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Real Estate Hire a Realtor or Not?

Discussion in 'Real Estate Investing' started by Shawn, Dec 1, 2007.

  1. Shawn
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    Shawn PARKED

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    We are thinking of building a new home and selling our current one. The nice thing is our new home wouldn't be complete for about a year, so we'd have a year to sell our current one. Our neighborhood is a really prestigious new development area with homes ranging from 1M-4M and we have cars outside our house all the time looking at the home. So foot traffic in that sense is really high.

    We had our current one built about 2 years ago. It cost 1.5M to build. We were thinking of listing it at 1.7 and trying to get 1.6 after the negotiations.

    Our neighbor is a realtor and her husband is a mortgage guy (bad jobs to have in a bad economy!). Anyway, she wants us to list with her and she'll do it for 4%. At 1.6, that would be $64k, which seems like a lot. But then if we use her, we would have to get more like 1.65M to get our 1.6. So that would mean the selling price of the home would have to be more, which may mean that it would take longer to sell.

    On the other hand, we can make a website up ourselves, use an mls listing service for $400.00 and get it on the mls and then do it by owner. Maybe even offer buyers agents 2.5%? And if they don't have a realtor we save $64k. But then we gotta deal with the people who just want to see what a million dollar home is like.

    I dunno what to do, what do you suggest? Hire a realtor or do it ourselves, or..?

    Thanks,
    Shawn
     
  2. Bilgefisher
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    Bilgefisher Bronze Contributor Read Millionaire Fastlane

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    Newb questions; I thought the higher the cost of the property the % commission generally got smaller. Do they charge a larger percentage just because million dollar home is harder to sell? 4% seems high, but then again I have never sold a 1mil+ house.

    Perhaps another Realtor can give you a better deal and give the best of both worlds.
     
  3. yveskleinsky
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    yveskleinsky Bronze Contributor Speedway Pass

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    4% is about right on a higher end home.

    There are lots of different ways to look at this. If you do decide to list with someone, list with them because they know what they are doing and have a solid marketing plan for your property- not because they are your neighbor. If your marketing plan is the same as theirs (which it usually is) then don't use a Realtor. I would start off (since you are on the fence with hiring a Realtor) by meeting with at least 3 different ones and hearing their listing presentation. During the listing presentation you will want to find out a couple of things:
    1. Days on the Market. Find out what the days on the market are for a home like yours in your area. This way you can know what to expect. Most FSBO end up listing because they have no idea of how long their home may take to sell- and they think it should sell right away!
    2. Their list price to sales price as a percentage. A lot of Realtors "buy the listing" meaning, that they go in telling a seller they can get a lot more for the home than the seller was expecting, then they end up making price reductions. The problem with this, is that the first month your home is on the market is the most critical. After the newness wears off, your home becomes stale- and generally all you've done is wasted time and are setting yourself up for a low-ball offer.
    3. Marketing plan. What are they going to do to market your home? You'll want to see sample flyers. Can they spell? Will they at least use cardstock paper? ...Presentation is everything- especially on a highend home. If their presentation of your home is unpolished keep looking.

    If you do decide to FSBO, welcome looky loos- you'll get them, and who knows maybe they'll tell a friend. Realtors get looky loos too! The only way to really get around looky loos is to demand that they are prequalified before they come over- your call. Maybe consider buyer's incentives- you'll pay closing costs, etc. Like you said, you could always offer to work with buyer's agents for 2.5%. ...If you do this, I would create a stack of flyers and then find out when your real estate caravan is at your local dept. of RE and drop them off. ...Or have a Realtor's luncheon at your home, so they can preview.

    Depending on your state, you can use a basic real estate contract found at Staples or Office Max for a basic transaction. Most Title companies will help you if there are questions or issues along the way.
    Hope this helps- good luck to you!
     
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  4. Shawn
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    Very helpful yveskleinsky, thank you!
     
  5. MJ DeMarco
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    MJ DeMarco Raving Lunatic Staff Member Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    I've sold two houses not using Realtors and will NEVER use a Realtor to sell.

    I suggest paying a service to get it into the MLS and in the MLS specify that a 3% co-broke will be paid to the buyer agent.

    The nice thing about this is you save the amount above the 3% charged by realtors. On a $1.6m house, this is $16,000 plus! Go get a lockbox at Home Depot and put the house on lock box. Have buyers call you.

    The other benefit: There is a good chance you can sell the house without ANY realtor's involved since you get good drive by traffic. This savings could be close to $50K. If you list with an agent, and that drive-by traffic becomes a buyer, you are still on the hook for the commission. With the two houses I've sold, I had to pay 1 buyer agent and the other was a non-represented drive-by saving the commission. In both cases, I saved thousands and had boatloads of traffic looking at the homes.

    Caveat: You really want to be home when people view the house - the backup plan is the lockbox if you don't have anyone available. Make sure to get names and numbers of people viewing.

    Good luck!
     
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  6. Shawn
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    Great info MJ, thanks. We sold out last home by owner too and paid $300 for an mls listing service, but ended up selling to a buyer without a realtor. It took 6 months to sell, but we walked away with more than we planned to which wouldn't have happened with a realtor.

    And a little more info here, the house next door to us is a new construction spec house (same price, but ours is way better though) and our neighbor is also the realtor of that one, which my wife thinks is a conflict of interest and I see that way too or it could be good in that they could show that one and then say hey the house next door is mine too.

    On the other hand, if we didn't list with her and put a sign and flyers ourselves in our yard, every time someone looks at the home next door, they would see our sign which would bring more people interested in ours.
     
  7. MJ DeMarco
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    MJ DeMarco Raving Lunatic Staff Member Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    This is EVEN MORE a reason not to list with an agent. You can siphon traffic from already existing listed homes in the area. Just make sure you price your home correctly!! You don't want to under/over price. I saw pics of your home and would have thought that baby was worth $2m+++ ... very nice!
     
  8. andviv
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    andviv Gold Contributor Read Millionaire Fastlane FASTLANE INSIDER Speedway Pass Summit Attendee

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    You said you have time... list it yourself and try for 3 months, if it doesn't sale then hire a realtor. But please list it yourself only if you do know what to do... I've seen many nightmar-ish situations in FSBO cases where they screwed it up in something simple and got into a difficult legal situation.
    The agents' commissions are negotiable. Offer 10K to the buyer, 20K to the seller, instead of talking about percentages. Worst case scenario is they say no, but that is the worst could happen.
     
  9. Shawn
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    Thanks very much for all the help. There's great info here :)

    We are going to give it a shot by owner and the mls listing service for now and offer buyers agents a percentage.
     
  10. MJ DeMarco
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    BTW, you might want to start your time frame from Jan 1st. Not many people buy in late Dec due to the holidays so if you can't sell in the first 3 weeks, I wouldn't count that as a bad sign. Let us know how this all works out!
     
  11. traderjphx
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    traderjphx New Contributor

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    Have you thought about getting licensed yourself? When we were flipping, my wife got her license and worked for a broker who let her keep 100% of the commission since she was owner/agent (she kept all the commissions except for a transaction fee to cover error/omissions insurance). Sounds like you have the time and you could cover some liability with it.
     

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