The fact is, selling FSBO (a.k.a. For Sale By Owner) isn’t rocket science. It’s pretty simple, especially if you do your research and get a little help when necessary. Most importantly, it saves sellers tons of money.
Save Big Bucks
Selling a home is stressful and time-consuming, so it's only natural to want to hire a professional to do it, but if it comes at a cost, and an extravagant one at that. For example, if you sell a $500,000 home, you’ll be paying a whopping $30,000 in commission fees to real estate agents.
Not many homes sell for that in New York City, of course. According to the broker Douglas Elliman, the median price of a co-op and condo in Manhattan just dipped slightly below $1 million to $999,000. That means the broker/agent commission is a whopping $60,000. If you were to divide that by the hours an agent actually works on selling a home, their compensation typically exceeds $1,000 an hour.
What Does A Real Estate Agent Do to Earn Those Massive Commission?
Not much, in fact. The truth is that listing agents are trained to win listings, and the most challenging part of their job is getting you to sign an exclusive listing agreement with them and convincing you to price your home correctly. This can be tricky at times as some unscrupulous agents will overpromise in the hopes of getting a listing agreement signed, all while knowing that it'll be much easier to come back to you in a month or two and push you to drop the price. When it comes to marketing a home agents do very little outside of posting the listing to their company's CMS (content management system). Their firm then handles the automated listing distribution to various marketplaces, databases, and of course the MLS (multiple listing services) or in NYC where there's no formal MLS to REBNY's (the Real Estate Board of New York) Residential Listing Service.
Now, thanks to PropertyClub's NYC For Sale By Owner Marketing, homeowners themselves can do all of that and pocket the money.
Avoid the Two Fatal Mistakes of Selling FSBO
There is some truth to the fact that many FSBO sellers fail to sell their homes. The primary reason for this is not that agents have a secret formula that mere mortals can’t fathom. Instead, home sellers make two fatal mistakes:
-Over-pricing the home
The biggest and most deadly mistake is to over-price the home. Some FSBO sellers simply look at what their neighbor got for their home last year and think that’s the price – plus maybe 5% - that they’ll sell their home for. Others pick a number they’d like to get for it, not thinking at all about what the market will bear.
Obviously, this is not the way to do it. Home prices have slowed recently, and in some places declined. The real estate market can also be cyclical, and picking the right month to list can influence your ability to sell (for example, more people search for homes during the spring, leading to homes listed in April, May, and June selling faster than other months in the year). Furthermore, their neighbor’s house may have had their kitchen remodeled, or may merely be more desirable for one of many other reasons.
The correct way to price a home is to have a CMA (Competitive Market Analysis) done. This is when a licensed agent comes in, examines the home, and then surveys the market to determine what homes like it sold for recently. An agent can get this information on the MLS.
Buyers have a pretty good idea of what homes are worth. It’s critical to have a CMA done on a home before selling it. Listing it at too high a price and then lowering it months later wastes time and gives the impression that the home is a lemon.
-Not having the home listed on the MLS or RLS
The simple fact is that most homes sell via the MLS, or, in the case of New York City, the RLS (Residential Listing Service). Buyer agents go there every day to see what’s new on the market. Not having a home listed on the MLS/RLS significantly decreases its exposure to buyers. And exposure is what sells homes.
It’s not hard for home sellers to get their home posted on the MLS/RLS. For a small fee, a licensed broker can list it on the MLS/RLS. Furthermore, in New York City you can also pay to list your FSBO on the New York Times as well as streeteasy. Together, these provide broad exposure to millions of potential buyers.
Pricing a home correctly and putting it on the MLS/RLS are the two essential marketing tools one needs to sell a home in New York. Also, hiring a professional photographer is helpful and highly recommended.
While conducting open house events don’t generally help sell homes nationally, New York City may be the exception. It can be difficult coordinating individual showings in the city. An open house throws the doors open for everyone and can also help spark interest and generate bid wars as cramping what can be upwards of 50 people into a NYC apartment for an open house will lead to the impression that one must act quickly, and make a competitive offer if they want it to be seriously considered.
University Study Notes That Brokers Often Sell a Home for Less Than Its Worth
A study done at the University of Chicago, and featured in the New York Times, revealed something very concerning to home sellers who use a broker. In some cases, the study noted, real estate agents sold homes too quickly and for less money than they could have gotten had they left the home on the market for a longer period of time.
The reason for this was because the additional commission income generated from securing a slightly higher price is often negligible. It’s therefore in the interest of the agent to sell the home as quickly as possible to lock down the price - and their commission - even if that price could have been higher.
The study looked at thousands of homes sold by agents on behalf of others, and thousands they owned and sold themselves. The homes sold on behalf of others were sold more quickly and for less money than the homes they owned and sold themselves.
If this isn’t a reason to think twice about selling a through a broker, we don’t know what is.
Get Some Help but Don’t Pay a 3% Brokers Commission
It’s a good idea to get some help, particularly when it comes to handling marketing, as well as the closing and paperwork. You can pay a broker to be posted on the MLS/RLS as well as to do a CMA. PropertyClub's FSBO marketing includes RLS placement as well as distribution to Streeteasy, the New York Times, and dozens of other real estate marketplaces.
The bottom line is that using a broker to sell your home is like pouring lighter fluid on a stack of hundred dollar bills. It’s not only a fire hazard, but it’s also a costly way of losing money that could otherwise be spent elsewhere, like on buying a new car.