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| The Basics | 3 cut-rate ways to sell your home
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Real estate agents often caution that FSBO sellers can invite lawsuits by failing to make proper disclosures about their properties. Glink says there are two remedies for that problem: - Educate yourself on what's required in your state (which is often listed on your state Department of Real Estate's Web site), and
- Hire a good real-estate attorney to review your contract.
You can get sample contracts from the attorney or from books like "House Selling for Dummies," by Eric Tyson and Ray Brown.
Glink also recommends noting on your sign and in any advertising that you'll "cooperate" with buyer's agents, meaning you're willing to pay their customary commission (usually 3%). Otherwise, she says, many agents will simply avoid showing their clients your property.
Donald DeWeese, a Seattle mortgage broker, let buyers' agents know he was willing to pay their commissions when he sold a rental property several years ago. He received two full-price offers during a three-hour open house -- both from realtors, although one was representing her son and willing to waive the 3%.
"Obviously, she won out," DeWeese said. "We subsequently netted $7,920 more than if we had listed with an agent. Not bad for three hours' work."
Of course, in less competitive situations your proceeds may be trimmed if your buyer expects to share in the savings. Someone who knows you're not paying the 3% seller's commission might expect you to sell the house for 1% to 3% less.
Using a discount broker
A major disadvantage of selling a home all by yourself is that you can't advertise on the Multiple Listing Service, the database used by real estate pros to market properties. A listing in the MLS isn't necessarily required to sell your home, particularly in hot markets, but it does vastly increase your house's exposure to potential buyers.
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You don't need to pay full price for MLS access, however; discount brokers also can get you listed. Owners.com, for example, allows you to advertise your property on the MLS for a $499 fee plus a 3% commission for the buyer's agent. (No commission is owed if the seller, rather than an agent, finds the buyer.)
Many discount brokers, including Owners.com, Assist-2-Sell and Help-U-Sell Real Estate, also offer flat-fee arrangements for handling paperwork. Help-U-Sell has a $2,950 package that includes a consultant's help negotiating the contract and managing the deal through closing.
Still other discount brokers promise full service for less. ZipRealty.com, for instance, aims to charge 1% less than the going commission rate in a given market. Catalist Homes in California and Foxtons, which operates in Connecticut, New Jersey and New York, charge sellers 3% total commissions, which are typically split with the buyer's agent. All three companies use MLS, local newspaper ads and Web sites with virtual tours to help sell homes.
Catalist and Foxtons, by the way, dismiss the conventional wisdom that lower-than-average buyer's commissions can discourage home sales. The companies say most home seekers do at least some independent searching for homes, typically using the Internet, and aren't as vulnerable to being "steered away" by buyer's agents.
Author Tyson remains skeptical.
"You really should set the commission to be paid to the agent bringing you a buyer at about the same level being offered on comparable homes for sale," he said.
Negotiating with a full-service agent
Another cause for skepticism: a seller's agent who pretends commissions are set in stone. There's no legal minimum for commissions, Tyson said, and any agent who pretends otherwise should be dumped.
How motivated a particular agent will be to negotiate depends on several factors, though. In a buyer's market where a home will need lots of marketing and time to sell, an agent may well insist on 6% or 7%. In a seller's market where agents desperately need listings, the motivation to knock a point or two off the usual rate will be much stronger.
An agent's ability to negotiate also may be hampered if he or she works for a broker that insists on holding the line on commissions. The agent's commissions are split with the broker, and both parties usually must agree to any discount.
If you do negotiate a discount, you probably should make sure the breakpoint skews in favor of the buyer's agent, Tyson and Glink said. Regardless of how wonderful your home is, it's still competing with many others in the same price range that offer a buyer's agent the full commission.
Travis Mack of O'Fallon, Mo., said he negotiated a 5% commission with a full-service broker after trying a discount broker for two months with no offers. His home sold within two weeks.
"The split was 2.9% buyer and 2.1% seller," Mack said. "The typical (commission) is 6% to 7% in this area."
You also might consider a tiered arrangement, such as 6% for the first $100,000, 5% on the next $500,000 and 4% thereafter, Glink said. But she warned against using a sliding scale, where the commission decreases the longer a home takes to sell.
"You don't want to give the agent incentive to sell faster" rather than for the highest price, Glink said.
Liz Pulliam Weston's column appears every Monday and Thursday, exclusively on MSN Money. She also answers reader questions in the Your Money message board.
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