Real Estate Q & A >  For Sale By Owner

(November 22, 2016 )

I’m selling my home "by owner," and a real estate agent who wants to show my home to a buyer said something about "agent protection." What does this mean?

This probably refers to the agent wanting to protect their right to a commission should you elect to sell to their client. In our home selling library, we have an article on types of listings. One of those is a "one time show or a 1-day listing." This is something the agent will probably come in and get you to sign before bringing in their clients. It identifies the client, the commission, and prevents you and that buyer from negotiating directly at a later time, with the intent to cut the agent out of the deal and not pay a commission.

On a FSBO (for sale by owner), what is financial obligation, if any, to sell to client with buyer agent?

When a buyer's agent has a client who makes an offer to buy your home, the offer will also ask you to cover the agent's commission - either directly or indirectly. Since the traditional arrangement usually includes two agents and the customary commission is approximately three percent of the sales price, the commission asked for in this transaction should be approximately half. There is only one agent involved.

On the one hand, you save money over traditional agent marketing. On the other hand, you don't make as much as if you sold the home at its full market value. Then, on the other hand again, sellers working with agents usually get a higher price for their home than seller who work by themselves. And you have buyer's agent against you like a lawyer protects his client. Remember, the buyer's agent is not your friend. Anyway, the offer will ask you to either pay the commission directly to the agent and their broker, or apply a "credit" to the buyer so that the buyer can pay the commission. Either way it comes out of the proceeds of your sale.

We are thinking about selling our home on our own. If a buyer comes in with a Realtor do we still have to pay their agent the 1.5 to 2% commission?

That depends on whether you choose to "cooperate" with agents or not. If you do not, agents will not bring buyers to your house. If you do cooperate, some agents will bring buyers, but if their client makes an offer and closes the deal, they will expect to earn a commission. A 1.5 to 2% percent commission is customary.

Before an agent brings a client to your house, they will probably stop by and ask you to sign a "one time show" agreement. This prevents you and the buyer from negotiating directly in an attempt to not pay the agent’s commission.

So what are you gaining in the end? Nothing. On the contrary.

You pay to your own real estate lawyer approx. 0.5% or more. You pay the buyer's agent 1.5 to 2%. You pay for an ad on some unsuitable website. Some people pay $500 to someone just to get their property on the MLS and another $500 to the same person in case the property eventually sells.  

And here is the kicker: you have nobody who marketed your home to the fullest extend. Remember, every property becomes a product as soon as it hits the market and products must be professionally marketed. Otherwise we would not be bombarded by TV commercials 24/7. For every single property for sale there are dozens and often hundreds of very similar properties for sale on the market. This is your competition so do not be surprised that they all sell quicker and the vast majority sell substantially higher. However,  almost every FSBO (for sale by owner) lowers his price twice on an average . 

Nobody is sitting on a pot of gold. 

92% of all competing properties are either professionally marketed by Realtors or development companies. (for example: one-page ads in newspapers, beautiful model suites, constant blast email campaigns to thousands of Realtors, etc.)  So if you did not spruce up your property and followed expert advice you are already behind the eight ball apart from all the professional marketing actions a good Realtor does for you.

Talk to Bernie about his Biggest Free 50+ Marketing Strategy in the Industry.

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