Nov 30, 2007

An Agent or No Agent

Squirrel left a question about people who try to sell their homes without a real estate agent. These are called "For Sale By Owner" (FSBO). It has been my experience that FSBO is usually not worth the trouble. Real Estate law varies from state to state, so some closing expenses cannot be cut through FSBO anyway. The chief thing that people are trying to accomplish through FSBO is a savings in the commission costs, by eliminating the agent. This is almost always penny-wise and pound foolish. The problem is that the sellers hope to save as much as seven or eight percent by eliminating the agents and the buyers are usually looking for a discount because they realize that the seller will have that savings in the deal. Buyers selling on their own and sellers looking to buy a FSBO, are both trying to save the same seven percent. In practical terms a $300,000 sale with a 7% commission will cost the seller $21,000 in commissions. They want that $21,000 for themselves, but the buyers look at the deal and think to themselves that they should only have to pay $279,000 since the buyer isn't paying the $21,000. Less obvious is that an agent is a professional at recognizing what makes a home attractive or unattractive. A good agent might sell a few dozen homes a year, FBSO sellers, sell one a decade. Sellers usually think that their home looks fine as is, but a motivated agent will point out the warts that need addressing in order to make the home sell quickly. FSBO sellers also tend to try to sell at the top of the market. A good agent will help you set a price that is realistic. It may be higher than you think, but could be lower. Having a home on the market for a year because a naive home seller is married to a hyped price is a hassle. Lastly, an agent acts as a sort of impartial intermediary and a reality checker. Often in home deals buyer and seller will have differences over relatively minor stuff. Since this is an emotionally charged transaction, having someone or two someones, to act as go betweens can really move things along. Lastly, lastly, real estate agents have access to ninety-nine percent of the buyers. It doesn't cost the buyer anything to hire an agent, so they almost always do. It is the rare buyer trying to buy on their own and when they do, they are almost always looking for the upper hand. So that's my opinion. P.s. Many times FSBO sellers are approached by people who have bought "get rich through real estate" type tapes on late-night cable television. They are usually bozos trying to make a quick buck and can get sellers into real messes. That is all, I think. Things in this blog represented to be fact, may or may not actually be true. The writer is frequently wrong, sometimes just full of it, but always judgmental and cranky


Steve said...

I firmly believe that it's worthwhile to have a Real Estate agent. Sometimes you just gotta pay for a valuable service, you know?

d. chedwick bryant said...

so we need those annoying women in pantsuits... yes.

d. chedwick bryant said...

Oh, and P.S.

Rather than Land-Lording 100% by yourself, it is well worth it to get a management service--they get the best rent and deal with the tenants for you, none of the little nitpicky stuff comes to you. They take care of everything for you. Of course you choose the tenat after they have screened people, and you can interact with the tenant, inspect the place from time to time.
Still it is a great service.

Kurt said...

Word on the street is that agents will negotiate their commission in some cases, particularly when the market is hot and their job easier.

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