Redfin vs. traditional broker

[sdrealtor]

EP
Generally speaking not much difference in the marketplace between those two price levels but again everything is negotiable and you can always ask. Ultimately it will come down to how hungry the agent is. If they are hungry they will negotiate more. They will also be more under pressure to get a deal done asap so that could work against you. Its not an exact science out here and attempts to make it so always fall fall short.

Svelte
I would generally agree with your dad’s assessment. Irony is that FSBO’s tend to be the most overpriced as they look at what neighbors home sold the highest and go up from there without adjusting for the lot size, condition or upgrades. A good listing agent will educate the seller in a way such that they understand the comps and read the signs the market gives them. Of course you never know and there are sometimes deals to be had direct from a seller

[EconProf]

[quote=svelte][quote=scaredyclassic]
I’m wondering what the pitfalls are to representing one’s self in a sale.[/quote]

My Dad has done that. Worked out fine.

However, he did not recommend it. After several buying and selling transactions, he said it would be better to BUY from a FSBO and sell through a real estate company.

Here’s why:
When you buy from a FSBO, you know they’ve had less traffic because realtors shun FSBO homes…therefore, you can negotiate the price lower with the seller.

When you sell using FSBO, the shoe is on the other foot: you get less traffic because realtors shun FSBO and potential buyers know it and offer you less. Therefore, what ends up in your pocket is not much different than if you listed with someone but you end up with about the same amount of money.

That was his theory. Sounds reasonable to me, though it is opposite what my intuition would think.[/quote]

Re FSBO: What if the FSBO advertises “Courtesy to Brokers”, meaning any broker bringing in a buyer gets his traditional 3% or 2 1/2% commission. I can’t imagine a broker running away from that. Of course, the seller has to be pretty savvy, since he does not have a broker looking out for his own interests.
Any Piggs ever try that?

[svelte]

[quote=sdrealtor]
Svelte
I would generally agree with your dad’s assessment. Irony is that FSBO’s tend to be the most overpriced as they look at what neighbors home sold the highest and go up from there without adjusting for the lot size, condition or upgrades.[/quote]

Having been around several FSBO homes, I think this is correct in many cases. Sometimes the reason they didn’t list with a realtor is (a) they want to keep more in their pocket and/or (b) realtors were telling them to sell for a price below what they felt their house was worth…so they handle it themselves and overprice their home.

That’s where patience comes in. The FSBO owner has made his bed and is often reluctant to admit defeat and list with an agent – instead lowering the price several times and waiting. Eventually the house becomes a good deal and that’s the time to pounce. Worked for my dad, though I’ve never tried it.

[sdrealtor]

A legitimate strategy that can work. More often than not FSBOs. That don’t sell end up listing the home with an agent. There is a well documented strategy for agents to chase after them until they do and its part of most agent training programs

[svelte]

Wow the memories this thread is bringing back. In 1970, my dad offered to buy a house from a FSBO. Within a few of days, he changed his mind and decided to buy a different better house in another area for about the same amount of money.

So we had to drive over to the FSBO and tell them we had changed our minds. When we pulled up, they had their fifth wheel out front and were loading it up. We all slunk down in our seats while my dad walked up to the front door and broke the bad news.

We felt like scum. My family doesn’t do things like that. But in the end, I went to better schools and lived in a better house because of it. I sometimes wonder how different my life would have ended up had we bought the original house. I would have had a different education, different friends…would that have led to different values? Would I have ended up in San Diego?

[gzz]

You all made me curious, so I did a search of only FSBOs on Zillow.

Observations:

They did not look overpriced. Most were below or close to Zestimate, or else had a clear reason to be above like recent major renovations.

The number of FSBOs listed in Zillow was tiny, or at least the number of listings that Zillow gave that label to. Like 1:300 ratio to normal listings.

About 1/3 of the FSBOs are listings by investors, RE agents, or other people in the industry.

[sdrealtor]

GZZ,
A few thoughts

FSBO’s often price near zestimate which are often too high which is one cause

Pulled up a townhome near me. Comps are 430 to 440K for a great location in the complex. Zestimate says 450K. Remodelled FSBO in what I would consider an impaired location listed at 485K

Condo listed in La Costa for $527K. Zestimate says 485K. Comps say price is closer than zestimate to reality.

Small remodelled 1 story house on huge lot near me listed for $1.65M. Zestimate says 950K butt hat doesnt adequately value the lot and view. Its probably worth 1.2 but is overpriced by hundreds of thousands. Guy has had it on and off the market for years. He’s got another around the corner thats bigger on smaller lot but similar view. He’s had it on and off the market for last 10 years also. Always hundreds of thousands too high. Everyone around here knows him. he’s been looking for a sucker for over a decade

And then there is this

https://www.zillow.com/homedetails/354-Oak-Ave-Carlsbad-CA-92008/16646049_zpid/

There are occassiionaly some priced right but more exception than rule. You need to look closer.

And this one. Read comments. Way overpriced. Gave up listed with agent

https://www.zillow.com/homedetails/543-Willowspring-Dr-S-Encinitas-CA-92024/16721209_zpid/

[bzribee]

I just want to say that I appreciate this very thorough discussion about Redfin vs traditional realtors.

Years ago, when I should’ve bought a condo, my most wonderful agent then took me to places he had pre-screened. He had the ability (which I don’t) to help me imagine what it would look like with a few simple changes. Sadly, I got cold cold feet and never bought.

Years later, a RedFin agent, knowing about my severe allergies, brought me to a property that smelled so bad from outside I wouldn’t even finish the walk up the stairs. I was told that’s what all agents nowadays are like.

I prefer the Redfin website (soooooo much easier to access information) and considered using a Redfin agent if I look again. This discussion explains why some Redfin open house realtors know so little about the property. They’re “door openers”.

So thank you for reminding me to be more open minded about traditional agents and to understand the commission differences may not be so different. As I will clearly need somebody knowledgeable with a bit of hand-holding included, I will be more comfortable using a traditional agent I’ve already met and liked. He has been patient with my process, which I appreciate.

[EconProf]

Bzibee: glad to hear you are benefiting from this thread about RE commissions.
I’d like to ask again about another approach to the subject of commissions. Have any Piggs tried the ForSaleByOwner approach while advertising “courtesy to broker”, meaning 2 1/2% or 3% commission to a broker who brings in a buyer?
Two unusual elements of today’s San Diego market make this approach especially attractive: our extraordinarily low inventory combined with high prices. So a $1.5 million dollar newer house with plenty of close neighborhood comps (thus establishing a fair price), could attract realtors with a ready buyer and earning the broker around $40,000. Why would a broker turn that down? Of course the seller would be have to be knowledgeable because he/she has no one looking out for the their interests–perhaps hire a RE attorney to review the paperwork?

[svelte]

[quote=EconProf]
I’d like to ask again about another approach to the subject of commissions. Have any Piggs tried the ForSaleByOwner approach while advertising “courtesy to broker”, meaning 2 1/2% or 3% commission to a broker who brings in a buyer?
Two unusual elements of today’s San Diego market make this approach especially attractive: our extraordinarily low inventory combined with high prices. So a $1.5 million dollar newer house with plenty of close neighborhood comps (thus establishing a fair price), could attract realtors with a ready buyer and earning the broker around $40,000. Why would a broker turn that down? Of course the seller would be have to be knowledgeable because he/she has no one looking out for the their interests–perhaps hire a RE attorney to review the paperwork?[/quote]

I believe my dad did this once but to be honest I don’t remember which house or the outcome. It seems like it did work for him, but again I don’t recall the details which is why I didn’t respond to your initial question.

I think this is probably related to where he came up with his original theory that it is better to sell through a realtor and buy a FSBO without one. If you pay the buyer’s realtor you’ve already cut your savings in half and then when you factor in other costs such as MLS costs, lawyer fees, etc you really haven’t saved much. It seems to me he also stated that realtors like to deal with other realtors and are skeptical of working with FSBOs because they view them as inexperienced and troublesome which is another reason (beyond lack of commission) they steer clients away from FSBO.

That being said, he was doing most of these purchases/sales in areas where homes cost much much less than metro areas such as San Diego. In San Diego, 1% of purchase price can be $6K to $15K….multiply that to get 2-3% and you’re talking real money! He may have had a different opinion in that situation.

Hope that helps but I didn’t really add a lot of info.

[svelte]

This is all bringing back a flood of memories on dealing with realtors.

My father and I have had good ones that I would totally trust and bad ones that we felt didn’t look out for our best interests.

I saw several cases where the realtors talked amongst themselves to figure out ways to get the deal closed so they could get their $$, without regard to whether it was in the best interest of their client. In some instances, they actually hid information.

I truly believe the best way to go into a real estate transaction is not to rely on someone else for knowledge of the area, the home, or the process but instead to look after your own best interest and go in very well armed with knowledge and understanding of your needs and desires.

[svelte]

Beyond what I’ve described above, other areas where I thought a realtor should have alerted us to potential problems but they stayed silent:

– homes with aluminum wiring
– homes with PEX pipes

We toured homes with both of those things and our realtor failed to alert us to the fact that homes in those subdivisions had those characteristics. Even when going over the home inspection with us, not a peep. We had to read the inspections close and discover that on our own.

In one case we were able to negotiate a price reduction based on aluminum wiring, in one case we backed out of a deal due to PEX. Maybe I’m using the wrong term, whatever plastic piping it was they were using 20-30 years ago.

In any case, I feel that realtors should have discussed potential problem areas with us, especially since we had selected realtors familiar with the areas where we were looking.

As I said before, go in armed with all the knowledge you can get…don’t rely on anyone else.

[gzz]

Why is the Carlsbad listing overpriced? 5 million for about an acre a block from carlsbad beach seems reasonable and is in line with my area.

[EconProf]

Svelte, you bring up good points. There are good and bad brokers. My theory is that in today’s unusual market situation, and with the new technology available to both buyers and sellers to inform what a home is worth, $40k is a lot for something a knowledgeable FSBO can avoid. Technology has disrupted a lot of businesses and occupations, and the traditional commission model may be under siege.
Off topic somewhat, I think colleges and universities are about shrink considerably in number for a variety of reasons, not just COVID-19. So many other RE markets are facing severe downsizing, and many commercial buildings will go dark and fall in value, especially in certain parts of certain cities. This was the trend for shopping malls well before Coronovirus.

[gzz]

EconProf,

I have never done a true FSBO because I have never sold RE, but I’d probably give it a shot, and set the buyer’s agent amount to something low like .5 to 1%. It’s a hot market, and if there’s a clueless buyer with a conflicted agent, oh well, there are lots of fish in the sea.

I did, however, do a purchase without any listings or agents. I made a fairly casual and non-serious loball offer to someone planning on moving out of state. To my surprise, it became a deal, and we used a mortgage broker and title company to create all the paperwork, disclosures, etc for a flat fee that was about 0.2% of the price.

I’m just a do-in-yourselfer at heart. I do my business and personal taxes myself as well.

It is odd that we end up seeing seller agents getting squeezed more than buyers, even though in most cases they do more work and have higher expenses.

[Author]

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