It wont, it's just media fluff to make a story sound good.
My For Sale By Owner Journey (Home Sale)
- Thread starter Owen Lucas
- Start date
Since you asked the question.
The answer is, why do you think someone is going to show your house and not get paid? Close to 90% of buyers use an agent.
The second question you asked.
How do you know how much it cost any business other than your own to run and pay the bills?
It's ok to rage against an industry, really. But we who do, do it because we dont know the industry and that isnt just real estate.
BTW I would expect in your case to have maybe an easy sale, more so your not sure how to price it and like you say, its a depressed area and many savvy investors buy up properties like that at the snap of a finger and pay cash too. Investors love depressed areas.
I cant even warp my head around an area where a home sells for that price. Heck my first small home that needed lots of work 40 years ago was that price.
Truly good luck.
What maybe really interesting for you, is selling yourself and then holding the mortgage for it as well, then if they default, you get it back, and can sell it again, or if they pay you get a decent income from it for many years and avoid a big lump of taxable income?
I've heard of one fellow who sold his farm 3 times, before the 3rd buyer actually paid off the mortgage. He did well just on the down payments and it sold for more each time.
I've heard of one fellow who sold his farm 3 times, before the 3rd buyer actually paid off the mortgage. He did well just on the down payments and it sold for more each time.
JHZR2
Staff member
Agree. To me it’s a stupid extension that someone is going to ask for x% less due to a marginally lower commission… and that this is going to magically fix the home affordability issues for people.
Of just use Redfin which charges less than 6% already. Or use a flat fee listing. I've done it.Wait until July. The 6% commission is going away.
Home prices could go down now that the biggest group of real-estate agents agreed to lower commissions
The National Association of Realtors said it would pay $418 million in damages to settle lawsuits that claimed the NAR kept commissions unfairly high.www.businessinsider.com
Owen Lucas
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I don't expect them not to have a commission, but 6% is egregious in my view and many others.
"Americans have long paid unusually high commissions to real estate agents. The typical commission in the U.S. has been almost 6 percent, compared with 4.5 percent in Germany, 2.5 percent in Australia and 1.3 percent in Britain. As a recent headline in The Wall Street Journal put it, “Almost no one pays a 6 percent real-estate commission — except Americans.”"
The Realtors’ Big Defeat
A settlement in the real estate industry is a case study of a central flaw in free-market economic theory.
Showing a house a few times is not a complicated high skill task, I hate to be gruff about it but I don't see the value of doing that and charging $100's / hr. Sure they need to get paid. If this wasn't an issue then why is there a massive settlement and now the DOJ is getting involved? People are tired of paying too much.
I don't and I'm trying to reverse engineer the system with my little experience on the topic and then recreate it as a DIY project. I'll let everyone know what I find out.
From being involved in managerial levels in other businesses it appears the main cost is employees here. The employees may have 4 year degrees and pay some RE licensing exams. I presume these exams are difficult but not bar / medical exam difficult.
What other costs are there, a CRM for managing prospects, building space? Basic office stuff.
What I'm saying is there is a lot of fluff and I hate to say, unnecessary profit / markup, which is what all the recent outrage appears to me for. Maybe it's worth it for some but to me it's too much.
If someone can itemize, even very briefly, the costs of selling a house, I am open to that. The actual numbers behind a sale and the profit margin.
I agree, my case will be an outlier because I presume most investors / landlord prefer out of pocket FSBO deals. They are cost conscious to begin with, it's the nature of being a land lord, and dealing with these guys is going to be tough negotiating I presume. I like negotiating though, I've been borderline kicked out of car dealerships and I know what I have here. A high quality house, turn key operation, and I presume it will sell itself and generate a lot of interest. We'll see!
Thank you, I appreciate it. I know I might have gone a little scorched earth on the profession and don't mean to offend anyone in the industry. It's mostly my ignorance and napkin math assumption of the process. Maybe I'll be right, or get lucky, or end up finding a realtor?
I figure if I can't pull this off myself, then what am I good for, is it that hard? It's not like I'm going into a match to play Andre Agassi.
Us BITOGs take on mechanical projects that push the limits of our experience and skill. To me, this is one of them, just in a different field.
Just so you know, I’m not offended and I’m not in the industry and I haven’t been in a long time now.I don't expect them not to have a commission, but 6% is egregious in my view and many others.
"Americans have long paid unusually high commissions to real estate agents. The typical commission in the U.S. has been almost 6 percent, compared with 4.5 percent in Germany, 2.5 percent in Australia and 1.3 percent in Britain. As a recent headline in The Wall Street Journal put it, “Almost no one pays a 6 percent real-estate commission — except Americans.”"
The Realtors’ Big Defeat
A settlement in the real estate industry is a case study of a central flaw in free-market economic theory.www.nytimes.com
Showing a house a few times is not a complicated high skill task, I hate to be gruff about it but I don't see the value of doing that and charging $100's / hr. Sure they need to get paid. If this wasn't an issue then why is there a massive settlement and now the DOJ is getting involved? People are tired of paying too much.
I don't and I'm trying to reverse engineer the system with my little experience on the topic and then recreate it as a DIY project. I'll let everyone know what I find out.
From being involved in managerial levels in other businesses it appears the main cost is employees here. The employees may have 4 year degrees and pay some RE licensing exams. I presume these exams are difficult but not bar / medical exam difficult.
What other costs are there, a CRM for managing prospects, building space? Basic office stuff.
What I'm saying is there is a lot of fluff and I hate to say, unnecessary profit / markup, which is what all the recent outrage appears to me for. Maybe it's worth it for some but to me it's too much.
If someone can itemize, even very briefly, the costs of selling a house, I am open to that. The actual numbers behind a sale and the profit margin.
I agree, my case will be an outlier because I presume most investors / landlord prefer out of pocket FSBO deals. They are cost conscious to begin with, it's the nature of being a land lord, and dealing with these guys is going to be tough negotiating I presume. I like negotiating though, I've been borderline kicked out of car dealerships and I know what I have here. A high quality house, turn key operation, and I presume it will sell itself and generate a lot of interest. We'll see!
Thank you, I appreciate it. I know I might have gone a little scorched earth on the profession and don't mean to offend anyone in the industry. It's mostly my ignorance and napkin math assumption of the process. Maybe I'll be right, or get lucky, or end up finding a realtor?
I figure if I can't pull this off myself, then what am I good for, is it that hard? It's not like I'm going into a match to play Andre Agassi.
Us BITOGs take on mechanical projects that push the limits of our experience and skill. To me, this is one of them, just in a different field.
My posts are always nothing has changed in the last 50 years.
There are many successful for sale by owners, but they only constitute 10% of the population and 5% of that they knew the people. Even when they sell many underpriced, the house, and an agent wouldn’t have caused them anymore.
The number 6% is used for dramatic purposes. I would think it might be that on lower priced homes, but I have no idea.
I have not seen 6% commissions in the New York metropolitan area since around the year 2000 and in fact the 4.5% media report your quoting for Germany is very typical.
That doesn’t matter real estate is a service pay whatever you want or whatever you don’t want. Truly and I mean this all good
As far as the media, I don’t care what they say, happens in the rest of the world as I assume it’s been the same for the last 50 years. We love to quote the media when it fits our side of an argument that we’re trying to create that goes for anything and any topic.
Since the Internet there is a media story for any topic that you want to choose
Home priced like yourself is way below the national average of almost $500,000 and it might be smart just to try to sell it on your own since you want to do it as a project anyway.
It sounds like you really in a rural area vs where people in metropolitan areas, severely limit their showings when not listed with a broker.
If you read my previous post, the agents have the buyers, buyers do not want to go around and talk to 4, 8 or 12 homeowners, some of which are dishonest or have something to hide. The buyers see the homeowners as the sales people and just imagine the dredge of them every week lining up all the homes they want to see which of for sale by owner only knowing they will have to talk to each and everyone of them and tell them what a great house they have so they can get out the door and move onto the next.
I’m just talking here and now it’s time for me to shut off the phone and get some work done outside the house
Just a few thoughts...
It's legal to sell your own property but you have to ask if you're willing to bear 100% of potential liability if/when the buyer decides to sue you, for anything whatsoever, before or after the close of escrow? Most, but not all, "Realtors" (keep in mind not everyone who holds a real estate license is a "Realtor") carry E&O (Errors and Omissions) insurance to not only protect themselves, but you as well against potential lawsuits.
Since you're going through this process ..."mostly for the principal and the challenge"..., you have to ask yourself if you're willing to take the risk of potential litigation?
When you sell a house yourself, you're not "saving" any money. The buyer(s) know you're not paying a commission, and they factor that into their offer. They want to absorb the commission, just like you do. In California, commissions have been negotiable for decades. I can quote you the California Civil Code section if you like and the standard "CAR" (California Association of Realtors) contract even says, in 10 point bold face type that commissions are not set by law and are negotiable. (Note: I know the property you're describing is not located in California).
Keep in mind that the commission you pay is split between ALL agents (buyer AND seller) of the transaction. In a typical situation, the buyer agent works for one real estate office and the seller agent works for a different real estate office. Let's use your example of $130K sales price. IF you paid the "typical" 6% commission (for all real estate agents involved), that would be $7,800. Now split that between both real estate offices, and escrow would send them a check for $3,900. Each agent working for an office doesn't get to keep that $3,900 because they have a commission "split" agreement with their office, which (typically) ranges from 55%-80%). Let's use the best case of 80% here. That means that agent would get paid $3,120 for the transaction. If they're e new agent who likely doesn't have that lucrative agreement with their office, they may get $2,145 (55% of $3,900). And one final thing...that's their gross pay so you have to take State and Local taxes out of those figures when April 15 comes around. The commission gets whittled down quickly!
"The estate attorneys real estate agent nosed in on the deal and said the property is worth $130k after driving by the house"...130K?...where did they come up with that figure? From their Ouija Board? Without looking at comparable sales? Without even looking at the property? That's laughable for an agent to make statements like that and does disservice to agents who do things correctly.
Call your favorite pest control company and have them perform a pest inspection. It will probably cost you ~$100, but you'll know before you begin any negotiations if you have any dry rot, active and/or inactive pest infestation, etc. After the report is completed and you know what, if any, repairs may be needed, you'll be in a better position to negotiate price and very likely have a smoother transaction. Give the report to any potential buyers before they write you an offer to purchase. It would be better to find out before you meet the buyer(s) that you have $100 of repair work or potentially thousands of dollars of repair work (dry rot, powder-post beetles, etc., etc.).
Good luck!
Ed
It's legal to sell your own property but you have to ask if you're willing to bear 100% of potential liability if/when the buyer decides to sue you, for anything whatsoever, before or after the close of escrow? Most, but not all, "Realtors" (keep in mind not everyone who holds a real estate license is a "Realtor") carry E&O (Errors and Omissions) insurance to not only protect themselves, but you as well against potential lawsuits.
Since you're going through this process ..."mostly for the principal and the challenge"..., you have to ask yourself if you're willing to take the risk of potential litigation?
When you sell a house yourself, you're not "saving" any money. The buyer(s) know you're not paying a commission, and they factor that into their offer. They want to absorb the commission, just like you do. In California, commissions have been negotiable for decades. I can quote you the California Civil Code section if you like and the standard "CAR" (California Association of Realtors) contract even says, in 10 point bold face type that commissions are not set by law and are negotiable. (Note: I know the property you're describing is not located in California).
Keep in mind that the commission you pay is split between ALL agents (buyer AND seller) of the transaction. In a typical situation, the buyer agent works for one real estate office and the seller agent works for a different real estate office. Let's use your example of $130K sales price. IF you paid the "typical" 6% commission (for all real estate agents involved), that would be $7,800. Now split that between both real estate offices, and escrow would send them a check for $3,900. Each agent working for an office doesn't get to keep that $3,900 because they have a commission "split" agreement with their office, which (typically) ranges from 55%-80%). Let's use the best case of 80% here. That means that agent would get paid $3,120 for the transaction. If they're e new agent who likely doesn't have that lucrative agreement with their office, they may get $2,145 (55% of $3,900). And one final thing...that's their gross pay so you have to take State and Local taxes out of those figures when April 15 comes around. The commission gets whittled down quickly!
"The estate attorneys real estate agent nosed in on the deal and said the property is worth $130k after driving by the house"...130K?...where did they come up with that figure? From their Ouija Board? Without looking at comparable sales? Without even looking at the property? That's laughable for an agent to make statements like that and does disservice to agents who do things correctly.
Call your favorite pest control company and have them perform a pest inspection. It will probably cost you ~$100, but you'll know before you begin any negotiations if you have any dry rot, active and/or inactive pest infestation, etc. After the report is completed and you know what, if any, repairs may be needed, you'll be in a better position to negotiate price and very likely have a smoother transaction. Give the report to any potential buyers before they write you an offer to purchase. It would be better to find out before you meet the buyer(s) that you have $100 of repair work or potentially thousands of dollars of repair work (dry rot, powder-post beetles, etc., etc.).
Good luck!
Ed
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Make sure to get up to speed on disclosure laws in your state.
Owen Lucas
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As I posted in the Zillow thread: "I've been calling multiple agents to see if I can negotiate this magical negotiable rate and everyone is sticking to their guns saying 6% or maaaybe 5.5%. It's a monopoly and you guys know it."
This the biggest story that has come out on this topic in years in my view. Realtor laws and regulations have never made it to MSM headlines from my daily observations, which is why I am talking about this and realize the grift.
Major metro area / warzone.
Are the realtors advocating for the buyer here by showing them all homes for sale or are they protecting the agencies profits and going for the home run deals? If FSBOs are so rare then can't the realtor use their superior negotiating skills and education to work a deal out in favor of everyone?
Shouldn't the buyer be aware all homes for sale or is the resentment of FSBOs and "tough negotiations" thus turning this into a anti-FSBO campaign at the stake of showing all potential candidates to the customer?
To me it looks like a focus on the easy wins with low effort work provided by a rigged system that pays well. A lot of people are seeing it this way, the DOJ and this class action settlement didn't arise out of thin air without reason.
I will have a real estate attorney draft up documents. Property for sale as is and all the legalese that goes with it.
I'll wait them out, it's a hot market.
What difference in work and effort considering a 1 week sale in a hot market does the agent do with selling a $130k home and $500k home? The demand is there, it's not 2008.
The guy was supposedly an expert in that market, maybe he is familiar with comps or he's just talking out of his muffler, doesn't matter. I had the appraisal done recently and we'll see what the numbers come back as.
I'll be hiring an attorney.
So tell me guys (@Tharber, @Ed_Flecko, @alarmguy), what is the difference in effort and cost of doing business between these 3 properties when they sell in a week due in this hot market?
1. $150k 2 family duplex in a bad area of town @ 6% = $9000 commission
2. $500k Average home @ 6% = $30,000 commission
3. $1MM Mansion in wealthy neighborhood @ 6% - $60,000 commission
They all get uploaded to MLS, photos taken, an open house, forms filled out. What extra things do you do to warrant a $30k increase over the $500k home when selling a $1MM? What extra expenses go into it when people are banging down the door and getting into bidding wars? Why even waste time the $150k property?
So what is your idea of a solution?
Forced labor?
Government mandated pay for employees of all companies and self-employed people?
Government mandated pay for independent contractors?
Are you being forced to list your home?
Are you being denied the right to sell it on your own?
Why is it when I go to buy a product? Let’s say a Chevrolet traverse wherever I go in the country. General Motors puts the price of the product on the car i that I must pay is that a monopoly too?
How about your company? Do they have a set price that they charge?
I mean, oh my God I can’t even believe what I’m reading truly and I’m saying this respectfully.
A real estate agent is an independent contractor and is free to operate his business in the United States of America, and make any income he/she wishes.
Hey, you know what when I go buy gasoline for my car, guess what all the gas stations around here are within $.10-$.15 of each other too LOL same with the case of Coors light! LOL which is also the same as a case of Miller light!
It’s a free country man there’s no collusion, no one has to show your house, and no one is obligated to show your house.
Sometimes agents will, but as a for sale by owner an agent is at a detriment having to deal with the homeowner who is not experienced in real estate, so it’s less desirable to show a for sale by owner.
Not only that the agents workload is doubled because the homeowner doesn’t know what the heck he’s doing but I don’t need an excuse. No one has to show your house or any house.
Curious to hear what your solution would be?
Would you like your company or the company of people you know or anyone in this forum to have the government set a price that they have to sell their products and services for and determine where those products can be displayed, and sold?
I thought you were selling on your own and we’re going to list on MLS for $100?
You seem to want something for nothing, you want to determine the pay of other peoples professions?
I’m curious to hear your point of view because all all I read in your posts is you want people to work for you at a price you determine.
Hey, what if you come to my house this summer and cut my lawn for five dollars a week?
All the lawn services here charge $55 a week gosh darn Monopolies. we should have a national set rate for landscaping services to, and housekeeping, don’t want to clean your own house have the government determine a pay that somebody has to come into your house and clean it LOL
It’s all good. I hope my statement doesn’t sound angry because I truly mean it to sound silly because that’s how silly this is.
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AZjeff
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I tried selling real estate when I was a lot younger. FWIW the commission was 6% no negotiating in small town Pa. I soon found it wasn't for me, I discovered I need to be paid for hours worked to be comfortable and feel useful and that's not how RE works. My take-away was that what you made on a sale whether you sold a property or listed a property that got sold by another agent covered the time you spent chasing leads, networking, taking photos, doing showings that didn't result in a sale, office time, etc. that didn't generate a dollar of income. The seller paid me for time not spent on his sale. Just how it was and how it is still I imagine.
That's what every commission sales position is like. Its not for everyone, that is for sure.
Real estate agents hate this one little trick
and this one is true lol
Put a sign out front. Wait for a flipper. Flippers and wholesalers LOVE duplexes in low rent neighborhoods. Sure, they'll heeem and haaaw at what you want, but you ain't in a hurry.
and this one is true lol
Put a sign out front. Wait for a flipper. Flippers and wholesalers LOVE duplexes in low rent neighborhoods. Sure, they'll heeem and haaaw at what you want, but you ain't in a hurry.
In California, it's very common to have buyers or sellers (although usually buyers) complain after the close of escrow to an attorney who will take their case "on contingency". The plaintiff owes the attorney no money unless the attorney can recover some "damages" from the agent(s) involved. Attorneys know (because they are taught - https://www.ceb.com/products/practitioner/real-property-law/) that most agents carry E&O insurance with a several thousand $$$ deductible. So, they just need to contact the agents of the transaction and threaten them with litigation unless the agents are willing to settle for X number of dollars. Agents will often acquiesce and pay the plaintiff money to make "the problem(s)" go away and not have to submit an E&O Insurance claim. Ask me how I know all of this?...one of my best friends is a Real Estate Attorney and I personally have experienced this type of scenario.
I don't sell Real Estate any more as a Broker. When I did, I charged from 5% to 8%, depending on the complication of the transaction and a variety of other factors. Some buyers and sellers are very slimy. As an agent, you have to weigh your risks versus reward carefully before deciding on that you think is a fair commission.
Ed
Owen Lucas
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My personal solution is to DIY, FSBO, or a discount broker.
The real solution is coming from the DOJ and multiple pending law suits, why would they be targeting realtors? The agents I spoke with on the phone say they don't know what is going to happen or either they don't want to show their cards.
In no way am I looking at regulated pricing, that's an un-American slippery slope.
What I am point out, along with the sentiment and experience of some cost conscious people, is that there is a decentralized collusion here. Most realtors don't want to adjust their negotiation which essentially structures the market price a certain way and consumers don't have much say.
Then the defense is "well everyone's paying us for it, it's the invisible hand of the market". But those that try to negotiate are stone walled and the FSBOs are shunned.
The gov't is stepping in to rectify this and those that don't see the value add from realtors, especially when homes sell them selves in a week, go FSBO with attorney help.
No one here has been able to quantify the difference in work or effort between a $30k and $60k commission on a home selling in a week.
There's a variety of car manufacturers, I can choose one that is cheaper, but in the world of real estate, most companies won't budge.
My last 2 vehicle were purchased well below MSRP with no fluff addons. They didn't hit a homerun with me but they'll get the next 10 people that come through the door.
I'm cost conscious and if I go with a realtor, I'll find a discount broker. I don't see the value of using a realtor in a hot market.
My main plan is to FSBO though and wouldn't you have it I might just end up like the 5% of people that sell to someone they know. The neighbor (who's also a landlord) came out saying they are interested. If they agree to the price then great, everyone saves time and money sans some legal formalities.
To me that isn't worth a $40,000 commission, which is why I'd rather DIY and save $10's of thousands.
Yep, if the neighbor doesn't want to play ball I'll have a sign made in addition to MLS.
I see your point, kind of boxes out FSBOs because they can be dicey, but is the buyer ever told this property exists or are they left in the dark, especially if it meets their criteria?
I will have a RE attorney work everything out so I presume this will cover me, especially since the neighbor might buy the property now.
Owen Lucas
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Update:
- House cleaned out.
- Appraisal in process. The guy seemed very knowledgeable.
Neighbors talked to us and said they are interested in property. They own multiple multi-family homes.
Once the appraisal comes back I'll double check the value and see if there is any other homes I can find. Once I'm comfortable with the price I'll see what a reasonable increase over the value can be.
I'm ready for a hard bargain with experienced landlords but having a rental property next to theirs is worth a premium.
If the neighbor doesn't bite, I'm off to the MLS.
- House cleaned out.
- Appraisal in process. The guy seemed very knowledgeable.
Neighbors talked to us and said they are interested in property. They own multiple multi-family homes.
Once the appraisal comes back I'll double check the value and see if there is any other homes I can find. Once I'm comfortable with the price I'll see what a reasonable increase over the value can be.
I'm ready for a hard bargain with experienced landlords but having a rental property next to theirs is worth a premium.
If the neighbor doesn't bite, I'm off to the MLS.
Get the pest report done and see if there's any damage, i.e., dry rot, active infestation, etc. Then, get an estimate to correct whatever is uncovered. Ideally, if you have the pest control company perform the repairs (if any), they warranty their work. Ask them for a bid to do the work. Additionally, if the have the pest control company perform the corrective work, they will not charge you a "re inspection fee" to give you a "clearance", which will save you a few bucks.
Now...you have all of the facts needed to bargain appropriately.
Ed
Now...you have all of the facts needed to bargain appropriately.
Ed
