For Sale by Owner: Pros and Pitfalls. Please proof this new MIC article.

For Sale by Owner: Pros and Pitfalls.

Good job Nick!

Thanks for all you do for us Nick. The article now lives on my site, with a few local SEO modifications.

The are attracting massive consumer traffic.

Respectfully, that article looks like it is written by someone who has a (personal) bone to pick with REALTORS and paints them with a very broad brush, in a very poor light.

It is also not entirely accurate with the actual information presented, and even contradicts itself.


Al in TN

I agree.

The article does not mention that the broker on both sides sees part of that 6% one way or another. I would also think that the $800,000 house is not the norm for most the Realtors in the U.S.

While the seller has a potential to save money selling the house themselves, the buyer is also thinking they can save money buying a house from a “FSBO”. So the chances of the sellers getting the $48,000 isn’t as likely.

Agent wants? They seller has the control. The agent may give the sellers a good reason to sell at a lower price and if that reason is good enough for the seller - Adult(s), than that is a different story.

From there on I don’t see a problem. The first three paragraphs are in need of some work. That information makes people think one way when it is really another.

LOL - Didja notice that right next to that article on the page was “Find Your Dream Home or Apartment” with selected by default? Too funny.

Incidentally – Numbers 2, 3 and 5 present inaccurate (and obviously slanted for the purpose of/by the author) information. Number 4 is a gray area and Number 1 has always been that way, even before the Internet became an everyday appliance in our lives as a FSBO could advertise in almost as many places as an agent could in the olden days too.

Al in TN

Al - I too sometimes get a distorted sense of an article when I skip over the largest paragraph. There are no “sides” in this article as much as a discussion of two options, and explanations as to why a seller might choose both. Read the whole thing.

And 2, 3 and 5 are inaccurate? It just says to learn legal requirements, hire a lawyer if needed and be a good negotiator. Criticize me for stating the obvious, maybe.

Broad brush? Guilty as charged. It’s not easy to cram an entire profession into a page, so if I’ve created a broad picture for a non-expert audience, mission accomplished. Thanks for the compliment.

Rob, the item numbers I referenced were in regards to the link to an MSN article that Mr. Currins posted, not the InterNACHI article you co-authored. The link itself was in my response/post but do apologize for any confusion.

As far as “your” article goes, feedback was asked for here and I gave my general impression in a previous post. Perhaps I should have been more specific, but I didn’t want to turn it onto a bashfest so I kept my comments relatively generic so as not have my post construed as an attack. Hey, it was late and I was tired – Past my bedtime.

Hurt feelings and sarcastic responses aside, I would be happy to list possible items of concern that I saw (and I DID read the whole thing - Three Times) in the article/report. if you’d like.

Lemme know if I can help. I have been charged with being a Technical Editor for books and online articles on/about the real estate industry in the past, I am used to ensuring accuracy in an article regarding the field.

Al in TN

BTW - No one ever lists the Number One reason a home owner can go the FSBO route instead of listing with an agent…IT’S THEIR DANG HOUSE AND THEY CAN DO WHATEVER THEY WANT WITH IT (even if that means statistically netting less $$$$$ in most cases than if they listed with an agent, or potentially setting themselves up for a lawsuit later on as the vast majority of real estate related purchase/sales lawsuits involve FSBOs and not agent brokered sales - Usually due to a Lack of Disclosure of Material Defects).

I used to get grief from my former house schlepping brethren for saying that little “it’s their house…” diddy out loud :wink:

Sometimes I think they forget…

Al in TN

Go for it. I’ll make changes to the article if need be.

OK, here goes. Please remember that this is intended to be constructive, and to make your article more believable:

First off, that $800,000 figure used is pure sensationalism and a red herring. The current median home sales price in the US is about $173,000, and has been under 150K for most of our lives.

I sold real estate in CT (THE or one of the Top 3 richest states in the country year after year) for almost 19 years, ranking among the Top 200 or so in sales transactions in the entire state (out of something like 37,000 licensed sales people) and was usually 1st, 2nd, or 3rd in sales in my immediate sales area (out of approx. 1,400 agents) and I have never sold a $800,000 home so it (your example) got my attention.

I wished you would have used a more realistic number that people can relate to, maybe 250K? That’s roughly CT’s average today if memory serves me correctly.

Commissions - There is NO such thing as a “standard” (often called “typical”) 6% commission. Frankly, commission rates are much closer to 5% nowadays and often less on higher priced homes so that 800K example you used would be highly unlikely to have a 6% tag on it; probably more like 4% or even 3 1/2% (before it get split up).

I charged the highest rates in my old area and it has been like pulling teeth to get 6% even on low priced properties for most of the last decade. Properties (cheap houses and condos, under 100K) that I would have gotten 7% for 10 years ago I was recently getting only 5 1/2%

FWIW, the highest rate I ever personally received was 22 1/2% (yeah, you read that right, 22.5%), and the lowest was a flat fee of 500 bucks to broker (do the paperwork and take care of the appraisal).

Agent Commission Splits - The reality is that 94% of the time (actually 93.7% last time I checked) someone other than the listing agent brings the buyer (co-broked via MLS) so the total fee is almost always split between companies. From there the agent splits their take with the brokerage (60% to the agent is commonplace nowadays) so the agents themselves are getting only a fraction of that 5% total fee. Even in “100%” Brokerages (like RE/MAX) the agent gets 95% of their take, then pays rent and other expenses to the brokerage, usually averaging out to about 65% in the end (I was a RE/MAX agent for 8 years before opening my own place).

I don’t know what a Boxster costs, I’d rather have a Corvette Z06 anyway :wink: – Regardless, it is pretty damn rare that an agent would get $48,000 for a single transaction. Shoot, most (75%) of them don’t make half that amount for an entire year. I once had 11 closings in a single day and didn’t make $48,000.

There was a conflict when you said in one paragraph that “The agent might want to accept a low offer because they’re in a hurry to sell the home” yet not too long afterwards you laud said agents for “the best reason to hire a real estate agent is that they know how to price a home”.

Which is it? Are agents poor, starving (or greedy, money grubbing) people who want you to undervalue your home for a quick sale, OR, are they professionals that know what to price your property properly at so you can maximize your equity when selling?


You stated “When selling a home without an agent, owners will be responsible not only for paying the fees charged by various professionals (real estate agents typically absorb these fees)” – What are these fees you are talking about that an agent normally pays?

I have paid for a home inspection or two in my time when a client was running tight, but it has never been my experience that an agent paid for a closing attorney, a mortgage originator, an appraiser, etc. so I don’t understand what you were getting at.

You mentioned that “In 2006, these “for sale by owner” (or FSBO) sellers totaled 12%” but did you realize that was a drop from the historic FSBO rate of 14-15%? We were in the hottest real estate market ever at the time yet the FSBO rate was roughly 20-25% lower than what had long been regarded as the norm in the industry.

Interesting, yes? At a time when it should have been easier to sell on one’s own, many more people than in the past chose to use an agent. That could be a story in itself. :smiley:

See what I meant when I said your article was anti-agent and using a pretty broad brush to paint a bad picture?

You said a couple good things in the article too, I’ll start another posting to highlight those and to offer some constructive suggestions of reasons to FSBO, and/or hire an agent so this post doesn’t get too long and unruly.

More to come, back in a few as I have to run to the store for wifeypoo…

Al in TN

Part Deux :slight_smile:

The number one reason (in my mind, based on almost two decades of used house selling) for an owner to go the FSBO route is the ability to be more flexible on their pricing, especially in a down marketplace.

In a down marketplace with lots of inventory and few buyers Price is King and one can’t go by the “last three comps” to set their house price in many cases as that is already ancient history and prices are still dropping.

The solution is to cut their price under the sales comps, plus a little more, to make themselves ultra competitive against the current competition; because if they languish on the market then they’ll get even less in the end if they aren’t aggressive and cut to the chase right up front.

Going FSBO might help them do this without taking too big a financial hit.

They aren’t “saving the commission” per se, but it could be the difference in selling and moving on, or not at all, and evading potential financial ruin. In essence they are doing the agent’s job, but doing it for free in exchange for a sale.

Gotta toss some Ribeyes on the grill, back with more later.

Hope this is helping you with the article :slight_smile:

Al in TN

Good Read and Argument, lol

Now that I’ve recovered from the prank call (LOL, I’ll get even) from a fellow iNACHI member this evening I figured I should follow through on my promise and finish what I started here so – Part Trois :wink:

I mentioned earlier about the 800K thing being off base but that doesn’t mean that selling on one’s own can’t still save a sizable chunk of change.

Using a more realistic 250K sales price and a fee amount of 5% a potential FSBO, all other things being equal, can still pocket a cool $12,500 for their efforts.

And they don’t care about an agent’s split, or if the sale is co-broked between companies, it’s the (full) 12K that is real to them that they’d like to keep in their own bank account, and understandably so.

So why hire an agent?

First off (and also why all agents should demand the use of a good home inspector as well) is Limiting Liability. A good REALTOR will help keep a seller out of Court, potentially saving an owner tens of thousands of dollars.

Whether it’s making Proper Disclosures, or insuring that the seller client “stays in contract” (and not allowing them to default needlessly) and acting as the buffer so that something as simple as a slip of the tongue by the seller (there are so many Fair Housing Laws that can innocently be violated it’s amazing), this reason alone will often pay back the seller several times a commission payment simply by their agent keeping them out of trouble.

The buffer also works in other ways - Buyers many times don’t want to deal directly with an owner. Sometimes it’s a trust issue, other times they are simply uncomfortable dealing direct and want someone in the middle helping things along.

I’ve heard it dozens of times, even on houses that are listed, when going to show and the buyer says something along the lines of “Oh crap, the seller’s home” and virtually without exception after the ‘Seller’ showing them the house they end up buying something else.

Why? Probably a combination of most sellers not being professional salespeople, having too much Pride in their homes thus being too emotionally involved to objectively sell the features and benefits of the property and not being able to properly quantify/qualify a buyer’s actual needs and desires.

Home Inspectors run into this a little bit too when a seller tails along on the inspection.

This is also reflected in those 2006 Stats you quoted in your article Rob – Did you know that of those 12% sales that went FSBO that 5 of those 12% were buyers who already knew the seller, so in reality only 7% of sales were true FSBO to strangers (and a good chunk of them still involved a buyer’s agent on the other end anyway).

I could go on and on about helping with financing, handling the Appraiser, etc. etc. etc. that a good agent does to earn their keep but I won’t bore everyone here and will stop, hoping you see the root of my original comments on your article.

There is one other thing though - Statistically a FSBO nets in their pocket roughly 11-16% LESS than if they had used an agent. I’ve seen several studies over the years quantifying this.

(the 2006 Study actually showed a crazy figure of something like 32% less for a FSBO believe it or not, based on median home sale prices but personally I would never use that figure and believe it to be an aberration)

So I suppose that they many times don’t save much or any $$$$ while at the same time taking on lots of potential liability, aggravation and loss of free time when doing it themselves.

I dunno, maybe there isn’t a good reason for a FSBO to do it themselves except in rare circumstances afterall.

I hope I provided some food for thought :slight_smile:

Al in TN

Thank you, I made some changes.

That or they don’t have enough money in the house to sell it and pay a Realtor. Many took the equity and paid other item such as credit card bills or vacations.