If you’ve been thinking about selling your house you may have come across the advice to to a “For Sale By Owner”. Whether selling yourself or through an agent, advertising online and in an MLS (notice that I didn’t say “the MLS”, and I’ll explain this more in a moment) is extremely important nowadays. Some real estate companies have begun offering what is called “flat-fee selling” as a “for sale by owner” option. This might sound like a great option, but you really have to be careful here as a seller.
First, what is a “flat fee” option? Simply put; instead of committing to a percentage commission to a real estate Broker, the seller pays a fee to the Broker for a set of services in selling your home. Typically the service is centered on entering the property into an MLS which advertises your home on Realtor.com, provides advice on dealing with agents bringing buyers, etc. Basically, it’s a very watered-down set of services offered to sellers and really focuses on simply “getting the property entered into MLS”.
Sounds great, right? Well here’s the pitfalls of this program and how to avoid them:
- There is not just one MLS, and all MLS’s are local. This part is HUGE with this program. MLS’s (Multiple Listing Service) are privately held local databases owned and operated by the local Association of Realtors. Almost all MLS’s syndicate to Realtor.com, but entering a property into a California MLS for your home in Flagler County Florida makes it practically invisible to local Realtors here in Flagler County. Important: Ask the company what MLS they enter your property into prior to paying them anything. If it’s not with the local MLS, you are actually limiting your exposure.
- You can actually limit your exposure. First, let’s look at the first part. Entry into an MLS does get you exposure onto Realtor.com, and although that’s the #1 place buyers shop for properties online . . . it’s not the only place. Likewise, it often times not the property people end up buying that they see on there. When I list a property for a customer, it’s entered into and syndicated to hundreds of websites where I know buyers are looking. Likewise, I want every local Realtor knowing it’s for sale. Why? Because they are working with buyers every day. If it’s a non-local MLS, your limiting your exposure a great deal.
- You may cost yourself more in equity than listing on a commission basis. The biggest enemy of a listing is . . . time. The greater the days on the market, the more likely price will be impacted. The “gut reaction” to a lack of showings and anxiety is setting in is to reduce the price. The biggest contributor to time on the market is lack of exposure to the widest possible buyer audience. In essence, you can reduce price and not address your advertising issue which then results in the same lack of response and further price reductions. Beyond that, buyers are savvy today and one of the questions they ask is “How long has it been on the market?” (or they may already know if they’ve been patiently watching the property). Why? The reason is they know they longer it is on the market the more desperate I seller is probably getting and the buyer typically gains negotiating leverage. You may find yourself taking far less than you initially advertised the property for. And if you are not pricing based upon valid comparable sales you are wasting your time. Not only will you reduce your chances of getting an offer, you will reduce the likelihood of being able to close a sale on your property that could not possibly appraise for too high a price.
- Putting up barrier to others bringing buyers. One of the slogan angles with these “flat fee” services is often times “Reduce their commission.” So put the shoe on the other foot for a moment and you are the agent, which property are you going to be more motivated to sell? The one with the lower payout or the higher payout? Your property may have a lot of great features but it’s not the only property on the market. Likewise, if your property is listed with an MLS outside of the local area you most agents won’t ever see it and the many buyers they have set up on automatic email updates of properties aren’t going to see it either.
- The risk factor. One of the things agents take into account with listing a property is security for the seller. They know who is showing your property and the buyer is monitored. Lockbox systems are monitored to insure access is limited to agents who have scheduled a showing. I spoke with a woman the other day who is selling this way and she told me how she has someone coming to see her property because of an ad she placed on a free online classifieds website. So how does she know the person coming to see the property is legitimate? She doesn’t. AND she has two children with her. I’m not trying to go the “fear” angle here, but the reality is that you have to be careful as to who you granting access to your home when selling and the route she is going is far less secure.
- Negotiation. What you listed your property for sale is often not what you’ll sell it for. Have you developed a negotiation strategy and planned out various offer scenarios? Do you know th elocal market as to what properties have sold and what ones are available? If not, you have greatly reduced your negotiation leverage.
The bottom line to it all is that selling a house (and any real estate) is complex. There is the intricacies of advertising and then there is the actual transaction if you do get to offers. I know that equities have been reduced and have even considered offering a “flat fee” type of service myself. Here’s why I chose not to. I can’t honestly reduce the amount of service to a seller, take their money, and be ok with the property probably not selling. At the same time from a business perspective, I can’t afford to invest the same level of service for a fraction of the income. So why is this service offered a lot of times? It’s simple . . . leads. Many times this service is offered knowing that you will not sell and then later convert the seller to the original commission model. Again, a route I don’t feel is the best level of service I can offer to sellers and is misleading them.
Again, be careful with these offers. And if you want the “secret formula” to successful selling, this is the one I use and it works:
Priced right + Great Exposure to the Widest Possible Buyer Audience = Showings => Offers => Negotiation => Contract => Sold!