Flippers: Do you sell FSBO or use a seller's real estate agent?

Question

As a flipper, do you sell FSBO or use a seller's real estate agent? Does a good seller's agent raise the realistic selling price by the 3% it costs to hire them?

I'm assuming you expect to pay the buyer's agent's 3%, or is that not what you do?

Jay Hinrichs · Answer

that's one way FSBO works is selling under market .. however I am sure the OP thought was he was going to save the 3% list fee or 6% total fee and pocket it.. while this can happen its dog tough.. whats more likely is exactly what Steve talks about.. plus I don't think Steve is under as much pressure to get a property sold if it sells this month fine next month no problem.

Many flippers though are on serious interest carry and time is for sure money..  The key to this is having your own license if you want to save commish.. my wife lists all our properties so we only pay sell side.. but in other markets depending where I am at I will pay anywhere from 1 to 2% for the list agent side and then full on buyers side.. cant think of how we could sell those without representation.

Steve Vaughan · Answer

Nowhere else will you get such true and honest advice from a sales professional. Wow!

I don't flip, Greg, but do sell my long-term rentals after prettying them up. Vacant and sometimes staged.

Anyway, I sell FSBO now after a horrible experience with a full service brokerage.

But I don't recommend it.  Most don't know enough to stay out of legal hot water with disclosures. Not to mention exposure.  You will most likely net more with an agent.

I want to pass the commission savings on to my first time buyers.  I do not net more and don't try to. Helping others out that are just getting started makes me smile.  List it with a high octane agent and learn.

Russell Brazil · Answer

@Jay Hinrichs in the markets I operate in, FSBO is generally a non starter.  But I dont know every market, it might be feasible in others. Every market is so different, as I continually learn on these forums.  But I do think FSBOing is better than some of these bad agents, where I watch some of those inexperienced agents crash and burn and cost their clients tens of thousands of dollars.

I just closed this transaction...where the agent had the seller himself providing access to the property. So Im there with my client, the seller touring the property.....we leave, I tell my client, that the seller clearly indicated to me at least 3 times, how low we could get the property for.  You cant ever, ever let your client have face time with someone like me, because we are going to take advantage of that situation. That property also was listed in the single family section of the MLS and it was a multifamily, so the right eyes were never put on the property.  Then we are at the closing table (listing agent isnt there) and no one had explained to the seller how the commission structure worked.  He thought the entire commission was 1/4% being split between 2 agents. I think his agent charged 1/4% on their side, and I received a normal sized commission for the location.  I felt so bad for that guy, but what could I do, my job was to get my buyer the best deal I could. (BTW, Im likely selling that guys next 2 properties)

Jay Hinrichs · Answer

@Russell Brazil  I dont know about you Russell but FSBO in the markets I have worked in is a non starter.

can take forever and forever ruins returns..  when your FSBO buyers want to low ball you all the time and waste a ton of your time..  best to cut deals with agents..

What many people dont understand when they think they can go FSBO is savvy buyers will automatically deduct 6% of their offers.. you have to be in one heck of a white hot buyers market to have a FSBO out perform a top agent

Russell Brazil · Answer

Commissions on both sides vary more than you probably think.  My commissions Ive actually gotten have varied from as low as 1% to as high as 10%.  You will want to familiarize yourself what they specifically are generally in the location where the property is.

Standard operating procedure in my market is, if you purchased the property through an agent, then they de facto get the listing on the back end.  This is even true, if you yourself are an agent. You still hand that listing off to who brought you the deal.

The question though I think largely should not be between agent or FSBO. Because, not all agents are good at what they do.  the choice should be between FSBO and Good Agent.  Dont just hire some bad agent, because selling yourself is better than a bad agent.

Getting a higher price is obviously important function....but liability in your case being a flipper will be higher.  Id suggest working with an agent who is not only good, but also experienced with flipping, so they can help you navigate those specific pitfalls.  I also suggest bringing them in early on the process.  When Im working with a flipper...some of my expertise is used in helping them pick the specific finishes tailored to that property, in that neighborhood, that the likely buyers in that location and price range are looking for.  It might be cherry cabinets in one neighborhood, and white cabinets in another.  Those little nuances, and that knowledge, will have an effect on demand and price.

Steve Vaughan · Answer

Exactly, Jay.  I do not sell FSBO for speed or highest profit.  I like giving back a bit and meeting folks.  I could start a meet up with all the investors and investor agents I chopped it up with in my living room during the open houses.  One person gave me their resume to be a mentee or something.

Anyway, wanted to give Greg a FSBOs take.  I do it for the experience, not the fastest and highest dollar.

Russell Brazil · Answer

@Steve Vaughan I think one of the main things that distinguish really good agents from the bad ones....is how desperate the agent is for the money.  So you have tons of these agents that are just scraping by and they NEED that commission check....so they are going to do anything to make that sale go through, whether it is in the clients interest or not.  Me....I could care less. I could not sell a single house, and the only affect that has on me, is I cant go out and buy more houses for myself. I can sit back and rest comfortably on my rental income.  If any of my buyers dont buy a particular house....they are going to buy a different one instead a few weeks or months down the road. If I dont get a listing, who cares, Ill have another listing in a couple weeks instead.

Now that doesnt mean all agents that are successful are good....but the ones desperate for money, is not where you want to be drawing from as a pool of agents to start.

Rich Littlefield · Answer

As a general rule it is the opposite of what people assume. They assume that as buyer, you pay no commission, and the seller pays the commission. So they think that as a buyer, use an agent and as a seller do not use an agent.

Actually buyers who use an agent to buy fixer homes, do well using agents, otherwise they are likely to be paying full market price.  Sellers who do not use agents, do not expose the property to the full market and are likely to be leaving money on the table.

Buyers who don't use agents are usually much more savey negotiators then people selling by owner.  There are always exceptions, but that is what I see.

Therefore if I am a buyer I don't want an agent, in many cases, and if I am a seller I probably do want an agent.

Jay Hinrichs · Answer

@Russell Brazil  Yes like U say regional.. out our way you never ever let buyer and seller meet unless its rare or you cant help it.. of course agents going through a home may run into a seller.. but savvy agents tell their seller to leave the house its being shown.

also WE NEVER and I mean NEVER have a closing at a closing table.. NO way are all the parties at the same place at the same time.

Seller comes in or in my case my docs are e mailed and then they send a courier for them to retrieve them. and this is done 2 to 5 days before closing.. if they have to adjust a hud they just e mail one I sign and send it back via e mial.

Buyer comes in 2 or 3 days before the actual settlement or close date.. they sign all their docs etc.. and sometimes the agent is there with them sometimes not.. and this is at title and escrow companies with the senior escrow officer in charge of the file.

Then once they sign the bank docs those are sent back to the bank for approval. once approved then they are instructed to record.. once the title company can give recording numbers the bank wires their funds in..

the Buyer has already deposited their funds normally the day they sign but sometimes they will wire in same day as bank.

Then final huds are sent out and generally they have missed wire time.. and sellers proceeds are wired next day.

Commissions are auto deposited into the brokers accounts.. and there ya have it  a DRY closing ..

Flippers: Do you sell FSBO or use a seller's real estate agent?

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