March 30, 2010, 4:50 am

6 Reasons Why I Will Not Use A Real Estate Agent To Sell My House

by: The Financial Blogger    Category: Properties
email this postEmail This Post Print This PostPrint This Post Post a CommentPost a Comment


 

 

***Welcome to the Globe and Mail readers! As a scoop, I can tell you that I have sold my house within 2 weeks at 330K. So I saved $18,810 in commission (5% commission rate + taxes). If you like this article, please subscribe to our RSS feed***

Last week, I announced that we were selling our house to move to a better place (hopefully!). We spent the previous week painting, buying frames and other decorative goodies and moved our furniture around to make our house look its best. I will write more about staging our own home later on (you probably guessed that I will be writing a few “selling your own property” articles in the upcoming weeks!). But today’s article is about all the reasons in the world I have to NOT use a real estate agent to sell my house.

#1 Avoiding a real estate agent: I have 18,000 reasons to avoid it!

I actually have no doubt that some real estate agents are pretty good at  presenting and selling your property. The problem is how much they charge to do it! If I calculate a 5% commission fee (that is taxable!), I will end-up paying  an agent around $18,000 to sell my property.

Since I will probably have to buy a second car once I move to my next property, the real estate agent commission represents more than what I will actually pay to buy my car! In the end, I really wonder what they can do that I can’t for this sum of money!

#2 Avoiding a real estate agent: Independent websites are just doing fine

When I look at properties myself, I always have 2 websites that come to mind: mls.ca (which houses all the properties listed by real estate agents) and bytheowner.com (which is the most popular site for individual sellers). I don’t know if you have taken a look at the site but it is probably one of the most efficient and appealing real estate sites.

Searches are convenient and there are enough properties for sale that most people consider taking a look before visiting properties. Then, it comes down to the fees; $800 (tax included) to put a full time ad with 12 pictures (10 + 2 in extras). There is a guy that come to your place, take professional pictures and put the “for sale” sign in front of your property. $800 vs $18,000… any questions?

#3 Avoiding a real estate agent: I love negotiating!

Another thing I don’t like about real estate agents is that you never negotiate directly with the buyer/seller. Therefore, when you have a quick question or you want to negotiate something, you always have to go through a third party. It’s even worst if you are buying with an agent and you are looking to buy a property that is being sold by another agent! The 2 agents are negotiating together (i.e. talking about how much commission they will both make) while the seller and the buyer don’t discuss anything.

I really like talking to people and getting their feelings about my property. Therefore, I find it easier to offer them a nice cup of coffee and negotiate at my kitchen table.  As opposed to telling my agent that will tell the other agent that will tell his client that I would like to move earlier!

#4 Avoiding a real estate agent: What do they do that is so special?

The key idea behind this article is simple; what does a real estate agent do that I can’t and justifies the huge commission I’ll give them? Do they provide legal advice? Very few and they are not responsible for what they say so you are better off checking with a lawyer/notary for real advice. Do they ensure a legal transaction? Hey! A 3 page contract that you can print from the internet… I don’t call it a legal transaction! Even the notary is not responsible if he makes a mistake so what is the real estate agent is responsible for? Do they negotiate for you? Well, for them, if you sell your house 300K vs 325K, it only makes a difference of $1,250 in their pocket (while they will still make 15,000$ at 300K). Do you really think they will encourage you to wait to get your price if they can do a quick sale? You are losing 25K, they are losing 1.25K… who’s the winner, who’s the loser?

#5 Avoiding a real estate agent: Previous bad experiences

I dealt with a real estate agent to sell my previous property and I was quite disappointed. It took 6 months and all my agent did was create confusion between the buyer and us as regarding the possession and moving dates… In the end, he cost me all the profit I was going to make on the house and I didn’t feel he did much more than take a picture and put it on a website (oh wait… I am doing that for $800!).

#6 Avoiding a real estate agent: I’ve seen the difference with bytheowner.com

A few years ago, I helped my parents sell their house through bytheowner.ca. Back then, the system was less effective than today (less options, no professional pictures, no online tools, etc.). but even then, they were able to sell it within 2 months (and they had 2 buyers fighting for it!). The transaction went pretty smooth and my parents just kept a good $15,000 in their pocket instead of giving it to a third party!

What about you?

I would be curious to hear about your stories or even better, if a few real estate agents can tell me why I should pay them 18K to sell my house?

Image source: Kiz

Similar Posts:

You Want More? Sign-up! ->
TFB VIP Newsletter


If you liked this articles, you might want to sign for my FULL RSS FEEDS. If you prefer to receive the posts in your email, subscribe CLICK HERE


Comments

Spot on with the reasoning.
Last time I sold my condo it cost me my profit in commissions.
When we were searching for a house, we found it through mls. In buying/selling the agent simply took visiting appointments. I am not used to having a personal secretary, as such from my experience I do not see the added value an agent can provide.

Hi!

In fact, the agents’s incentive at #4 is even less than $1250, since usually half of it goes to the buyer’s agent.

Regards,
Vasile

We’re actually in the same boat as you, selling our house to upgrade and we’re doing it with a 10 month old. It has been extremely stressful. We decided to do it with an agent. We’ve sold one other property before, but that was in 2007 and the times were different. These are the things I’ve noticed from our experience so far.

One thing RE agents are able to do is easily get sale data on comparable houses in your area. This way you can price your house really well. Basing your price on what is on mls is not a great way to do it since most of the houses on mls are overpriced (because they haven’t sold yet).

We’ve dealt with sleazy agents and we’ve dealt with good agents. Good agents are definitely worth their commission (with the advertising channels and contacts/buyers they bring). You can also negotiate on the commission. We were able to do that with ours and I’ve known lots of people who have negotiated thousands of dollars off their commissions.

With the example you gave on the price (300 vs 325). You’re making it seem like agents have the final say in the price you get. You’re still the one calling the shots. They’re just there for advice on what it will take to get the deal done. If the price doesn’t satisfy you then you don’t have to take the offer.

You did mention that you had a bad experience, that is definitely understandable. There’s nothing worse than bad RE agents. If you don’t have a good one you can go to. You can call several of the big RE agents in your area and interview them. How will they market your property, is the commission negotiable, why should you choose them over their competitors, etc.

I do find it ironic that a financial planner is calling RE agents useless, because a lot of people say the same thing about financial planners. (Indexing is all the rage these days) I for one do see the value in having a professional person when dealing with tens and hundreds of thousands of dollars. Just like in your business, where, for every good financial planner, there is a sleazy salesman, so too is the RE world filled with good agents and crooks.

Hey, I was thinking of writing a series on the useless professions, with realtors high on the list (but I started with Lawyers including real estate lawyers).

My experience with realtors is the same. They are even worse than you say, because their commission on the first 100K or so is high, like 6%, then on the later amounts it is lower. So although the average is 4-5%, they really don’t give a poop about getting you that extra $1K. I have bought and sold 8 properties over the last 4 years and in almost all cases, I was the one who negotiated harder than my realtor and got more money for myself than the realtor would have got. The only one time was Etienne Mellor in Montreal who actually got me more money than I would have got myself. To be honest, there was also another one in Newfoundland named Stephen Winters who, although we got more money than he would have, provided us with a lot of good services in selling property a long distance away.

However, even these good realtors were probably not worth the money. Mr. Mellor probably made about as much in commission as he got me in price reductions. His work was only a few hours, so the hourly rate would have been very high, with his main tangible benefit being a negotiated purchase price reduction of $5K.

All the other realtors I found to be very very bad. They don’t know very much and they put in the minimum effort to sell your house, relying mostly on the market to sell it. They will claim they market it, but marketing is just listing it on MLS or showing it to buyers who inquire and maybe fellow realtors at the office.

Did a quick search for the website and couldn’t find it until I realized its actually bytheowner.com. Very useful article, thanks for sharing your experiences.

by: The Financial Blogger | March 30th, 2010 (12:37 pm)

@ Brian,
thx for the right web address…. completely forgot to double check before posting!

@ Vadim,
I agree with you that some people may think that financial planner are useless as they are many of “us” who are just “taking orders” and not giving advices. However, we are “mostly free” since you don’t have to pay the Planner 5% of your assets to talk to him.

However, the RE agent is charging way too much to list a property on a website (mls) and wait to do visits. Since 85% of the buyers find their own through internet, advertising in the local newspaper is almost useless. Therefore, I really wonder which kind of “profesionnal” advice they can offer.

I had a relatively bad experience but the RE wasn’t THAT bad. It is just that I really wonder why I paid him so much as he just confused the buy/sale dates with the notary as a return of my 10K in commission fee ;-)

As to compare your house in order to price it, you still need to use MLS price as you will have to negotiate your price anyway. It is right that you are the only one responsible of agreeing to the offer of purchase in term of price, but the RE agent won’t push you do not accept the offer of 300K since it doesn’t matter to him anyway ;-)

In the end, I am more complaining against the cost of them then about their utility. If I had to pay 3-4K to go with a RE, I would do it. But not at 18K!

We bought our house with an agent, and it was useful in this particular situation because the couple was in a horrible divorce, almost throwing plates to each other head… So I preferred not being there.

But it was a first experience, so I also appreciate working with an experienced agent showing me stuff that the inspector might point out before we fell in love with the property and ask for an inspection that will end with a opt-out… we learned and now, we plan to sell our house by ourselves with bytheowner.ca.

We think that we are the best to sell our house because we are not afraid to negociate and we are convinced that we know our property’s assets. We lived in it for a couple years, so it easier for me to talk about my lovely and practical kitchen as an example.

I couldn’t agree more with your 6 reasons…

I’ve been shopping around for a home and couldn’t believe the ridiculous amounts realtors make with the 5% commission (ESPECIALLY here in Vancouver where the average price of a detached home is in the 750K range).

I went to a new condo development and the developer told me they give a “realtor price” and a non realtor price (e.g. the charge $20,000 more). The $20,000 goes directly the the realtor and the realtor doesn’t have to do anything at all! (No researching strata meeting minutes or anything!!)

Good luck with the house selling!

By the Owner is great, too bad there’s not much selection to choose from though- maybe we need to spread the word! =)

[...] The Financial Blogger: 6 Reasons Why I Will Not Use A Real Estate Agent To Sell My House [...]

I think people who use real estate agents can have valid reasons for doing so. Sometimes people aren’t comfortable taking on the risk of going it their own way, negotiating, and putting it all on the line so to speak.

I”m presently living in my 3rd home over the course of the past ten years (likely my last) and each time I sold my principal residence, I did not use a real estate agent. I think agents serve their purpose for a large percentage of the masses and they have their place in the private sector just like every other profession. I just think for those who take the extra initiative and are comfortable doing the transaction themselves, huge savings can be realized.

Great post.

[...] The Financial Blogger about 6 reasons why he will not use a real estate agent to sell his house. [...]

I cannot agree or disagree with selling your own home with the FB since I have not done both.
Some individuals may be cut out to sell their own and maybe the FB is.

However I don’t think MOST PEOPLE are …
However some RE agents are probably not either!

However stats from the U.S. say this …

1) The best realtors are worth more than they cost.
2) The best realtors achieve a 16% higher price for you than you alone.

Now interestingly enough some have brought up “Financial Planners” which I believe is a misnomer. Most FP’s that I have seen are simply glorified salesmen with a CFP after their name for which you get NO EXTRA SERVICE or KNOWLEDGE on average.

However personally I have found Gord Stockman of EfficientWealth.com to be the best I have met or heard about! He doesn’t pay me to say this and I do not make any money from him except for the excellent strategies he employs to help my wife and I to survive the financial crunch of 2008 and recover from the who-cares company whose name starts with ASS….. and maybe with good reason! (:-)

Unless you have a LOT of money to invest, other than Primerica, MOST FP’s don’t want to talk to you since you can not bring them enough money. Even the Credit Unions which were established to help the little guy now want you to invest $150,000 or go talk to a mutual-fund-licensed teller!

[...] Financial Blogger lists six reasons why he will not use a real estate agent to sell his [...]

[...] couple of weeks ago, we decided to put our house up for sale. I’ve already discussed why I will not be taking a realtor to sell it (even though they call me everyday!). But when you sell on your own, you need to put all the [...]

We bought our first house last summer and ended buying a property on bytheowner.com (or duproprio.com here in QC). Out of the 25 houses we visited, 17 were with an agent, and I must say that we far preferred the process of dealing directly with the owners. They know their house and can answer all our questions on the spot. With the agent, we had to search for and select the houses on mls by ourselves and the agent didn’t seem to be very knowledgeable about the properties other than the information already on mls and the comparable prices. Even though we were newbies in buying house, the buying from the owner was a smooth process.

Regarding the selling price, I think as a seller, you can look for how much a property in your neighbourhood was sold for on bytheowner. As a buyer, we looked for that kind of information to assess our negotiation margin.

I`m in Canda but the program is the same here as in theUS .

I have sold many homes in years past on my own just by putting an ad in the local newspaper.

I always include a cluaue that says :”this offer conditional and subject to purchasers and sellers lawyers ”
This puts the onus of responsibility on the lawyers to make sure evreything is correct.And makes them EARN their money for handling the deal.

From my limited point of view, I think that many individuals do not have the requisite marketing, negotiating and work skills necessary and I am talking about both the realtor and the sellor! In any event, everybody gets what they negotiate!

Have a great day in the marketplace!

I agree with comments above that selling without a RE agent is not for everyone. And I fully agree that paying 4%-5% in commission is way too high.

I would rather push for the RE industry to set up standards for selling homes in terms of hours. That is, it takes 1 hour to process seller information in the RE agent’s office; 1 hour a week to update the file; 50 hours to sell a house; all in, say, 60 hours to sell a house. I pay up to $100/hour (the higher the rate, the better the agent; better agents are measured by moving 3- or 5-year averages of properties sold).

Frankly, I’ll pay the lesser of 0.5% of the selling price or $3k to the average agent if s/he takes a couple of months to sell my place.

It’s a free market. You can negotiate ANY RATE you want. Plenty of agents. Everything is negotiable.

by: The Financial Blogger | April 21st, 2010 (2:31 pm)

@Chakkar,

I agree with you 4-5% is way too high. I was ready to pay about 1% to 1.5% (max 5,000$) for the sale of my house. Since no RE would ever do it, I have spent $800 with http://www.bytheowner.com and I sold in 2 weeks.

If you think that you don’t have the expertise to sell your house on your own, try talking with the sales coach at By The Owner. They have a real strong team to help you out durint the transaction.

Even 1-1.5% is way too much in a sellers market,I wouldnt pay any more than what the banks pay you for your money which I think is quite fair.

1/4of 1% of the selling price would seem fair especially today in a sellers market when you dont even hav eto have any RE skills to sell a property.It sells itself , with many cases of bidding wars on a single property.

However having said that ? I have never paid a RE to sell my homes.

HI I just sold my own home for just over the asking price.
I had 3 open houses and 9 private showings. I figure I spend less than 19 hours of my time – not including keeping my house immaculate as that would have to be done anyways.

I saved over 31K in after tax dollars. I could have taken 4.33 months off of work just to sell my home and would have made out the same finanacially vs using an agent

Please explain to me why my home was worth more if I would have use a r agent? My buyer was only willing to spend so much $$ as well as the banks are not as eager to over borrow now.

I had many agents saying they had buyers for me. I offered 5K if the bought the buyer. None did. I also had many people they would not use an agent as they can find a house on their own.

by: The Financial Blogger | May 2nd, 2010 (7:26 am)

@ Dean,
this is their best trick (to tell you that you that RE can sell your house at a higher price). So they crank your price, wait for 4 months with no offer and 2 months before their contract expires, they tell you that YOU are asking for too much and tell you to drop your price ;-) hehehe!

There are two sides to this topic and before people can truly comment they have to know both sides. Sure if an agent came to me and said they want 5% of the money i make on the sale of my house i would say screw off, unless i truly know why.
First of all agents take all the risk upfront. They pay for all advertising and marketing with out getting a dime from you. If the house doesn’t sell, they don’t get any money. Offer them a flat fee up front to sell your house, they will do it for less than since there is no risk in losing money.
Have you ever tried to publish a photo and article on a website or in the newspaper or magazine? On average if you went to your local newspaper of home magazine, they will charge twice the amount of money from a realtor than they would you average Joe sending in an article.
The whole 5% of a commission doesn’t just go to the one realtor. It is split up in half to the other agent who brings a buyer. then each agent has to give their Broker a certain percentage. Say they sold a $300,000 house for you at 5%. The commission would be $15,000. That will be split into $7,500 for each agent. then their broker can take anywhere between 10-50%. Say on average the broker takes 30%, the realtor is only left with $5250 out of the so called $15,000 you say they make.
Factor in that they can easily spend $1,000-$1,500 marketing your property(yes that much as advertising is not at all cheap). So what is left? The realtor will be left with a net amount of around $3700. If you want to go with what one poster said about paying hourly and that the Realtor will do maybe 60hours of work for each client it will work out to $62 an hour ($3,700/60=$61.6per hour)
I don’t think $62 dollars an hour is asking too much from a person who is always on call works evening and weekends all the time. Gives up family time to help out client in a pinch.
Realtors are not for everyone as there are people that can take the time do the research to learn everything they need to know. But don’t say they charge too much as there is just reason. you wouldn’t become a Realtor and work 24/7 just to make and average or below average income.
Read the facts first then make you opinion. Don’t just assume they charge too much without finding out exactly what it cost’s to do business.

@ Andrew,

Thank you for bringing this other perspective. However, while I can appreciate that your job is not easy, $60/hour is way more than most people. You salary is still pretty high.

On the other side, I am not saying that you are not working and that you don’t deserve your money. But since everybody is taking a cut, it is still very costly for the client (even though you make 3-4K per transaction, the client still pays the full 15K).

On the other, why would you not concentrate on finding buyers than trying to sell property? you would be making the very same 3-4K but you would rarely work more than 10-20 hours to close the transaction…

In the end, selling my home cost me $1,500 in home staging (what the agent would not pay anyway) and another $1,000 in advertising (since 85% of the buyers are looking on the internet, I truly beleive that other medias are absolete to sell your house). So the total cost was $2,500 to sell compared to about $19,000$ (commission plus taxes) and I don’t even count that I would have disburse the first $1,500 in home staging anyway…

I spent about 15-20 hours on the sale of my which a good part of it would have required my presence anyway (cleaning my house before visits, being there for the inspection). The agent could have done the visit for me and negotiate (which took about 10 hours…).

So, then again, I don’t say you are not working hard, I just say that is way too expensive for me to pay $19,000 while I can do it for $1,000. And there is no way an agent could have sold my property 25K higher than my asking price.

thx for your comment though, it helped me understand the other side of the transaction!

by: T. Amazed | May 24th, 2010 (9:20 pm)

Wow, I can’t believe how uneducated you sound. You definately need an agent. You have no idea who this person is calling you to buy your house. Private stranger. There are people making a career out of getting into your home these days and deciding how ease it is to get back in to rob you. When you let someone in – THEY DO NOT WANT TO MEET THE OWNER. They cannot place themselves in your home. You turn them off by existing. They need to see themselves there. 83% of the public (and that is large) do not have vision. They cannot listen to you brag about every nail you changed in the house. You also have no idea what is right or wrong to say to buyers. We do. You are basically a “SECRET SELLER”. Without an agent. We have 18 web sites. 180,000 agents just in your state will see the house list on the MLS. For sale by owner web sites are for people who can’t afford to buy your house in the first place. How do you know how much you could/should or will get for your house. You have a very uneducated guess. That is it.

My professional opinion to you is you better hire or you will sit with your house on the SECRET market for a very long time.

by: The Financial Blogger | May 25th, 2010 (6:02 am)

@ T. Amazed,

Uneducated, huh? can’t sell my house on my own, huh?

I guess that if I tell you that I have sold my house within 2 weeks through bytheowner.com…and this is how I have saved $18,000 in commission paid to your “professional agents”.

Secret Seller? during those 2 weeks, I had an average of 75 visits on my website per day and I have received 7 requests to visit my house… that it is quite interesting to see how many people that are living in my “secret” world!

Breaking my house? come one, unless you live in a castle, most properties are pretty easy to break-in and rob the owner. No need to visit.

Uneducated? I guess that paying 18K in commission in a quick sale must be a real proof that I am uneducated! come on!

Face the truth; real estate agents are quite expensive and DIY websites have emerged to offer an alternative.

by: T. Amazed | May 25th, 2010 (1:55 pm)

I am very happy to hear you got lucky and sold your home in 2 weeks!!!!! Congrats. The facts if you did that are that you under priced your home.

Most people have no idea what their home is worth and what an upgrade you did to your home can get you. If you sold and quickly like you wanted, I am happy for you.

75 visits compared to 1,000 hits from all around the Nation on 18 web sites that can get you over proper asking price since someone coming from London can see your house, needs the area, love your home style, town, etc., does not impress me.

Again, if you are happy with your result, I am happy for you.

You could have made 25K over what you got.

by: The Financial Blogger | May 25th, 2010 (2:07 pm)

When I look at the market in my area for a similar houses (properties listed with agents included) , the time for sale is about 30 days. I guess that most people are selling underpriced then?

Before putting my house for sale I did a complete comparaison with houses currently on the market including:
- square footage of the house and land
- additional equipement (A/C, natural gas, pool, garage, etc)
- material (wood vs floating flooring vs carpet)
- bathrooms and kitchen finition (and number of bathroom)
- number of rooms and size of them
- localisation of the property (area, services nearby, etc)

I also had a profesionnal appraisal dated a year ago comparing real sales as well and used their guidelines to establish the value of my house.

I know that I did most of my comparison based on the asked price and not the real price but if my neighboor is asking 350K, I should be asking the same thing (supposing we have a similar house). So if we are both asking the same price, we will end-up with similar final price as well.

The funny thing is that even if you were right and I was off by 25K, by giving 19K in commission (the 18K I saved included 1K for marketing expenses), I would have potential 6K more and probably would have waited about 60 days to sell my house instead of selling it in 15 days….

This is, again base on the assumption I was 25K off after doing all my due diligence. Assuming I was 20K or 15K off… I would be losing money once I paid the agent… interesting calculations for an uneducated man, isn’t?

What is with all the crap about you have under priced your home if you sell it yourself and it sold fast?

It is not rocket science. If realtors got more, who the heck would use one to buy a house? That would guarantee you would pay more vs buying privately.

by: The Financial Blogger | June 2nd, 2010 (12:17 pm)

@ Dean,

I guess this is just a common argument they use. you sign with them thinking you can sell at a higher price and 6 months later, they tell you that your price is too high and that you should lower your price ;-)

If they claim to be able to sell your house for a large price only give them a 3 day listing.Dont wait 4 months to find out they are full of bull-droppings.
And if they tell you they have a buyer for your home and they need to list it ? tell them ok you have a 24 hour listing .

they`ll either comply or go away , becaus eyou called tgheir bluff.

BEEN THERE DONE THAT~!!!!!!

For those who are on the fence without an agent or who want access to the MLS.

http://www.ihatecommision.com for a MLS listing for $109

http://www.propertyshop.ca/ for a bunch of lawyers to help you sell your house

Cheaper options for the savvy.

even worse in Asia!
they r fucking useless shit!
cheat money. expensive. full of hassle
a job that should never exist in first place
for the very fact everyone can be a real estate agent…
i.e. even idiots can be real estate agent and most idiots do become a real estate agent!!!

Hello “The Financial Blogger,”

First time reader and commenter and I agree that you have some valid concerns. I feel that one of the biggest shortcomings the Real Estate industry has is its obvious failure of educating the general public in exactly what Realtors do and what makes them valuable.

I will address your 6 reasons as follows:

1. “I have 18,000 reasons to avoid it!”

Value is a subjective topic. Some people value their time more than money, others their money more than time. If FSBO’s and Realtors SOLD properties for the same amount of money and that was the only value that Realtors brought to the table (higher sale price) then there would no reason to use a Realtor. My experience is that Realtors sell for a substantial amount more. However, a capable, professional Realtor brings many other things of value to the transaction such as liability transfer, professional advice, experience in complicated Real Estate transactions, lack of emotion, rational/ critical thinking etc…

2. “Independent websites are just doing fine”

There are many more choices for the public these days which is great. I welcome competition and if the FSBO model is superior, it will win and Realtors will cease to exist. A pretty telling story I read in the Wall Street Journal details the founder of http://www.ForSaleByOwner.com trying to sell his condo in New York for 6 months with no luck. He decides to hire a broker and the broker immediately increases the price by $150,000 and then SELLS the property at that price. Read up on it here on my blog if you like: http://www.koryprince.ca/Blog.php/forsalebyowner.com-founder-uses-realtor-to-sell-his-home

3. “I love negotiating!”

You are in the minority who loves negotiating. Also, many homeowners are unable to divorce themselves emotionally from their home. That destroys deals and/or profit margins. In my experience, me negotiating with a FSBO is great for my client because it is professional VS an amateur and they rarely are any competition.

4. “What do they do that is so special?”

Again, this is by no means the consumersâ?? fault that they do not understand what we do to earn the commissions that we earn. In BC (British Columbia), Realtors are duty bound to represent the best interests of their clients, even above their own. This representation is something the public usually misunderstands and does not see much value in. Unfortunately, it is only after some legal troubles that some people see value in this protection. One of the more important things that Realtors do is write an enforceable contract with proper conditional clauses or oversea one that is written for their seller client. Also, a contract in BC is typically 8 pages with the last 3-4 pages being conditions. An example of a poorly written financing condition would be: “subject to the buyer obtaining financing.” An example of a professional financing condition would be:

“Subject to a new first mortgage being made available to the Buyer by 6PM on December 15, 2011 in the amount of $100,000 at an interest rate not to exceed 4% per annum calculated half-yearly, not in advance, with a 30 year amortization period, 5 year term and repayable in blended payments of approximately $475 – per month including principle and interest (plus 1/12 of the annual taxes, if required by the mortgagee).
This condition is for the sole benefit of the Buyer.”

The latter one protects the buyer from being forced to close if they can’t get favourable financing terms. The first one can and in some cases will be forced to complete at an interest rate and terms that they do not want because they have a binding contract. This experience in contract writing is critical.

5. “Previous bad experiences”

I am sorry that you have had bad experiences. Some Realtors are good, others are not. Some lawyers are good, others are not. Same for doctors. However, I would not represent myself in court even though I am entitled to. I also value the education and experience of a good doctor because I am not interested in studying medicine to the degree that he or she has. A good Realtor is worth more than they charge.

6. “Iâ??ve seen the difference with bytheowner.com”

I am happy that you have had what you perceive to be good FSBO experiences. Whether you got top dollar for your property is debatable. The aforementioned http://www.ForSaleByOwner.com founder story above should give you some insight into the possibility that you may not have gotten top dollar. I hope you did.

FSBO’s have been around for a very long time and they are not going anywhere. There is always going to be a certain percentage of people who prefer to handle the sale of their property themselves. I guess it all comes down to how much risk you are willing to take on by handling a transaction that compromises most in not all of your net worth. I trust true professionals in matters that are important to me when I feel that they are more qualified. The average FSBO is far less qualified then an experienced Realtor in matters concerning Real Estate, that is a fact.

Thanks for the post; you certainly got some people talking which is great.

Kory Prince
http://www.KoryPrince.ca

by: Caldwell Banker Sucks | January 19th, 2012 (8:49 pm)

I recently attempted to buy a lot that attaches to my property in cash directly from the owner who had just purchased it. I found out they wanted to do a quick flip so I got their email address and opened a nice friendly dialogue with them about buying it. They had purchased the lot for 140k, which is above average for a lot like that in the area and lots like that are in low demand around here so I offered them 160k confident they would jump all over the quick cash. Then the seller did an unbelievably stupid thing. They out-of-nowhere forwarded our private string of emails to a real estate agent with Caldwell Wanker who talked them into asking and listing it for 220k, way more than the lot is worth.

Its a shame that the realtors idiotic greed blew up a potential deal and the outrageous asking price will ensure the lot never sells. Not only that but the realtor slapped an 8% commission on it that would have to be split between any buyer and seller. In my part of the world the average commission rate for vacant land is 4% tops. The moronic sellers and the greedy realtor really made me angry as it should have been a nice easy and profitable flip.

Now I hope that the land and their money sits there and rots for a long time or that the buyer comes to their senses and sells it to me at a fair price with NO USELESS AGENT INVOLVED.

We listed our place for sale with a realtor, for 3 months, now. We need to sell it soon as we paid deposit for the new place.
We might be able to sell it ourselves afterall. Do we still owe commission to the realtor if we found the client ourselves? He might be a good realtor, had every intention of selling it, sent us a few people to show the place to them and kept in touch with us, informed.

Hello @Caldwell Banker Sucks,

I am sorry that you feel so upset. However, you demonstrate a complete lack of understanding of how fiduciary relationships and Real Estate agency works. The listing Realtor owes a fiduciary obligation to represent the best interests of their client (the seller), even above their own and especially above yours. The agent’s suggested price, if the Realtor knows what they are doing, is not a number picked out of thin air because that is what the seller or Realtor want to sell the land for. It is representative of “Market Value.” If it’s overpriced, then it won’t sell for that price and the seller will be unhappy and the Realtor will have worked for FREE with full accountability for his/her suggestions. Successful professional Realtors don’t take listings at prices that they can’t sell them at. I personally will not list overpriced homes or vacant lots because I get paid by closing deals and people do not pay over “Market Value.”

As far as characterizing the agent as USELESS (with all CAPS nonetheless), this is one reason some people decide to employ a Realtor in the first place, emotion. You have made a judgement about a professional because you didn’t get what you want. Also, the amount that the seller paid for the lot ($140,000) has no correlation or affect on what the “Market Value” of the lot is currently.

Have a nice day.

Kory Prince
http://www.KoryPrince.ca

Ok, so I am selling my house privately via website after unsuccessful attempts to sell through a realtor. I have had more calls in the first week of posting for viewings on my Private sale than my realtor got me. So I get a call the other day from a buyer’s realtor who’s clients found my property and wants to setup a viewing. So this realtor wants a commission. I said a flat fee and offered what I thought was fair (after all the ‘no frills’ MLS listing option is $1000), as the realtor is not doing any work but meeting the buyers at my house to do a walk through. So far pretty easy money for the realtor, right? Guess what the realtor’s response to my commission offer was….”Don’t think my office would permit me to take such a low commission”. So I am thinking ‘OK, your buyers can walk and you make $0.’ I don’t get how realtors think they are entitled to anything in this case? Besides, if I were in the realtor’s position and I knew I wasn’t going to make anything on this sale, why would I continue to entertain the client’s interest in a private sale? I would probably try to steer them away. Or the other option is to make an easy $1K. It baffles me.

by: The Financial Blogger | February 1st, 2012 (6:54 am)

@FedUp,

don’t give up…. realtors want their commission and they are convinced they work for even though they don’t do anything… quite funny!

I am interested in the statement that a RE will get on average more money for you. How exactly do they do the math on that one?

My last house I sold for a certain priced. How can they prove I would have gotten more for my home if I listed with a RE? Saying a comparable home sold for more is not PROOF they could have gotten more from my home.

A realtor could not get me 75% of what he said it was worth. It was listed for $265k. I dropped it to $179 ( not all at once ) and it would not sell. So much for them knowing the market place.

I am friends with several realtor and they are great people except for the fact they will do damn near anything to get the listing.

I just bought a nice place in the country. When I looked at it ( and in the listing pictures ) it has several items that were not there when I took possession. The dishwasher, new fridge, washer and dryer were gone. I now know it must be in the contract what appliances come with the property. The fact they were there when I originally looked at the house and the listing pics show them there, does not mean they come with the house.

I guess i have been lucky as no one has every screwed my on a home purchase before.

My response to the realtor was by that logic I could reno the kitchen with nice cabinets and them replace them with cheap crap after the place sells and too bad for the new owners as the contract did not state the cabinets would not be replaced with junk after it sell. My realtor hung up on me. Nice.

I did get some satisfaction though when I received mail from the former owners. They got T4′s and social assistance slips in the mail ( No I did not open them.The envelopes tell the tale ) . It is not nice to collect social assistance while working.

@ Stanley
Real estate agents are way over paid, but they are not idiots. Anyone who can see how to make a ton of money while sitting in their office or at home, is obviously intelligent. The system that is in place for the real estate industry is the main reason why the commisions are too high. Greed from the broker all the way down to the agent keeps this corruption going. The regulations and the commission platforms need to change and I, for one, feel that until they do, I will be going the private sell/buy way. I have friends that are agents and brokers and I see how well they live and how much money that they make from the small amount of work they do. Although they do work on weekends and evenings. I personally do as well and have enjoyed doing so, because I can always say no and take a day or an evening off. It ‘s great being your own boss. With todays technology and all the options that are available in helping a buyer/seller, real estate is changing, but unfortunately, not quick enough. Real estate agents/brokers should realize that they need to adapt to the changing costs and lower the commissions to reflect their skills and their tools of trade, which everyone has at their disposal. They need to start looking at every client with moral values and be honest with themselves. They are going to become a useless neccessity for the rich and I feel the sooner the better. To finish off, most people know that real estate agents and brokerages are ripping them off and that the fees they charge are enough to make them sick, but the majority of society are too lazy to do anything about it and feel that if it isn’t broke, why fix it? Believe me, the Real estate business structure is not broken, it is actually working perfectly. Making smart, sly, savvy people rich from your hard earned dollars. Just too much money for the amount of work they actually do. I get paid by commission as well, but the difference is my advice lasts a life time and is based on building a relationship to continue looking after the advice that was given. I don’t believe real estate agents care about that, I have never even heard from my first agent since she handed over the keys to my first home.

I had a bad experience with Tania Menicucci my real estate agent. She did not help us negotiate a lower price than the asking price…. more comission for her! Looking out for her best interests only! We were naive… first time home buyers which we realized later. She also recommended me an inspector who worked with her and so we trusted her. We later found out the house had a problem which her inspector should have seen….or did not want to see. That was a very bad idea…..always use your own inspector. We learned the hard way. I will never recommend her to any of my friends.

I am a real estate agent. It’s true, smart people who do enough research and invest the time will be able to sell their homes without an agent. They will have to be thorough so that they do not make themselves vulnerable to legal action. Many things can and do go wrong. It’s not complicated, there’s just a lot to remember.

Many people don’t want to deal with all of this. Many people are not well enough organized or even competent to deal with all of this. Most people wouldn’t know where to begin when it comes to marketing. Most people do not have the time it takes to handle all of the details.

Real estate agents provide a service like many other professions. We could all perform most basic maintenance on our vehicles. Do we? No, most people have someone else do it.

Are real estate agents overpaid? Absolutely not! If anything we are underpaid. Most people don’t even realize how much work we do without making a dime. And when we do stand to make some money we deal with clients who for the most part are irrational, ignorant, pseudo experts who are more in need of baby sitting and hand holding than the average kindergartener on their first day of school. There is something about people who are buying or selling a home that makes them loose not only their minds but their humanity. They become mean, nasty and vicious. I work for one of the most prestigious real estate companies in the world, but time after time I see hard working agents being treated like dirt by the general public.

I understand that agents are not popular, are seen as superfluous, are often considered dishonest. But most are hard working, honest people. A few bad apples ruin it for the rest of us. The problem is that these misconceptions come about from a process which is highly emotional. Buyers and sellers loose their minds because they allow their emotions to make decisions when logic should prevail. This is one of our most important jobs, to remind our clients that this is a business transaction.

The fact remains that the vast majority of those who believe they can sell their homes alone end up working with an agent for a variety of reasons.

FedUp wrote:
“Ok, so I am selling my house privately via website after unsuccessful attempts to sell through a realtor. I have had more calls in the first week of posting for viewings on my Private sale than my realtor got me. So I get a call the other day from a buyer’s realtor who’s clients found my property and wants to setup a viewing. So this realtor wants a commission. I said a flat fee and offered what I thought was fair (after all the ‘no frills’ MLS listing option is $1000), as the realtor is not doing any work but meeting the buyers at my house to do a walk through. So far pretty easy money for the realtor, right? Guess what the realtor’s response to my commission offer was….”Don’t think my office would permit me to take such a low commission”. So I am thinking ‘OK, your buyers can walk and you make $0.’ I don’t get how realtors think they are entitled to anything in this case? Besides, if I were in the realtor’s position and I knew I wasn’t going to make anything on this sale, why would I continue to entertain the client’s interest in a private sale? I would probably try to steer them away. Or the other option is to make an easy $1K. It baffles me.”

FedUp, you obviously know nothing about being a real estate agent. We spend hundreds, thousands of dollars driving around showing homes to clients. Your offer of $1000 likely means $500 to the agent after he/she splits the commission with his/her broker. Do you really expect the agent to lose money so that you can sell your home? Buyer agents deserve and earn their commissions just as much as any other agent. I suspect you don’t work for free either.

But you make an excellent point. You illustrate perfectly why home owners are far less successful at selling their own homes. Without compensation you will get little or no cooperation from agents and you’re on your own…not a good place to be when you want to sell your home.

We invest a LOT of money to market your homes and we make a complex process look easy, so it’s only natural for outsiders to believe we don’t earn our commissions. Most of us do. Check with friends and family, ask around to see if they know an agent they could trust and rely on in the past. You’re likely to have the same great experience.

Just an update…I got an offer on my PRIVATE sale home 2 weeks after I posted it and closed two months later as scheduled, each using our own solicitors — and without a realtor.

My experience with using a realtor on the selling end was that I did not find much value that warranted a 6% commission (and I know they only get to keep half if they don’t represent the buyer as well). As far as marketing was concerned, my realtor only posted my home on the MLS system, and passed it out to the other realtors in their office. What kind of marketing was that? No open house. No local paper advertisements. No mention on the regular spot on the radio either. You tell me, what did my realtor do for me to market my house? Not a heck of a lot. I had to overprice my home so I would have enough to pay my realtor and my mortgage penalties (don’t even get me started on Interest Rate Differential!). Who is interested in an overpriced home? I did not, or ever intend to, sell my house for any profit, I was just looking to sell to get out of my mortgage because of financial difficulties associated with loss of income. I listed my house as a PRIVATE sale because I did not want pay a realtor’s fee that was an extra $9,000. I think that was an excessive expectation considering in this case I was responsible for listing and marketing my own property and in the end it was the buyer that found my listing and brought it to their realtor’s attention.

I am so grateful for this blog. It allows me to let it all out on the topic of overpaid real estate salespeople. In my profession, I have to network with salepeople in all different industries, but by far I regret working with real estate salespeople all the time because I feel like a hypocrite, I’m always inches away from saying nasty things and asking thought provoking, harsh reality type questions towards their inmoral practices of placing their greed and bank accounts in front of their clients feelings. Just read above, Mr. Mark’s thoughts on some of his clients. Talk about foot in mouth or bitting the hand. Mark you should put your real name on that so people can sympathise with you and hold your hand while you deal with the emotions of not caring about a house that you have no vested interest in other than to profit from the homeowners hard earned dollars. Real estate salespeople are the most overpaid glutens for the amount of work they do for their clients, right behind politicians and CEO’s/Corporations. To bad the OREA exam wasn’t 6 phases instead of 3, because knowing how lazy they are, they would never finish the course. Now I believe you should get paid fairly for the work you put in, so real estate salespeople who do a great job, should be paid a good commission, 1.5% to 2% and the brokerage should get .5% out of that. That would seem fair and would also seem fair to the person that works hard for their money to own that house for a real estate salesperson to actually have a job. 20 houses sold per year at an average of $200,000 could earn that salesperson a fair salary, perhaps $60,000 – $80,000(minus expenses and brokerage fees, expenses are 100% deductible). 20 houses for a whole year shouldn’t over exert a real estate salesperson. Not to pick entirely on the little guy, brokers are mainly to blame on the commission fees, can anyone say corporate greed? And where are they on my list of over paid, corrupt, money hungry, glutens?

by: The Financial Blogger | August 22nd, 2012 (9:47 am)

Hey Fedup!

great job on selling your house by yourself :-)

by: you're full of blog | August 28th, 2012 (11:49 pm)

A real estate agents commision is 3%. 3 for the seller and 3 for the buyer (6 total). Then the agent splits the 3% with the broker they work under. So (minus fees) when all is said and done they get less than 1.5% So for a 300k sale its more like $4,000 commision, not $15,000 !

Also it’s not like they sell a house every day. It may take up to 6 months to sell your house. So they need to make at least enough from the deal to live on.

If you do FSBO all the agents who have buyers that are currently looking won’t bother to show them your property because they don’t work for free. Even if you paid them the 3% buyers fee then they still have to somewhat do the sellers job for you and “hold your hand” to make sure you get everything right. So without sellers commision again they are doing work for free.

Even if 90% of people do the initial online search for a home themselves 90% of people do not buy a house without an agent. More like 90% will use an agent. And 90% of people in the market have an agent. From pricing, inspections, mortgages, appraisals, paperwork, showing, negotiating, and closing a lot of people need someone to guide them through the process.

So good luck selling your house FSBO. Or getting anyone to look at it for that matter. Even with an agent If it’s not priced right and you don’t sell it with the big rush of people you get in the first 1-4 weeks then the amount of potential buyers will slow down to a trickle. You can bet you’ll be one of those houses that sits on the market for the next 12 months desperatley lowering the price by 10K every 60 days.

So whats more worthless a real estate agent that makes less than 1.5% selling your house for you, leaving nothing for you to think, worry about or do except “sign here.” Or a blogger that tells you to DIY while making 2cents per click and leaves you looking like a cheap bum with generic paperwork downloaded from theinternet and an ugly FSBO sign on your house. Who will want to deal with you when you look so unprofessional and desperate to save a buck? … Nobody.

BTW I am not a real estate agent, just someone who has bought and sold a few homes. Really it’s about as smart as asking the prosecutor if they will also defend you ,,, for free.

@ you’re full of blog, actually I think you are full of something and it isn’t blog. I do not believe you have truly understood what the issues at hand are with the real estate industry, One thing I do believe is that you are smart enough to tell us that you are not a real estate salesperson. Whatever, I think you are embarrassed to admit that you are. But on the other hand, if you want to throw your hard earned money away, then do it, thats your choice. By doing this, I hope you know that you support a corrupt system and place your name in with the rest of the followers. Drink all the juice, its goooood! I will not, and as a someone who has success in selling privately, I will never use a tool that is useless in every way. I just had an “ah ha” moment! Tool! I will use this word instead of real estate salesperson from now on, it fits the desciption all around. Find a tool that you can use to get the job done, as long as it doesn’t cost you an arm and a leg. Ha!

I am buying a house and around here there are no FSBO available. We put an offer on a house. I went back to do a more detailed inspection and my agent was pissed that I was taking so long. Excuse me but $277K is a lot of money to me and i want to protect myself.

I am a real estate agent and the majority of buyers (that are not investors) use an agent to represent them because it is a free service to them (seller pays the commission). What buyer wouldn’t use a free service to guide them through the process and protect their best interest?? Since the buyer’s agent splits the commission with the seller’s agent, and can see online how much commission they will get if their buyer purchases the house, the commission is definitely a tool for selling a home. If you worked for commission, wouldn’t you naturally want to make the most money you could on a transaction? So as a seller, if you want to sell your home quickly, it makes sense to pay out a good commission. Also, agents network with each other and have lots of connections to buyers through many means, including relocation through businesses. As with any job, some agents may not great, but most of us are very good at negotiating, marketing, staging, and guiding our clients through the process because we do it every day. A good agent makes the process seem effortless, but behind the scenes takes on all the stress that comes with home inspections, appraisals, mortgage, title, and closing issues. Some FSBOs may get lucky and sell their home themselves, but it seems pretty risky. If a mistake is made, there is liability of getting sued.

by: Finance Doc | September 4th, 2012 (8:26 am)

Again, another tool shows us how much of a tool they really are. “seller pays the commission” but who is purchasing the house at that set price with the commissions built into it? Thats not free to me. When you sell privately, the price is set without the over inflated commissions. The corrupt commissions is the issue. The tools have corrupted the whole industry with their greed, as shown in your comments, ” if you worked for a commission, wouldn’t you naturely want to make the most money you could on a transaction?” This attitude is why you are ranked high on a “not trusted and very useless” scale. You should be saying ” I will try my very hardest to focus on your needs and price while using common skills called communication, networking and honesty to negotiate a lower price to make you, my client, happy with purchasing your new home”. As for being a seller, you wouldn’t have to worry about your house selling, if you have taken care of it, invested money into it for upkeep and are asking a fair price, without inflated commissions built into it.. It is way too easy showing how the tools really have tried to cover up their dishonest and inmoral practices. Please stop trying to justify your policies and put more effort in adjusting to the changes and help fix something that has been broken for too long. Your are a tool aren’t you?

I love this blog! My home is worth over $1Mil, I’m in no rush to sell and there is NO WAY I will pay a realtor over $60,000 + taxes to a realtor. No one can sell my home the way I can sell it. What does a realtor do that adds any additional value? I can do my own open houses and marketing. It isn’t rocket science. I am going to use Comfree as they have a great package and provide MLS.ca listings.

I have purchased several homes throughout the years and I have ALWAYS found the home I wanted to purchase on my own. Never has a realtor actually found a home for me that I purchased. The realtors I have dealt with are basically order takers.

If you have the time you can sell your house yourself.

Sandie it is not a FREE service. A home has to be listed for more to cover the commision.

On the subject – too many realtors have on 1 or 2 pics of a house and have it listed wrong. Here almost all the mobile homes are listed as a house so when I get a print out from an agent on homes, it has moebile which I am not currently looking for ( I own several mobile BTW that I rent out so I am not predudiced in the least ). Here they list the sq footage which is usually way off. You can buy an electronic distance meter for under $200 so you just point at the far wall and it tells you the distance. I own one and is very accurate. It only differed from measuring the tyape measure was by 4 sq ft in a 1090 sq ft home.

A realtor contacted us about a house we had listed previously saying she has a buyer that might be interested, could she look at the house. We said sure, I assumed she was a buyers agent. One email she wrote struck me funny so I wanted clarification, I wanted to know if she was the buyers agent and she said oh no, I am representing you for a one time showing. HUH!, okay so if you were to represent for this one time showing what would the fee be? She said 4% …. and we know nothing about this … she just phoned and asked to show the house? I thought I could live with giving her 3% so countered at 2% – only because I know my husband wants to sell, I would have said stick it …. thinking she would come back at 3% but she says I will have to pass, good luck. So I said thanks. WTF

by: Finance Doc | September 29th, 2012 (7:35 am)

@ Milly, unfortunately you have witnessed first hand of a useless tool for real estate. If you could imagine this tool is being used still by other hard working individuals to complete the task of selling their home. Using a stone hammer to frame a home could get the job done, but would cost the user a lot of wasted time, money, grief and misery when he/she looks around and realizes they could have used a nail gun that would have been more efficient, less time and would have saved him/her lots of money. Anyways, lets step away from the analogies, I think you understand what this blog is about, so lets look at some ideas that could help you. Have you ever considered going to open houses in your area and handing out flyers or information about your home? I believe by tapping into a market that is already out shopping for what you have could only help with promoting your home. Now you need to be approachable and not to forward. It could be just putting the flyer on their vehichle when they go into the open house or standing on the sidewalk out front, but what ever approach you take, if I was looking to buy, the more options I had while I was out looking, the better! You do not need a useless tool that is obsolete when you have yourself and all your tools at hand.

Thanks for the confidence your blog is giving me. My first step is seeking out information and that was how I got to your blog. I know I have the intelligence to become a real estate agent if I chose to … so I should have enough intelligence to be able to learn the ins and outs enough for this one transaction? And I do now have the time. Last time the property was listed she posted on MLS the wrong house dimensions and it was full of spelling errors. It took 2 weeks for her to make the corrections. I know I can do better than that … so once again thanks.

Sorry one more thing …. does this make sense … the realtor tells my husband to list for $399,000 six years ago …. they say market conditions, no sell (I thought they increased your opportunity to sell?) anyhow now this realtor (different one but from same company) says my husband would be lucky to get $150,000. Then in another sentence she says finished out (new house, needs kitchen, bath, floor) the house would easily fetch $350,000 plus ….. the estimate was $50,000 to finish it out. The appraisel for taxes is $250,000. Do projects really increase the value that much or is this buyer she is no longer bringing by looking for something under $150,000. How does one trust the figures they throw out? It is hard to find comparables because of the acreage and unfinished condition but geez. Does this sound like she has our interest at heart? She should she was planning on collecting 4% without our knowledge! No more venting. :) thanks again … very informative

@ Milly
It seems to me that you have found a broken tool. This broken tool looks like it would do the job, but when you try and use it, it screws everything up and you have to start over. Do you have anyone that you can trust? You should find someone that has done what you are trying to do and ask them for their opinion. My experience with investing into your house has always added value if done by code and by a professional. Whether the value is in how much your house can list for or in putting your house above the next in terms of comparing whats in the market and making it easier to sell. Is it in the budget? If you can’t afford to finish then you can’t expect to ask a price that isn’t warranted. Common sense always prevails. These, ” By the owner” companies that are out there can offer support in this area as well. Research is key to any successful venture, so the more you educate yourself, the better. Keep digging and don’t give up! You could be three feet from gold!
P.S. Throw that tool away and don’t be shy to express your feelings like you have, let people know what company and who you have had dealings with, as long as you don’t slander their names, your only expressing your opinions.

@ everyone
There is a tool for every job and sometimes its better to have an experienced person use the tool to get the job done, because you can get hurt if you do not know how to use it properly. Also, I personally know of some awesome tools that do a great job, so remember not every tool is obsolete, they might cost you a pretty penny, but dome will do a great job!

by: The Financial Blogger | September 29th, 2012 (1:54 pm)

@Finance Doc,

I agree with you in regards to experienced people. The problem has evolved overtime thought:
- would you pay $2,000 for an oil change? if my mechanic would charge me a ridiculous price for relatively simple task on my car such as an oil change, I would probably search for another option. If this option exist where there is someone that is willing to show me exactly how to change my oil for a one time fee of $100, I’ll certainly do it.

So as long as my mechanic is charging me less than $50 to change my oil, I won’t try to do it by my own.

It’s the same thing with selling a house. When the commission was 5% and houses were selling $75K, it wasn’t that bad to pay $3,750 to sell your house. Now the same house worth over 300K and you will have to pay over $15,000 in commission for the exact same job. This is when it becomes ridiculous.

@T Amazed,
Just thought of this; if your amazing websites gets over 1,000 visits per day per house, how come you are not able to sell them faster??? I mean, your conversion rate is just pathetic if the house takes 60 days to sell. This equals to 60,000 visits for 1 conversion! I was able to get the same sale with less than 1,000 visitors. If you would get to my rate of conversion, you would sell 365 houses a day per agents… lol! you are far away from that. So is your 1,000 visitors worth something?

The Truth!

I can understand the analysis in this article BUT the truth is different, this is my assessment:

- Buyers are rarely buying directly from Owners, when was the last time you bought a piece of jewelry from someone or through ebay. I can tell you never because you need to be sure that what you are buying is free of problem. No one pay 300K$ without secure his transaction.

- Selling a house at maximum value required a special marketing and tools that owners don’t have access.

- What public sites offer you is to list your house on limited traffic websites. This is easy, you pay between 1000$ and 1200$ and they give you access to post your photos.

- Selling your house is the biggest challenge, finding a buyer is you biggest challenge. Brokers have potential buyers and they direct them to houses that lead to profit to them.

- When the market is good, anyone can sell everything but when the market is tough as it is right now, you need enormous efforts to lock a buyer and get your house sold.

- Most of homes are sold through a broker that means you still need to pay 2.5% for the buyer’s broker, that leaves you with 2.5%.

- When selling by yourself, you published that the sale is without commission and buyers are expecting to buy at 5% less than the prices of houses around you. To say that you are saving the 5% is not true. The buyer is the one that is saving the 5% because this is what you are offering to them.

-By the time you sell your house, you will be paying 1000$ + 2.5% + 5% less than market value. Make your calculation and you will see that you are losing money.

- Broker provides you with a safe transaction. Selling your house is one thing but protecting your transaction from future legal pursuit is another things. Having a broker with special insurance will cover you from future surprises.

-Believe me I was a FSBO and found out that on the long term it is worth it.

Enjoy it.

by: The Financial Blogger | November 5th, 2012 (6:09 pm)

Hey Marwan,

I have a few observations upon what you just wrote:

#1 do Real Estate agents takes any sort of legal responsibility in case there is a problem with the transaction? nope, you can’t sue your Real Estate agent if you have problem with your house.

#2 which kind of super powered marketing tool a guy that took a 6 month course to become a Realtor has and I don’t?

#3 limited traffic website? do you have an idea of how many visitors bytheowner.ca gets per month? their traffic is astounding|

#4 honestly, how many “potential buyers” do a Realtor has that can possibly buy your house? it’s not like they have a bank of 100 people looking for your type of house in your budget range all the time.

#5 What the Realtor does when the market is rough that he doesn’t do when the market is easy?

#6 That’s not true, I’ve sold 2 of my properties without paying any commissions.

#7 That’s not true either. A buyer had used this argument once and I just told him that I was sticking to my price since I was doing the Realtor’s job and I’m the one who’s putting the 5% in my pocket. He ended-up buying my house at my price!

#8 Where are you getting your 5% less than market value? Do you think I’m too dumb to look at how much similar houses to mine are selling for?

#9 Safe transaction? Honestly, I’ve dealt with brokers before and when I ran into troubles, I had to handle them myself as he claimed he wasn’t responsible. Btw, most sites where you can sell your site on your own offer legal protections now so this is not a valid point anymore. And if you are not dumb, you will just hire a quality inspector to go around your house.

If you like paying 5% commission, good for you but that’s not worth it if you are willing to put a few hours of work to market your property.

by: Finance Doc | November 5th, 2012 (11:25 pm)

Marwin, I’m sorry but you sound ridculous. Have you read anything on this blog? I can’t understand where you get your facts from. They are just not adding up to someone who has done their research. Point blank, if you want to blow your money on something that is not worth it, go ahead.

After I read comments from agent in this blog, I feel that these are why I don’t trust realtor agent.

See Marwan’s comment: “-By the time you sell your house, you will be paying 1000$ + 2.5% + 5% less than market value. Make your calculation and you will see that you are losing money.” If you are a buyer, would you want to hire an agent when you can buy a house 2.5%+5% = 7.5% less than market value from private sell?

See Charles’s comment: “2) The best realtors achieve a 16% higher price for you than you alone.” If you are a buyer, would you want to hire an agent when you have to pay 16% more than to buy from private owner.

The answer is very obvious. The agents actually point out that to buy property through agent is a BIG loss to buyers if the above agent’s comments are true.

According to agent, if the sale goes with realtor agent, the seller is winner, the buyer is winner, the agent is winner. There is no loser. In other words, buyers don’t need to pay commission, sellers save commission(compare to 16% higher than sell by owner). I’m just wondering where does the commission come from?

Buyers, do you still believe Buyer doesn’t “PAY” commission? That’s a trap. It’s like someone said this is a well designed corrupt system.

by: Sebastien Cloutier | March 5th, 2013 (10:55 pm)

I am starting in the Real Estate business and I actually loved this article! It helps me see why some people would not want to sell with a RE agent.

However, one thing in your article that seems contradictory, is that you said that when you are looking to buy a property, you go to 2 websites and one of them is mls.ca. This is the website of properties sold by an agent. So you kind of have to admit that having an agent can be useful! Right?

Also, not everyone is comfortable with negotiating. We can help with that.

Finally, I do have to admit that many RE agents are morons and worthless. But this is the case in all professions (lawyers, cops, salesmen, teachers, dentists…and so on). There are crooks and unqualified people everywhere. Unfortunately, many times it will make the better ones look bad.

Cheers!

I use one gauge to separate all realtors. If they have a BAD domain name or use their name.com. It tells me. They have invested nothing in their business and chances are their services are going to be a reflection of that.

I am in Quebec, I want to sell my my house my self, what is best duproprio.com $800. But they do not list on the mls but do have some traffic on there web site or list in Ontario with Isellmyhome.com they will list on mls. $300 (I find them very cheesy and cheap looking). I plan to use only my mktg tools ie web site, photos, video, sell sheet etc. I have the time, I am in sales and mktg so that part should not be hard for me.
By the way I fully agree with Jim about DNS ( domaine name) I gauge lots of companies that way.

@Sebastian

MLS also lists FSBO houses that have paid to list.

Thanks Nick!

I didn’t know that.

Cheers!

Having been in the building and design business for 40 years, I am quite familiar with the labor that goes into building a house. Think about the mason that works many hours out in the heat and cold and maybe makes $15K as his contribution to a $300k home. Along comes the realtor and charges the seller $18k for a minimal contribution. What a joke!

The biggest problem with not using a realtor is you may have to wait to find a buyer who wants to “save” you money by overpaying, and risk their own financial well being by not using a realtor. Owners frequently try to sell homes for “what I have in it” and as a buyer, I don’t give a hoot. If comparable houses sell for a certain amount and you want $15000 more, I hope you wait a long, long time. I tried to buy a for sale by owner and if my friends had not insisted I get a realtor, I would have been totally ripped off. First it was overpriced, second the seller said it was “fine” and didn’t need inspecting (which turned out to be a lie–it wasn’t) and I’d have been stuck if I had not used a realtor. The house appraised for $50,000 less than the asking price. I applaud your desire to sell on your own, have at it! But I will never, ever, try buy directly from an owner again.

I had a great experience with my agent Tania Menicucci. She acted very professional, diligent, and was very knowledgeable. She did refer her inspector as well as a couple others which I did call but did decide to go with hers. I did not have any problems. She was actually very patient and did not make us feel rushed as I know other friends have complained of things like this with their agents. We also got a very good deal on our home and this was our second purchase with her. I was surprised to read your bad experience Mary.

by: ClosingInDays | January 5th, 2014 (8:37 am)

I’m days away on closing on a house…
I didn’t have an agent and the seller didn’t have an agent.

- I was told upfront by the seller they could go at least $10k lower with me without an agent
- in today’s internet world, finding the house was EASY
- having a real estate lawyer look at contract was easy
- finding and talking to an inspector was easy
- working with bank and title company has been easy
- researching and understanding the for sale by owner approach was easy
- getting opinions from various people on a variety of subjects was easy
- I’ve absolutely loved talking with the seller and they’ve even given me things I didn’t ask for because they are nice people
- negotiation was easy; I researched what the house was worth, aimed low, and won the house for less than expected; people can’t believe the deal I got

- agents aren’t appraisers or lawyers or online marketing sites. They are just middle men that offered negative value to me. I think they are a pre internet need.
- agents always use the free for buyers bullshit. No it’s not free, it’s an indirect cost

I had a realtor last year, didn’t sign a contract, and all I was signed up on an automated email list, called a few times, and shown a few houses. Agent was looking for any sale and not trying to get me into the best house for me. Didn’t understand me at all. Even if he/she did they offered me nothing I couldn’t easily do on my own.

I highly recommend not using middlemen!

By the way I worked buyers down 35k and 150k down from the price if house 4 months ago. It’s big and relatively new in a great area.

I totally agree with you.
I have sold 2 of my houses and bought 2 all by myself.
As soon as I put up a house for sale, the agents swarm in like vultures.
You are the seller and you make the rules – hey, after all, it’s your property!
So I just tell them very clearly up front: I don;t care how much commision you want ot make – you can evan make $80000 if you are good. The bottom line is, that in the end, I NEED to end up with $325,000 in my pocket (that was the price I was asking for). If you as the agent can sell it for more – all the power to you – YOU will have the “extra”. And remmember – if they post the house for $350,000 and then they try to get the seller to drop the price – stand firm – tell them that the drop in price goes directly from their commision first.

On another note, think of if this way….if you have to pay your agent $20,000 in commision – sell it yourself, drop the price by $10,000 – you will sell easy as pie – and still be in a better profit then with the agent.
Cheers,
-jinn

by: Finance doc | January 12th, 2014 (12:13 pm)

@ any real estate salesperson

Any real estate salesperson that would have any moral values should look in the mirror and ask themselves, when it comes to my work and effort, does it truly justify my commission and the commissions my brokerage takes from the hard working people who buy and sell?

……….then again, if you are doing this for a living and not trying to change the industry and the structure of the fees, then you do not have any moral values.

Also, any real estate salesperson defending their commissions are probably just scrapping by and should really think about changing careers. Maybe a FSBO advisor would make a great and rewarding career, because you would know all the crooked and illegal tricks a real estate salesperson would know.

See an agent’s comment – Mara July 8th, 2013. You will find that some agent always lie. He said “First it was overpriced, second the seller said it was “fine” and didn’t need inspecting “. Actually seller never say “my house doesn’t need inspecting”. I sold my house privately last year and I encouraged the buyer to do the inspection. I sold my property at a market value – 2.5% which benefits both sides. Sell by owner is the same process(like ask for inspection, find a lawyer to issue a contract and mortgage broker etc.). The only thing different is that both buyer and seller saving money.

I just wanted to say that there are many dedicated, hard working, ethical realtors out there making a living – not a windfall, but a living. If I make $100,000 in commissions in a year that’s before taxes which is 48% (33% fed, 7% state, 8% social security). Now I’m down to $52k. But wait, I haven’t paid any of my overhead – advertising, licensing fees, dues to MLS, state assoc and NAR, required education classes, MEDICAL INSURANCE, office rental, E&O insurance, gas for my car. (Only some of these fees are tax deductible and not at 100%) So my bottom line is about $40k a year. And I work 24/7. I am available evenings, weekends and holidays to show property and present offers. For just as many “easy” transactions where I sell a home in a day and only put 20 hours in total and make $10k (before taxes and expenses), there’s at least 9 more where I will spend over 100 hrs and received no payment whatsoever.
I went to college and to grad school and I have an MBA. I chose real estate because I love helping people find the home of their dreams. There are so many times I have walked into a home and knew it was right for my client. It’s a great feeling to know they will raise their family in a home I found for them.
Yes, there are many people very able to sell their home by themselves. But there are many that are not comfortable with a 17 page legal contract, plus 4 legal disclosures plus all the showings and negotiations and planning and paperwork. I may not be an attorney but I can tell you I am legally responsible. If my client gets sued, I get sued. And my client can sue me if I didn’t fulfill my contractual obligations to them.
Sell your home by yourself if you want, but don’t degrade my profession. Yes, there are some bad real estate agents out there just like any profession. I love what I do – and not because of money. I get to meet new people, many becoming lifelong friends, and I get to help them find the home of their dreams. Could they have found it themselves? Again, yes. But many people have a 40 hr a week job and really don’t want to spend the rest of their time showing, negotiating, writing contracts, etc. That’s why they hire me.

As a Tough-Love proponent (who happens to be a “rebel-agent”), I could not stop reading until I finished every post. Very useful exchange.

Finance Doc, that was a wise idea about agents providing a sort of coaching function to include revelation of all the tricks of the trade and the counter to them.

I call my service Principal to Principal Direct sub titled “Use A Broker To Choose, A Broker”. Thanks for the hint that such a service will fill a needed gap.

My two cents worth on this thread is as follows: anyone can sell anything for any price but not anytime. My Guru, Tom Hopkins,(a Real Estate Champion) emphasizes the difference between perception of value and price.

If a FSBO has a bargain(or perceived bargain), he certainly needs no outside help to sell it, all he would need to do is whisper the bargain-price to his neighbor, and it would be gone in one day.

There are two reasons for this hypothetical quick sale. One reason is the perception of value because of the aggregation effect. The second reason is that a neighbor knows, the value of his own property, so he has no fear that he is overpaying.

Remember, it not price as much as it is perception of value. To demonstrate this fact, I usually bet a seller that if we were to walk to the corner of a street and tried to give away $10 bills, we would not succeed in getting the first person to take one. until perception of value is ascertained. i.e., until the takers perceive that the bills are not worthless play money, or the giver is not baiting them into some kind of scam. Now tell me if you could top that bargain.

Just to rivet this concept into your mind, try this site http://www.markDice.com/gold coin, here is a guy trying to sell an $1100.00 gold coin for just a fraction of its true value, but because of perceived value, he gets no takers.

As a “Real Estate Rebel”(I am borrowing this label), I do understand and acknowledge many of the flaws, follies and falsehoods of my fellow agents, but in this stanza I am exploring with you some of the benefits that a conscientious agent might be able to bring to the table.

If you have already viewed the Mark dice video demonstration, then you will be ready to join me in gleaning a more useful conclusion Mark Dice. Mark’s take on the demonstration is that people are so unsophisticated that they can’t tell a bargain hen they encounter one.

My take is as follows: one, had Mark been among a crowd of close friends, he would have sold that gold in two minutes. Hence, it’s not that the strangers are unschooled, instead they were schooled that “if a thing seems too good to be true it is”. Hence there are three lessons here: a bargain has to be perceived as such or ascertained as such or the exposure sample must be enough to attract the eyeballs of demographics that has their guards down or don’t know that(if it’s too good, it’s no good)rule.

Here is where a even a no good agent can’t help but benefiting the seller(unless the agent induce you into that ungodly OFFICE EXCLUSIVE”), if an MLS has say 200 brokerages and each has 10 agents, and intern each agent has 10 customers then that is 20,000 eyeballs without including Realtor.com. and the rest of the internet.

Another way Mark Dice would have gotten someone to take his claimed bargain, was if he had stayed long enough to stumble upon one of the folk who don’t know that famous saying.

To drive home the point, even if you were offering a bargain like Mark you would not achieve lift-off until enough eyeballs see it to sift out the one that does not know the rule.

However since you are not selling your home at a bargain, we may move on to the more relevant discussion. The reason I spent so much time explaining why it may require as many eyeballs to “give your property away as it would to get above market, is to introduce you to Tom Hopkins(my guru)next admonishment.

Many supposedly smart agents have induced sellers and buyers into believing that a price-reduction is a good sign. My Guru thinks not, for the following reasons: buyers don’t think that you are doing any favors by reducing your price, instead they know that you had an over-priced turkey and you are just coming to your senses, they smell blood in the water and come in for the kill. The buyers still expect to start haggling down from (the reduced price). I acknowledge this is one of the “tricks” that some agents employ to win the right to list the property. I also note that many sellers seduce this action by gravitating to the broker who agrees with their price wish.

Another Real Estate Guru of mine, Barbara Corcoran, recommends listing lower than market, then stand back and watch offers go up rather than listing high and watch the haggling go down. Human nature is not to buy on the way down because they think they can time the bottom, while they don’t mind if the prices increase while they are still in contract.

Guru, Tom Hopkins says: if you choose the path of listing too high, instead of reducing your price, you ought to increase the value instead(remember it isn’t price as much as perception of value), instead of reducing by 10K, offer to pick up the closing cost or throw in a smart car, or pay the pay the first year of mortgage payments, just don’t spill blood in the water by reducing your price… TO BE CONTINUED…

by: Unikanic | June 1st, 2014 (2:19 am)

I think the realestate model is flawed, you want to buy a house then you pay an agent to find a house for you. (Very useful if you are moving to a new town) This way the commission would not be so high when you list a house, At least half of commission .
If you know what you want With MLS really you can find a house on your own.

You want to sell your house, then you pay flat fee for expenses upfront it show your commitment, and the agent is more likely to do some MKTG, commission after.
It’s just flawed how that works no fair for them.
There is Lots of part time realestate agents out there, the market is saturate, so agents do what ever to get the listing or sell you a house. By the way NEVER take the house inspector offered by the agent, I learned it the hard way with my first house.

That said, I sold my house my self without MLS I would have liked MLS but it is forbidden in Quebec. Oh it’s not rocket science, the actual “real estate” work was 30hr. It’s not for everyone for sure,there still a need for agents (elderly, person with no social skills, traveling people etc.) but it defenetly worked for me and it was a very rewarding experience.

by: ughh realtors | June 1st, 2014 (3:02 pm)

the first time I sold my home was with a realtor….never, ever, ever again. what. a . rip off. This was about 8 years ago and I am still mad about how much this asshole ripped me off.

The second home I sold I listed and showed the home myself. The buyers had an agent and it was hilarious to hear the agent lie about my house to the buyers. The agent was totally clues about the water issues the house had and other aspects that needed repair. It was totally obvious to me the sellers agent wanted to make a quick buck. Not only did the sellers agent fail to negotiate a better price, I refused to budge on my price since they had an agent, and the people still bought it.

by: Finance doc | June 1st, 2014 (4:38 pm)

@ Donna

Read my Jan 12th post. When you are done, read it again. By the way, you should really think about moving to Canada, it is even more corrupt up here.