How I sold my condo and saved $5,000

This guest post from Nick Rothacher, the self-taught economist, is part of the “reader stories” feature at Get Rich Slowly. Some stories contain general advice; others are examples of how a GRS reader achieved financial success — or failure. These stories feature folks from all levels of financial maturity and with all sorts of incomes.

Our condoSix months ago, my wife and I sold our two-bedroom, two-bath condo located in the heart of downtown Salt Lake City. We saved close to five thousand dollars and sold the property without much stress, frustration, or wasted time. Here's how we did it.

Starting Early

Life changes fast, and when my wife started applying to graduate schools across the country, we knew we needed to be flexible with our housing situation. We started talking about selling our condo over a year in advance of when we would be moving. This extra time was invaluable because we weren't stressed about reducing our price in order to make a quick sale. When you sell real estate in a depressed market, time is your friend.

Exploring Options

Initially, we tried selling the condo “For Sale By Owner”. The primary benefit of selling For Sale By Owner is to avoid the commissions and fees paid to real estate agents. We took digital photographs, created our own fliers to market the property, and started advertising on free sites like Craigslist and local online classifieds. Unfortunately, nothing seemed to work.

After three weeks with few prospects, we escalated our marketing attack. From my yearlong stint as a real estate agent, I learned that many buyers (especially Baby Boomers) prefer to use a real estate agent to help them purchase a property.

We needed to get our property listed on the MLS (the Multiple Listing Service). We paid a local discount brokerage $175 to list the property. This service is considered a “discount” or “flat-fee” brokerage and the fee covers the following services:

  • Property is listed within 24 hours
  • Six month listing period
  • Property is advertised on multiple websites
  • Six photo listing

But in order to really market the property, we needed to go beyond the services listed. My wife and I took the initiative and did the following:

  • Adapted our flier to direct people to the MLS listing.
  • Used our own pictures that highlighted all parts of the property — inside and out.
  • Provided property tours to folks that called to schedule a walkthrough.
  • Held two open houses and advertised with yard signs, the MLS listing, Craigslist, and other online media.
  • Communicated regularly with our broker to update the MLS listing.

After another three weeks had passed, we received a low offer. We submitted a counteroffer with a price closer to our listing price and it was accepted! Property sold. Many dollars saved.

Crunch the Numbers Yourself

Conduct a simple cost-benefit analysis to see if an agent is really worth it. Typically, you pay 6% of the sales price to have an agent list your house, which is divided 50/50 between the buyer's agent and the seller's agent.

What this means is that the remaining 94% of what an agent can get for me better be worth more than 100% of what I can get for myself!

I listed my property at $165k, which means I would have paid 3% to the buyer's agent ($4,950) and another 3% to the seller's agent (another $4,950), for a combined cost to me of $9,900.

But because I used a discount broker, I paid $4,950 to the buyer's agent and only $175 for the seller's (our) agent.

Total savings = $4,775.

The Death of the Real Estate Agent?

Did you know there are over a million real estate professionals currently affiliated with the National Association of Realtors? (And that's down from 1.2 million at the peak of the housing boom in 2006.) I'm bound to upset a majority of them with what I say next, but my sole intention is to educate GRS readers.

There has to be value to justify hiring a real estate agent. If my wife and I believed that a full-service real estate agent would have provided $4,950 worth of services in the following areas, then we would have hired someone to:

  • help with paperwork
  • help with advertising
  • help with knowledge in a variety of areas
  • help provide access to the property
  • help to sell the property more quickly
  • help fix the cosmetic changes to help the home sell
  • help us to understand current market conditions and the value of comparable homes in the area

Thanks to the internet, most of these services are no longer as valuable as they once were. Every one of the topics listed above can be found with the help of an online search engine. The buyer/seller can learn about all of these topics in a matter of minutes.

In our case, it just didn't make sense to hire a real estate agent to list our home. We live in a busy metropolitan area and we knew our buyer audience was large. We ended up selling to some parents that wanted an investment and a safe place for their two daughters in college.

The Future of Real Estate Agents

The internet continues to change the way we access information about real estate. For buyers and sellers, this is a positive change that can save us money, but for real estate sales agents and brokers, it presents new challenges to the profession.

As the quality of information on the internet improves, many of the “gatekeepers” and the “knowledge holders” will be unable to keep their expertise out of the hands of the general public. I'm not saying that doctors, lawyers, and other professionals will no longer be valuable. But believe me, getting your real estate license is not exactly the equivalent as going to law school or med school.

Don't Believe Me?

Look around. Agents are posting properties on Craigslist and free classifieds because that's where buyers are looking. I definitely don't need an agent to post pictures on Craigslist — I can do that myself.

The MLS is the last stronghold that real estate agents cling to because their livelihood depends on it. But don't be surprised when someone develops a database that is fully accessible to the public, making the MLS obsolete.

United States house prices
Chart courtesy of JP's Real Estate Charts

My last complaint about real estate agents is that they get paid based on the market price of your home. From the graphic above, you can see that the values of homes in the U.S. have increased (look at the red line) tenfold from 1975-2005.

Did the amount of work increase tenfold? Did it become ten times harder to sell a home? No and No. This 6% “tax” really hurts Americans because on average, people sell their home every 5-7 years. If you want to read more about the negative effect this has on the economy and how full-service brokers are working hard to eliminate discount brokers, here is a great article.

So next time you buy or sell a property: explore your options, educate yourself, and save money!

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Pamela
Pamela
8 years ago

Nick did a great job of describing the work involved in marketing and negotiating a home sale. It would be great if he could also talk about the work involved in getting to closing. One reason many buyer’s agents dislike working with FSBOs (for sale by owner) is that they get a partial commission but they do double the work because the owner doesn’t know how to manage all the steps to get to closing. And if you rely on an attorney to do extra work for you, that can decrease your savings on an agent commission. I agree that… Read more »

Jo-Pete
Jo-Pete
8 years ago
Reply to  Pamela

On the other hand, just because you’re working with a realtor doesn’t mean that they know how to get to closing, either. When I bought my house a couple years ago, I had a very friendly, hard-working realtor who was very patient with me taking 6 months to find a house. He was very proficient at making offers (we made about a dozen), but turned out to be completely clueless when it came to resolving issues that came up during closing. At the end of the day, I had to ask for help from one of the people who gave… Read more »

No Debt MBA
No Debt MBA
8 years ago
Reply to  Pamela

Redfin’s business model is moving us closer to fee-based instead of commission based realtors. Their agents are all salaried which is a big difference. I’ll be interested to see how this evolves but I would bet it’s going to be extremely slow.

A similar trend is taking place in financial planning; where commissions used to be the norm, fee-based investment advice and planning services are now a major component of the market.

Dee
Dee
8 years ago

This story is framed as “Look, I sold my house without a real estate agent!” which is hardly true since … Nick is/was a real estate agent. That’s a far cry from an average person Googling some information and going at it.

CEE
CEE
8 years ago
Reply to  Dee

That doesn’t take from the value of his post. He still outlined the steps that anyone can take to sell his own home without a realtor. I’ve done it twice: The first time , the buyer brought his own realtor and I paid the buyer’s agent fees. The second time there was no agent involved. I learned then how much of the actual work the Title company does.

I thought it was an excellent post and find it amazing how quickly some people attempt to minimize the accomplishment or the value of the post itself with some meaningless dribble.

Patrick
Patrick
8 years ago

Great story. Selling your own house can be a great way to save money. But you also need to ask yourself can a real estate agent sell the house for more? An experienced real estate agent could well pay off their commission by getting a better selling price for your property. Really depends on how good you are at negotiating.

quail
quail
8 years ago
Reply to  Patrick

In the book as well as the movie ‘Freakanomics’ they actually study real estate agents. Seems that when an agent sells your house his incentive is to sell quick. He/she only earns like $150 for getting your house sold for an extra $10k. This is no incentive. But when agents sell their own houses, they statistically get more money for them then they do for their clients. Why? Because they will hold out for the better offer.

In the end, agents work for themselves. Not for the seller or buyer.

twiggers
twiggers
8 years ago

It seems to me that the easy part is the marketing/MLS. The hard part is all the paperwork, contracts, and closing.

ian
ian
8 years ago
Reply to  twiggers

Regarding paperwork – You may be interested to see/know how much paperwork the agent actually does. They generally use a standard contract for the offer and at closing (in Ohio) it’s the title agency that does all the paperwork.

quail
quail
8 years ago
Reply to  twiggers

Same for Texas. The title company truly does all of the work as well as the mortgage company. The real estate agent acts more like a gate keeper than anything else.

There are good real estate agents out there. There’s also those who would be better suited to selling cosmetics from a case or used cars from a dirt parking lot. Some of the horror stories I’ve heard from friends make me wish we could get rid of the real estate agent all together.

sandycheeks
sandycheeks
8 years ago

I wish real estate agents were paid on an hourly basis rather than commission. When compensation is commission based they have no fiduciary responsibility. I also feel like since many people do much of the search themselves via trulia, redfin etc, agents are getting paid for doing less than they used to. @twiggers…. I agree and yet as someone who checks listings on a daily basis I am appalled at how poorly marketed many homes are. I cringe to think of handing thousands of dollars over to someone who couldn’t bother to take proper photo’s. If they can’t do the… Read more »

Anonymous
Anonymous
8 years ago
Reply to  sandycheeks

Hourly doesn’t make sense at all. People wouldn’t be able to sell in a down market b/c the closing costs would be formidable. Loans can fail, the agents would encourage endless counteroffers, and you’d question every additional house they wanted to show you (or open house they wanted to hold). The commission is the perfect incentive for the seller’s agent. The buyer’s agent might work better with a flat rate, but definitely not an hourly one.

sandycheeks
sandycheeks
8 years ago
Reply to  Anonymous

Maybe I am misunderstanding, can you explain?

If a 400k home is sold, the buyers/sellers agents split 24k? And if a 200k home is sold, they split 12k? In my mind they should be doing the same amount of work for both homes. Why should they get twice as much money for the 400k home? Wouldn’t they both benefit from having the buyer pay more? Who is looking out for the buyer? This is why I was thinking hourly.

Like another poster said, not wanting to pay these commissions is part of why we added on instead of moving.

Amanda
Amanda
8 years ago
Reply to  sandycheeks

We too are building an addition rather than lose a large portion buying/selling…

Anonymous
Anonymous
8 years ago
Reply to  sandycheeks

If the seller’s agent’s interests are aligned with the seller’s, then the seller’s agent should want to sell the house for as much as possible. Hence, it makes sense that the commission should be pegged to the price of the home. Otherwise, the seller’s agent has a huge incentive to convince the seller that the house isn’t worth that much just so the deal can be closed more quickly. (This incentive already exists to some extent and has been measured; it’s explained in Freakonomics.) As I said, it seems the buyer’s agent might work better with a fixed price. But… Read more »

Rosa
Rosa
8 years ago
Reply to  sandycheeks

As a buyer, I would have been really angry if we’d been paying by the hour. It was bad enough that we wasted hours of our time looking at properties that didn’t fit the parameters we’d given the agent but she thought would be “great if we only saw them!” Finally after weeks of saying no, no, no we gave you these parameters because they’re important to us, she showed us a house that fit all of them (and exceeded some – it was cheaper than our max). And we bought it. But man it seemed like the hardest part… Read more »

Kevin
Kevin
8 years ago

I think you mean look at the blue line. And the blue line is irrelevant. The red line is what matters. And the red line is pretty much flat, especially if you look past 2005.

Jane
Jane
8 years ago

I largely agree with this article. When I bought my first home and therefore wasn’t involved in paying commissions, I of course thought my buyer’s agent was worth every penny. Now I’m not so sure. She didn’t even do the research to find us our home, since she just put the parameters in the computer and had automated e-mails sent to us with houses for sale. That took her a few minutes. It’s not like it is on HGTV or wherever when the agent previews homes first and then shows them to you. Okay, maybe they do this if you… Read more »

Pamela
Pamela
8 years ago
Reply to  Jane

It’s not quite true that you didn’t pay a commission as a buyer. The commissions for both agents come out of the house proceeds which you are financing. So, in a sense, you are paying a commission.

Mom of five
Mom of five
8 years ago

Years ago, when my husband and I were looking at our first (and to date only) house, it was pre-internet and we just walked into a real estate office in a town we liked. A woman took us to a few houses and then asked if we wanted to have an exclusive buyer’s agent. She handed us a contract, we thanked her and said we’d consider it. When we read the contract it was clear that she’d be representing the person selling the house and it was also clear the more paid, the more she’d benefit. We figured out then… Read more »

Mom of five
Mom of five
8 years ago
Reply to  Mom of five

Yes, I am saying that. In Pennsylvania at the time (mid 90’s), according to the contract language, the buyer’s agent was representing the seller so even if we’d have had an agent, we’d have not had representation in the contract.

However, we did have a real estate attorney look over and adjust our contract according to our interests. We did all our own negotiating.

Courtney
Courtney
8 years ago

This works for some people, but we moved to another state *before* our condo went on the market (about an hour’s drive away) and we both have full time jobs. It was enough of a hassle taking time off or going on weekends to do the painting and meeting the carpet installation guys (and one UPS delivery thanks to a very slow internet order). I couldn’t imagine trying to take on the hassle of managing open houses, meeting the inspector/appraiser, dealing with the condo association, etc as well. I consider my time and energy to be well worth the 3%… Read more »

Becka
Becka
8 years ago
Reply to  Courtney

Yup, same for me. I had already moved a month before I was able to list my condo for sale. I would not have been able to do all of that myself. Plus, the buyer ended up being a (jackass of a) lawyer – NOT something I wanted to deal with alone! As to the unfairness of the ever-increasing income agents get from commission, Nick, tsk tsk, shame on you for citing the nominal numbers AND cutting off at the peak bubble prices, yelling “10-fold increase!” when the very chart you’re using lists the inflation-adjusted costs that show an increase of… Read more »

Anonymous
Anonymous
8 years ago

A major factor not mentioned in the article is that the author was dealing with a very inexpensive and fungible property. It’s very easy to price cheap condos. People know exactly what they’re getting because there are usually dozens of replicates. Houses are not so easy. I also agree that the closing paperwork is formidable and not to be botched. This alone is a good reason to use an agent. (And no, I’m not an agent or closely associated with any.) @Mom of Five: Are you saying you opted for dual agency (the realtor represented both the buyer and the… Read more »

Mom of five
Mom of five
8 years ago
Reply to  Anonymous

oops. I accidentally replied to myself (#6). See above.

malcom
malcom
8 years ago

This article dis isappointing and misleading. The article says it is about how to sell a property without a realtor. In reading the article, the author reveals he WAS a real eatate agent. In reality he was representing himself. The average person is not going to have the knowledge and experience he has. This includes doing all the research talked about in the article.

Amanda
Amanda
8 years ago
Reply to  malcom

TOTALLY AGREE!!! I thought I could do it all. As an above poster mentions I did all the legwork for searching for homes, driving by to see if I liked the outside. If I did I’d ask the agent my husband used previously to set up an appt. Later, when we were looking at a home she’d point out the bad parts. Things I’d NEVER have noticed. A good agent, that doesn’t push you to buy quickly or in a higher price range than you want (even if you can afford it on paper) may to save you money in… Read more »

Ru
Ru
8 years ago

People sell their homes through estate agents because they don’t want to spend the time marketing it, or learning how to do all the paperwork or any of the other things needed to sell the house. I thought this was a good post because it showed us everything Nick needed to do to sell his house, how much time it took him and how much money he saved. The article allows readers to make an informed decision on their own property sale and decided whether they want to put in the time and effort, or whether they think the saving… Read more »

Megan
Megan
8 years ago

I have several major problems with this article. First, as was mentioned in passing earlier in the comments, this reads like your standard “I sold my house without an agent, and you can too!” article, but entirely neglects the skills the seller had as a result of experience as a real estate agent. Many parts of the home-buying process can be confusing to the uninitiated, and that should be acknowledged. Second, the writer focuses on the $5,000 savings as a result of not using a seller’s agent. The first question in my mind is, could an agent have sold the… Read more »

sarahk
sarahk
8 years ago
Reply to  Megan

Yes. I had problems with those exact same 3 things.

Tinsel
Tinsel
8 years ago
Reply to  sarahk

The savings $5k premise also presumes the seller’s time was worth nothing.

Kathleen
Kathleen
8 years ago
Reply to  sarahk

I thought the same thing at first about the author having experience as a real estate agent, but if you re read it, it looks as though it was a bit of a joke. He said his year long “stint” as a real estate agent. I read that as saying he took his time trying to sell his own home as “real estate” experience.

victor
victor
8 years ago
Reply to  Kathleen

It makes me ask, why if the poster made so much for so little did he quit. Things have change alot since 2008, I know alot of bad agents that could not cut it now and have gotten out. One agent sold 1 property in 2010 and she was an agent for 25 years. Making 100,000 for writing stories and doing a blog, or millions for playing sports, seems kind of like a real estate agent, but know ones complaning about that and a real estate agent takes on a whole lot more financial risk for the seller.

Quest
Quest
8 years ago
Reply to  Megan

A million dollar listing = $60,000 to be split between buying and selling brokerages.

$250k listing = $15,000 shelled out.

I see what you’re trying to say but I just don’t see how such a sum of money can be compared to that earned by a waiter or barber.

Megan
Megan
8 years ago
Reply to  Quest

An engineering or math professor could easily earn $60k a semester, and more if they’re at a top university, tenured or doing additional publications or speaking engagements. A concert musician could earn $15k in a week. You might say, yes, but the real estate agent is making that in a DAY. True, but they’re getting paid for weeks or months worth of work that might never have panned out. Part of what they’re charging for is that risk. The list of jobs I gave wasn’t sorted by salary. The unifying characteristic is that they’re all jobs where the fundamental tasks… Read more »

Quest
Quest
8 years ago
Reply to  Megan

But Megan, what you’re failing to address here is the VOLUME of sales a realtor can do. When I was working as such, I had a minimum of TEN deals going at any one time. That equated to an easy six figure++ income. Then, as now, I didn’t enjoy the feeling that came with getting paid $5k on the sale of a lesser priced condo with that of getting paid $37.5k on a million dollar listing I had. The amount of paperwork, etc was the SAME! From reading your comment, you’re talking about one sale. A good realtor doesn’t deal… Read more »

Mom of five
Mom of five
8 years ago
Reply to  Megan

I think the complaint about buyers’ agents being paid according to how much the house sells for is a legitimate one. I’ll agree it makes sense if the person representing the seller is paid according to the price – the seller and his agent have the same interest – i.e. getting the most for the house. But a buyer’s agent getting paid the same way? Ridiculous. A personal injury attorney gets a percentage of an accident victim’s settlement. Alright, that makes sense to me. But should the corporation being sued pay their attorneys a percentage of the settlement fee? I… Read more »

Megan
Megan
8 years ago
Reply to  Mom of five

But the buyer’s agent did get their commission anyway, so I don’t see how that’s relevant here. The main thing to keep in mind (and this applies to the comment above yours as well), is that anything is only worth what people are willing to pay for it. This crops up in the current real estate market all the time: “My home is really worth $500k, but similar properties are selling for $200k.” I’m sorry, but that means your property is worth $200k. The same principle applies to labor. You and I may think that it isn’t right that a… Read more »

Mom of five
Mom of five
8 years ago
Reply to  Megan

I completely agree and I think that’s what’s happening. I know several people whose agents recently had to take less of a commission to make the deals happen. Sites like Redfin, etc. Agents are hurting from more than just decreased total volume of sales – they’re also hurting because people don’t want to pay 6% anymore.

My point was more to consumers and people shopping for houses. If you use a buyer’s agent and are paying them a percentage of the sale price, that agent’s interest in the transaction diverges from yours.

Megan
Megan
8 years ago
Reply to  Megan

(Replying to Mom of five) Then it’s a perfect example of market pressures at work. I agree that there’s a problem with aligning interests. The seller’s agent’s interests are aligned with their client’s: higher sale means more commission, but the buyer’s agent’s interests are also for a higher sale. They’re legally obligated to work in their client’s interest, but they may be motivated to convince their client to take a higher price or buy more house than they otherwise would. In the current state of the real estate market, I bet it would be possible to find a buyer’s agent… Read more »

Quest
Quest
8 years ago
Reply to  Megan

‘The market tells us that real estate agents are worth 3% commission each. If you don’t agree with that, you’re perfectly free to buy your next house from a FSBO seller and not employ a buyer’s agent.’ Megan, the market doesn’t tell us any such thing. Why do you think sites such as Redfin and various discount brokerages are trying to make inroads into the NAR’s closely guarded territory? They are having mediocre success, not because they’re failing but because realtors would not show their listings! It became a real bone of contention between Redfin, NAR and agents everywhere. The… Read more »

Mom of five
Mom of five
8 years ago
Reply to  Megan

The NAR is always touting those statistics about getting more for your house with an agent but I think numbers only tell half the story. Transactions done within families (where a house is being passed/sold to a relative after a death) are very often done without an agent so non agent prices are naturally going to skew lower.

jim
jim
8 years ago
Reply to  Mom of five

Transactions between family members might skew the numbers. But how often does that really happen? I doubt its really that common. I don’t know anyone who’s bought a home from a family member. People inherit houses but I don’t think that registers as a sale in the same way.

Mom of five
Mom of five
8 years ago
Reply to  jim

Seriously? There’s at least 3 on my street. Maybe I’m just projecting something local on the whole country? In addition to my neighbors, I do actually know several adult children who bought their homes from their parents or grandparents when the retirees moved to a friendlier climate or else they died and one of the adult kids bought out their siblings. Their transactions were privately done and a bargain for the new homeowners. So it may well be I just think it’s common because I’ve seen so much of it? DH and I each have a sibling who are now… Read more »

Erika
Erika
8 years ago
Reply to  Megan

I agree. Re: the point about whether a real estate agent could have sold it for more because of his/her skills, the real question is: could the author have sold it for more if they weren’t doing a FSBO? When we tried to sell our last condo FSBO, people lowballed us SO BADLY. Potential buyers outright told us that since we were saving on real estate commission, they should pay us less. We eventually went with a broker, and she got us a much better price, even with commission.

karla
karla
8 years ago

I’m not sure if the author said he was a real estate agent, or merely played one for the year they were doing their sale.

That said, the scariest part (for me) of buying/selling houses is all the legal stuff, and our situation was more than worth the $300/hour we paid for legal fees.

I don’t see any mention of legal representation in the article, but if you’re not using a realtor you really should have one, IMO. (even if you are using a realtor)

Quest
Quest
8 years ago

Congrats on selling your condo yourselves! So many people think they MUST have a realtor to help them to sell a property when in reality they don’t. A good friend of mine tried to sell her house via Redfin which seemed like an excellent idea to me at the time. I am not sure how Redfin may have changed their model since then but, at that time, what we found is that the realtors literally IGNORED her listing in the MLS because they knew that she was using an online brokerage and thus hoping to save on commissions. This is… Read more »

Ryan M
Ryan M
8 years ago
Reply to  Quest

Being a Realtor yourself, you know that the commission is just as negotiable as the price of the home/condo/whatever. Sellers who feel that 6% commission is too high can ask for it to be lower. Also, the spilt between the buyer’s and seller’s agent can be arranged in the listing agreement. Many Realtors, especially in this market, are open to lower commissions for more expensive homes. Many people are acting like 6% is a must for selling their home. Also, since your were a Realtor, you know as a buyer’s agent that you can spend months showing buyers homes that… Read more »

Quest
Quest
8 years ago
Reply to  Ryan M

Everyone is entitled to their opinion. It keeps life interesting 🙂 To address your points: <<>> The broker I worked for would never allow a commission lower than 6% for any of our listings. Occasionally, he would go to 5% but he made his sales staff feel like losers in the process. At every weekly meeting, the ‘6% rule’ was enforced. I’m not talking about a rinky dink brokerage here. It was a leading national brokerage and following the 6% rule was cultish. <<>> To go to 5%, the listing had to be million dollar plus at the brokerage I… Read more »

jim
jim
8 years ago

This article seems more like an anti-realtor editorial than a reader story. I do think the industry could use some improvement but I also think good realtors add a lot of value and FSBO isn’t any walk in the park. I generally understand the argument against the 6% commissions. Its a lot of money. Especially in pricey areas. Try watching ‘Selling New York’ on cable for examples of some shocking commissions. So yeah for the seller the prospect of saving $5,000 or $10,000 or $42,000 if you do without a realtor is pretty compelling. But its not as if those… Read more »

Quest
Quest
8 years ago
Reply to  jim

The biggest reasons why FSBOs end up being listed by realtors is (a) the seller doesn’t know how to price real estate (that’s the seller’s problem) and (b) agents avoid FSBOs like the plague unless forced to deal with it by a buyer who really wants to see the inside of the property and make an offer because most agents look at FSBOs as diddling them out of commissions!

Emily
Emily
8 years ago
Reply to  jim

I have seen 2-3 homes just in my neighborhood go from FSBO to realtor represented in the last few months. It’s incredibly common, in my opinion, and reflects the majority of people who try to FSBO to save a few bucks but who don’t really know what they are doing. I include myself in that category, by the way. I own several properties, but I am not an expert on buying and selling. That’s why I use a realtor. For someone who truly has the knowledge and experience, FSBO can be a good option. But it’s not for everyone, and… Read more »

Mike
Mike
8 years ago

What would happen to the industry if the buyers paid for their own agents and the sellers paid for theirs? I think EVERYTHING would change at that point – there is no way MOST buyers would pay their agents 3% just to be able to go into a house. I suspect many buyers would be willing to pay for someone to do the negotiating, but 3%? Doubt it. The scam is that the sellers have to pay for EVERYTHING…which in turn causes buyers to go ahead and get an agent – I mean, why wouldn’t they?…they don’t have to pay… Read more »

Marcella
Marcella
8 years ago
Reply to  Mike

We have exactly that system in Australia. There are only sellers agents. As a buyer, I get in contact with the selling agent myself and can see just about any house I want. About 90% of all property on the market will have an “open for inspection” where you can just turn up and look, or it is very easy to get an appointment as well. I don’t need a buyer’s agent to get me access to any listings. Buyers negotiate directly with the buying agent. Occasionally a buyer will use a “buyer’s advocate” who will find listings and negotiate,… Read more »

Kate
Kate
8 years ago

We have gone through the buying-selling-buying process more than a few times this year, and I am still ambivalent about the act as your own agent trend. On one hand, I find it hard to believe that our agent really did enough work – despite being a good agent, a friend, and an overall good guy – to earn a 25k commission. My frugal mind cringes if I think about that too hard. On the other, as buyers, we saw a lot of the same mistakes being made by people selling without an agent, particular through our local for sale… Read more »

Fred
Fred
8 years ago

When buying/selling a home, a talented real estate agent is worth their weight in gold (well, maybe bronze). I agree with the comments above which mention that it’s unclear what positive impact a listing agent could have had on the author’s selling price. What we do know is that, for most people, there is no more complex and expensive transaction that ever takes place in one’s lifetime than purchasing or selling real estate. Real estate law is complex, so hiring an attorney makes sense in most instances – when a buyer isn’t handy, bringing in a trusted professional for a… Read more »

Quest
Quest
8 years ago

I would also like to add that the general public will never be able to publicly access their local MLS for as long as the NAR is a hard lobbying cartel. There is too much money at stake.

Libby
Libby
8 years ago
Reply to  Quest

I disagree. If you live in the Washington DC area (or possibly even Maryland or Virginia) you can use FranklyMLS.com to search the mls just like a real estate agent.

Quest
Quest
8 years ago
Reply to  Libby

Here in California, the local MLS guards its info like gold. Information is not instantly available as it would be if the public could access the actual MLS database. For example, my neighbor’s house has been for sale for two weeks and I have yet to see it pop up anywhere on any of the MLS feeds. The only reason for this is to give agents the jump on the listing and to prevent the general public from making their own arrangements with a sale. In order to know that this house is for sale right now is to literally… Read more »

Harmony
Harmony
8 years ago

I am disappointed that this article did not estimate the number of hours of work it took to sell the property. Marketing the property combined with the time involved with showing the house and doing 2 open houses doesn’t sound like a quick sell. If they spent > 200 hrs over the course of a year to sell the house they might have been better off with an agent.

Also, if someone without a year of experience was trying to follow their footsteps they would have to spend a lot more time on reasearch.

southernclay
southernclay
8 years ago

I am an agent, actually a successful one. Been selling for almost 8 years, will close over 100 homes in ’11, 75 last year, 52 in ’09. I work my tail off, am an expert in what I do. Not all are. I will agree with the writer that barriers of entry into RE are very low (I wish it were tougher) Part time and hobbiest agents are one of the toughest parts of the job, those are the ones that give my indusry a bad rap. I can promise you, if you hire the right professional agent, you will… Read more »

Jaime+B
Jaime+B
8 years ago
Reply to  southernclay

Honestly, I felt bad for my agent. I bought my first home about a year and a half ago. We looked at almost 100 homes. I never guessed it would take me that long to find something I liked, in my price range (very modest price range). I put an offer on one house that had another, better offer (I still think fondly of that house). The home I ended up buying, was almost 30k less than most of the other houses we’d looked at. lol, she might have been relieved just to stop the process, even though her commission… Read more »

Lyn Tucker
Lyn Tucker
4 years ago
Reply to  Jaime+B

I’m just saying: If I was a real estate agent and you had to see 100 homes before you chose one that came close to your likes, I would have dropped you as a client on number 5. Something is wrong if you’re viewing that many homes — obviously, you’re not be “filtered” on your preferences. At any rate, there’s either something obsessive about you or a mental deficiency in the realtor.

Bill
Bill
8 years ago

Interesting comment re: agents using Craig’s list and other public websites themselves. Three years ago we were trying to rent an investment property we own. We had the help of a friend who is an agent to place the rental in the MLS. We also placed ads in the paper and on Craig’s list. Any referring agent would receive the typical commission of 1/2 month’s rent. A week or so after placing our ads I was perusing Craig’s list to compare our asking rent to comparable properties in the area when I found a remarkable ad. It was our house… Read more »

Steve
Steve
8 years ago
Reply to  Bill

Not just unbelievable, but illegal.

Jadzia
Jadzia
8 years ago
Reply to  Steve

I had an even worse CL experience. We listed our home for sale on CL, and predictably, our local realtors closed ranks and would not even show it. (We had priced it after a good deal of market research, the house was in good shape with recent renovations, we had a housekeeper come in regularly so it would always be spotless and ready to show — we were not delusional FSBOs, in other words.) About 2 weeks later, my voicemail was filled up with people dying to come look at our house. Why? Because some [email protected]#[email protected]#[email protected] “listed” our high-end home… Read more »

Insomniac Lab Rat
Insomniac Lab Rat
8 years ago

My husband and I purchased our condo directly from the previous owners, without using any realtors on either end. It worked out great for us, and we think we got the best deal possible. The sellers in this case also started trying to sell FSBO about a year before they would be moving out. They were actually just about to give up and list with a realtor, when I happened to overhear one of them telling a friend that they were going to give up (they were grad students at the same school as us)-we hadn’t started really looking for… Read more »

Tyler+Karaszewski
Tyler+Karaszewski
8 years ago

I just bought a house from the previous property owner without either of us using an agent. It wasn’t particularly hard, no harder than I imagine it would have been if we had used agents. There would have been $33,000 paid out in real estate commissions at the standard rate. $33,000. I know that as a buyer, I don’t necessarily see any of that money, but the price was lower than I believe it would have been if we factored in paying real estate agents. The whole real estate industry is full of scammy people and parasites. They keep a… Read more »

Quest
Quest
8 years ago

When I bought the house I currently live in, I did so through an internet auction site. The house had been listed by the bank both with a local realtor and with the online auction site. The realtor was unbelievable ~ told me not to bother submitting an offer because he already had a pile on offers on his desk. Illegal! Anyway, I put the address of this house into Google’s search box and lo and behold up comes the auction house’s listing at THOUSANDS below what the local realtor was listing it for. I jumped on it. Submitted an… Read more »

Laura
Laura
8 years ago
Reply to  Quest

Sounds like you’re savvy about such things (in ways I’d like to be.) What internet auction site did you use…and how did you figure out where to look? (Sorry if this is a stupid question…. I’ve intermittently tried to figure out how to get the inside info on foreclosures and have never been terribly successful). Thanks in advance for any advice you can offer. When we bought our first (and only) house, we were looking for a fixer, so we spotted houses we were interested in (some not on the market), and we contacted the owners (by looking up public… Read more »

Quest
Quest
8 years ago
Reply to  Laura

@Laura ~ I just input the address of the house I wanted to buy into Google’s search engine. Back came a list of sites that contained the address. Some search results were IDX MLS feeds but one result in particular was the auction house’s data for the house. I was able to see the minimum that the lender was willing to accept as compared to that which the local agent was listing the house for. I got lucky because no one knew that the bank was also trying to sell the house via online auction and, therefore, I was the… Read more »

Jen
Jen
8 years ago

Yes, there are lots of jobs that if I think about them, I figure I could do them pretty well. However, I don’t really know all that’s involved, and I’m not well trained enough to do some of it without having to spend hours learning what I need to know. One disadvantage to the internet (which I love dearly, of course!) is that there is a tendency to want more and more things for free. Again, I love free as much as the next person, but as more and more jobs pay at part-time rates or come without benefits or… Read more »

PawPrint
PawPrint
8 years ago

I’ve bought and sold FSBO, used a buyer’s agent a couple of times and sold once using a realtor (the same one we used to buy the house). The only reason I used a realtor to sell the house was that we moved out-of-state. She was definitely worth the commission. However, when we sell our current house, I’m pretty sure we’ll use the discount broker to pay for the MLS service and market the house ourselves like the writer did. While I don’t have experience in the real estate field like he did, I know that I can’t take what… Read more »

Quest
Quest
8 years ago
Reply to  PawPrint

My advice would be to hire an appraiser and get a written appraisal report. That way you know exactly what you need to ask. Rule of thumb, if you want a quick sale, is to price 1 or 2% below the appraisal. Here in California, I would open an escrow to handle all the legal paperwork. A good escrow agent will tell you exactly what other paperwork you need to provide to the buyer on your end, in addition to the paperwork escrow will do for you. You could also ask an attorney because you will have to deal with… Read more »

Penelope
Penelope
8 years ago

I live in England where I’ve bought and sold plenty of real estate (or ‘property’ as we call it) and have looked at places in the US but have never bought. Here, only the seller has an agent. The seller pays them 2% to 3% (It’s perfectly possible to negotiate a fixed fee) usually and each side has a lawyer (around 1% costs) whose job it is to handle the contractual paperwork. It is up to buyers to locate the property they want and negotiate it with the ‘estate agent’ (a profession considered somewhere below journalists for ethics). A savvy… Read more »

jim
jim
8 years ago
Reply to  Penelope

“(a profession considered somewhere below journalists for ethics).”

UK journalists have a much worse public perception. Journalists aren’t really considered unethical here in the USA. They are kind of in the middle of ethical rankings based on public perceptions. I think a better analogy for the USA would be used car salesmen.

almost there
almost there
8 years ago
Reply to  Penelope

Jethro Tull had a song about estate agents, “Down At The End Of Yoir Road”, a good listen.

Quest
Quest
8 years ago
Reply to  Penelope

I bought a couple of houses while I lived in England and it seemed to be a lot less hassle than buying here in the US although I will say that on one of my purchases the lawyer was inept LOL

Nick
Nick
8 years ago

I really appreciate all the comments, both positive and critical. Here are my responses to a few of the reader questions: @Pamela: I really didn’t do much work to sell the unit. I spent two full days hosting Open Houses for the property, I produced my own PDF fliers to send electronically and print, I used my local online classifieds and Craigslist, and I tried to get my property in front of as many people as possible. Total time: ~35 hours. @Dee: I should have done a better job framing the story. Yes, I did work as a realtor for… Read more »

sandycheeks
sandycheeks
8 years ago
Reply to  Nick

When I search Trulia I see how long a property has been on the market, every price reduction and past sales. I think it may also link to the state tax records. Trulia is a consumer site, how does realtor MLS differ?

Courtney
Courtney
8 years ago
Reply to  sandycheeks

I see the same thing on Zillow…

sandycheeks
sandycheeks
8 years ago
Reply to  Courtney

just an FYI about Zillow…. they are grossly inaccurate in my neighborhood. My tax records are tagged on another street altogether, my neighbor across the street is tagged on my property, square footage is incorrect etc. Maybe this is just in my area but for those reasons I tend to stick with trulia and redfin.

Jadzia
Jadzia
8 years ago
Reply to  Courtney

Yeah, Zillow is all over the place. When I sold my last house (in a huge West Coast city), it went for WAY over what Zillow estimated its market value as. The market value it gives for my current (vacant! ugh!) house in Oregon, on the other hand — well, let’s just say I WISH somebody would buy it for that! I would guess Zillow comes in about 50K higher than anybody could ever get for that place, and I stay pretty on top of the market there because I can’t stand living in one country and dealing with owning… Read more »

Courtney
Courtney
8 years ago
Reply to  Courtney

Interesting. I’ve been endlessly frustrated by Zillow’s ‘Zestimates’ but for everything I’ve looked at in our neighborhood and nearby neighborhood, and friends houses (hey, I’m curious) the factual information seems to be about 95% correct. The only error I’ve ever knowingly seen is that it thinks our condo has a fireplace.

Jadzia
Jadzia
8 years ago
Reply to  Courtney

I know! The factual information for the homes in our Oregon neighborhood (we knew all our neighbors and had been inside most of their homes) all seemed to be basically correct. It was the Zestimates that were really wacky.

Erika
Erika
8 years ago
Reply to  sandycheeks

We’re able to access a lot of free MLS info through our public library – anyone else?

Quest
Quest
8 years ago
Reply to  Nick

You’re absolutely correct. The public MLS is NOT the same as the actual MLS database itself. Also, the public has to wait a lot longer for the MLS feed to spit out the property info, at least that is the case with our local MLS. My neighbor’s house has been for sale with Century 21 for a couple of weeks and has yet to surface anywhere online via the public MLS feeds. My theory for that is that it gives the agents the jump on the listing over the general public which just goes to show that the MLS database… Read more »

Lori
Lori
8 years ago

great article. we had a terrible (lengthy) experience with a series of incompetent realtors when selling our last home. we tried to sell it ourselves but didn’t have the time or energy to devote to doing it right.

Golfing Girl
Golfing Girl
8 years ago

I am grossly disappointed in my agent right now. My site on Zillow looks 100 times better than her official site. She has typos in the description of our home that I’ve asked her to fix multiple times and I spent hours staging the home for pictures and none of hers “turned out” so she came back two days later when it was messier and not staged. I will definitely get a different agent in the spring (I don’t foresee us selling this fall). For 6% of $185K, I would be working a lot harder than she is, and in… Read more »

Quest
Quest
8 years ago
Reply to  Golfing Girl

Getting paid over $11000 for pushing a few sheets of paper around is sweet. As me how I know. /sarcasm This is the biggest reason why I got out of real estate. I felt that I was being forced to charge my clients too much money for so little (in my eyes) value. Every single time I showed a house, it sold itself. I was very good at zeroing in on what my clients wanted and, as a result, I would only show a couple of houses before finding them exactly what they wanted. I guess that’s a skill? Whatever… Read more »

KarenJ
KarenJ
8 years ago

Congrats on having a successful experience selling your home. It could have turned out much differently if your buyer had been unqualified to make the purchase, as frequently happens in FSBO. Realtors (I am not one) are professionals knowledgeable in their field. There are many things we, as homeowners, can do on our own, but in the end it’s a choice of how you wish to spend your time. It seems that many hours went into your home sale, which you gladly put in to save $5,000, but there are many who do not have the time, knowledge or inclination… Read more »

Quest
Quest
8 years ago
Reply to  KarenJ

The first thing any seller does is to check the buyer’s credibility. That means providing a local lender name and phone number and getting a commitment to lend in writing from the lender. Before accepting ANY offer, the seller needs to check that the buyer can actually buy!! Anyone who doesn’t have the sense to do that should pay a realtor 6% to sell the house for them.

Ross
Ross
8 years ago

A friend of mine sent this to me and I read every one of your letters. Yes, I am writing this at midnight since this is one of the only times I have to do this. I am a second generation Realtor that has been in residential real estate for over 24 years. When I started we had no personal computers, no cell phones and no fax machines. My how times change. We offer our MLS information to the public through IDX sites that can be accessed by any member of the public. We gave up control of our information… Read more »

Quest
Quest
8 years ago
Reply to  Ross

Your post applies to those people who haven’t educated themselves or those who are just too plain scared, due to lack of transparency within the real estate industry, to even think that they can tackle the ‘extremely difficult’ job of selling their home FSBO. I feel very strongly about the 6% commission. I feel that most if not all real estate transactions should be conducted on a flat fee basis. I would gladly pay $1000 to be split between two agents for the sale of my house. Here in California, I can easily check with a potential buyer’s lender to… Read more »

Andrew
Andrew
8 years ago
Reply to  Quest

Pay an attorney $100??? What year are you living in, 1955?

Quest
Quest
8 years ago
Reply to  Andrew

No, Andrew. In my town, a local real estate attorney will charge $100 per hour in order to sit down with him and just ask “What paperwork do I need to provide to my buyer, here in this particular region?”

It takes about 15 minutes to get that info. He has a list of disclosures that are needed that he hands off, printed on a sheet of paper. If you are unable to find the forms, he provides them to you at extra cost or will represent you at even more cost.

bob
bob
8 years ago

if you think real estate agents are making too much money, how about your 401k manager who rakes in 1% of BILLIONS of dollars. Does he do more work for a portfolio of 10 million versus 10 billion?

Mitch
Mitch
8 years ago

They of course didn’t mention a ton of benefits of listing your home with a professional. First and foremost. SAFETY of your family. When a Realtor lists your home we put a supra electronic lock box on your home which only licensed agents background checked can access the home and monitor the buyers who are roaming around the residence. Furthermore, the supra box sends the listing agent a text message and email letting them know which Realtor just opened their lock box on a certain property seconds ago. The for sale by owners tend to get stuff stolen or have… Read more »

Pail
Pail
8 years ago

Another important consideration is that realtors will lure you into picking them to sell your property by selling YOU on a higher starting price than the other guy or by selling yourself. Then if the price is too high they push you to reduce the price, and repeat as necessary. It doesnt affect their commission nearly as much as your bottom line. On a $100,000 price, a price reduction of $10,000 is only a reduction of $600 in commission (100k x .06 = $6000 vs 90k x .06 = $5,400). So you lose $10,000 while the realtors only lose $300… Read more »

Robertnavor
Robertnavor
8 years ago

As a realtor and an avid reader of get rich slowly I disagree mostly because this article lacks research and logic ( i know big surprise) First of all, the writer of this article was a previously a real estate agent! That is far from the typical homeowner or typical reader of GRS. Even if he didn’t close one home he knew the language he knew the game and now he claims immaculate knowledge of what realtors do. What sort of logic and on what authority does the writer claim that there are problems presented to realtors because of FSBO’s???… Read more »

victor
victor
8 years ago

I have purchased and sold over 35 homes and have always used a real estate agent. I know that my agent has saved me alot of money when I purchased and Made me alot when I sold them and has taught me alot about the art of real estate investing. Could I do it on my own? YES!!! Would I NO!!! My agent has called me several times with properties that she felt were very underpriced by FSBO’s and I have purchased them and flip them for a great profit, because she knew the market and the poor FSBO who… Read more »

Sandy
Sandy
8 years ago

If people knew exactly what they needed to do in order to sell a house, in general they would. It is precisely because of the purposeful lack of transparency within the real estate industry that they do not. Keeping the information secret is the only way that realtors can hang on to their jobs. It’s an industry!! If all of those forms were readily available online with a list by state of all the disclosures and other paperwork needed to make a sale, with another list of other things needed like specific inspections (roof, septic, natural hazards, etc) it wouldn’t… Read more »

victor
victor
8 years ago
Reply to  Sandy

Real Estate Agents have to take 12 hours of class every two years and these are the things that they learn and are required to study. All of you can take the same classes to learn how its done, if you want to spend the money and take the time required. That is why the person in the story knew what to do. The reason there is no check list is because the laws are always changing and even some agents cannot keep up with the changes.

Paularado
Paularado
8 years ago

We did this when we sold our house in 2002. I went a step farther and created a webpage with TONS of pictures. Also, we paid a realtor to do a market analysis for us. That was money well spent. I realize that realtors will do this for “free”, but that is because they want your business. It seemed unethical to take advantage of a realtor that way. Also, we live in a small community, and we wanted the realtors out there excited about our property, not ticked off. We did not use an MLS listing, but instead I made… Read more »

Sundaybell
Sundaybell
8 years ago

Great job getting your home sold! There is also another alternative for consumers that lets you anonymously find, interview and negotiate with real estate agents so as to avoid paying for any services you don’t want to lessen your expenses. Three service levels are available to users of Sundaybell, all of them free for consumers. Those who already know which agents they’d like to correspond with can choose Sundaybell’s SelectAnAgent service, for example, which will contact those agents and enable anonymous communication with them, allowing consumers to negotiate commission rates, buyers’ rebates or à la carte services ahead of time.… Read more »

Laura
Laura
8 years ago

Nobody has mentioned that the REAL money is made off your home purchase by the mortgage holder. Makes the real estate agent’s take look paltry! Truth-in-lending documents mean that you get to see how much money they are making (unlike the real estate agent), but that doesn’t make it any easier to swallow!… A $350,000 home costs you more like $800,000 by the time you’ve paid off all the interest (depending, of course on your mortgage.) That’s $450,000 in interest paid to the mortgage holder. While the real estate agent(s) is(are) making $21,000 @ 6%. Of course, the real estate… Read more »

Alex Woodby
Alex Woodby
8 years ago

Agreed, SOME agents may be worth their salt. Maybe. But what’s their incentive to sell the house for a better price? On a $200k house, they’re going to get $6k for selling it. What’s their incentive to work hard to get it sold for $210k, another $300? Last use of an agent, they were one of the highest sellers in our area, but just out of the odds game, the agent had “open houses” where their representative was clueless and totally unprepared, the agent was NEVER proactive throughout the whole process. We ended up taking the house off the market… Read more »

Lynne
Lynne
6 years ago

Thanks nick for that info..really makes me think about selling my dad’s condo the same way you and your wife did..just a little nervous though!

Sally
Sally
6 years ago

There are some crummy agents and good ones. A good one is worth every penny. I sold my house in 2 days with an agent. There is no way that would have happened on my own.

Perry
Perry
5 years ago

awesome story, a friend just went through a terrible experience with a real estate agent. The issue was the contract signed between the RE and friend (seller). She networked and found a buyer for the house before the house was ever listed or photos were taken. Since she had already signed the contract, the RE was paid a commission despite not doing any additional work. She was devastated.

Jacob Ding
Jacob Ding
5 years ago

Nice story. Its a learning information to save money in a great way from selling your own house. As a buyer, I would have been really angry if we’d been paying by the hour.

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