For Sale By Owner

Every once in a while when I am on a listing presentation, I get asked to explain why a seller shouldn’t just sell their home on their own?  Put another way, why they should have me do it?  I love this question.  That might seem a little counter intuitive; I mean, who wants to have to defend ones livelihood?  Many agents stumble here because they may not have thought it through enough to actually be able to verbalize the many benefits of hiring a Realtor to represent them.  But I like this question because it opens the door to a conversation I want to have and lets me explain what it is that I do and why I’m worth top dollar.

The first and most obvious point I start out with is the marketing aspect of my job.  I’ll explain that my expertise on market conditions, market value and home preparation are going to help them price the home in a manner to get it sold for the highest price and in the shortest amount of time.  I’ll tell the seller how they’ll get a higher price by being on the multiple listing service (MLS) and exposing their home to the entire Realtor community and that this also feeds their listing into the online real estate sites like Trulia and Zillow and  How it also goes into all the brokerages online sites as well like Redfin and Yahoo Homes amongst many others.  When asked about the For Sale By Owner or discount brokerage sites that will put a listing on the MLS for a flat fee, I must acknowledge that this is a vehicle for selling your home on your own, but I remind them that they’re still paying a commission by doing this.  I usually get the blank stare or maybe a “Huh?” to this reality.  “Of course you’ll pay a commission” I’ll say.  I’ll explain that to go on the MLS, you have to offer compensation to the cooperating broker.  It’s usually about here that the conversation will roll over to commission.

When a broker lists a home for sale for a 5% or 6% commission, the listing broker only receives their portion, typically half, at closing.  So on a 6% commission agreement, the listing office keeps 3% and pays 3% to the agent bringing the buyer.  Therefore if a seller goes it alone or with the help of one of these discount services, they still have to pay the half of the commission that goes to the agent representing the buyer.  “Well what if I only offer 1%?  That’s $8,000 on my $800,000 home.  That’s a lot of money.”  I am happy to explain that while it is true that $8,000 is a lot of money, a qualified buyer is worth far more than that.  So when an agent is representing a qualified buyer, they are not going to accept less than they feel that buyer is worth and on an $800,000 home, that buyer is worth a lot.  “You mean an agent won’t show my home to their client for less than 2.5% or 3%?”  This is a great question and the answer may surprise you.

Most agents are aware of the compensation being offered even if they say they don’t pay attention to commission, it’s only human nature.  If it’s a 2.5% commission, they will gladly show a home and usually speak well of the home if they believe it offers the amenities and value their client is looking for.  But if we are offering a compensation of 3%, I argue we might actually get them to work a little harder for us.  If you aren’t paying them a full commission, even if they are willing to show it to their buyer, how hard do you think they will work to point out the positives of your home?  Not very.  So paying the buyer’s agent’s commission is truly imperative.  That then leaves us with other half of the commission equation: the concept of paying for someone to represent you and help you sell your home.

This usually brings me back to the marketing side of my job and I’ll remind them that I am not paid if I am not successful in bringing them a satisfactory offer.  Moreover that I will expend considerable money in the process of marketing their home, which I only get back via my commission at closing.  They don’t pay for any of that.  I go into all the other forms of marketing the home that I offer.  This starts with professional quality photographs.  I’ll typically ask if they have been online looking at homes, which of course they have and then if they judge a home at all by the photos they are looking at?  At this point the light starts to go on because they realize that to be successful they are going to need some great pictures online.  I then bring up things like a property specific website; enhanced presence on those online sites like Featured homes etc.; there’s my personal website and my company’s website; there’s other forms of online advertising and agent to agent communiques.  We’ll talk about print media and how I’m not a huge proponent of that as a marketing vehicle anymore, but that it is sometimes helpful when promoting open houses.  Oh yeah, open houses…

A seller’s interest in open houses can really vary from seller to seller.  Some want them as often as possible while others don’t at all.  I usually explain that at minimum, we want one at the beginning since we never know where our buyer is going to come from and neighbors are often our best advertiser.  Plus there’s all those “Free Agents” out there that want to see the inside of homes, but aren’t yet affiliated with a broker and we want to expose our home to them as well.  Besides, how else are people going to see your home?  At this point I remind them that if they are without representation, they would be holding their own open houses and showings and letting total strangers into their home.  Moreover that they would have to restrict Realtor showings to the times that they’re at home.  So that would mean only weekends and evening after work.  Yikes!  What if a Realtor wants to show during the work week?  By restricting access, we make it that much harder to sell.  Having strangers in your home is kind of creepy; suppose they are just scoping out your artwork and things like jewelry?  Are you going to send your family out every time you show or is the whole gang going to hang about while a potential buyer is looking at your home?  How can they possibly focus on your home’s features with you following their every move?  It’s at about this point that the would be seller starts squirming in their seat because let’s face it, selling your home may sound easy enough until you start looking at the reality of what is entailed.

“So now Mr. and Mrs. Seller, let’s say that offer comes in and you start to read the contract… the contract that’s 24 pages long… and the agent for the buyer is asking for your disclosures…”  Disclosures?  As a seller you have a responsibility to tell the buyer about your home.  “Everything?  You mean like the time the toilet over flowed and I had to fix the ceiling?”  Yes.  “What about the cat that always peed in the corner?”  Yup.  “Do I have to tell them about dad’s passing in the front bedroom?”  As you can see, a seller who goes it alone is going to have a lot to answer for.  Are you going to counter that offer?  Perhaps about now you start thinking that maybe you’ll just offer the buyer’s agent a percent to handle everything?  So now you are paying a buyer’s agent commission and a portion of a seller’s agent commission but you’re the one who had to determine how much the home is worth; what if you under sell?  Or worse and you over price and it doesn’t sell at all – which is usually the case with for sale by owner?  You also have to market the home yourself.  You don’t have anyone to advise you on the negotiation; you’ve still got the buyer’s inspection looming, termite, repairs, escrow, title, hazards disclosures, appraisal, the buyer’s loan approval to consider and monitor… what if the buyer tries to renegotiate or refuses to close?  Yeah, there’s a lot that can happen and a lot that can go wrong in a real estate transaction.

Can you sell a home on your own?  Of course you can.  But here’s a little tidbit fact: When I list a million dollar plus home, I am almost never faced with defending my importance; that conversation is typically in the lower to mid-priced home range.  The reason is pretty obvious:  the more savvy the seller, the more they recognize the value in having professional representation.  Now not all Realtors are created equal, so you need to do your due diligence when you choose your representative.  In the end I firmly believe that you get what you pay for and there’s a reason phrases like “Penny wise, pound foolish” exist.  So if you’re thinking of selling or know someone who is, give me or someone like me a call; it will save you money not cost you money; your family will be thankful for it and so will you.

About Tim Freund

Tim Freund has been a licensed real estate agent/broker since 1990. He spent 14 years as a new home sales rep, ran his own boutique resale brokerage for 5 years and is currently an Estates Director for Dilbeck Estates/Christie's International Estates in Westlake Village, Ca. Tim is a Certified Residential Specialist (CRS), an Accredited Buyer's Representative (ABR), a Corporate Mobilty Specialist (CMS) and a Senior Real Estate Specialist (SRES). Tim has successfully negotiated a loan modification for a client and has been a professional short sale negotiator. Tim sells along the Los Angeles and Ventura County lines, “from LA to Ventura..”. Tim has been married 31 years, has 2 children, is a native Californian and has been a resident of the Conejo Valley since 1991.
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5 Responses to For Sale By Owner

  1. Chris Griffiths says:

    Great post Tim!

  2. Maryann O'Donnell says:

    good letter, Tim. Thank you for writing it.

  3. Chuck Lech says:

    Perfect. Absolutely perfect. Those that worry about Trulia and Zillow putting them out of business need to realize what their business produces for their clients.

  4. Elliot Blinder says:

    Tim, once again you have gathered the most salient points and presented them in a way everyone can understand. Thank you . Only one thing I’d elaborate on , and that is to advise the FSBO what can happen if they forget to make any of the numerous disclosures required by law .

  5. Klara says:

    Having read through this I thought itt has been really informative.
    I appreciate you putting in the time and effort
    to place tthis short article together. I once again find myself spending too much time
    both reading and leaving comments. But just what exactly, it was still worth it!

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