For sale by owner vs buyer with realtor.
Myrtle Beach, SC · Member since 2017 · 2 posts · 0 votes
I am selling my home by owner. My question: if a buyer has a contract with a realtor and we go to closing, am I, still responsible for the realtor fees? Even though I have no contract with a realtor?
With the internet and things available to buyers these days realtors don't find the houses to show, buyers find the houses they want to see and request showings. If your real estate agent says they don't want to show you a house you want to see because it is FSBO fire them immediately and get a new one.
The buyers realtor will typically discuss that with you before showing. The realtor is going to want to know how he/she is going to get paid before they bring the buyer to your house. They might even ask for you to a sign a one time showing agreement.
If a buyer has a Realtor and writes an offer a 3% succession fee would likely be written into the contract. Rarely do buyers pay the Realtor and its almost always the sellers. 9 out of 10 buyers have a Realtor so be prepared to pay the commission or lose out on 90% of the buying pool. Also, many Realtors won't want to show FSBO's because the amount of work to close is twice as much for the same pay.
You might save a few bucks by going FSBO but you also might be able to list the property for more with an agent. You never know unless you meet with a listing agent.
With the internet and things available to buyers these days realtors don't find the houses to show, buyers find the houses they want to see and request showings. If your real estate agent says they don't want to show you a house you want to see because it is FSBO fire them immediately and get a new one.
I am selling my home by owner. My question: if a buyer has a contract with a realtor and we go to closing, am I, still responsible for the realtor fees? Even though I have no contract with a realtor?
No you are not repsonsible The buyer can pay their agent
@Ralph R. closing a FSBO should be just as easy as doing one listed with another agent but experience says it's twice the work. FSBOs rarely know the protocols and processes. The agent in the middle has to hold the hands of both parties and make twice to three times as many phone calls to smooth feathers and keep everything moving. All that said, the buyer's side commission is adequate to cover the work IMO.
Also just as a point of clarity. In Colorado, the agent representing the seller collects all of the commission and shares it with the buyer's agent. This is spelled out in the MLS. In almost all cases, the buyer's agent's commission check comes from the seller. If the FSBO doesn't agree to pay the buyer's agent in writing, then the buyer's agent can end up not getting paid or if they have an agreement with the buyer, the buyer may have to pony up the funds.
Lots of times here, I see FSBOs saying, if you are an agent, add your commission to the purchase price. That levels the playing field and sometimes makes that less expensive FSBO not so much less expensive.
Bottom line is, if you want to sell the house figure out how to pay the people who contribute to that.
@Ralph R. because you will need to be the main point of contact between the seller that doesn't know the first thing about selling a house (usually) and your buyer. Most sellers don't know how to accept or counter a contract, they don't know what happens after it is accepted. They don't realize it needs to go to title, they don't know how to handle negotiating repairs from an inspection or appraisal. Basically I have to baby sit the seller and keep my buyer moving forward through the process. A good agent on both side makes the transaction much smoother and easier for all involved. I do believe there are sellers that know what to do but most have no idea.
I had a FSBO client that was telling me before I listed their house that they had an offer before they contacted me. Once they got the offer they had no idea what to do with it. Then they after about 2 weeks the other agent told the sellers they were backing out even though they were past the 10 day inspection period etc. They had no idea they were entitled to the Earnest money deposit. The other agent pulled a fast one on them and my clients lost 2 weeks on the market and $1,000 EMD.
Also, after they listed it with me I got them an over asking over in 3 days and paid for my entire commission with the offer I was able to get. People don't like using agents but the good ones are worth what they earn.
In my area, When I contact a FSBO that I think ay work for one of my buyers, during the initial call I will ask "Are you paying a buyers side commission?".
If a FSBO says, "Yes"
I say "great" and setup a time to show the house.
If the FSBO says, "No"
I say "OK, I will let my client know that there is a place I found that matches their criteria". "If they would like me to take them and they end up liking it they will have to cover the commissions, which will be up to them if they want to see it or not".
If a FSBO says, "What's a buyers agent commission"
I say "It's where you pay the buyers side of the commission, I charge 3% but you remain unrepresented and I represent the buyer".
Personally I have no problem being the buyers agent for a FSBO because I have a client to protect. Having to protect them from someone who doesn't understand the contracts is usually fairly easy. I am able to put outs all over the place. So you are not responsible for any contract that you don't sign, if they have a buyers agent agreement then that is on them, unless you agree to it in the terms. There is no automatic thing where you pay it.
Good Luck!
@Bill S.@Jake Thomas@Mike Cumbie I wasn't trying to rufflel feathers here. I was trying to point out to the OP that the commission was negotiable, and that she should not expect to recieve a service or the services of a realtor for nothing. I have as a buyer paid my realtors commission on a sale in Colorado. It was paid to her broker from me not paid at closing I employed her as a buyers agent and paid a% to her after the sale. I was not privey to what the seller may or may not have paid out of their proceeds. I specked the property price and desired rent. When she found it I submitted the offer through her. I had a buyers contract with her that came due upon closing. It was not on the MLS but an off market property she located. Not sure why MLS rules would have anything to do with a contract between me and my realtor. i do get your drift here though. you are saying if you work one side of the deal you split the commission with the guy who worked the other side but if you work with both sides as in the case of an Inexperianced seller, you can't do it for only 1/2 of the commission. That does make sense I stand corrected. I in no way was trying to undermine or downplay any realtor. I use you guys everyday and am not looking to start a war. RR
@Ralph R. no offence here. Lots of folks don't know who commissions work so I wanted to set the record straight. As for paying extra to handhold a FSBO, if I was a buyer's agent and I had a chance to do a deal, I would for the same fee if there was an agent on the other side. It might be more work but it would put food on my plate and get my buyers a deal vs submitting more offers and entering more bidding wars. The extra work of hand holding a FSBO through close would probably be less than submitting an offer on another one or two properties.
Bottom line is now realtors dont concentrate on sellers. The focus is now to round up the entire pool of buyers and get them contractually obligated and tell them they will be represented for free because the seller pays the commission
This is what I have been told. The seller pays the commission.
I have a lawyer who is doing all the paperwork for me, he charges fairly and I am willing to pay the buyers lawyer fee if they use the same one. But plan to negotiate the agents commission to 1.5% prior to signing a contract.
No feathers ruffled by any means. There are plenty of deals running around and I work for my principal. If it is the buyer or the seller, I do everything I can to protect their interests. I am required by law to do that. I do not mind doing it against a person who does not spend 8-16 hours a day valuing properties in this area and negotiating the same contracts we use.
I do worry when people that never buy and sell (or are working on their first few properties) are given advice to go it alone.... save a commission.... People who buy and sell a few a year sure, go for it. But recommending new people step up to the plate in a major league park with out so much as a warmup swing or practice round puts them at risk.
Getting my buyer the best terms, the best price, protecting their EMD are all required for me to do by law. It's not me being shady, it is a legal requirement.
@Account Closed
I've never used an exclusive buyers agreement, my clients are always free to leave and find an agent more in line with what they need. It's simple really, I know of no less than 15 houses right now that are not on the market (But the owner wants to sell). The owner does not want to list (Save the money, not really ready yet, only put a sign on a grocery store bulletin board). I just get them to agree that if I find a buyer they will cover my commission. Since I am not listing them all I have to do is find a buyer, we have no competition, we are the only offer in town. Who wins out?
Now you believe I should find these properties and just offer them up for free to anyone looking, maybe put an ad out there, out of the goodness of my heart. Help them sit down and fill out contracts together, explaining each step and how things work in this area. The differences of putting "No exceptions" and "None" in block 3. Explaining the appraisal process and saying which vendors have a commitment in a week and which take 60 days. I'm sorry I just don't have the money to spend all day keeping current and then giving my services away.
"This is what I have been told. The seller pays the commission."
You have been told incorrectly. The commissions are negotiable there is actually a huge issue with saying "Standard commissions are 3% or sellers pay them". Getting into that starts price fixing which is illegal (at least in my area and I would say most if not all).
You decide when an agent calls if you are paying a buyers side commission. They will call you before they bring anyone to your house. If they don't ask and just plan a visit without getting that piece covered then you are not on the hook. Now they could show up with an offer and before presenting it request you sign a commission agreement if you accept that offer, but the choice is still yours.
Jake Thomas You got me curious. Why/how is it twice as much work for the realtor to do a closing on a property listed by the owner? The realtor fills out the same offer and the tittle company, lenders do the actual closing don't they?? In my experience it's the buyers that complicate closings. Can't get a loan, waiting for appraisals, wanting concessions etc. how does being a FSBO complicate a closing? Just curious. RR
I'll tell you how. I had buyer clients who wanted to see a FSBO, and they eventually made an offer on it.
To set up the showing, I needed my commission agreement signed. So I had to call the owner, explain the process and the agreement, and then email it to him. He said he "needs his lawyer to read it before he would sign". This was a Friday, so now the showing gets delayed through the weekend until he could get a hold of his lawyer. He finally says "ok I signed it" so I show up with buyers, and first thing I do is ask if I can have the signed doc. It isn't signed, and when I request it be signed before we proceed, he mutters about "what's the big deal"? ...Oh nothing, this only the sole way I make a living that's all.-__-
So we stand there awkwardly for a couple minutes while he signs the thing. So the showing goes well. It took about 10 times more effort from me than a normal showing which is usually 3 clicks of a mouse. Feeww, glad that's over. Oh wait it's not, the buyers want to make an offer!
To make the offer I request a copy of the property disclosures. It takes him about 3 days to email them to me. When I get them they are not legible and are incomplete. It takes another few days to sort out. (These are the same property disclosures, by the way, that should be 3 mouse clicks away, pre-loaded on the MLS, in a "normal" transaction.) But no worries, I finally have the disclosures, so now with the RE contract we have a complete offer.
At this point I should be able to email the offer to a listing agent, and be done. But since this is FSBO, and since the guy has already displayed to us that he struggles with email, and reading things and signing things, I take it upon myself to present the offer in person. I must be a crap buyer's agent though, because his counter was "his asking price + my commission" hahaha FML.
My buyers made a FMV offer, but the guy just didn't want to budge. No worries, my buyers found something else, bought it with me, I listed their house, and they have referred people to me since then. So yeah, about 10 - 20 times more of a time commitment from me. If all showings took that much, buyer's agents would get paid 9%.
Obviously a licensed agent is the regular way to sell a home. Not quite sure what the protocol is in other states for a for sale by owner transaction, but in Southern California the escrow company organizes the closing. To get started we had the buyer submit the good faith deposit to the escrow company and we emailed the escrow officer a copy of the written Agreement spelling out the terms. They took it from there.
I used Lotus Escrow for a few of my sales; they walk you through the process and make the transaction as smooth as possible. Here’s their yelp:
https://www.yelp.com/biz/lotus-escrow-arcadia-2
But I assume any escrow company would be able to handle the transaction just as well.
There is so much info in how to sell a house, the few reasons why a FSBO isn't happening is because the seller it too stupid, lazy or unmotivated to bother educating themselves to actually sell. I dealt with multiple agents throughout my 23 years as ainvestment property owner. Some great some good some bad some atrocious. Let's face it. Most people want to have their hands held. That's why I made so much money on a small side business as a construction consultant.
While I could do a FSBO the prices here are so high that most go above asking anyway. I will negotiate from a 6% though as the market is so hot there isn't much waiting to get 10-15-20 offers. Way I sold before was I need to net x amount. Anything above that is gravy. I have no issues with someone making money on a sale.
I just hate hiring incompetent people and paying for it. What I have noticed is agents get complacent once the escrow opens. By the time you're past due diligence sime already moved to their next deal.
Most realtors like to get people to sign a buyers agency agreement which forces that buyer to use that real estate agent and is ultimately responsible to make sure that the agent gets paid.
You are not "responsible" to pay that agent but it has become over time assumed the seller will pay for the buyers' agent. That is incorrect. If your buyer does have an agent and you don't want to use that agent then ask your buyer to break that agreement with the agent. If the agent has not done any work on this particular deal they don't deserve to get paid. Most buyers these days are finding homes on their own on the internet anyway.
I've heard it argued that an agent has shown a lot of homes to a buyer and then the buyer found an FSBO but yet that agent feels somehow they should get paid. That should be the risk they take.
If you do want to use the buyers' agent to facilitate the deal for you then negotiate what you think is a fair price. They'll more than likely try and convince you to pay them an exorbitant price because they have to handle both sides of the deal. Personally I find it much easier to do a deal without another agent.
I've let many people out of an agency agreement so they could save money on a FSBO. I've done a lot of FSBO deals too, where the seller wanted me to do the paperwork for them. The time to ask a buyer to sign an agency agreement is when that buyer finds a home they want to buy. Not when you meet them, therefore, limiting the buyers' opportunities.