Boycotting agents?

[FutureSDguy]

This article reminds me of my experiences as a seller who initially hired the help of a flat-fee listing service, and then later had to hire a real broker: http://money.cnn.com/2006/09/22/real_estate/help_home_for_sale_young_ballanco/index.htm?cnn=yes

Disapppointly few buyers came to check out the property. Granted, it was hard to sell this property due to economic conditions. But the onwer said that “only calls he was getting were from realtors, who wanted to act as his agent.” So the agents obviously knew about the property. Most people who go FSBO or flat-fee-listing, if they’re reasonable, welcome buyer’s agents. Yet they don’t come.

I think its a boycott–agents do not want to participate in a FSBO or discount-broker market, and are not acting in the best interests of the buyer in letting them preview all the properties out there (while I admit my property was priced a bit too high, I do believe the quality was among the best in the comparables class.)

Does anyone else agree or disagree?

Buyers who hire agents should also be looking around on their own also.

[sdcellar]

Buyers who hire agents should also be looking around on their own also.

Absolutely, especially with this new fangled internet stuff.

Even though we were working with an agent for the last house we bought, we were the ones who actually found the property. It wasn’t a matter of steering us clear of FSBOs, we were just pretty picky, so looking on our own just helped the cause.

[FutureSDguy]

What is a typical commission arrangement for when a buyer discovers and, possibly in addition, previews a FSBO home, and the seller already figured in 3% for the buyer’s agent. In interest of fairness due to reduction in service, my personal opinion is that the agent should be rewarded with 2% in the form of a 1% rebate to the client.

What if the seller won’t cover the commission–then buyer must pay the agent directly. Then in my case, I’d just do all the paperwork myself (and maybe get a real estate attorney to loook it over). This scenario would probably not go over very well the agent has already invested into the process. What’s the typical solution here?

[Bugs]

The argument about that I’ve seen is that a lot of the brokers assume that they’ll have to do all the work for both sides of a transaction involving a FSBO or discount broker. I’d say that’s probably a fair assumption in many cases.

Of course, I’ve also heard comments from a few of them about avoiding listings with cut-rate brokers as a form of competition control, too.

A seller who really is savvy about pricing their home probably could do well by paying for a discount broker or an attorney to oversee the technicalities. A seller who is less than savvy would need more help.

[SD Realtor]

For me it is more of a matter of risk. Guys, the SDAR risk mitigation classes I have taken drill over and over and over into our heads risk management. While I may be the Realtor that represents the buyer only for a given transaction, I can still be held liable for a snafu’d transaction by a court in a FSBO (sellers side) transaction, even when it may not be (in my opinion) my fault. So even if the seller does pay a buyer side commission, it still is a lot more risk for me (the buyers agent) and in order to mitigate that risk, I will do alot more work, (verifying the disclosures, getting the NHD, and other such issues)…

The fact of the matter is many many FSBOs do offer good co-op commissions. Again, it is simple risk. I have buyers who have seen FSBO’s and like them and when they told me they wanted to buy it, I didn’t stop them at all. I gave them the number of a real estate attorney and advised them to have him represent them. As a REALTOR that is just the way things go if your invested time doesn’t get you the sale. So no it doesn’t go over well but I understand the motivation of people.

Again, I know most everyone here pretty much view agents as worthless and that is okay. However if any of you guys actually attended some of the seminars and classes that we have attended regarding risk mitigation, and all the lawsuits, you would see why most (but not all) of us Realtors shy away when a FSBO is involved. Especially as I am a small business, not one of massive brokerages, that even makes me more risk averse. I get nervous enough when there is a mortgage broker on the other side of my transaction instead of a Realtor.

[bubba99]

If everything in a transaction goes well, the realtor does look somewhat un-necessary. But when thngs start to go south, everyone looks to the agent to fix the problems. It is probably true that the better the agent, the more un-necessary they appear.

FSBO transaction can work smoothly and save the seller some money, but if there is a problem with the loan, or title, or cold feet, or enything else, an agent is sure a welcome addition to the party

[FutureSDguy]

Actually, I don’t think realtors are worthless. I think clients need them to various extents. But I also think that buyers and sellers don’t know enough about the process of a RE transaction to accurately judge whether representation is really needed.

Buyers are protected through a sellers disclosure form. I would certainly demand one, if it isn’t already required by law. Both buyer and seller is protected by the purchase agreement which specifies the deposit, contingenices (i.e. inspections and previous house sale), extra items that go with the house, and of course the timeline towards closure. Escrow protect the money and the title transfer itself.

Things can go wrong along this course, but there’s risk in lots of transactions. In RE, billions of dollars are changing hands to mitigate a risk that doesn’t occur that often, especially when buyer and seller are acting in good faith–and much of the time I believe they are.

I bet a good portion of the risk seminar involves the risk of not getting a commission, or a client feeling that s/he is not being properly represented. I think the relationship between client and agent is just as complex as the RE transaction itself, so there’s a risk of a lawsuit in that alone.

My expr. with FSBO as a buyer was actually pleasant. We both sat down, verbally negotiated all the terms, and I drew up a purchase agreement with contingencies and a timeline. We helped each other through the process because we knew that most of what needed to be done was just stuff dealing with escrow, the title company, and the clerk’s office.

[powayseller]

I value realtors. The seller pays the fee, so why not use a realtor? I doubt the seller will give the buyer a discount for not having a realtor. From what I’ve been told, transactions involving only one realtor means that agent does double the work. If somebody wants to save the realtor commission, why don’t they just go out and get a realtor license?

[powayseller]

duplicate.

[FutureSDguy]

Such a messed up system. I think the MLS with the buyer and seller commission figured in upfront is only there to protect the interests of the agents involved.

So homes typically have the 6% commission built into the price. A seller representing himself shaves 3% off the price to be more competitive. In negotiations the buyer can say “I want to represent myself, can you knock off another 3%,” to which I would say sure! (Because I would have been prepared to pay an agent anyway.)

Powayseller, the scenario in which I get to pocket that 3% and still sell at the same amount is the same scenario in which I increased the ask price by the same amount and gave the buyer the 3%. Either way, buyer pays the same, seller receives the same, hence the marketability stays the same (except for the fact that the buyer won’t know that’s built into the ask price until he asks the seller).

I don’t buy the part about realtors doing double the work. (They double the amount of paperwork on their own, actually.) Any seller has to prepare the same amount of prerequisite paperwork, and any buyer likewise. Whether someone chooses to hire an agent to do their respective part of the paperwork doesn’t affect the other side.

I’ve only done an FBSO where both buyer and seller were self-represented, not where one side is represented. Am I blowing smoke here or am I hearing FUD from the RE industry. (FUD = Fear Uncertainty Doubt).

Also note that the paperwork on the sale is pretty much the same no matter what the value of the house is. So sellers who don’t want to the paperwork can have it done for a flat fee. “Oh no, it can’t work that way.” Yeah it can, but until then there needs to be more education and less anti-competitive practices revolving around the MLS.

And if someone says “my gosh, you sure are a cheapskate.” Selling RE is hard partially because finding the fair price for a property is difficult. 1% movements matter, especially as the price of the house increases. Plus the seller has a fixed obligation to the bank, so any 1% increase the overhead of the sale comes directly out of the seller’s pocket.

Look at it another way 6% is a whole years worth of appreciation (in a normal market, at the risk of the seller) spent on what could be as few as 4-6 hours of agent time doing paperwork that is routine for them.

I know it’s a rant against the commission system. I do think buyers and sellers do need agents if they don’t want to do the work. But for those who want to be closer to the metal in the overhead costs, they’re excluded from the market, hence the title of this thread. Agents boycott FSBOs.

[kagster]

When i bought my first house through FSBO i don’t recall that much paperwork at all besides the loan documents. We just sat down together and went through each item of the standard sales agreement the seller bought from the bookstore. All the paperwork were handle by escrow. And when i sold there was a transaction coordinator that charged us $450.

When i bought I should have had the home inspected and find out comps of the area, but i was ignorant. Using an agent would have helped us learned more about the process. I didn’t even know that you needed or should use one.

When i sold I did FSBO and had a friend, from Help U Sell, listed in the MLS for me. One thing i noticed was that the only agent who showed up were the ones that wanted to be my agent if the house didn’t sell.

One other things i noticed around my neighborhood was that the homes using Help U Sell were not selling. This was going on for about three months. Then it hit me……the agents were probably boycotting the discounters. It’s not openly discussed but probably talked about behind the doors at the big firms.

My house sold because the buyer droved by and then told his agent about it.

After the listing were expired, the homes in my neighborhood used the conventional agent/broker and the homes were sold within a month or less. That confirmed my conspiracy theory.

[SD Realtor]

There are many reasons why I sold my Help U Sell franchise and started my own brokerage. One of them was due to the fact that I felt that traditional brokerages didn’t bring as much traffic to my listings. Now that I sold I do see much better traffic. Now that could be for many reasons but I also get alot of calls from high end property owners to list then when I owned my Help U Sell. I still actually charge less to list a home from HUS but I am a small brokerage and my pricing policies are not of any consequence to the big guys.

The postings that talk about the simplicity of FSBOs are correct. FSBOs are simple because they are an unregulated and private transaction. You can make the disclosure process as simple or complex as you like. I am sure other Realtors will chime in but the proper disclosure documents depend on the age, location, and type of home. Included in the package would be the standard TDS, this is the one most of you are familiar with, then Sellers Additional Disclosure document, the San Diego County addendum to the Purchase Agreement, the Sellers Questionaire, a defective furnace advisory, mold disclosure statement, lead disclosure… just to name a few. Again, none of this matters if you are doing a FSBO… However if I am a Realtor and representing a buyer I better get these forms and more. So if the seller is a FSBO he needs to get them to me some way. So then it DOES become MY responsibility to get them done and MY responsibility to make sure the Seller fills them out right. Why? Because I can be found liable as a Realtor even though he is not even my client.

Again, when it all works out right, and most transactions do… there is nothing to worry about at all. However when things don’t work out and it all crashes and burns ALOT of money is at stake. My brokerage is not worth risking it.

As far as paying commission goes… well…you can find great agents that give you rebates if you are a buyer, or a very low commission if you are a seller.

FSBOs most always work out fine… I would just advise someone to get a real estate attorney at the least. It is a small premium to pay. Regardless of which side of the transaction you are on.

[SD Realtor]

There are many reasons why I sold my Help U Sell franchise and started my own brokerage. One of them was due to the fact that I felt that traditional brokerages didn’t bring as much traffic to my listings. Now that I sold I do see much better traffic. Now that could be for many reasons but I also get alot of calls from high end property owners to list then when I owned my Help U Sell. I still actually charge less to list a home from HUS but I am a small brokerage and my pricing policies are not of any consequence to the big guys.

The postings that talk about the simplicity of FSBOs are correct. FSBOs are simple because they are an unregulated and private transaction. You can make the disclosure process as simple or complex as you like. I am sure other Realtors will chime in but the proper disclosure documents depend on the age, location, and type of home. Included in the package would be the standard TDS, this is the one most of you are familiar with, then Sellers Additional Disclosure document, the San Diego County addendum to the Purchase Agreement, the Sellers Questionaire, a defective furnace advisory, mold disclosure statement, lead disclosure… just to name a few. Again, none of this matters if you are doing a FSBO… However if I am a Realtor and representing a buyer I better get these forms and more. So if the seller is a FSBO he needs to get them to me some way. So then it DOES become MY responsibility to get them done and MY responsibility to make sure the Seller fills them out right. Why? Because I can be found liable as a Realtor even though he is not even my client.

Again, when it all works out right, and most transactions do… there is nothing to worry about at all. However when things don’t work out and it all crashes and burns ALOT of money is at stake. My brokerage is not worth risking it.

As far as paying commission goes… well…you can find great agents that give you rebates if you are a buyer, or a very low commission if you are a seller.

FSBOs most always work out fine… I would just advise someone to get a real estate attorney at the least. It is a small premium to pay. Regardless of which side of the transaction you are on.

[powayseller]

kagster, there is no reason the Help U Sell would be banned, since they pay the 2.5% or 3% fee to the buyer’s agent. My house sold in 6 weeks with Help U Sell, and I am the last sale in my neighborhood in 9 months. The HUS is a discounter only to you as the seller, because they work on volume and they eliminate a couple services, such as sitting at your Open House, they don’t use an independent photographer for your photos, etc. So if you wanted an Open House, you would do it yourself. My photos were very good even though my agent took them with her camera. I did not see any other indication of any discounting.

My positive bias for realtors is based on several things. First, I am always amazed at the disclosures I must give and receive and am nervous about lawsuits. What if I get a house with a cracked foundation or mold or some other problem, just because I didn’t know to ask about it? A FSBO doesn’t have to tell you, right? My cousin spent $60K retrofitting her foundation because she didn’t know it was settling when she bought the house. My realtor told me of several subdivisions built on settling soil in San Diego, where the foundations are settling and cracking. There, even the realtors were not cautious enough. What if someone sues me for not disclosing something that I should have disclosed?

Second, I want MLS information to know everything about the comps, the true days on market, the pendings, and the previous sales prices. How will you get that information? Only the realtor has access to it via the MLS. If I overpay by $50K just to save $20K on commissions, how smart was I? If the $680K house went into pending, but I am making an offer on the $710K house, how smart am I really? So having MLS access is very important when you make your offer.

A good realtor can also advise you on what to look for or avoid. For example, Jim Klinge has some really good posts on his website telling people not to buy near power lines, avoid a house where the neighbor looks down in your yard, look for xyz, …He/she can advise you that this particular home is a very good deal for that neighborhood, etc.

Next, I never know how to fill in those forms. What is the buyers supposed to pay for, vs. the seller. Escrow and title fees, closing costs, etc. What if I put in my contract I will pay for it, but usually the seller pays for it? What about the # of days for contingency,e tc. I never know what to put in for all those numbers. But perhaps an attorney could advise you on that. Probably if you took a realtor course you would know all that.

Last, I have some friends who are realtors.

I hope the realtor commission system changes. I would prefer to pay my realtor in the same way I pay my accountant: by the hour or by the project. Currently, most of a realtor’s fee goes to pay for his sales and marketing efforts toward the clients he does not get. A realtor probably spends 70% of his time trying to get clients. So about 70% of the fees I pay go for that part of his day. I don’t want to pay for that, frankly. So if some looky-loo client wants to take up 3 months of a realtor’s time looking at houses he never plans to buy, or works with a realtor for 2 months and ends up buying a house from a different agent, I think the realtor should charge that looky-loo and that disloyal client, rather than wrapping it into the commission that I have to pay. Let each person pay for the service they use.

So David Lereah, change the realtor pricing model. Don’t charge the person who gives you the sale for all the time you spend with the person who *doesn’t* give you the sale! What a perverse form of pricing punishment that is.

I’d also like to see better training and entrance requirements. Most of the realtor training is in closing the deal and figuring out the paperwork, not in the economy, construction, or business matters. I think the training could be vastly improved.

So while I value realtors, I vote for a complete overhaul of the payment system, and better training and screening.

[powayseller]

FutureSDGuy, you make some very good points. But I think it doesn’t work in practice as we might think. Mainly, sellers who list by owner tend to overprice their home. They have no idea of the correct market value, because they did not receive a “Comparables Analysis” from a realtor. Say their house is really worth $750K, but they think their place is so unique because it is a corner lot, the sink is 1 year newer than the neighbor’s sink, and they just planted a tree in the front yard, zo they list for $820K. This example is to point out how completely irrational sellers are in pricing their home. Where is the discount?

If a seller lowered his price by 3% from a realistic market price, he does have a pricing advantage. As long as he is in the MLS and pays a cooperating broker commission, he should get showings. When I listed FSBO with a 3% broker coop, I had several realtor/client showings.

If you come without an agent, will you save 3%? I very much doubt that. The seller has a minimum price in mind, and he won’t lower it just because you don’t have an agent. Say the seller will go as low as $550K, so that is his lowest price. Out of that price, the realtors take split the 5% commission (5% of $550K is $27,500, or $13,500 per agent). Since you don’t have an agent to pay, will he let you have the house for $13,500 less, so $536,250. I doubt it very much. Sellers have that ego thing going and they do not want to go to their cocktail party admitting they got noly $536K for their house, when their neighbor got $550K. For sellers, it is all about the ego! Their house is worth more because it is special, and all that crazy emotional mumbo jumbo. It’s so stupid, but sellers are completely irrational animals.

However, I would love to be proved wrong. So if anyone has any examples where they think they saved 3% by shopping without an agent, and have some comps to make the point, I will eat my words.

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