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Are Agents Showing Your FSBO?

FSBO

I was involved in an intereting thread over on Trulia Voices last week concerning FSBOs. I was the first to respond (at the bottom), but the discussion got very lively soon there after.

The basis of the thread turned out to be, "Do agents avoid showing their buyer clients FSBOs?"

Two very different opinions came out. One, from a colleague of mine Marla Mullen, co-founder of Territory Real Estate, an exclusive buyers agency offering rebates to their clients here in Boston. And the other from a couple of local agents who admitted they are less likely to show FSBOs offering a "low" commission.

My approach is show my buyers any home that matches the criteria they are looking for, regardless of the amount of money I will potentially make on the deal. Obviously, not everyone agrees with me on this one.

I also believe as technology pushes us forward. we'll see more home sellers trying to FSBO. It's not for everyone, but before I was in real estate sales (back when I was just an appraiser), my wife and I sold our West Roxbury home ourselves to a buyer with no agent. Couldn't have gone smoother and the $22,000 savings was HUGE to say the least.

This anti-FSBO sentiment that seems to run rampant through the RE industry is based purely on fear. As the industry becomes more transparent (with the help of companies like TerritoryRE) opportunities for web-savvy sellers up for the task to successfully FSBO will only increase.

So my approach has always been to be a resource for FSBOs rather than try and belittle, berate and scare them into listing with me.

Well, in this case it seems the scare tactics of a couple of commission-chasers did the trick. I was connecting with the sellers outside of Trulia and learned that they have decided to lower their price and list with a local agent next week. Keep in mind they had been getting lots of activity, just no offers.

In my opinion, based on looking at their listing on MLS and looking at the property with my appraiser hat on, the price reduction alone might have been enough to get the house sold. Going FSBO is definitely not for all home sellers. There is a lot of work involved. I know. I did it.

But I hate to think that based on some borderline unethical tactics and opinions of a couple greedy agents, that homeowners think that ALL agents avoid showing their clients FSBO properties.

I am most definitely in business to make money and take care of my family, but my first priority is to best serve my clients.

In this case we were talking about a difference in commission of about $1,800 (2.0% vs. 2.5%). Personally, I am not nearly willing to sacrifice my reputation and ethics over a couple thousand dollars.

So how about it fellow agents? Does a FSBO situation or a "slightly lower than typical" commission (in these parts a 2.5% co-broke is the norm) influence your decision on whether to show a buyer a property or not?

I'd love to know if I'm the "kooky" one, as one of the Trulia respondents on this thread so eloquently put it.

Comment balloon 12 commentsMike Lefebvre • July 27 2008 03:04PM

Comments

I would show A fsbo if that is the house the buyers wanted to look at. I don't go out of my way to show them, there are plenty of listed properties to show buyers. There is no advantage to listing your home if Realtors are going to show them any way.

Posted by Alan Brown, 26 Years of Real Estate Experience . (Coldwell Banker Montrose Colorado) almost 10 years ago

Thanks for the reply Alan. I can tell you have your buyers' best interest at heart. Up here in my neck of the words there are several companies that can post "entry only" listings right on the MLS side by side with standard broker-listed listings. So if a home seller believes that all their agent is providing is a yard sign and an MLS listing, for a few hundred bucks, a seller can get both.

It's our job as Realtors to demonstrate that listing with us is much more valuable than going it on their own and WELL WORTH the additional cost. But like I said, for the right person, willing to put in all the effort required, going FSBO is a good option.

Posted by Mike Lefebvre (Hallmark Sotheby's International Realty) almost 10 years ago

Well... maybe I am going to look like the bad guy here.  I negotiate my commission with my clients - I don't just take whatever is offered.  I have a minimum.  My clients understand that, and we have discussions on how to handle any listing (FSBO or not) that offers less than my commission.  Then, we proceed as agreed - the answer is different for every situation. It's based on the balance of helping my clients and the fact that I am in business.

In some cases, my clients do not want to be shown FSBOs, unless there is an agreement for the proper commission to be paid by the seller.  In other cases, they are fine if they pay 100% of the commission so long as they find the right property for the right price. It depends on their financing arrangements more than anything.

My mom is trying to sell FSBO (in another area) right now... she's done it before.  I am an agent and will probably have someone else handle my sale when I sell, because I understand that owners - myself included - need someone to help them analyze the situation without emotion. 

I have said it, too... the thing where you say "but my house is more because..." and what follows has some merit, but probably not as many bucks tied to it as we think.  In my case, I am in a subdivision, but you can't see another house from my back yard, and we are adjacent to a (newly designated) historical farm.  Of course, someone would pay more for this house!  But, how much more?

As for FSBOs, my mom just turned down an offer that would have, after all costs to sell, gotten her to a break even point - she bought the house in 2006.  WHAT AN IDIOT.  She didn't think that was good enough.  Meanwhile, everyone else in the country is loosing their backsides selling properties they bought in 06.  Too bad she didn't have an agent to guide her through the process.  That probably cost her $25K, if she can sell the property at all now.  The commission would have been abotu $6K.  By the time she got around to telling me about her hard hitting negotiation skills, the buyer was gone.  I tried to get them back for her. 

Last time she sold FSBO it was to an agent who bought her house and flipped it for a profit. 

So, I guess some people can do it... but some people do it and THINK they saved $$ when they really lost; and they're not even smart enough to know that. 

On the other hand, some people don't end up with good agents, and that can be worse than doing it alone. 

Enough about that... as to whether I will show it or if I have animosity about FSBOs, no.  I make my judgements about people based on my dealings with them and nothing more.  You can't blame them for trying, and sometimes it works out.  As you said, they'll earn their keep.  But, my dad is a builder, and he doesn't think that people who finish their own basements are evil, either.  Sometimes he shakes his head at what they end up doing... and then charges them to fix it.  But, he never thinks poorly of them for giving it a shot.

And... I saw the conversation you were referencing... it got ugly and I was embarrassed to be associated with some of those agents.  It is hard to present yourself as a professional when others around you use the same description and act like that!

 

Posted by Vicky Chrisner (Fieldstone Real Estate) almost 10 years ago

Mike I have no problem showing a FSBO no matter what the commission they agree to pay is.  I am focused on my clients happiness.  So if that is the home they want then I will get it for them at the best price possible.  I will say that I ask for more then typical % commission.  If I don't get it then fine but, I will approach it from the standpoint that they are wanting me to put my license on the line on this transaction so I need to watch both sides.

 

Posted by Larry Story, Total Care Realty, LLC, Greensboro, NC Real Estate (Total Care Realty) almost 10 years ago

Vicky: Thanks for your insight. Glad you saw the conversation on Trulia Voices. I honestly couldn't believe that some agents were flat out saying in a public forum, that they would not show a FSBO because they often stand to make less money on the deal, totally ignoring their clients' needs and desires! PS- I LOVE Leesburg, VA! Beautiful part of the country down there!

Larry: Glad to see someone else who has their clients' happiness as a priority! I've worked in a lot of different businesses, and I know that sometimes a deal comes along that blows this theory out of the water, but for the most part on a deal-by-deal basis I think we are paid pretty well. Like I said, we all have horror stories and deals that fall apart with no payday, but overall it's a pretty good living. My approach = take care of your clients and they will take care of you.

Posted by Mike Lefebvre (Hallmark Sotheby's International Realty) almost 10 years ago

Mike, This discussion has been going on for years. The correct answer is to discuss commission with your buyers upfront and let them know how you are paid and who pays you(seller, buyer or both). Then you need to let them know how much you charge and put it in writing by use of a Buyer broker agreement. Then it is their choice whether or not they want to look at a listing where they may have to "chip in" on your commission. It is neither unethical or illegal for me to refuse to work for less than I charge. BUT, it is imperative that I place my buyers best interest first (assuming I am working as an agent) by having this discussion PRIOR to them hiring me.

Posted by Bryant Tutas, Selling Florida one home at a time (Tutas Towne Realty, Inc and Garden Views Realty, LLC) almost 10 years ago

Broker Bryant: I get that. Makes perfect sense. Question: What do you personally do when you come across a buyer who is not interested in "chipping" in on your commission if the scenario arises? I'm relatively new in the sales side of the business, so it helps to hear from the veterans how to handle potential objections that may come up.

Posted by Mike Lefebvre (Hallmark Sotheby's International Realty) almost 10 years ago

If the buyer wants to buy it is up to the real estate agent to show them all available options, good post!

Thanks,
Tom Davis

World Class Delaware Realtor

Posted by Tom Davis, FREE Delaware Homes Search!, $$ Save $$ - Find Homes! Delaware Realtor (Harrington ERA,DE Homes For Sale, $$ Save $$ Buy Today !) almost 10 years ago

Mike, That's a good question. First I want to mention that I don't work with that many regular buyers. Most are investors or folks that have been referred to me. I have found though that most good qualified buyers have no issue with making sure you get paid. If I explained all of this to a buyer and they were adamant that they were not going to ensure my pay then I would have to decide whether or not I wanted to work with them anyway. I probably wouldn't.

Having this discussion with a buyer also requires good timing. There is absolutely nothing wrong with showing a buyer a few properties and using this opportunity to build trust. But after a couple of hours of this you should have a good feel for whether or not you want to work with these folks. And if you do...then it's time to sit down and go over what they can expect from you and what you expect from them. The BBA is the outline for the entire relationship.  

Now let's say we have agreed in the BBA that they will guarantee me a minimum of x% for working as their agent and the house they are interested in is only offering y%. First if y% is satisfactory to me then I certainly do not have to hold the buyer to the amount in the BBA. But let's say it's not satisfactory. I have three options.

The first one is I can contact the listing broker PRIOR to showing the property and negotiate the co-broke. Simply have him ask the seller if they are willing to pay you x% if your buyer decided to purchase the home. There's no reason why they should have a problem with this assuming your requested amount is not out of line. I mean why should they? If an offer is made they will just negotiated it accordingly. Remember it's only the NET that the seller is concerned about. Also, the listing broker needs to be reminded that he needs to run this request by the seller. It's the seller's decision not the brokers. You are not asking the broker to reduce his side you are asking the seller to increase your side. Don't let the broker blow you off. Be nice but make sure your request is presented. If the seller agrees put it in writing.

The second option is to let the buyer use the terms of the purchase offer to increase your commission. As a REALTOR(R) you can't use the purchase offer to negotiate your commission as you are not a party to the contract and it is against our CoE. BUT...the buyer can. It's real simple. All the buyer has to do is ask the seller for a closing contribution. Your additional compensation will show up on the buyer's side of the HUD as a closing costs for the buyer. The seller's contribution will offset this cost.

If none of that works them the buyer can just pay it at closing as part of his closing costs. It would be the same as the second option he just wouldn't be getting a seller contribution to off set it.

The advantage of working this way, for both you and the buyer, is that you are able to focus 100% on finding them the right property with out worrying in the least about the commission.

As much as we like to help folks find the right house and swear "commission never comes into play". The fact is that it does come into play. There are listings in the MLS right now offering a $1 co-broke.  Any agent that says that doesn't  matter is not being honest with themselves.

Our compensation is a HUGE part of the transaction and needs to be discussed with our potential buyers as soon as possible and certainly before we are hired. To not do this, in my opinion, is where the ethical concerns come in. 

Think of a BBA as freeing not confining. It's as much to the buyers advantage as it is yours. It does not replace building a relationship it strengthens it.

Does this help?

Posted by Bryant Tutas, Selling Florida one home at a time (Tutas Towne Realty, Inc and Garden Views Realty, LLC) almost 10 years ago

Thanks BB: $1 co-broke? Now you're messing with me. That is unreal. I was more talking about the guy complaining that he would only make $7,500 rather than $9,000 for the 10 hours of work he was going to put into pulling a deal together.

I promise I'm not getting into a conversation about "justifying commissions"....promise I'm not! : )

Mike

Posted by Mike Lefebvre (Hallmark Sotheby's International Realty) almost 10 years ago

Yep we have $1 co-brokes in my area. Justifying commissions? What you talkin' bout Willis? I guess the next time the Barries interview me we need to talk about something I do. Justifying my commission is not one of them:)

Posted by Bryant Tutas, Selling Florida one home at a time (Tutas Towne Realty, Inc and Garden Views Realty, LLC) almost 10 years ago

Shell:

That's a perfect example of how serving the best interest of your clients ALWAYS pays off in the end. Thanks for sharing the story!

Mike

Posted by Mike Lefebvre almost 10 years ago

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