Don’t be afraid to sell home alone
On a lark last spring, Ronald Grant decided to “list” his South Pasadena house for sale on the popular real estate valuation website Zillow.com. ¶ Zillow estimated his home’s worth at $1.4 million. But Grant, who was planning to sell his home when he retired in two years, decided to have some fun. So he posted a notice on the site saying he would gladly hand over the keys to anyone willing to pay him $1.6 million for his 4,500-square-foot abode. ¶ “I thought, what the heck. I had nothing to lose,” he recalled. ¶ Two days later, after receiving an e-mail from a would-be buyer and giving a showing, his house was in escrow for his asking price. ¶ “Usually when you sell a house, you have to repaint it, put flowers in the yard, spruce things up. I didn’t have to do any of that,” Grant said. “I didn’t even have to make my bed.” ¶ Even better, in Grant’s view, was the fact that he didn’t have to pay a real estate broker’s commission, which typically runs 5% to 6% of the sale price and is split between the buyer’s agent and the seller’s agent. Grant ended up saving $80,000 to $96,000. ¶ “Everybody wants to save that commission,” he said.
Especially these days. As the real estate downturn leeches value from homes, homeowners thinking about selling are tabulating how much it will cost them if they do. And they are looking for ways to sell on their own, skipping the traditional method of hiring a full-service, high-commission broker.
“People today are paying more attention to how much equity they will have left at the end of the transaction,” said Steve Ozonian, chairman of Help-U-Sell, a nationwide real estate brokerage that offers sellers a menu of services that range in price. “Now that the market has slowed and in some cases prices have declined, what’s left in your pocket is a relevant issue -- and the commission that is paid is a big part of it.”
New Internet options
Traditionally, the role of the real estate broker has been to help sellers market their home to other brokers representing buyers; as compensation, the brokers keep a percentage of the final sale proceeds.
In the process, the broker shares local market data with the seller to help set the asking price, puts a sign in the yard, sends out fliers, prepares brochures, takes out ads and networks with other real estate professionals. The broker also handles queries from prospective buyers, negotiates on behalf of the seller and sees the transaction to its close.
One of the broker’s most important functions has been to list the property in the MLS, or Multiple-Listing Service, a nonpublic database that alerts buyers’ agents to what’s on the market and how much they could be paid. When a seller agrees to list his house with a full-service licensed broker who is a member of the MLS, he relinquishes control of the listing. Even if the seller finds his own buyer, he will still be required to fork over the commission.
Nowadays, sellers can perform many of those functions themselves -- often at lower cost.
Sellers can tap the Internet to learn what the market conditions are and help set their price. Websites such as Trulia.com, Catalisthomes.com and ZipRealty.com offer free information about recently sold homes, average time on market, neighborhood price trends and other market information that was previously available only to brokers.
Once a homeowner decides to sell, sites such as Zillow and Craigslist.com offer a free platform for consumers to advertise their properties, allowing them to reach potential buyers without the MLS.
All this is making it easier for consumers to educate themselves about their local housing market in a way unimaginable even five years ago.
“With all the sources and the breadth of real estate content and with more analytical tools, and given the fact that more consumers have become skittish about overpaying, consumers will continue to use more of these tools online,” said Steve Murray, publisher of Real Trends, an industry newsletter based in Littleton, Colo.
How one couple did it
It was “basically a financial thing” that spurred physicians Emily and Giancarlo DiMassa to sell their Westwood condo this summer on their own after buying a house in Pasadena.
“We wanted to see if we could do it ourselves and save money on a real estate agent,” Emily DiMassa said.
First, the couple spent time researching local “comps,” or comparables -- that is, recent condo sales in their neighborhood -- on various websites, including Zillow. Then they stopped by a couple of open houses of condos for sale on their block. Finally, they set their price.
“We made sure we were in the ballpark,” she said. “We priced it based on a combination of what was on the market and what we needed to make it worth our while.”
Deciding that their three-bedroom, two-story unit was worth $859,000, they placed a free ad, with photos, on Craigslist as their first marketing effort and then arranged to list their house at Forsalebyowner.com, which charges $89.95 to $899 for various services, including providing website space for sellers as well as contracts and other forms. (The company is owned by The Times’ parent, Tribune Co.)
The DiMassas also signed up with Iggy’s House, a Chicago-based real estate brokerage that lists homes on the MLS for free. Once it was in the MLS, the DiMassas’ listing was available to Realtor.com, ZipRealty.com and other top-ranked websites most frequently used by potential buyers who search online.
The couple also loaded up on “For Sale” signs that they plastered around their neighborhood, which sparked 10 to 15 calls. And they hosted three open houses on Sundays in June and July.
“You definitely have to dedicate some time to it and you have to feel comfortable doing it,” Emily DiMassa said about acting as her own sales agent.
After their third open house, a couple that had seen the signs and had inquired two weeks before made an offer. The DiMassas’ condo closed escrow last month, after several rounds of offers and counteroffers.
Yet, even when home sellers do it themselves, there is no free lunch, the DiMassas learned. When they arranged to list their condo on the MLS, the DiMassas had to abide by an MLS rule that requires paying a commission to any agent who brings a buyer. In their case, they offered 2.5% of the sale price and ended up paying about $20,000.
Still, Emily DiMassa said paying 2.5% was a bargain because it was about half of what she and her husband would have paid using a traditional brokerage. Plus, the buyer agent’s expertise came in handy when price negotiations got thorny.
“I was grateful at the end that they did have an agent and she was very good because it made it easier for them and for us,” she said.
Look before you leap
That said, do-it-yourself home selling is not for everyone. Homeowners should consider whether they have the time and energy to handle calls and visits from potential buyers, make up fliers and put up signs. And they must decide whether they have the funds to pay for ads in newspapers and online. Such expenses normally are paid by a seller’s agent.
For-sale-by-owner sellers need to gird themselves to deal with the common perception that FSBO (pronounced FIZZ-bo) transactions can be messy; be ready to hire an attorney if they do. What’s more, prepare to be snubbed by real estate agents steering their clients away.
“Real estate agents will not show a FSBO because they are afraid of not getting paid and of losing the buyer who might want to do the deal without them,” said Michael Levine, a licensed sales agent who runs Debra Levine Realty in Oak Park with his wife, a licensed broker.
Sellers need to evaluate how comfortable they are negotiating without an intermediary and whether they can control their emotions when dealing with a persnickety buyer who may have complaints about their home. And sellers need to be able to discern whether an interested buyer is qualified by a lender or wasting their time.
“It’s much easier said than done, and I’m a Realtor,” said Robert Mickalson, a full-service real estate agent in Santa Clarita who typically charges 5% or 6% for selling a house. A Realtor is a member of the National Assn. of Realtors, a Washington-based trade organization.
“Everybody thinks they know something about real estate, but that’s not always the case,” said Mickalson, who works for Sotheby’s International Realty. “I won’t tell a surgeon how to operate on me.”
During the recent real estate boom, when homes were selling like hot cakes, about 20% of sellers nationwide were going it alone or using alternative, lower-cost brokerages. Once the market started to cool, the use of alternative services edged lower, as selling became more time-consuming, industry consultant Murray said.
But now, with prices actually dropping, some financially strapped owners are finding that they have almost no equity left in their property and mortgage balances higher than their home’s value. To cut their losses, they may decide to sell “short,” getting what they can before prices fall even lower. As a result, Murray said he expected to see alternative home-selling methods rise again.
“It’s clear to me that with the rise in short sales, we will have a lot of people trying to lower the brocost of transactions,” he said.
Real estate agent Levine is already seeing an uptick in just such sellers who want to hire his firm, which offers a full complement of real estate marketing services but charges a 1% commission plus 2.5% to 3% to pay the buyer’s agent.
“We help give sellers more leverage to negotiate with the potential buyer because we take less money,” he said.
Levine and other agents are counting on converting the growing ranks of for-sale-by-owner sellers as they tackle today’s real estate climate.
In Southern California, the vast majority of homeowners with real estate on the market today -- whether they’re represented by a broker or going it alone -- are finding that it’s more likely to take a minimum of three months to get a worthwhile offer, if they’re lucky. And not without some haggling over price.
The region’s housing market has gone from red-hot to frigid as the inventory of unsold homes has swelled, prices have stopped rising and lenders have backed off from financing mortgages for all but the most credit- worthy and financially able consumers.
“Right now the only hard thing is finding a buyer -- and it’s difficult for me with all the marketing tools I have,” Mickalson, the Santa Clarita-based agent.
‘I did everything myself’
In many ways, real estate investor Joseph Compositor represents the home seller of today -- and possibly the future.
The Irvine resident decided this year to put his home and one he had bought for his son up for sale -- and decided to do it himself.
So he placed ads on Craigslist, signed up with a free service that got his listings in the MLS, spent a few hundred dollars on slick brochures, bought newspaper ads and networked in the neighborhood. “I did everything myself,” he said.
With the potential savings on commission costs, Compositor figured he could set his asking prices below all others in the area. The homes sat for six months, and then two offers came in on one of the houses on the same day at full price.
“It was so easy,” said Compositor, who paid a 2.5% commission fee to the buyer’s agent and hired a real estate attorney to help him with the paperwork.
But his other house hasn’t seen a nibble, even after a $40,000 price reduction.
So Compositor threw in the towel this summer and hired a full-service broker to get things moving. Two months later, the house is still for sale.
“I’m convinced it’s all a matter of luck.”
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Do-it-yourself resources for sellers
Sellers today have a variety of lower-cost options for marketing their homes to potential buyers. Here is a partial list of such companies operating in Southern California.
Craigslist.com provides free space on website for ads, photos.
Zillow.com provides free space on website for ads, photos; offers free comparable-market data and neighborhood trends and information.
Flat-fee services and brokerages
Assist-2-Sell offers a menu of services at various prices.
Forsalebyowner.com charges $89.95 to $899 for various services, from placing ad on website to getting listing on the MLS for up to six months and providing professional consultation, signs, video tour of home.
Fsbo.com charges $69.95 to $199.95 for a menu of services and listing on website; charges as much as $499.95 to get on the MLS.
Help-U-Sell offers a menu of services at various prices.
Housepad.com has fees starting at $149 for six-month MLS listing and forms; signs, consultation extra.
Iggy’s House doesn’t charge for placing listing on the MLS, but seller must agree to offer a commission to the buyer’s agent; provides free website space for ads, photos; offers toll-free number and voicemail box for every listing; charges extra for forms, signs, lockboxes, professional consultation.
Redfin charges $4,000 to place listing on the MLS; seller must agree to offer a commission to the buyer’s agent; provides signs, lockboxes; professional consultation over phone or online.
RealUmbrella, set to launch Sept. 25, charges fees ranging from $349 to $949 for space on website for ads, plus use of its proprietary system that gives sellers and authorized third-party users such as title companies and lenders access to all contracts, disclosures and other documents to electronically sign online through a secure server; provides consultation for sellers to learn how to pre-qualify buyers; provides access to comparable market data from title companies; seller can avoid paying a commission because listing is not placed on the MLS.
Full-service and lower-commission brokerages
Catalist Homes charges 3% commission, which is split with the buyer’s agent, but seller has option to offer more.
Debra Levine Realty charges 1% commission plus whatever the seller agrees to offer the buyer’s agent, usually at least 2.5%.
ZipRealty charges 2% commission plus whatever the seller agrees to offer buyer’s agent, usually at least 2.5%.
Research by Annette Haddad