Specialist · Chicago, IL · Member since 2016 · 77 posts · 202 votes
It is my contention that in most circumstances you should not use a real estate agent to buy a single family home, and only in limited circumstances should you use one to sell.
This strategy saved me approximately $15,000 in the purchase of my most recent home and I think most real estate savvy people in places like the BP forums could likely do the same.
"Dear seller, your home is listed at $445,000. If I assume you'll pay a 5% commission to sell the home, the net price to you if you receive a full list offer is $422,750. However, half of the commission (2.5%) of the house, will go to the buyer's agent. In my case, I am not using an agent, so that portion of the commission can be eliminated. Therefore, I'd like to offer you $430,000, which, after the 2.5% commission to your agent, nets to $419,250. Therefore, your net price with my offer is very close to the list price. I look forward to hearing from you."
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
5y
100% of the time I receive offers from buyers that are not represented, they pay more for the house than if they had an agent. They always convince themselves how smart they are, and I feed that ego to make and make sure to give them a good pat on the back.
Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
5y
That does not work at all and leaves you with no representation at all. The seller is contractually obligated for the entire listing term, whether they try to break off or not, so they would have to wait for the listing to expire to agree to your "offer." This is like a strategy out of an old book, but not worthwhile now for listed properties because they are already tied up and the market is steaming hot so they are getting so much more than they expected they aren't going to complain about paying a commission they already agreed to.
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
5y
100% of the time I receive offers from buyers that are not represented, they pay more for the house than if they had an agent. They always convince themselves how smart they are, and I feed that ego to make and make sure to give them a good pat on the back.
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
5y
Originally posted by @Account Closed:
It is my contention that in most circumstances you should not use a real estate agent to buy a single family home, and only in limited circumstances should you use one to sell.
This strategy saved me approximately $15,000 in the purchase of my most recent home and I think most real estate savvy people in places like the BP forums could likely do the same.
"Dear seller, your home is listed at $445,000. If I assume you'll pay a 5% commission to sell the home, the net price to you if you receive a full list offer is $422,750. However, half of the commission (2.5%) of the house, will go to the buyer's agent. In my case, I am not using an agent, so that portion of the commission can be eliminated. Therefore, I'd like to offer you $430,000, which, after the 2.5% commission to your agent, nets to $419,250. Therefore, your net price with my offer is very close to the list price. I look forward to hearing from you."
Boom $15,000 in my pocket. Disagree?
I've been offering solo for 18 years, so for the most part I agree with you.
The problem you will have in balanced markets is over-paying. While it may be listed at $445k, without pulling comps and knowing your market well, whose to say it's worth that minus $15k?
What I do is offer what it's worth to me through the listing agent, reserving the right to obtain representation if my offer is countered. The seller and LA work out the net. I haven't offered on listed properties in a long time, but when I did I was rarely countered.
So yes, there can be some savings if you know what you're doing and know what homes are worth, just know you are a bigger risk and more work for the LA. An offer submitted thru a respected buyers agent is usually more attractive to the seller.
When I sell FSBO, it totally sucks when a buyer is solo. Try and get them to docusign/authentisign or notarize or produce a POF or know how to do an after inspection request (vs e-mailing the whole 52 pg report) or complete a disclosure or what have you is a pain. 99% of solo buyers on the street suck and your seller and LA will know that.
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
5y
For those of us with the knowledge and experience, transacting solo is a no-brainer.
I saved over $120k in one 5 transaction exchange last year alone. This year my savings are over $60k so far, including a listing with a full service brokerage.
$15k off each purchase adds up. Keep up the good work👍
@Phil McAlister if you list a house in MLS millions are looking at that and possibly is you will get multiple offers. I been doing real estate since 2006 I have had clients who want to make an offer on a house just by looking at that house online. People have given me check and said hay make an offer on such and such house. Life without realtor is limited - a nice house said that
Real Estate Broker · Jacksonville FL & Middletown CT · Member since 2008 · 1k+ posts · 632 votes
5y
@Account Closed You lost me at Redfin and Zillow lol. Those are not "resources" they are AVMs which are pretty bad on a regular basis and almost useless in a quickly changing market.
I am not going to explain the value of a realtor as it will surely fall on deaf ears...however I will second exactly what @Russell Brazil said.
Realtor · PInellas County Largo, FL · Member since 2016 · 902 posts · 810 votes
5y
You mean listing agent. The selling agent is the buyer's agent.
Otherwise, wew, what a clickbait post! Not you, Phil. . . the OP
There are some people that definitely don't need a Realtor, for sure. Before I had my license, I was fine with off-market transactions. I did the research and the work, though. I do find that the vast majority of unrepresented sellers and buyers just want to cheat and get the work done for free or at the expense of the party that is paying. Most people do not have any transaction management experience or tools and want to ride the coattails of the people paying thousands per year for the tools.
Investor · Marin County California · Member since 2018 · 1k+ posts · 2k+ votes
5y
@Account Closed Here in California we typically do not use lawyers in our closings and the paperwork/regulatory burden is substantial and always seems to be changing. You could easily have a deal unwind because some seller failed to provide 3 sets of lead paint disclosures or some buyer failed to initial each and every page of some 80 page county hazard report. I would never consider buying or selling without an agent out here. One blown deal is worth a lot of commissions.
Rental Property Investor · Manitowoc, WI · Member since 2016 · 178 posts · 186 votes
5y
Originally posted by @Account Closed:
@Minna Reid I would love it if you tried.
No reason to make things angry or personal. If the value is there, surely it is easy to explain in a clear and concise manner, no?
Can you get into more detail about what people might be missing if they're only using realtor.com or redfin? How late to the party are they? How many sales comps do they miss?
How much money do we stand to lose if we don't get it right? Are we likely to net a better price, especially on the buy side, even after paying the commission?
I'm trying to pull good, reasoned, logical answers out of people but all I sense is hostility.
I don't think she was hostile at all, she was just pointing out that based on your posts you seem to already have your mind made up regardless of feedback.
For the record, I agree with you in that I don't use a realtor and when selling I use a mls flat fee listing service. However, there are millions of people who have no clue how any part in the home buying/selling process works and those people desperately need a realtor. Is it worth 2.5% or 5%? In all of those cases I'd argue that it is. Less that half of the US are attorney states for real estate transactions, so those people would have absolutely no representation without a realtor.
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
5y
@Account Closed I read your "Dear Seller" offer several times and I still can't understand what benefit your offer gives to the seller. You told them a full price offer will net you $422,750 but my offer will net you $419,250. You claim to be saving the seller money and giving them close to full price offer, but you are doing neither. The buyers agent commission isn't saved, it is given to you as a discount.
The trouble for the listing agent is without a buyers agent, they are now stuck dealing with you to make sure you do everything on schedule to get to closing. In other words, they do twice the work for half the pay.
Most houses today are selling for over list price. Multiple offers are how they bid price up, so in that situation a seller wouldn't be smart to take your offer.
The challenge with FSBO in general is that everyone expects to gain financially. The seller wants to keep all the money that would be paid in commissions and they buyer expects a steep discount because there are no commissions. The less savvy party ends up losing. So I agree you can gain without a realtor, but there is equal opportunity to lose.
I am going through this right now. I found the property, contacted the seller representative, and made an offer. Why do I need a realtor?...In the scenario does the work performed warrant $15k?...or even $2500 for that matter. No. Paperwork is just that and as investors we should be up on all paperwork because that's what we do. If we have questions/concerns we can use an attorney.
Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
5y
I always use the listing agent. It seems to work. Not sure how they negotiate the commission behind the scenes, but my offer always seems to stand out and gets me the deal.
Real Estate Agent · Bowie, MD · Member since 2014 · 53 posts · 32 votes
5y
@Phil McAlister
In MD, whether buyer is represented or not, seller is obligated to the ENTIRE agreed upon percentage which goes to the listing broker. The listing broker then shares it with a cooperating broker who brings a buyer. If buyer has no broker/agent, seller still pays all (5% or 6%) to listing broker. He saves absolutely nothing so I don’t know where this strategy works.
Deland, FL · Member since 2017 · 2k+ posts · 1k+ votes
5y
Originally posted by @Account Closed:
It is my contention that in most circumstances you should not use a real estate agent to buy a single family home, and only in limited circumstances should you use one to sell.
This strategy saved me approximately $15,000 in the purchase of my most recent home and I think most real estate savvy people in places like the BP forums could likely do the same.
"Dear seller, your home is listed at $445,000. If I assume you'll pay a 5% commission to sell the home, the net price to you if you receive a full list offer is $422,750. However, half of the commission (2.5%) of the house, will go to the buyer's agent. In my case, I am not using an agent, so that portion of the commission can be eliminated. Therefore, I'd like to offer you $430,000, which, after the 2.5% commission to your agent, nets to $419,250. Therefore, your net price with my offer is very close to the list price. I look forward to hearing from you."
Boom $15,000 in my pocket. Disagree?
I would just call the listing agent and offer that same amount
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
5y
this is not a new concept I have been doing this as an agent and a retail buyer and seller for about 3 decades now.
Even now when I have a savvy buyer that wants to buy one of my new constructions I will discount a bit for a commission I am not paying there by giving them a better deal. And when I list my properties in other states I always have doubled ended commissions be lower than shared.. commissions are negotiable.
the issue is and as others will notate not every one is savvy enough to buy RE without some representation.. But bottom line nothing new here.. and I am glad you figured it out and use it.. nothing wrong with it
In MD, whether buyer is represented or not, seller is obligated to the ENTIRE agreed upon percentage which goes to the listing broker. The listing broker then shares it with a cooperating broker who brings a buyer. If buyer has no broker/agent, seller still pays all (5% or 6%) to listing broker. He saves absolutely nothing so I don’t know where this strategy works.
You guys are all missing the point some listing agents will have no problem just taking the listing side and telling their seller they will net the same as if they paid the entire 5% or 6% .. that is if the buyer truly does all the work and the listing agent does not have to hand hold the transaction.
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
5y
The numerous ways I take advantage of both unrepresented buyers/seller.....and in addition to people who just use bad agents, and lets be honest, 75% of the agents out there are just bad....and that has added up to millions of dollars of difference over the years. The thing is, the other side usually has no clue about the mistake......and usually feels good about the whole thing without ever realizing how much money they missed out on.
This is one recent example. I had a previous client that I helped by a 3 unit property a few years ago. When the time came to sell it, they decided to hire a bad agent instead of using me again to save a few bucks. This property in the tax records was listed as a 2 unit property. But there was a variance granted to it to make it a legal 3 unit, and that variance was recorded in the land records. The agent that listed it, in the description described it as a 2 unit property, and insinuated in the description the 3rd unit was not legal. They also listed it in the single family section of the MLS instead of the multifamily section of the MLS......so none of the numerous people who had autoemails set up for multifamilies received an email about this property. They listed it at an even $1,000,000. Another mistake as listing at $999k would have captured more searches, but less of an issue since it wasnt set up to be found in a multifamily search.
This property should have been listed for $999k, and should have been bid up and sold $1,100,000. Instead it languished on the market, and I ended up writing an offer and closing on it for $925k. $175k swing. But hey, they did save 1% on the listing fee, so they got that for them. At the soonest chance to refinance at the 6 month mark, the appraisal came in at $1,150,000.
Those sellers though never once had any idea the property was listed in the wrong MLS section. They had no idea that the description of the property indicating the 3rd unit was illegal was wrong. They did not know that listing at $999k vs $1m could make a difference. They never knew they left $175k or so on the table, and they walked away from the transaction feeling great about it, because the opposite side of the deal from me often feels great about the experience....thats how I get deals done.
Now, theres maybe 50 agents, maybe 100 in my metro area, out of 20-25,000 agents who would have listed this property properly. Multifamily is incredibly rare in my metro area, and theres only about a dozen of us agents who do all the multifamily deals. Most of the agents have zero clue about how to check the units legalities, variances, understand the multifamily MLS system, etc.
This is just one story out of hundreds I have. I buy properties in other states as well....and when I do, I hire local agents even though I am a top 1% agent nationally, because I know how many little quirks there are in things that can cost big dollars. I will say though, I have a much better gage to judge the quality of an agent when Im hiring one than a lay person does.
Rental Property Investor · Albany, NY · Member since 2018 · 55 posts · 65 votes
5y
I consider myself a savvy investor. I have completed many deals and own many investment properties. Some I self manage (for my enjoyment), others are through a PM (my time is very valuable).
My agent has provided way more value than they cost. Off market deals, contractor networking, feedback on when I’m pushing too hard, feedback on when I’m not asking for enough. Sure you can write it off as “you’re not as savvy as you think”. You’re right, I’m not. That’s why I pay a specialist who does this every single day to close deals.
Real Estate Agent · Winston Salem, NC · Member since 2014 · 486 posts · 303 votes
5y
@Phil McAlister working as an agent, there are so many unknowns I have ran across in deals, this can be risky advice to someone who is either pressed on time or someone who is just starting out. There’s just so many things you can overlook when doing a real estate deal and it can bite you later on.
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
5y
Like anything it sounds cool like you phrased it, but it's not always going to work out that way.
For example I wouldn't reduce my commission just because you didn't have an agent. You are also making the assumption that the commission split is always going to be 50/50 or in your case 2.5%. How do you know what the full commission amount even is? You don't. You're showing your lack of knowledge on how the business actually works so maybe you DO need an agent.
Although most agents don't know how the business actually works so maybe you Don't lol. Moral of the story, might come out ahead some of the time and behind other times.
Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
5y
Maybe in low class areas. But in the trendier areas where most BP members are willing to live using agents is the norm and you will get laughed away writing a letter like that most likely no response. It doesn't put good faith that you will stick to contracts without a professional representing you, gives off wholesaler vibes which most educated sellers know typically waste their time and don't actually close.
I don't know why people think they can save the 2.5%. In our markets 90% of properties are listed by the top 10% of agents myself included. We would never kick back 2.5% to an unrepresented buyer as it ends up being way more work for us. Maybe in low income neighborhoods where you have more desperate realtors this works differently.
Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes
5y
Isn't it simpler to get your own license and keep the 2.5% commission? Same math but much less complex to explain and then you are actually qualified to self represent.
