Some big news happened last week in Texas which I discuss on my blog [link removed]. In a nutshell, the FTC obtained a Consent Order from the Austin Board of Realtors to eliminate a rule that treated Exclusive Agency Listings different from Exclusive Right to Sell Listings, at least with respect to the publishing of those listings on public web sites. Rules like these have been adopted to deal with flat fee listing brokers who did nothing more than insert the listing into the MLS database. In other words, these are “disguised” FSBOs where the owner has agreed to pay some selling office commission but usually receives little or no additional help from the listing broker.
In its investigation, the FTC found that, prior to the adoption of the rule, 18% of the listings in the Austin MLS were Exclusive Agency Listings. Once the rule was adopted, the number of Exclusive Agency Listings dropped to 2.5% of the total.
I have always heard that the FSBO rate was somewhere around 10-15% nationally. Since the 18% figure does not include what I might call “pure” FSBOs where the seller basically hammers up a sign and calls it good, the actual FSBO rate in Austin (before the rule adoption) was probably greater than 20%. Is this surprising? Do you think it reflects historical numbers or is some kind of trend? Any thoughts on where the 15.5% went after the rule was adopted?
In my experience, areas that have less appreciation have more FSBOs. In Florida the market was so flat for a long time that people didn’t have enough equity to pay expenses and there were tons of FSBOs. In high appreciation areas I saw very few FSBOs. In very high end “people talked” if someone went FSBO. “It’s a shame poor so and so can’t afford to hire someone to sell their house.”
You raise an interesting issue: how can we determine the FSBO market share, when the data we evaluate is controlled by the MLS, which has a vested interest in discouraging FSBO? I don’t know the answer, and I don’t know whether there is a trend towards FSBO. I do know, however, that there are many benefits to FSBO (benefits hopefully realized by Dustin and Anna when they sold their home in Seattle), and that the internet can only strengthen the FSBO market share.
We are just getting started in selling our home. This is the second house we have sold and I feel I understand what makes the house curb friendly and how to make the interior speak kindly to the house as well. For this reason I am interested in sell it myself. There are several online companies that list on the MLS as well as give all the signage etc. that we would need. Do you have any experience with these companies, if so,what would you suggest are the things to look for when choosing one?
Where are you located?
Janet,
I have no first hand experience from your side of the table. You should have some arrangement for the company to receive and go over offers with you since you didn’t list legal paperwork and contracts as an area you feel comfortable with.
Maybe Craig has a service like that or an attorney nearby. But you often only get 24 hours to 48 hours to review the offer before responding and then sometimes there’s back and forth addendums.
Maybe you can get an attorney boyfriend for 30-60 days 🙂
Janet,
We close transactions for FBSO’s on a regular basis and also from companies such as Assist2sell, Help-U-Sell, Flat Listing Fee, America-At-Home Real Estate among others that charge less.
If you need resources let me know and I can give you contact names.
E-mail me at: support@legacyescrow.net
Janet,
We close transactions for FBSO’s on a regular basis and also from companies such as Assist2sell, Help-U-Sell, Flat Listing Fee, America-At-Home Real Estate among others that charge less.
If you need resources let me know and I can give you contact names.
E-mail me at: support@legacyescrow.net
Ironically, the flat-fee-MLS brokers are worse of a middleman than a full service broker. Membership in the MLS here in Austin costs about $400 a year. An MLS-only broker takes this product and resells it to the consumer, with absolutely no added value, for about $500 or more. Now isn’t that a true middleman?
The problem with fee-for-services models is that some things are just hard to unbundle. If I have certain market knowledge that I can pass along to the seller which can save them a lot of money, should I withhold that information because I only agreed to post the listing on the MLS? That knowledge may have come from years of experience, but it only takes a minute to apply, so many consumers see no value to it.
A good realtor is like a financial advisor. They save you tons of money with a few simple tips, and for this they make a commission. If I net my seller 6% more, should I not be entitled to get a proportional compensation, instead of a flat fee.
Ironically, the flat-fee-MLS brokers are worse of a middleman than a full service broker. Membership in the MLS here in Austin costs about $400 a year. An MLS-only broker takes this product and resells it to the consumer, with absolutely no added value, for about $500 or more. Now isn’t that a true middleman?
The problem with fee-for-services models is that some things are just hard to unbundle. If I have certain market knowledge that I can pass along to the seller which can save them a lot of money, should I withhold that information because I only agreed to post the listing on the MLS? That knowledge may have come from years of experience, but it only takes a minute to apply, so many consumers see no value to it.
A good realtor is like a financial advisor. They save you tons of money with a few simple tips, and for this they make a commission. If I net my seller 6% more, should I not be entitled to get a proportional compensation, instead of a flat fee.
There is no way that Limited Service Brokers had 18% market share in Austin before the rule, and that it dropped to 2% afterward. My office tracks market share in Austin. One Percent Realty, the most visible and active Discount Broker in the market, has about 1% market share of MLs listings. I am seeing other Discount companies with listings, but it’s nowhere near 18%.
I will say that a couple of the Limited Service companies seem to have a very good system in place for handling calls and showing the home. By “very good system”, I mean that my ability to show the listing is not hampered by the home not having a lockbox, having to call an out-of-state scheduling service to make an appointment with the Seller, etc.
But mostly, the many of the Discount listings look like they were simply entered into MLS and we have to make extra efforts to be able to show the property, which we attempt to do, but it is a hassle.
most likely, this discrepancy is a case of user data-entry error. Associations would have to be more than stupid and negligent to have a rule such as this in place, thanks to the crosshairs trained on them by DOJ, FTC, etc.
A recent article in Money confirms, I think, your suspicion that FSBOs are being undercounted. Here’s a link to the article:
http://biz.yahoo.com/hmoney/060807/080306_discounters_moneymag.html
I talk more about this subject in my own blog:
http://fsboprimer.com/blog.html
I am President of FreeFSBO.com, we are a new For Sale by Owner website that offers a Free FSBO Kit that includes a professional webpage and real estate lawn sign. I can certainly vouch that accurate information regarding FSBO sales and the industry in general is virtually impossible to get your hands on. The increase in Flat Rate MLS, which basically allows FSBO properties the “exposure” that Realtors enjoy, further convolutes the equation. I’ll go with the NAR statistics that peg “true” FSBO’s at approximately 14% of existing home sales or based on NAR data – 840,000 unit sales annually. Based on the seasonally adjusted average sale price of $230K/unit we are talking about around $200 Billion in non-real estate related existing home sales and $12 billion in potential real estate commissions lost or home equity gained depending on how you look at it. If you factor in the Flat Rate MLS variable I think it is safe to say you get closer to 20%. That pegs the Flat Rate MLS at approximately 6% – Personally, I see that number increasing each year until the NAR can successfully defend it’s position and eliminate the renegade Realtors within their ranks that offer this service. I am not a Realtor basher by any means, my mother is a long time agent and I truly believe they provide a reasonable service and receive reasonable compensation. That said, I also believe there is always a place in our society for DIY – particularly when you consider the savings associated with a successful FSBO sale. If I were selling my home I would strongly consider Flat Rate MLS – I would maintain my right to sell my home personally, without real estate fees, worst case scenario, save a minimum 50% of the real estate commission and at the same time gain entry to the very desirable exposure that MLS provides.
Mark,
The question agents have is this. Does the for sale by owner seller, expect the buyer’s agent (who comes with a buyer) to represent the seller AND the buyer for that 50% of the “normal” fee?
Many do. Many sellers who save the listing fee, expect the agent to give the seller advices for that “buyer agent fee”, which creates a problem for the agent and the buyer. Not just because of the money…but because of the dual agency of it.
Is it OK to a For Sale By Owner, for the buyer agent to treat the seller as “representing himself” and not give seller advices? Out on the street…that is not the norm. The seller wants the agent to explain escrow and other facets of the transaction. The seller want the agent to explain the contract to them, and what everything means. Saving 50% to “represent yourself”…fine. But saving 50% and then expecting the agent to “do both sides”…not OK.
Mark,
The question agents have is this. Does the for sale by owner seller, expect the buyer’s agent (who comes with a buyer) to represent the seller AND the buyer for that 50% of the “normal” fee?
Many do. Many sellers who save the listing fee, expect the agent to give the seller advices for that “buyer agent fee”, which creates a problem for the agent and the buyer. Not just because of the money…but because of the dual agency of it.
Is it OK to a For Sale By Owner, for the buyer agent to treat the seller as “representing himself” and not give seller advices? Out on the street…that is not the norm. The seller wants the agent to explain escrow and other facets of the transaction. The seller want the agent to explain the contract to them, and what everything means. Saving 50% to “represent yourself”…fine. But saving 50% and then expecting the agent to “do both sides”…not OK.
I would expect the Buyers agent to represent the buyer. They should deal with an FSBO homeowner in the same manner they would a “listing agent” – which in effect the homeowner represents. That said, they (Buyers agents) should contact the FSBO homeowner to set up showing, present any offers in a written format, and act for the buyer with the homeowner when negotiating price. I’m sure some individuals will, as some individuals do, attempt to take advantage of the situation and make demands or inquires on the Buyer agent but I suspect that if the agent simply explained their position and obligation to the buyer that most FSBOs would appreciate the possible conflict of interest.
10% seems more accurate to me, I think 18% is very high. There are also people that give very little effort by just sticking up the sign and most of those aren’t serious about selling their home.
I think over the next 2-3 years you will see a larger upswing in FSBO listings. Many of the people selling their homes won’t have the equity needed to make a decent profit and will try to sell themselves.
10% seems more accurate to me, I think 18% is very high. There are also people that give very little effort by just sticking up the sign and most of those aren’t serious about selling their home.
I think over the next 2-3 years you will see a larger upswing in FSBO listings. Many of the people selling their homes won’t have the equity needed to make a decent profit and will try to sell themselves.
ARDELL raises a good point with FSBO’s wanting the buyers realtor to do the work usually associated with the listing agent. I have seen this with alot of discount realtors as well. I have no problem with agents doing their work and competing on price. Or simply offering their client less services. What I see more and more is discounters pushing work onto the realtors on the other side of the transaction. Kind of like a plumber and a roofer fixing up a house. In the middle the plumber tells the roofer “hey why dont you do the plumbing because Im not really making too much money on this”. I think if we see an upswing in the number of FSBO’s and discount services things might start to fall apart. On one side the discount listing agents dont want to do anything but put a lockbox on a house. On the discount buyers agents like redfin they expect the listing agent to show the house because they cant afford to drive buyers around. But in the end someone still needs to show buyers the house. Not to mention dealing with the transaction and helping to educate the parties involved.
I’ve had a condo listed in a beach front property for a while with two different realtors (Century 21 and Prudential). Both “promised” me EXCELLENT service and monthly (or possibly even weekly) reports of when my property was/has been shown. Guess what I actually got from each one? Very little beyond a MLS listing. A new MLS agent wanted me to simply use him to list my unit as the elast expensive unit in the place “so that it would move quickly”? And here I was thinking that it was the realtor’s JOB to promote my unit! Show me how they are going to list it, get client’s in there, etc. No thanks, where are those 1% listing agents? I need one NOW!
Jay,
Where are you? You may want a “lockbox 4 u” service that is cheaper than 1%, if you are going to drastically reduce your price and undercut everyone in your building. Those services are paid for whether the property sells or not. Still…depending on sale price, up front flat fee might be an option you should look into, before considering a lower percentage option.
But don’t chintz on the BA fee if you do. Save the money on your side of the fence, and not the mls offering fee, as that would likely be counter-productive in your case. Make sure your offering is equivalent to the units that are selling, whatever that may be.
If nothing in your building is selling, and condos in other buildings are, you may want to get an advance copy of the Resale Certificate from the management company. Maybe there is something going on in your building, like a soon to be announced special assessment, that is holding up all sales in your building. If that is the case, it might be better to wait that out if you can, than dropping the price to compensate for a temporary negative issue.
That’s the best I can do without knowing the State and town you are talking about. Also remember to price based on what has SOLD and not what other units are “asking”. If your asking price is much higher than sold prices, doesn’t matter that it is the lowest of “asking” prices. Sometimes ALL of the “asking prices” are too high. So value off comps and pending sales, not “for sale” properties.
Good luck!
OK, I just have to toss my hat into the ring. As I see it, my past experiences are very much like Jay’s. I’ve sold 2 houses FSBO after I went the realtor route. My current home would fetch a listing broker a $20940.00 commission. Can you realtors please explain what you can offer me for $20000.00 that I can’t do myself?
Let’s face it sales is a numbers game. The more people who see the house the more likely you are to sell. It’s not some special voodoo that only realtors have. So, if I get a CMA, price within reality (based on my CMA and amenities) have an MLS listing, an internet site, ads in the local and or regional papers, do open houses and showings and stage the home properly where do you fit in? I’ve lived in the community, my kids go to school there, built and lived in the home for 8 years and know every nook and cranny of it…Who better to sell it than me. Many of you have never stepped foot into a property until I call and ask for a showing. Where does your expertise help me? I can’t count the number of homes I’ve looked at over the last 20 years with a broker and they knew nothing about the property except what was on the “sheet”. Come on! $20000.00 of my hard earned equity for that! Sorry my kids could do a better job.
Beware realtors, it’s a new day in the home sales market like it or not. There are a lot of buyers and sellers out there who need your hand holding. However, as buyers and sellers become better educated and confident the way houses are bought and sold will continue to change. Get your collective heads out of the clouds and bring your commissions down to a reasonable level (2.5-3%) or continue to lose business to the FSBO’s.
FSBO’s get a good attorney and the process is easier than you think not easy but not anywhere near as complicated as many would lead you to believe!
Mike
OK, I just have to toss my hat into the ring. As I see it, my past experiences are very much like Jay’s. I’ve sold 2 houses FSBO after I went the realtor route. My current home would fetch a listing broker a $20940.00 commission. Can you realtors please explain what you can offer me for $20000.00 that I can’t do myself?
Let’s face it sales is a numbers game. The more people who see the house the more likely you are to sell. It’s not some special voodoo that only realtors have. So, if I get a CMA, price within reality (based on my CMA and amenities) have an MLS listing, an internet site, ads in the local and or regional papers, do open houses and showings and stage the home properly where do you fit in? I’ve lived in the community, my kids go to school there, built and lived in the home for 8 years and know every nook and cranny of it…Who better to sell it than me. Many of you have never stepped foot into a property until I call and ask for a showing. Where does your expertise help me? I can’t count the number of homes I’ve looked at over the last 20 years with a broker and they knew nothing about the property except what was on the “sheet”. Come on! $20000.00 of my hard earned equity for that! Sorry my kids could do a better job.
Beware realtors, it’s a new day in the home sales market like it or not. There are a lot of buyers and sellers out there who need your hand holding. However, as buyers and sellers become better educated and confident the way houses are bought and sold will continue to change. Get your collective heads out of the clouds and bring your commissions down to a reasonable level (2.5-3%) or continue to lose business to the FSBO’s.
FSBO’s get a good attorney and the process is easier than you think not easy but not anywhere near as complicated as many would lead you to believe!
Mike
Mike you are right on!!! Denial, some people think that certain things last forever. however those people eventually learn the plain and simple truth. many many years ago the dinosaurs roamed the earth alongside real estate brokers and agents who held the “holy grail”. “the mls book” but then came along came the world wide web…dinosaurs extinct and brokers and agents wondering when people would notice that they in fact did not hold the “mls” anymore. Flat rate real estate is todays and tomorrows real estate.
Craig
Thanks for the response. The property is in a resort beachfront area and is about 4 hours away from my primary home so obviously lockbox access is not practical. As far as pricing goes, my point was that the realtor’s calling me seem to be “opportunist” rather than of any TRUE benefit (or value) to me. Sure, ANYONE could sell a unit by undercutting. Some have. That’s not of any VALUE IMHO. If the ONLY thing the agent is doing is listing it on MLS, then they aren’t doing their job. Since that last post the actual resales in that particular building have INCREASED by about $25K and I am once again talking to regular brokers to see what they have to offer. PS – I am almost as far away from Seattle as you can get.
http://flatraterealtysavannah.com
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Most buyers of FSBO ppty’s are themselves independent of realtors when hey approach the seller and so, in that instance, realtor participation is irrevelant.