I have always been a fan of the NAR. I've had a couple great agents in the past that really helped guide me and grow in my real estate venture. However, now that I have a pretty solid footing, I'm not sure that I need that person any more. However, with 6% off the top of any deal I'm trying to execute, is it worth it?
Alternatively, I have considered getting my real estate licence so that I can, at a minimum, capture 3% on my future dealings, and maybe even help other investors get their feet on solid ground.
What's your strategy? Is it Buy & Hold or Fix & Flip? And, how are you finding your properties?
I'm in DFW. Inventory is so low and the market so hot that the MLS is useless, unless you're doing buy & hold. You have to do off-market here to get deals for F&F or wholesale. Understanding that, if I'm doing F&F, I only have to worry about commissions on the exit. The market is currently hot enough, particularly in the neighborhoods I'm farming, that you barely have to put a sign out to sell a home, so I only have to worry about the end buyer's agent commission at 3%. That's the max I'm going to pay, and I'm going to build that into the bottom number I'm going to take for the property.
If you have to worry about marketing your property to sell in your market, I would ask myself what kind of marketer am I? How much longer will I have to hold a property if I sell it myself, instead of listing it with a realtor? Let's say it will take you 4 - 6 weeks longer to sell than a realtor. How do your holding costs & the cost of your time (showing, marketing, etc.) compare to the commission?
@Hattie Dizmond , I hadn't really thought about the exit side, that is a great point! I generally execute a buy and hold strategy. While I see the potential for F&F, my current job scenario doesn't allow enough free time to delve into such ventures.
What is the process of selling outside of using a realty? They seem to do some processes in the background, probably not significant, but I assume they are getting paid to do something other than open doors for me to look at a house.
Realtors are (or should be!!) market & marketing experts. Aside from relieving you of the hassle of showing the property, their primary job is to market the property. That is everything from ads, signs, MLS listing services, open houses & broker open houses, etc. They do a lot. Again, in my target areas, houses are flying off the market, so the marketing isn't that big of a deal.
I'm particularly sensitive to the double expenses of F&F strategies, because not considering those seems to be the issue with a lot of wholesalers in my market. I hear again and again from F&F investors...real, active investors...in this market that wholesalers keep bringing them deals that are too thin and that wholesalers "never take into account the fact we have to resell the property."
If you are buying & holding, you only have the front end of the transaction to worry about, and all the commissions come out of the seller's proceeds. Now, the sellers will often increase the price to account for the commissions, but it's not going to be a line item on the buyer's HUD, unless you're employing an agent to purchase off-market deals. If that's the case, then it's a personal choice on your part as to whether you feel you can find and negotiate the deals on your own.
Isn't it 7% off the top? 3% for the listing agency, 3% for the buyers agency and 1% to the MLS? I think if you have a nice house that's ready to sell in a desirable neighborhood you should be able to market it on FSBO websites with no problem. We posted our home on craigslist earlier this year and had a signed offer 2 weeks later. I think it's worth giving it a shot yourself first. We hired a RE lawyer for $500 to make sure we did the legal paperwork correctly. We did have to find our own comps on the assessor website but the FSBOs also offer that service.
@mike dricken it depends on the market. The big corporate brokerages typically have set minimum commissions. I work for a small company and have the ability to set my own commissions. In my market the average is between 5 and 6% with each side getting typically getting half. For a loyal repeat customer I usually go as low as 4.5%, remember in real estate everything is negotiable.
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