Selling Multifamily - with or without realtors?

Question

Hi All,
  This is my first post, I appreciated any feedback and/or advice.  I am considering listing my 3 family investment for sale.  I have met with 3 realtors and their CMA's indicate a value of around 450K(Cap rate > 7%).  Due to the location of the property(beach), I believe that the property will sell rather quickly if priced right.  I would like to avoid using a listing agent to save on the commissions(they want 5%), as I could easily get a website up for advertisement and list the property on loopnet to see what happens.  The realtors who I have worked with all claim they have a buyer for the property at the price I want and are constantly calling me.  How do I navigate this situation?  Here are some of the scenarios I have come up with, please let me know your thoughts:

Scenario 1:
  Use a listing agent and pay the $22,500 commissions

Scenario 2:
  List the property on loopnet and various other free/minimal cost websites.  Create my own website and signage.  Attempt to sell completely on my own with no buyer or sellers agents.  I realize the buyer may want a small reduction due to the absence of realtors

Scenario 3:
  List the property on loopnet and various other free/minimal cost websites.  Create my own website and signage.  Offer a commission to buyers agents(2-2.5%)

How would I handle conversations with the realtors I have already met and claim to have a buyer?  Would I explain that I am listing the property myself but would offer them a 2% buyer’s agent fee?  Or could I ask them to act as a transaction facilitator and give them a fee for that?  I want to maximize profits and am looking for advice on what “Industry Accepted” strategy would best position me to sell this property in a way that preserves my reputation and compensates involved parties appropriately.

Any insight would be appreciated, thanks in advance for your replies.

-Dan

Wayne Brooks · Answer

You'll miss 90% of the potential buyers, not being on the MLS exposed to every agent out there.  Buyers will be working with agents, of which 99% don't use Loopnet. Most Loopnet viewers aren't looking for triplexes, but for commercial and larger multifamily properties.

Phil Z. · Answer

Maximize profits by not marketing the home properly?  "Tripping over dollars to save a penny"

You make it sound like the listing agent gets 5% .. but then your ok offering 2.5% to the buyers agent. So actually your only saving 2.5%.  Then your saying your willing to not advertise the property to the largest pool of buyers which can easily cost you another 5%.  You just lost money.

Maybe you should find an agent that actually knows how to sell real estate .. because it sounds like you think your agents only value is a picture on loop-net.

Thomas Quinn · Answer

Has any offered a variable rate so it would be say 5% if 2 separate agents and drop down to say 4% if one handles the whole transaction.

Dan Verteramo · Answer

Joel, you mentioned "You could have an OFF Market private showing agreement with the brokers/agents that say they have buyers in which you pay them the full commission etc. and that way you would not be stuck with them. "

This is of interest to me.  Is this an industry accepted practice?  Would most realtors understand and accept this type of arrangement and what do you think is a fair full commission for this type of arrangement, 3%, 4%?, 5%?

My feeling is that if the agent already has a buyer, and is not having to split the commission with another realtor, that they should be willing to accept a lower commission because they will "net" just as much commission(with no split) and have to spend less time marketing the property.  If their buyer is truly "ready to go" then their would essentially be no marketing costs, no pictures, etc...  I guess I am looking for a creative way to maximize my return when a potential listing agent claims to have a buyer lined up. I like Joan's comment of "show me the written offer", perhaps I'm being unreasonable, my skin is pretty thick so any candid responses are welcome.

JOAN DICKIE · Answer

I will take my clients to see FSBO with the understanding that if the seller doesn't pay a commission, they will have to pay my minimum commission.  The cynical part of me says to tell the realtors that if they are so sure, show me the written offers!  I agree with Wayne Brooks that you should be on the MLS to maximize exposure.

Joel Owens · Answer

Hi Dan,

It's probably area dependent but here most 2,3,4 units are under residential MLS. They have a commercial section but hardly anyone uses it.

I do larger commercial transactions and where it is marketed is completely different and a different network of buyers.

On LoopNet there is a few of the smaller buildings for sell. One of the things to realize is that unless you are a paying member on LoopNet only about 10% of the LoopNet members see the property. This is by design so LoopNet sells memberships.

Most agents avoid the "agent protected" sellers that are going FSBO (for sale by owners) and offering a commission to the buyers broker. The reason is they still end up helping you get through the transaction for half the fee and also by helping you some can create unintended implied agency and liability the brokerage does not want.

If it is directly on the beach as you say then it might be a hot commodity. Buyers try all kinds of crazy things with sellers. Many flakes out there. For instance the value I bring when I list commercial property is my vast connections and resources to QUALIFIED buyers ready to buy property.

Having said that the buyers are not flakes overpromising and under delivering on giving the seller an inflated price. It's a 2 way street where the seller and buyer are sometimes out of touch in reality and both trying hair brained ideas to get above market expectations.

Some brokers/agents say they have buyers and they do not have anything and just want to put on the MLS. The value of a broker is not only having the buyers but qualifying them and also helping negotiate the contract and keeping the deal together during closing.

You could have an OFF Market private showing agreement with the brokers/agents that say they have buyers in which you pay them the full commission etc. and that way you would not be stuck with them. The really good brokers and agents are not going to get excited and throw their full energy into a seller saying " I want you to give me full representation but at a discount and if I find someone on my own you could possibly get nothing ". If the property there is really flying off the shelves then you could maybe just do it yourself and have an attorney for the real estate contract.

Every seller has a right to sell their property how they see fit as long as you are not violating any laws etc.

David Niles · Answer

You absolutely can, issues are involved though.

Do you completely understand the contracts/forms etc involved with the sale of a home?  It will be your job to represent yourself with all those matters. I know MANY agents who will not even bother with the discount/limited listings exactly for this reason, homeowner doesnt know any of this and expects them to "help" and "carry" them so basically doubling their work.

Buying agents need to make a living too and if your paying a discounted %, they can and will take their clients to the full commission homes first making you a last resort if at all.

Dan Verteramo · Answer

Thanks Wayne, Couldn't I use a "Limited Service" of "Flat fee Agent" to get exposure to MLS?  Wouldn't that would save me half of the commission and get the MLS exposure I need?

Selling Multifamily - with or without realtors?

Most Popular Reply