Retirees Frank and Dee Caputo have sold two homes without the help of a real estate agent. Now they're trying again, with their Clifton bi-level.
Though they started out by listing with a Realtor last summer, they decided they could more easily lower their price to attract more buyers if they didn't have to pay an agent's commission. In a tough market, they say, that's an advantage.
"We have room to negotiate," said Dee Caputo. The house is now on the market for $459,000, down from $479,000 when it was listed with an agent.
The Caputos are among the minority of home sellers who go it alone rather than list with an agent. These "for sale by owner" — or FSBO — sellers usually are motivated by their desire to save the real estate agent's commission, typically 5 percent to 6 percent. Depending on who's counting, FSBOs make up 11 percent to 20 percent of the market nationwide.
The housing market's troubles over the past three years offer compelling reasons both for and against do-it-yourself selling.
With home values in the region down about 20 percent from their peaks in 2006, many homeowners are "underwater" on their homes — that is, they owe more on their mortgages than the property is worth. That makes them especially eager to save the commission cost, which can run $20,000 or more on a $400,000 house.
On the other hand, sales have been much slower than during the housing bubble a few years ago. Buyers — facing tighter mortgage lending standards and high unemployment — are hard to come by. That leads most sellers to seek an agent's help.
"There used to be a sprinkling of FSBOs," said Michael Fitzpatrick, a Hackensack lawyer who does real estate closings. "Now that the market is tough, it's really making it more difficult for people without selling experience or expertise to get their houses sold. I'm not seeing them."
One of the key obstacles is that most buyers work with agents, who tend to find properties through the Multiple Listing Service. These agents are unlikely to bring buyers to see an FSBO property unless the homeowner will pay them the same commission they'd expect from another agent.
To plug into that network, many FSBOs pay a flat fee — typically starting around $400 — to be listed in their local MLS, with the promise that they'll give a buyer's agent 2.5 percent or 3 percent of the sales price.
Owners.com, a Web site that lists FSBO properties, has focused more of its energies on this approach during the tough market, according to CEO Steve Udelson. Owners.com charges $395 to place a property in the local MLS.
"Sellers are trying to cut out the listing agent because they don't feel the listing agent does a lot for them, but they want the exposure on the MLS," Udelson said. "Working with a buyer's broker really increases your chances; you'll be much more successful than being outside the system. It's a smart middle ground for a lot of do-it-yourselfers who are looking to save money."
According to a recent survey by the National Association of Realtors, FSBO sellers actually sell faster and for closer to asking price than sellers working with a real estate agent. However, FSBO sales tend to be for less money, according the NAR survey. This may reflect the fact that FSBOs are more common in rural areas where property values are lower.
Certainly, the FSBO route is much less popular than working with an agent. Many sellers don't have the time, flexibility or expertise to create ads and show the house. Real estate agents argue that they offer expertise on pricing, preparing and marketing the home, as well as screening buyers to make sure they can qualify for a mortgage.
"The value that an agent brings is knowledge of the market and the process, along with negotiating skills," said Walt Molony, a spokesman for the NAR.
"We help the sellers free up their time," said Chuck Martini, an agent with 3.75 Realty Group, a discount brokerage in Cresskill. "When someone doesn't show up for an appointment, it's our time, not their time."
Realtors say they also follow up on the paperwork that keeps a deal together.
"It's a hand-holding process," Martini said.
But FSBOs believe they don't need anyone holding their hands. They rely on their lawyers to draw up contracts; they study the Internet and visit nearby open houses to set their asking prices. And they ask potential buyers to bring mortgage preapproval letters from a lender.
The Caputos paid $600 to post their house on ForSaleByOwner.com, and another $100 for a professional sign for the front lawn. They acknowledge that they'd get more exposure working with a real estate agent, but hope that they'll make up for that with pricing flexibility.
John Fazio, a 33-year-old teacher who now lives in West Milford, sold two homes in Clifton last year — his own and his late mother's. Both sales went smoothly and took only a few months.
"We didn't want to pay a Realtor 5 percent or so," Fazio said. "I figured I'd give it a shot."
He acknowledged that the pool of buyers was not as big as he would have attracted by working with a Realtor. But he felt bargain-hunters would find his two-bedroom house, which was listed on ForSaleByOwner.com and Craigslist. He and his wife, Charmaine, also put a sign on the lawn and held a couple of open houses.
"People who are looking for a good price, eventually they'll get to a 'for sale by owner,' " he said. The Fazios sold their two-bedroom house for $246,000, after starting out asking $270,000.
Having heard that most buyers start their home search on the Internet, Lou and Joann Salomons of Wayne recently decided to bypass an agent and put their colonial on ForSaleByOwner.com for $729,900.
"We wanted to save ourselves $30,000," said Joann Salomons. They're also veteran FSBOs, having sold their starter home in Totowa in 1993 to buy the Wayne house.
To get the house ready, they painted, had the floors refinished, and upgraded the kitchen with granite countertops and stainless appliances.
They haven't put their house on the MLS, but are willing to pay a 2.5 percent commission to an agent who brings in a buyer. No one has taken that deal yet.
The people who run FSBO Web sites say that buying and selling without an agent is likely to become more popular as people now in their teens and 20s — who do everything on the Internet — enter their home-buying years.
"It's in their DNA," said Greg Healy, vice president of operations for ForSaleByOwner.com.
Healy said that information on home prices is now so readily available that sellers can price their homes without an agent's help. "If you're online and in the right place, buyers are going to find you easier than ever before," Healy said.
But for now, especially in a tough market, many people who try FSBO end up turning to an agent.
Nick Zampetti of Bogota decided to list with Martini, the Cresskill agent, after trying unsuccessfully to sell a Bogota investment property on his own for several months last fall. Zampetti started out asking $319,000, then cut the price to $289,000, on Martini's advice.
He admits his advertising efforts were not sophisticated – just sticking a sign on the lawn and tacking ads to the supermarket bulletin board next to the "Lost Cat" fliers. He didn't have time to post the house on Web sites and do other marketing.
"Sometimes it's better to compensate someone else because they'll do it more quickly and diligently than I'm going to do it," he said. "You don't need to be a jack of all trades.
"I doubt very much I'll ever try it again, unless the market becomes super-hot and I can just throw up a sign and sell it," Zampetti said.