OLD DEBATE IS RENEWED - As A Homeseller, am I Better Off Going it Alone - FSBO?
WITH CHICAGO AREA HOME PRICES DOWN 9.4% WITHIN THE PAST YEAR, MANY CONSIDERING SELLING THINK THEY WILL SAVE MONEY WITHOUT A REAL ESTATE BROKER. BUT . . . WILL THEY, REALLY?
In the decade and a half I have been selling Residential Real Estate here in Chicago, our Team has repeatedly gotten the question from homesellers - "Won't I save a lot of money going it alone, without you?"
This question seems particularly relevant now, with an excess of inventory for sale here in the Chicago Metro Area, escalating market times, and falling prices. After all, a Realtor's Fee can run thousands of dollars!
According to Jim Merrion, Regional Director for ReMax of Northern Illinois, a national franchise real estate brand, real estate fees charged by brokers in the Chicago area average between 5.0 and 5.5 percent. For a $350,000 home or condo, that fee, or "commission," as called by some, would total between $17,500 and $19,250.
Many homeowners see the average real estate fee - a sizable amount - as something they can easily save by "going it alone - BY OWNER." The truth of this logic has been hotly debated - by Real Estate Sales Professionals, Attorneys, and Lenders, as well as family members, competitive lower-cost Real Estate Salespeople, and, most recently, Real Estate Deep Discounters.
These "Discount Service Providers" often expose the home or condo on the Realtor's MLS, for a negotiated Flat Fee - UPFRONT, Sale or No Sale! This fee can range from a few hundred, to one thousand, to several thousand dollars, depending on such items as ancillary services - optional signage, advertising consulting, showing scheduling, and web exposure.
"Many people are turning to us because they've worked with agents for six to 12 months and they need to change direction," said Greg Healy, Vice President of Operations for ForSaleByOwner.com, which provides services to FSBOs. "Hiring an agent is a luxury that many people cannot afford."
Healy suggests that between 20 and 25 percent of home sellers try selling By Owner these days. Of these, the National Association of Realtors finds that only 12% of these FSBO sellers actually close on the sale of their home, down considerably from 18% in 1997.
He identifies three major components of the home selling process.
"You need to be able to price your home, market your home and transfer the title."
During the last couple of years, websites offering pricing advice, based on similar properties that have sold nearby, have proliferated. Several even offer an automated formula for setting an asking price, although, of course, this is based on publicly-available sales data only, without interior inspection of the seller's own home. "With the advent of the Internet, you can find comparable-sale data and current market conditions at your fingertips—this is open and free information."
The Internet also has certain marketing services, Healy continued. There are dozens dozens of companies, including his own, that will place homes on local multiple-listing services and other sites. His company offers services for For Sale By Owner Sellers that range from $90 to $899. Dean's Team has found several Limited-Service Brokerage firms here in Chicago will place your property on the MLS for flat fees ranging between $200 and $600.
Real estate lawyers and title companies can handle the third need - title transfer and other services for a closing, Healy stated, to handle the third step..
Many who try initially to sell By Owner end up listing with a Realtor of some kind - sometimes a Discounter, but most often a Full Service, Full Fee Practitioner, however? Why?
There are numerous arguments here, and the discussion becomes a din.
Larger brokerage companies may fell their Name Recognition can help precipitate a sale. National Real Estate Franchises like Coldwell Banker, ReMax, Century 21, Prudential, and Realty Executives, as well as local independent companies, spend thousands of dollars to ensure name recognition among prospective home sellers and home buyers alike.
Individual agents may tout their specific knowledge of a given neighborhood, their specialty in "hard to sell" property, and their own, customized advertising and marketing programs.
What we at Dean's Team Chicago find, after sifting through all the discussion, there are three primary arguments for selecting a Full Service Firm, and experienced Full Service Realtor, to help navigate the selling process -
1. EXPOSURE,
2. COACHING, and
3. NEGOTIATING EXPERTISE
Relative to EXPOSING YOUR PROPERTY FOR SALE . . . it's important to understand, in this market, simple MLS Exposure and coverage on a few of the popular public websites - Trulia, Google, Zillow, and the like - is nice. But these items alone are not enough to assure a sale. In 2008, your property needs to be properly positioned and marketed as well, with keyword-rich copy, as well.
Many, many pictures are crucial. Visual Tours are very helpful in driving interest. Streaming Video growing in importance. Print, which still appeals to older homesellers due to its tangibility - is rarely effective, and increasingly expensive.
Public Open Houses - contrary to FSBO perception - generate leads for Listing Real Estate Agents, but rarely sell the home advertised!
Agent to Agent Marketing - where the Listing Agent spreads the word to other agents serving the area - often makes the difference between a sale and a long-term listed property.
It's the right combination of exposure, pulsed at the right times, and with the right message, that will generate qualified buyers. Most importantly, locate THE ONE qualified buyer likely to buy your property, and close on it without hassle, in a timely fashion.
Often times, those selling by owner lack the expertise to balance EXPOSURE properly - time is wasted, as the correct message is not sent to the right audience.
COACHING
Sometimes, in life and in Real Estate, you need the right expert, at the right time, telling you what you NEED to hear - not what you WANT to hear!
Decisions on staging a property for sale. How to handle property showings neutrally. How to properly garner showing feedback. How to react when an offer comes in. What to do after several weeks when no offer is forthcoming. How to handle a property inspection in a buyer's market, when every buyer seems to be asking for credits or repairs after the inspection is completed.
How to handle a low property appraisal. A lawyer or a lender who refuses to return telephone calls or email. A buyer who attempts to change contract terms right before the scheduled closing.
Of course, there is always a "sounding board" that seems to know what to do during these times. This board consists of friends, family members, co-workers, or Real Estate Practitioners from outside the area. Many times, those on the "board" feel selling real estate is easy. Intuitive.
It is often seductive to listen to this "board." But their coaching is often misinformed - and nearly always wrong!
NEGOTIATING EXPERTISE
"Third party negotiation saves money," in the words of one of our Team Mentors, noted Real Estate Trainer Floyd Wickman. That's really true! If it wasn't, why would Hollywood Celebrities, and Professional Athletes, pay thousands of dollars to agents who represent them?
Negotiating your own sale becomes quite emotional. Personal! It's easy to reject a too-low offer out of hand, when the buyer might be very willing to come up reasonably, if you encourage them to do so. It's easy to assume Repair Credits are a necessity, when, often they are not.
Dates and terms are negotiable as well as money. Possession is negotiable. So is Included Personal Property. Often times, sellers have difficulty fully understanding this on a contract involving their own home. Or they feel particularly intimidated with the process itself.
Of course, lawyers can help you negotiate your real estate contract. Often times, however, you need the stone cool logic of the right Real Estate Practitioner, representing your interests, who knows neighborhood pricing and current sales trends, to stand by you closely during crucial negotiating time - often on weekends, or after usual business hours. Someone who closely knows the reality of your situation, and can instinctively help you get the best deal in the best time frame.
We've regretfully seen, in many non-Realtor negotiations, sellers taking too little - giving to the buyer far more than the cost of what the Realtor's Fee would have been. All the while, they're feeling they are getting the most they can.
IN CONCLUSION . . .
Real Estate is a Professional Business. Just like Medicine. Accounting. Or, the Law. Or even Auto Repair. Unlike with these other professions, however, Real Estate might look easy, if you're on the outside looking in.
That's not true, however, as the strong Real Estate Practitioner knows his specialty, and does it every day. Like those in other professions, the Realtor knows just what to do in other difficult situations, because he does these things all day, every day.
Some view the Real Estate Broker fee as a cost item, when actually it is an investment in the possibility of netting more money when you sell. The proper way is to look solely at NET DOLLARS IN YOUR POCKET, all costs included.
If it's likely you'll net more the Full-Service Real Estate Route, than that's the best option from the start.
If not, a cheaper route should be considered. But considered carefully!
Often times, the "commission" a seller thinks they are saving is lost - with interest - in a reduced price to the buyer. As you know, seller and buyer can't BOTH save the Realtor's Fee.
See Mary Umberger's thoughts and research in her article in the Real Estate Section of last Sunday's Chicago Tribune.
And, of course, call our Team to help you put things together, properly! We're here to help, when it makes sense to hire us!
DEAN & DEAN'S TEAM CHICAGO
