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The data is very problematic. My understanding in reading the NAR data that they use for the survey is that the homes are lower priced because they are inferior homes to begin with. (Not in a mean sense here) But that it is more common for someone to try and sell a $150,000 FSBO than a $400,000 FSBO. Then you have the non-arms length factor as people tend to cut their friends and families deals that they wouldn't give to a stranger. Averages and medians will be pulled down just because of the nature of the data.
What they'd really need to do for a valid study is compare comparable homes. So you'd match a FSBO with a comparable agent home and then look at those averages. That would be an insanely time consuming study though, which is why it hasn't been done.
Well the #1 reason FSBO's sell FSBO is to not pay an agent fees so I think it is logical to think they are hoping to keep those fees off the net sheet. The problem, as we agents know, is that buyers want to lop 6% off the price as well since no agent is involved too.
I saw at the KW convention this week figures that indicate that fewer transactions, on a percentage basis of all transactions, were FSBO in 2010 compared to 2009.
I think they were NAR figures, but seemed to be less self-serving than NAR figures on Realtors selling at higher prices than FSBOs.
I saw at the KW convention this week figures that indicate that fewer transactions, on a percentage basis of all transactions, were FSBO in 2010 compared to 2009.
I think they were NAR figures, but seemed to be less self-serving than NAR figures on Realtors selling at higher prices than FSBOs.
I think the percentage of FSBO transactions is probably a fairly true statistic. In my area, FSBO's are clearly on the decline. There is no reason for buyers to go hunting for them when there is so much inventory on the MLS that is easier to find.
Last edited by Silverfall; 02-24-2011 at 04:25 PM..
Reason: typo
Realtors want owners to give them 6% of our equity but they claim they don't get 6%. It is still 6% loss to the owner regardless of what side deals realtors make with their buddies.
The commission, as a whole, is what's accounted for, economically, from a buyer and seller's standpoint (that is, if sales people are used)
You are correct, six percent is still six percent of overall costs that act as an incentive. Sometimes, the commission is 3% or 4%, etc.., but it affects the overall cost as an incentive.
Unfortunately, the incentives may adversely affect the listing, and unfortunately, it may have a devastating affect on value; if the incentives are not accounted for and negotiated, economically, appropriately and properly and ethically.
As you gain basic knowledge regarding real estate transactions, you will understand that agent commissions can legitimately be considered to be a Buyer's expense.
Please educate me. That's counter intuitive to my understanding. I would call the commissions a seller's expense since seller is paying it directly out of escrow, subtracted from sale proceeds.
Quote:
Originally Posted by MikeJaquish
You may learn that in a great many areas the Seller and Agent contract in detail regarding the splits to be offered to co-brokers, meaning it is NOT merely the Realtor's own choice, but is quite commonly an agreement between Seller and Agent how much to offer to a Buyer's agent.
My contract with my agent says I'll be paying the commission for both seller's and buyer's agent. My agent and I negotiated the percentage. (Well he said 5% and that sounded alright to me.) I believe MLS has it shown as 50/50 split between seller's and buyer's agent. Buyer's agent has only the choice to accept the deal and show the property, or not.
Quote:
Originally Posted by Silverfall
The problem, as we agents know, is that buyers want to lop 6% off the price as well since no agent is involved too.
Good observation! Once you hear it you know it's true! Otherwise there's no advantage to buyer to not have an agent. (And IMO a great deal to lose if buyer is not expert and/or not lucky.)
I don't like paying the commissions but it's well worth the price to me.
Please educate me. That's counter intuitive to my understanding. I would call the commissions a seller's expense since seller is paying it directly out of escrow, subtracted from sale proceeds.
Is your price set to cover commissions? Will the Buyer be expected to bring funds adequate to cover commissions? Will you target and sell for a gross net proceeds or a net net proceeds?
Quote:
My contract with my agent says I'll be paying the commission for both seller's and buyer's agent. My agent and I negotiated the percentage. (Well he said 5% and that sounded alright to me.) I believe MLS has it shown as 50/50 split between seller's and buyer's agent. Buyer's agent has only the choice to accept the deal and show the property, or not.
Right. The split between agents is listed in the Listing Agreement, as I mentioned.
And there is little to keep a Buyer's Agent from asking for more. It happens from time to time.
Quote:
Good observation! Once you hear it you know it's true! Otherwise there's no advantage to buyer to not have an agent. (And IMO a great deal to lose if buyer is not expert and/or not lucky.)
I don't like paying the commissions but it's well worth the price to me.
Yes, both sides are in it to save a chunk of change in a FSBO. Finding a meeting of the minds can be interesting anytime, but particularly if one or both of the negotiators has a personal financial stake in the outcome.
Is your price set to cover commissions? Will the Buyer be expected to bring funds adequate to cover commissions? Will you target and sell for a gross net proceeds or a net net proceeds?
We're missing a meeting of the minds here. Your original comment said the commissions could be considered a buyers expense. Your arguments show it's a seller's expense. In today's market, a buyer's market, the seller has no ability to increase the price to cover the commissions. Sellers are lucky if they can sell at all.
You can target whatever you like but if you aim high you'll miss the mark. So how again can commissions be considered a buyer expense in a buyer's market?
The commission, as a whole, is what's accounted for, economically, from a buyer and seller's standpoint (that is, if sales people are used)
You are correct, six percent is still six percent of overall costs that act as an incentive. Sometimes, the commission is 3% or 4%, etc.., but it affects the overall cost as an incentive.
Unfortunately, the incentives may adversely affect the listing, and unfortunately, it may have a devastating affect on value; if the incentives are not accounted for and negotiated, economically, appropriately and properly and ethically.
We're missing a meeting of the minds here. Your original comment said the commissions could be considered a buyers expense. Your arguments show it's a seller's expense. In today's market, a buyer's market, the seller has no ability to increase the price to cover the commissions. Sellers are lucky if they can sell at all.
You can target whatever you like but if you aim high you'll miss the mark. So how again can commissions be considered a buyer expense in a buyer's market?
There is no free lunch just because one is the Buyer. The money coming to the table has to cover sales price and all fees.
Commissions are a Buyers' expense just like paying the delivery driver at Walmart is a Buyers' expense. Hiding it in the price paid does not mean the Buyer doesn't pay it.
If the Buyer contribution doesn't cover the overhead, there is no deal. If it goes on regularly and for long enough there is no long-term viability to the model.
Hiding it on the Sellers' side does not make it cheaper for the Buyer. All it does in the currently common brokerage business model is allow the Buyer to finance his brokerage costs, as well as the Sellers costs, with a little equity tossed in as a down payment.
Agents are so desperate to get Buyer clients, they will advertise that Buyer Agency services are free to Buyers, despite the fact that Buyers' Agents commonly are paid for those services from the money Buyers bring to the table.
Except these days the money coming to the table often does not cover sales price and all fees.
Sometimes it covers and sometimes not.
Sometimes it does not because of the cruises and the motorhome that were funded by the house.
Sometimes it does not because of bad economic breaks or personal misfortune.
All transactions are different.
But, in my experience, most of the time it covers. And I know I am blessed to not be working a market with 80-85% of the inventory distressed.
Even in a short sale, the bank or investors are considering their (net) proceeds when making a selling decision. They have to be able to accept the results, and the results are driven by what the Buyer brings to the table.
But, we are talking about the non-viable long-term market model that I alluded to in my prior post. If the buyer does not cover the costs of real estate conveyance, in general, real estate will not be conveyed.
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