Should I move from FSBO to a realtor?
First, here is some background on this deal. My wife and I are new investors located in Houston. This is the second home that we have rehabbed. I thought we made every mistake in the book on the first house, but after living through this second project, I now realize we hadn't even scratched the surface of stupid. I intend to write a detailed post mortem regarding this deal to help other newbies from making the same mistakes, but for the sake of brevity, here is the short list:
1) We bought a +$400K ARV house in a $275K neigborhood. This was an REO, and we paid $170K with a rehab budget of $82K and an initial ARV of $315K. Based on these numbers, we paid too much. However, after the lender's appraisal, it was discovered that the house was almost 1,000 sq ft larger than what was recorded, boosting the ARV to $415K. We were already under contract, so this may turn out to be our only saving grace.
2) Extensive work was needed, over $100K in rehab in all, much more than we should have taken on as inexperienced investors.
3) We took the wholesaler's recommendation on a general contractor. The pitch went something like this: "We have a long list of vetted, quality contractors that work exclusively for our investors. They know that if they don't perform, we will stop giving them work". As it turns out, the guy they recommended had never worked for them before, this was his first job for them. And we trusted him. After the dust settled, we were eight months into what was originally a two month project and were $40K over budget. We fired the contractor in month four and it took us another four months to complete the project and correct all the mistakes, shortcuts, and bad workmanship.
4) We over-improved for the area, believing that luxurious touches would hypnotize that perfect buyer with deep pockets who just couldn't live without this house. After all, who could walk away from a six-burner Italian gas range and an apron sink?
5) Oh, did I mention that we took out a hard money loan to buy and rehab the property? Nothing like writing a $3,000 check every month for almost a year.
Like I said, this is the short list. I want to make it clear that I don't blame the wholesaler, or even the contractor. We simply didn't do enough homework and due diligence, and that's our fault. We didn't seek enough advice from other investors, and we let our emotions overrule the numbers. The good news is that we learned some priceless lessons that we had to learn in order to succeed in this business, and we are very thankful for them.
So, we finally put this house on the market two months ago, opting for a FSBO approach that included an additional fee for listing on the MLS (HAR, Trulia, etc.) and also a contract negotion add-on from the broker who physically listed the property and manages the listing, e.g. price changes. All in we paid about $1,200 for the package. We offered a 3% commision to the buyers agent. We listed the price at around $480K, and had lots of showings the first month but no offers. At this point we have dropped the price by over $50K, and the showings have dried up. We went with FSBO to save on the commission because we don't think that a listing agent is going to be able to anything more to market this house than an MLS listing. At this high price point, I'm not sure how frutiful other marketing efforts would be, e.g. open houses, flyers, Craigslist etc. Not too many buyers want to pay this much for a house, plus this house is almost 5000 sq ft, further narrowing the field.
So my question (finally!) is, should we go with a listing agent to market and move this property? Will they do anything besides list it on the MLS, which we have already done? Or am I better off keeping the FSBO and continue to drop the price until it sells and just take our lumps?
I am looking forward to your thoughts. Thanks for taking the time to read through this!