(CBS) Many people selling their homes in this very trying market are doing it solo — without the aid of a real estate broker or agent — so they don’t have to pay the commissions such providers get — typically six percent of the sale price. Agents contend you’ll get more money for your home and sell it more quickly if you use them. But, explains Early Show money maven Ray Martin in the column below, if you choose the “FSBO” route — there are several strategies you could use to up your chances of being successful.
As the housing market downturn continues, one thing is clear: Folks are having a tough time selling their homes. And if that isn’t enough to concern home sellers, here’s another: the commission you’ll have to fork over to real estate broker.
Paying six percent of the selling price to a broker can often mean the difference between breaking even on the sale or having to dip into your savings. With the median home price at about $215,000, paying a typical six percent commission to a realtor can amount to almost $13,000. If you sell your house for what you owe on your mortgage, you’ll have to dip into your savings just to pay the realtor.
Some sellers look at the issue this way: Paying a commission to a listing agent is money paid to a person who does nothing more than put your home on the Multiple Listing Service. When another agent sells your home, the listing agent collects half of the commission. Others say listing a house with an agent can provide marketing advice and save time and the hassle of arranging showings, all of which is worth the commission paid to the agent.
For these reasons, For Sale By Owner, aka FSBO, pronounced “fizbo,” without the help of an agent, is an option that seems to be gaining the attention of more home sellers.
It can be a good strategy when your home is in a desirable area, at a price that is affordable to a lot of potential buyers, where a home like yours is in short supply.
There are conflicting numbers on how many homeowners are selling their homes themselves, but industry reports suggest as many as a quarter of home sellers try to do it solo. The average number of days on the market for FSBO sellers is about 114, and about 12 percent actually close, fetching about 96 percent of their asking price.
If you are considering selling your home yourself, it’s wise to consider this advice:
Think Like a Buyer: It’s important to keep abreast of the trends and what is working to sell a house. The National Association of Realtors Profile of Home Buyers and Sellers can be of some help to home sellers.
In order to successfully sell a home, you’ll need to think like a buyer. A report from the National Association of Realtors helps with these insights:
Most buyers use the Internet to search for a home. Such use has risen dramatically over the past few years and now, over 77 percent of buyers report doing so.
Buyers first learned about the home they bought from three main sources: 36 percent from a buyer’s real estate agent, 24 percent from an Internet search, and 15 percent from yard signs.
A typical buyer visited nine homes, conducted their search for eight weeks, and bought a home an average of 12 miles from their previous residence.
The take-away from this is that it is critical to your selling success to get your home listed on the Internet and to attract the attention of a large number of real estate agents in your local area.
There are many services where you can, without using a traditional real estate broker, get your house listed on your local area Multiple Listing Service, thus avoiding paying a commission to a listing broker. In doing so, you can still offer to pay a three percent commission to a selling agent, thus creating an incentive to show and sell your home.
But, while every home seller should try to save on real estate broker commissions, being your own real estate broker is not for everyone. There are some things you will need to pay careful attention to:
Set the Right Price: After getting a listing on the MLS, this continues to be the single most important factor in successfully selling a house. The housing market is constantly changing, and you really need to have a good feel for the market and good information in order to set the right price to sell your home. Not only is a home the biggest purchase most people make, it’s also the biggest asset people have to sell, and setting the wrong price can cost you real money. You don’t want to leave money on the table by setting a price that’s too low, and you don’t want to scare buyers away by asking too much.
But here is another thing to think about: A successful pricing strategy in a buyers’ market is much different than in a sellers’ market. In the latter, you would typically set the price for as much as you can get. But in a buyers’ market, where competition for a limited number of buyers is fierce and the supply of homes is high, sellers are advised to research the market and set the price at the low end of their competition. Pricing at the lower price point of comparable homes will ensure that your house will get the attention of bargain-hunting buyers.
When setting the listing price for your house, use round numbers, in increments of $5,000. According to industry professionals, buyers who use the Internet typically will search in increments of $5,000. So a listing at a price of $250,000 will turn up in more searches for homes priced at $200,000 to $250,000 and $250,000 to $300,000.
Get the Word Out: Putting a “For Sale” sign on your lawn is probably not going to sell your house. To know why, just think like a buyer. Most buyers don’t have time to drive around neighborhoods, searching for signs. The fact is that most buyers will begin their search either on the Internet or by asking a realtor to search the listing services of the local market for them. When a home is “listed” with a broker, they place information about the house in the area’s Multiple Listing Service (MLS). That alerts all real estate agents in the area that your home is for sale. The MLS also makes it easy for other realtors with access to the MLS to search for a home by location and price range, and if yours fits their search criteria, they will show it to potential buyers.
Consider All Offers: Selling a home is one of the most emotional transactions you’ll ever make, second only to buying one. Mixing emotion and a large financial transaction is never a good thing. If a buyer comes through the door and immediately points out your home’s flaws instead of the beautifully restored floors or newly painted walls, it’s likely to hurt your feelings. You may be tempted to turn down this buyer’s offer, even if it’s for a fair price. This is where a realtor can help, by showing a home and selling its features to would-be buyers and keeping the colorful comments out of the report back to the seller. To the realtor, it’s not a home, it a deal, and a deal they want to get done so they can get paid!
Despite these pitfalls, I’m not trying to steer people away from selling their homes themselves. You need to be aware of the pitfalls and, if you think you can tackle them, give it a try, particularly if your home is of the price, size and location that is in demand or in short supply in your locale. Remember, you can try the FSBO route for a set amount of time, and if you’re not successful, you can turn to a broker. Some sellers even report that they first unsuccessfully listed their home with a local real estate broker, only to re-list using FSBO and sell successfully later, saving money in the process.
If nothing else, use the knowledge that you “could” be your own broker to NEGOTIATE a lower commission with a broker. That storied six- percent is a result of tradition, and nowhere does it say that you HAVE to pay real estate brokers a six-percent commission.
There’s no question that there are a lot of services targeted to sellers looking to go FSBO. If you are looking for an alternative to a traditional six-percent real estate agent, some of the options that are becoming popular include:
• Flat-Fee Brokers: These are companies such as Help-U-Sell and Assist-2-Sell. Both are franchises that offer to connect you with the offices of local licensed real estate agents who subscribe to their low-cost realtor business model. You agree to show your home yourself, they perform all other duties of a traditional broker, such as advertising, marketing, helping with contracts, and even arranging inspections. The best part: You pay them one flat fee that varies based on home’s value, location, etc. If you pay them a little more, the realtors from these companies will show your house, too. They can also list you home on the local MLS, but if they do, and another brokers brings you a buyer, you’ll have to pay that broker their commission of 2.5 to 3 percent.
• For Sale By Owner: Other companies, such as FSBO.com and ForSaleByOwner.com, offer home sellers a variety of marketing options at different pricepoints. You can choose to have your home listed on the companies’ Web sites; you can pay more and have yard signs and color brochures designed for your home, and pay even more and have a virtual tour included in your home’s listing. Each company is different and offers different listing packages, which can include listing your house on the local MLS — the same place a real estate agent would list your home. Again, there’s the catch: If a buyer is brought to your home by an agent who saw the listing on MLS, you DO have to pay that broker’s half of the traditional commission, which is two to three percent.
• Negotiate Brokers Commission: There is no law stating that you have to pay a six-percent commission. As a matter of fact, commissions now average a bit over five percent, according to a survey by Real Trends publishers. If your home is an above average-priced home in a market where homes like yours are in short supply, you should have a serious conversation about a reduced commission with any prospective broker who asks to list your home. If you list your house with a real estate broker, they will charge you a five-to six percentage point commission when your house sells, even if all they do is list your home. But if you list your house on the MLS using one of the services above and a real estate agent brings you a buyer, you will only pay the commission charged by the buyer’s agent, which is typically half the amount charged by a listing real estate broker. Use this point and your knowledge of how your house compares to the supply on the local market to drive your negotiation for a lower commission.