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MY WIFE AND I DECIDED at the end of 2016 to sell our house. Selling a home is the biggest transaction most of us will ever make, and yet—in my experience—almost all home sellers spend too little time trying to find the right real estate agent.
Folks might interview two agents at most and many interview none at all, instead hiring based on a friend’s recommendation. I realized there must be a better way. Now, I didn’t know what that was, but I was determined to take a more rigorous approach. I had four options:
1. Full-service agent (a.k.a. “the 6% solution”)
We had used a full-service agent to buy our house. He hadn’t done a good job, so we interviewed three other full-service agents. All used what I came to realize is the classic (and only) real estate agent sales technique, which is to tour your house issuing generic compliments (“I love the natural light,” “beautiful floors” and so on) and then handing you “The Binder” which contains:
None of the three agents made any effort to personalize his or her pitch. The phone call setting up the appointment, the compliments and The Binder were all identical. I kept waiting for something specific to our situation, but it never came.
One tip: Try to negotiate a 4.5% or 5% commission. While agents will obviously resist, some may agree, especially if it’s a higher-priced home.
2. Discount brokerage
There are some full-service brokerages that don’t charge a 6% commission. One of them is Redfin, which only charges a 1.5% selling commission. That means you still need to pay the 3% to the buyer’s agent. I had noticed one of Redfin’s for-sale signs in front of a house a block away from our home and contacted the agent. She showed up at the appointed time and proceeded to use the classic (and only) real estate agent sales technique. See above.
At one point, though, she mentioned that she knew the builder’s rep who sold us our home two years prior. I became filled with hope that she would next say that she had called him in an effort to gain a better understanding of how best to sell our house. My hopes were quickly dashed. She mentioned how Redfin would market our house using the MLS, listing on Realtor.com, access to exclusive clientele, blah, blah, blah.
3. Flat-fee listing service
There are brokerage firms that will list your house on the MLS for a flat fee, thus sidestepping the 3% selling agent’s commission. Generally, you’ll still have to pay a 3% commission to the buyer’s agent.
4. For sale by owner
Otherwise known as FSBO, this means not listing through the MLS, thereby avoiding both the 3% commission to the buyer‘s agent and the 3% selling commission. This is a true DIY option, but to me it isn’t a realistic option. Without the MLS, I’m not sure how you could get the exposure you need.
And the winner was… discount full-service brokerage. Actually, Redfin wasn’t so much the winner, but the best of the worst. While we weren’t impressed with the agent, she was no worse than the others and we were saving 1.5%.
Well, we met with our agent and agreed on a price of $424,900. As Houston was a buyer’s market, we needed to price the house above our expected selling price to allow for negotiation.
As soon as I saw the first draft of the MLS description that our agent had written, I knew we were going to have to work for our 1.5% in commission savings. The description was atrocious, almost like she had never written one before. My wife completely reworked it, turning it into the superior marketing document it needed to be.
On April 20, 2017, the for-sale sign was installed and we waited for the offers to come pouring in. And in a way they did. We were excited when Beverly Mae called us with an offer only a few days later. Our excitement quickly ebbed when we realized it was for $390,000.
The low-ballers had appended to their offer a lengthy document used to profess their ardor for our house. To be honest, I’m not sure of the entire contents, because I stopped reading their love letter after they stated that $390,000 was the best they could offer. Despite their instructions, we countered at $420,000. We never heard from them again.
A week turned into a month, a month into two months. We started dropping the price, first to $417,000 and then to $410,000.
In our subdivision, there was a larger house that was for sale for $575,000. As both our for-sale sign and theirs were at the entrance to the subdivision, we realized that many buyers that visited this larger house may not have realized our house was also for sale. We expressed our concerns to Beverly Mae, who was not concerned. At our insistence, she provided us with a second for-sale sign, which we installed on our front porch, in direct sight of those visiting the larger house. I wasn’t sure it was going to help, but it made me feel better.
After 100 days on the multiple listing service, the missus informed me I could get out of the fetal position. We had just received not one offer, but two. Our agent said that she had gone back to both buyers for their best and final offer. Buyer No. 1 responded with an offer of $400,000 and buyer No. 2 with an offer of $397,500. Our agent said the next step was for her to get a signed contract from buyer No. 1.
“Whoa, hold on a minute,” I replied and asked her to go back to buyer No. 2 and “tell her the bad news.” Beverly Mae was reluctant. She didn’t think this was professional, but she would if we insisted. We did and were rewarded with an offer of $405,000 from buyer No. 2.
“Next step is for me to get a signed contract,” said Beverly Mae, to which I replied, “Not yet, please tell buyer No. 1 the bad news.”
“If you insist,” she reluctantly replied. We did and were rewarded with a $410,000 offer from buyer No. 1. Unfortunately, after buyer No. 2 heard the bad news (again), she didn’t make a counteroffer.
“Well, I guess the next step is to get a signed contract,” I said to Beverly Mae, and she did.
We subsequently invited buyer No. 1 to our home to say “hello.” After a congratulatory toast, we were satisfied to learn that they had only noticed our home was for sale when they looked at our front porch—and saw the extra for-sale sign.
Michael Flack blogs at AfterActionReport.info. He’s a former naval officer and 20-year veteran of the oil and gas industry. Now retired, Mike enjoys traveling, blogging and spreadsheets.
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So true. We recently moved to Raleigh NC which is in a county with just over one million. Our realtor told us that there are more than 20,000 licensed realtors in Wake County.
It all depends on the state of the housing market. In an extreme seller’s market (like now), it doesn’t take much more than a Craigslist ad and a $5 For Sale sign. In a strong buyer’s market you have to be very aggressive with the price and even more aggressive with the marketing. But you’re often better off just keeping the house and renting it out for a while.
I agree. I always wonder, how does a new agent get that first deal? Also, is > 50 deals too many? Will they have time to focus on you?
2 years ago we sold our deceased mother’s villa using a real estate attorney for $750…in a sellers market why pay for an agent ?
I agree. I you have the skills and some knowledge, then selling it yourself is the way to go.
You may call it good negotiation, but it doesn’t seem fair to buyer 2 as you did ask for best and final offer from both. Was the extra $5,000 that important?
It sounds like the realtor asked for best and final offer without first consulting with her client about this strategy.
An old saying in NYC is that all is fair in love, war and real estate, although we made a point of using an ethical agent. Her approach was to solicit initial offers and then ask those who weren’t the highest if they wanted to increase their offers without telling them what the best offer was. We ended up accepting the second highest offer because the buyer waived an inspection (we weren’t aware of any issues but one never knows what an inspector will find).
My son is a realtor so I have an idea how tough it is for them dealing with sellers and buyers. When we bought our condo two years ago the sellers realtor told us there were several other people interested to scare us into raising our offer. We really wanted the place so we took the bait. Turned out our purchase price was $30,000 less than when purchased new in 2011 and today same units sell easily for $50,000 more than we paid.
There is no legally binding contract until the buyer and seller both agree on all terms, including the price. Anything that happens before that point is fair game.
It was to me. You raise an interesting point though. many people will spend hours shopping for a new tv, trying to save $50, but when they sell a house for hundreds of thousands of dollars, they don’t seem to mind giving away $5,000. BTW: that $5,000 was tax free, which I would have to work a month to make. Never met someone who was willing to work a month for free.
Good advice.
When we had to do a fast sale in California in 2004 (if you have to do it fast, that was a pretty good time and place), I was still able to find a realtor happy to accept 5%.
We also got the low-ball offer to start, $40K less than asking, which we ignored… but in about ten days we had an offer $5K below, then a third offer at $10K over our asking price. The last offer was a mom trying to get her kids close to the local school. Done. Sold in two weeks… which was important because I had a new position 1100 miles away that started asap.
I’ve thought of picking up a license myself, just for the next time we sell a house… actually, as I write this, I realize I should look into this – I know I’m going to be selling at least two houses in the future in an executor role, and I really don’t feel like offering up the price of a new SUV to get it done.
You can list on Zillow without paying the MLS fee. Shoot your own photos and video tour, or pay someone to do it. Seems like a reasonable place to start as Zillow is so widely used and shows up first in many web searches.
Zillow could be an interesting option. Though without an MLS entry, I’m not sure if agents will show their customers your home.
I’m confused by the statement that you overpriced your home because it was a buyer’s market. It seems like the opposite should be true—you should list the house with an attractive price that will entice buyers who have plenty of other good choices. Your first impression on the market is usually the most important one.
In my limited experience, the theory is you underprice your home in a seller’s market to create a bidding war and overprice it in a buyer’s market to allow room for negotiation. Though it’s just a theory.
The realtor we used in 2004 was someone my wife had worked for part-time in another field. She did a good job. Then you see that this person you know is a realtor, and this person, and this person, and they’re sending you mail and posting pictures on social media. I have no way of knowing who’s better. Maybe they’re all pretty much the same. If we move again, I see no reason not to use our previous realtor. Why change something that worked? I wouldn’t have the guts not to use one because I feel like we wouldn’t price our home right. The last person got us a higher price and surely earned the 6%. Finally, it’s gotta be tough for a new realtor to get clients since there are so many realtors.
I’m not sure using the realtor you used to buy your home many years prior is the right person to use to sell it. This is the biggest financial decision of your life and you do yourself a disservice if you don’t at least interview at least one other realtor.