For Sale By Owner (FSBO) vs the Buyers Commission

[riotnerd]

Hi everyone.  My wife and I are considering selling our San Diego home sometime in the next 6 months-1 year and I'm strongly considering a FSBO.  The home should sell somewhere north of $700K, so if we use that as a baseline and went with a traditional 6% (3% seller agent, 3% buyers agent) commission, that would be $42K in fees. 

If we don't do that and opt for a FSBO, I'd like to understand how much our potential savings might be.  There would of course be an attorney or title agency fee to handle the paperwork, and perhaps a flat fee MLS listing fee...but the big one that sticks out is the buyers agent fee. 

Most of the threads I've seen in this and various forums seem to strongly suggest still paying the buyers agent commission in a FSBO situation, so if we go with that approach that would still be $21K going to the realtor that brings us a buyer and completes their side of the paperwork.  I understand they have value, but in my mind...that is still an excessive fee!  That's almost a full years worth of living expenses for a lot of us.  Is there any alternative that would still keep us off the blacklist?  Maybe offer a flat $5K to the brokers agent?  Has anyone done anything similar with a FSBO in the past?

Thanks!

P.S.  I wasn't sure if I should post this in DIY or Real Estate, so if a moderator wants to move it to wherever is more appropriate...feel free!

[CommonCents]

First, understand if San Diego operates by a traditional 6% model or something less.  In Boston, 5% is standard.  Next - it's always up to you to put the incentive up there or not, but understand that brokers spend a lot of time taking clients to view properties and understandably want to be paid for it.  You can post no commission, but you may not get many (if any) agents taking people through your house, so you're reliant on the small pool of people doing a DIY route of finding homes and culling through redfin themselves.  To me, the effort of marketing, needing to take people through the home (taking time off work), and even then dealing with people unwilling to buy FSBO wasn't worth the savings.  We didn't have the marketing connections/channel or time off work, and knew we'd reach a smaller pool of buyers if doing FSBO.  (We also had a negative experience going through a FSBO house ourselves.  Don't have your kids at home during an open house if you do this.)  If you can be unemotional, I'm sure you can figure out the right price for your house though w/o hand holding.  And consider hiring someone to be there at the open house so you aren't there (it can make people uncomfortable).

I'd offer something, even if reduced (2%?) to the buyer's agent. 

We bought a house without an agent, but sold with one, at a reduced fee that we negotiated in advance.  We negotiated a 4.5% fee instead of the standard 5%, 4% if it was an internal client for another agent of theirs, and 3% if no agent.  The buyer walked in with no agent, but got hooked up with the seller agent's company so we were in the 4% bucket.  During the negotiations - we had 10 offers - the broker dropped their commission slightly (to around 3.3% is my recollection).

ETA: I'm an attorney (not in real estate), so I drafted the offer letter myself with some samples from friends.  I could have paid a fee of about $75 and gotten myself licensed if I had wanted to, for when we bought the house.

[Annf]

A huge thing Realtors do is keep deals together. There are many reasons a real estate transaction can fall apart. An attorney doesnt care if it falls apart because you pay them regardless of the outcome. Not to mention the time for marketing and getting buyers into your home.

With that being said, at least offer the normal compensation in your market to the buyer agent. Ask several realtors in your area what the MLS payout is to a buyer agent and offer that.

[Villanelle]

About 7 years ago, I had no problem finding an agent in San Diego willing to work for 2.5%, and we offered 2.5% to the buyer's agent as well.  We didn't try to go any lower than that, but it may have been possible.  So I am confident you can do it for less then 6%, and maybe even less than 5%. I think that in expensive markets, that 6% is only standard for people who don't bother to negotiate or research. 

I also bought a home (from my dad) in San Diego with no agents at all.  This was in 2001, and my memory is hazy, but I think we ended up paying about $8000 for paperwork, title search,  and setting up a lien (dad was our mortgage holder).  There was no MLS listing or marketing of any kind included in that. 

[Bob W]

Best option is to pay the $500 to take the real estate exam yourself.   That way you can save the commission either half or whole on the sale.    You can also save the commission if you buy again. (you'll have to split some with the broker agency)

MMM's wife is a realtor.  There is a reason for this. 

It is the one license that virtually every MMM reader should consider.    You probably have a friend or two that would list with you or use you as a buyers agent in the next few years as well. 

[Bobberth]

My opinion is if the standard commission is 6% with 3% going each way; sell it FSBO and offer 3.25% or even 3.5% (if it's a slower market) to the buyers agent.  Yes it costs you more  than 3% but you're still saving 2.75% and you just made a nice incentive for agents to make sure they get your house on the "to see" list. 

On our first rehab, we held a 1 day "Open House" mainly for our family and the neighbors to come see what we were working on.  It was a Sunday afternoon and we didn't expect anybody other than family and curious neighbors to show up.  The next day we were going to list it with our agent.  An agent was showing a house down the street to her client and came by since they were already there.  They were excited about the house and asked lots of questions.  The next day the agent called me asking specific questions that I felt were very buying centered.  The last question that was asked was, "How much is the agent commission if you sell it yourself?"  I thought I'd save myself a few bucks and said 2%.  We never heard anything back from that buyer.  What we had a very interested buyer for at $150k ended up selling for $130k 4 months later.  Anything could have happened but I figure that one moment trying to be slick and save a little bit cost me $20k.

[JohnGalt]

When I sold my house last year, I went with a flat fee broker to get me listed.  They basically put me in the MLS and handled all of the paperwork for ~$400.  They didn't do any showings or any marketing - which was fine with me.  They did run comps for me to help me set a price, but I already had a price in mind.  When filling out the paperwork for the MLS, I was asked what % I wanted to offer to the buyers agent.  I went with 2.5% and didn't have any issues.  If my house was more valuable, I would have probably offered 2% instead.

I just set up a lockbox for the key myself, and the broker put me into the system that let's agents phone in to get the passcode.  I then cleaned my house and was out of town for the 2.5 months it was on the market.  I got a phone call every time it was shown and the feedback report in an email.  The offers and other communication still came through the broker's agent and they didn't do much more than act as the intermediary, but it really wasn't much work.  To the buyers, I don't think they even knew I had a flat rate broker. 

I highly recommend this approach but YMMV.

[TheThirstyStag]

There is some great info in this thread.  Lots of things I never through about. 

[mm1970]

We live in So Cal, and our town has a well-liked full service real estate agency that charges 1.5% -

Meaning, for sellers, they charge 1.5% (and probably pay out the normal 3% to buyer's agent).
For buyers, they take only 1.5%, so if the seller's agent gives them the normal 3%, they give half that back to the buyer.

You may find an agency like that in your area.  Median home prices here are about $900k.

[eae550]

I think skipping an agent is penny-wise, pound-foolish. I understand that it's a lot of money in fees (half of which goes to the broker, not the agent's pocket BTW) but you are likely to receive a significantly higher price given that your pool of buyers increases 10-fold. I used to work in real estate and I would never have shown a FSBO, even if they were offering more commission than a realtor-sold listing. Plus, the serious buyers tend to be working with agents.

For people who have bought a FSBO, how did you handle an earnest money deposit? At least if something went seriously awry in the deal with another agent I could call their manager, take a complaint to the ethics board or licensing board, etc...

Definitely negotiate if the selling agent brings in the buyer.

[couponvan]

I would recommend you let the neighbors know you are thinking of selling in the next 6 months.  Also look into home staging if you are doing FSBO.  We sold two houses FSBO, with a 2.5% buyer's agent commission.  DH is an attorney, so he handled all paperwork.  We sold the first house to the first person in the door full asking.  The second we sold to a person moving up from the town homes in the neighborhood, again for full asking. The home staging I believe made a huge difference - we spent about $500 for the staging and about $500 for the items they recommended we include like artwork/linens.  Of the display items we returned about $350-400....