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 can save sellers a boatload of money when done right.
How much can you save?
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 up to a whopping $30,000 in commission fees to real estate agents. Not many homes sell for that in New York City, of course. The median price of a co-op or condo in Manhattan just dipped slightly below $1 million for the first time in 4 years. That means that approximately 50% of sellers can expect to pay at least a whopping $60,000 in broker fees.
While the thought of saving 6% by selling yourself is undoubtedly attractive, it's important to remember that the commission is usually split between the listing broker and buyer broker. And if you want to attract as many potential buyers as possible, you'll still need to offer a commission to agents who bring their buyers, although you may be able to get away with offering a slightly lower 2.5% commission to cooperating brokers instead of the 3% they'd typically receive. Remember, approximately 87% of buyers have an agent representing them, so the best way to save is on the fee paid to the listing agent.
What Does A Seller's Real Estate Agent Do to Earn Those Massive Commission?
Not as much as you might think, 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 real estate 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. This potential conflict of interest is known as the principal-agent problem.
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.
A home that is priced correctly will more or less sell itself as long as you have the right marketing. In New York City, for example, that means getting on REBNY's RLS, sending out broker blasts, and getting on major real estate marketplaces.
Avoid the Three 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 three 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. Or even more common, sellers who aren't in a rush assume that since they have time, they can simply list for a higher price and always adjust the price accordingly.
Obviously, this is not the way to do it. Home prices have slowed recently, even experiencing significant declines in many neighborhoods. 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 start by performing a CMA (Competitive Market Analysis). This is when the home is compared to homes currently on the market as well as homes that have sold recently. An agent can get this information on the local MLS or from publically available data.
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, getting professional listing photos taken is helpful and highly recommended.
-Not providing convenient access to the property
Maybe the greatest convenience associated with hiring an agent is that you won't have to deal with showing your home. While the thought of showing buyers your home and helping them fall in love with it might sound appealing at first, remember that you'll be expected to field emails and calls at all hours and to accommodate showings seven days a week. Buyers expect easy access to homes as well as to have any and all of their questions answered promptly, or they'll move on to other listings.
Another thing to consider is open houses. While conducting open house events don’t generally help sell homes nationally, New York City may be the exception. There is an entire science devoted to using open houses to help spark interest and generate bid wars in the city. Cramping what can be upwards of 50 people into a NYC apartment for an open house can lead to the impression that one must act quickly, and make a competitive offer if they want it to be seriously considered.
You can always get some help without paying a high 3% commission
For many sellers, it can be 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. And you should definitely get professional photos taken by a real estate photographer. All-in-all you can expect to pay between $1,000-$1,500 to get photos and proper listing distribution, plus whatever the CMA costs you (this can vary dramatically depending on the experience of the agent performing it).
Alternatively, you can look for one of the many full-service brokers that will sell your NYC apartment for a reduced fee. Reach out to us at [email protected] if you'd like to learn more about how one of our experienced broker partners can save you an average of $23,000 (available in NYC, Long Island, and Westchester County).
The bottom line is that paying a broker a 3% fee to sell your home is no longer necessary. Technology has made it easy to get better results for a fraction of the cost.