affect your move, and any income or living expense considerations in your new location. Figure on spending at least a bill or two on ads and flyers. That leaves $300 for time considerations. Figure you spend one weekend (Fri-Sun) holding an open house at 4 hours a day, plus another 4-5 hours negotiating and running back and forth to the title company. That's 16-17 hours of your time in the transaction. You have just established that your time is worth about $18 per hour - that's what you're saving by doing it yourself.

Don't think I'm telling you not to try selling it yourself. Far from it. Many people sell their home on their own every year. Just understand what you're getting into. You only save money if it sells for the same amount, and in the same time frame, as a similar home sold via MLS. The odds are roughly 80% against.

Whatever you do, don't fall into the thinking that you can price your house up hping someone will just come in a make an offer. The stats are unequivocal in this respect. Houses priced closer to their estimated market value tend to sell faster, and for higher prices, than houses priced significantly over market value. In fact, if you look at the percentage under market value for sold price vs. the percentage over market value for original asking price, they mirror. In other words, if a house is priced 5% over market, chances are it will eventually sell for 5% under market. The only exception to this is a very hot market where there are few, if any, homes like yours available for purchase.

Brad

[Paddy]

Brad pretty much covered all the bases, but I'll add one more thing.  If/when you do find a buyer as a FSBO, how will you know that buyer is qualified or is just jerking your chain?  He may hand some some earnest money to open escrow with the deal contingent on his obtaining financing, or even selling his current residence.  You could be tied up for months only to have the deal fall through.  A competent realtor will qualify his buyers before making an offer.  A serious buyer will have in handa letter from a lender verifying their intention to make a loan in a certain amount.

There is also the issue of pricing.  Without comparables of recently sold properties, how do you know you're asking the right amount?

[TarpleyG]

^^^

That makes a lot of sense the way you laid it out.  This is a very hot market and houses sell very quickly here.  I don't think I am opposed to paying 3% like I said above but I am not sure I can swing 6%.  Sounds like pricing is really the key to a successful, quick transaction either way.  I need to get back with the local realtor we spoke to and ask her what her fee is just so I know for sure.  I am assuming the 6% figure you had in your example is either a transaction you all handle solely, meaning you are the seller's and buyer's agent, or it is a combined 6% where the listing agent gets 3% and the buyer's agent gets 3%.

A lot to think about, really.  I may have to swallow this pill just so I can sleep at night.  Oh, and BTW, $300,000 is cheap for a house here.  $250,000 is the least you can spend to get a 2BR/1BA in a somewhat decent area and in a 30+ year old house.  The only thing cheaper is a condo or townhouse and you're still looking at $150 K to $180 K.  It's out of control here.  I cannot wait to move.

Thanks for coming up with that example for me.  That helps a great deal.

Greg

[Felonious Monk/Fignozzle]

If it were me...
I'd throw it out there using a flat fee service like "Help-U-Sell" (or dozens of similar), which charges a LOW flat fee for 30-45 days or so.  If you get a bite or two, go for it!

If not, contact an agent.  If they can REALLY sell in half the time, as Brad says, you're still doing fine, and only out the few hundred bucks for taking the shot.

Worth the risk, IMO.

Best of luck,
Fig

[Brad Johnson]

RileyMc made a good point. Make sure that any buyers are pre APPROVED via a reputable lender. Some things to watch out for...

-> A pre-QAULIFICATION letter. APPROVAL and QUALIFICATION are two very different things. I can pre-qualify you on a calculator. All I am doing is taking the information you supply and plugging in a formula to see if you probably qualify. An approval means that loan application has been made and processed, and that the lender has verified the information and is comfortable enough with it to approve the loan.

-> Anything from a jickylender.com web site. Internet lenders have earned a notoriously bad reputation, often sneaking in extravagent fees at the last minute and requiring the seller to pay them. If someone has an "approval" letter from anyone other than a local lender, be afraid. Be very afraid. There is absolutely nothing from stopping you from requiring their lender to be local.

-> Good realtors will have their buyers pre-approved before they ever set foot out the door.

-> If you pay a comission, say 6%, the usual split is half for the listing agent with half being offered to the buyers' agent.

Although the public generally regards 6% as the mainstay for a full listing, commissions are set independently by each brokerage according to their needs. Brokerages cannot, by federal law, fix prices. In fact, there have been several cases where an innocent, off-the-cuff, well-intentioned comment has landed a broker in very hot water.

A little bit of free advice, be different. If the agents in your area are used to getting 3% from FSBO sellers, offer 4%. Make it worth their while to put your house a the top of the list. And make sure they know you are there. Some simple flyers, or even just a Word document with a couple of pics, some contact info, and a big "I'LL PAY 4% FOR A BUYER" at the bottom of the page is guaranteed to get their attention. Find out the four or five largest brokerages in your area and pass them out. It doesn't hurt to throw in a couple of boxes of Krispy Kremes.

Brad

[Matthew Carberry]

Also,  many agents are free to take whatever they want for a commission.  You can't necessarily get teh buyer's agent to give up anything but when you list you may be able to negotiate a half-point or so discount from your listing agent.  I've done deals for 5% total to me rather than 6%.  The agents can dicker among themselves.

Any money they make on your sale is money they didn't have yesterday, if you have a clean property that won't require a lot of work they will often negotiate on their cut.

[The Rabbi]

I generally think of real estate agents as one step above child molester.  Maybe.
But Brad is right here.

And I will add that a good real estate agent (there is probably one in your area) actually earns his/her commission.
I had a condo that I wanted to sell.  It was rented and the tenant agreed to buy it from me for $65,, which was a good price for it.  She jerked around and two weeks before close told me she wasnt going to buy it.
I called my favorite agent, a woman who works all the time.  In two days she had a qualified buyer for $75,000 and we closed.  Do the math, she made me money (and I'll add that she only charged 4.5%)
I would look to see who the top producers are in your area.  Look over several years.  Then pick the one who is consistently #2 or #3.
Of course you can also negotiate commissions, something realtors are loathe to tell you.

[Brad Johnson]

I generally think of real estate agents as one step above child molester.  Maybe.
But Brad is right here.

Actually, the social order from top to bottom is...

Used Car Salesman
Lawyer
Real Estate Agent

Brad

p.s. - If you can't poke a little fun at yourself every now and again, you should be doing something else...

[garyk/nm]

Another (part-time) agent here. Having sold a few properties of my own, and handled others, the temptation is always there to try and save a few bucks by going bareback.  Consider this: say a buyers agent comes to you with an offer, and you have agreed to let them do this, are you savvy and educated enough in RE matters to tell if they are trying to pull something over on you?
Here's an idea which may work well in a hot market. Go to the largest brokerage in the area and ask if they will go for a 4.5%* comm if they sell it in-house (seller and buyer agent in the same brokerage). This stands a good chance of happening if they have a lot of agents. Make the listing  in-house only for the first 30 days, then revert to MLS if not sold by then.
In a truly hot market, if you price realistically, you should have multiple offers well before the 30 days is up.
 
 * In a hypothetical 6% total comm listing, the seller's broker gets 3%, likewise the buyer's broker. It is then split between the broker and his agent, usually around 50/50. So in the case of an in-house sale, the broker would be getting double comm for both sides of the sale.
This has worked for me in the past and the potential savings are not insignificant.  (1.5% of 300K ain't chump change).

Sorry to be so wordy. HTH.

[Felonious Monk/Fignozzle]

Brad, Greg, Gary, et al--

I want to thank you for this thread.  We are learning so much from each other as we weather the bumps and hiccups of life, and this is certainly one we share in common.

It's like having a 'friend in the business', and just one more reason why this RoundTable is so valuable to all of us.

I'm printing this thread for future reference.  Greg, let us know how it turns out!

Thanks & Regards,
Fig

[The Rabbi]

.  Consider this: say a buyers agent comes to you with an offer, and you have agreed to let them do this, are you savvy and educated enough in RE matters to tell if they are trying to pull something over on you?

They'd better be.  This isnt rocket science.  The information is out there and not hard to come by.

Here's an idea which may work well in a hot market. Go to the largest brokerage in the area and ask if they will go for a 4.5%* comm if they sell it in-house (seller and buyer agent in the same brokerage). This stands a good chance of happening if they have a lot of agents. Make the listing  in-house only for the first 30 days, then revert to MLS if not sold by then.
In a truly hot market, if you price realistically, you should have multiple offers well before the 30 days is up.

I think that's illegal.  If the agent takes the listing I think they are obligated to list it in MLS in order to get the widest number of buyers and thus the best price for the customer.  I could be wrong on that, it's been so long since I had the course.
But in a hot market an agent should be happy to list it for 4.5% with minimal work on his part.

[Brad Johnson]

I think that's illegal.  If the agent takes the listing I think they are obligated to list it in MLS in order to get the widest number of buyers and thus the best price for the customer.  I could be wrong on that, it's been so long since I had the course. But in a hot market an agent should be happy to list it for 4.5% with minimal work on his part.

It's not illegal, but it is very shady/unethical unless the owner has agreed to or requested it. It's the "implied" part - by listing with you the client has an expectation that their house will be in the MLS. By implication this means the house should appear on MLS within a reasonable amount of time unless the client has consented to, or requested, the ommission.

Also, most MLS membership agreements give the broker a set number of days to input the listing to MLS. The specifics change from board to board but it's usually somewhere in the 3-5 day range. Agents who regularly disregard the rules risk being booted from the board.

Brad

[The Rabbi]

Thanks for clarifying that.  I remembered something about "hip pocket" listings being an ethical no no but not the specifics.

[Brad Johnson]

Around here, at least, referring to something as a "hip pocket" listing usually means the owner has told you they will sell if you find someone, but they are not wanting to officially list. It's all word of mouth. If someone lists, but has requested that their home not be on the MLS, we refer to it in casual conversation as an "in-house" listing.

Brad

[garyk/nm]

Rabbi, with all due respect, the seller dictates the terms.  If the seller wants a 30 day listing with no MLS, then the listing agent writes it up that way. There is no law (that I am aware of) which says that a listing has to go on MLS.
It is a matter of contracts and the seller dictates the terms.
Most brokers are cognizant of in-house sales and usually are willing to cut a deal to get the listing.  Nothing shady or illegal about it.

[The Rabbi]

Yes, the seller could contract that way.
But why would a seller do something against his best interest?

[Brad Johnson]

But why would a seller do something against his best interest?

I ask myself that same question several times a day....

Brad