Thursday, September 11, 2008

Make Friends with Agents

FSBO supporters would tell you how the real-estate agents are ripping people off. On the other hand, real-estate agents would claim that FSBO simply does not work. Do a quick search on all FSBO literature on the Internet, and you will quickly find out how fiercely the two camps are attacking each other.

I believe this kind of hostility is unnecessary. FSBO sellers and agents can work together. Indeed, they should work together. What a FSBO seller does is basically the job of a listing agent. Will a listing agent make enemy with a buying agent? After all, if somebody manages to find a buyer, he should receive some commission as his pay.

A buying agent should not get hostile with a FSBO seller either. He is just another agent representing his client, who happens to be the same person. Will a buyer agent make enemy with another agent selling his own investment property?

If you decide to go the FSBO way, be ready to receive a lot of calls from the agents. Don't hang up right away. Make friends with them! I have received about 20 to 30 calls altogether during my 4-week period of selling my house.

All these agents will try to lure you into signing a listing contract with them. Don't! One agent told me that they have a 'special' package for private sale owners. After asking him for more clarification, it turned out to be just another package for listing your home with them.

Here is the correct way to handle an agent. First of all, tell them that you will not be listing your house with them for now, but you might need them in the future if you fail to sell it privately. You simply don't want to burn your bridges.

Then tell them that meanwhile, if they happen to have some potential buyers (some might bluff that they do already), bring them to you and you will be willing to pay them commission. They might have a rate in mind. Tell them upfront the commission you are willing to pay. If they turn out to have some real potential buyer, sign a contract with them only for that potential buyer, or in some case, a 24 or 48-hour listing contract.

I still remember about 2 years ago, I was curious about the market price of my house, but I was not ready to sell it. I called up an agent, and he insisted that he needed to take a look at my house before he could tell me a price. He came in, looked around, and said he happened to have somebody looking for a house like mine. Then he pulled up a listing contract and wanted me to sign a binding agreement with him for 120 days! Of course, I refused.

Knowing that you are not interested in signing a listing contract with them, some agent would want to hang up. Don't let them go so easily. Get to know them more. Ask them about their experience in the industry and what they think about the current housing market. You are going to get a lot of insight from them. Try to build a relationship with them, for you never know when you will need them in the future. You may be surprised how many of them would like to continue the conversation. Some might even be willing to evaluate your asking price and analyze other houses for sale in your area.

Agents are your friends. Don't make enemy with any of them. Even the agents themselves know about this truth. Look at how they swap business cards around, knowing that they are all competitors of each other in some sense.

My FSBO Testimonial (Part 4) - Finalizing the Contract

It took about 2 weeks to get the written contract signed. This was longer than I expected. Indeed, after going through the intense negotiation, both sides were slacking off a bit. The contract went back and fro at slow speed. Then it took another 2 weeks to get the home inspection done and the final waiver signed.

I did not put up the "Sold" sign until the end of the 4 weeks. Potential buyers and agents kept calling. I would tell them upfront that an offer had been made and I was waiting for it to be finalized. Meanwhile, they could still take a look at my house. If in any case the offer went soul, I would contact them. During this period, I had another 3 to 4 showings, in which at least one party wanted to make me an offer.

I realized later that I was using a wrong approach. The first offer was not officially firmed until the contract and the subsequent waiver were signed. What I should have said was that there was an offer in process. Other offers were still welcome. If I had done it correctly, I might have received more offers.

At the end, I sold my house for $540,000, which was 97% of my asking price. I estimated that I might be able to get another $10,000 if I sold it through MLS. But then I would have to pay at least $22,000 on commission. So I reckoned that I and the buyer more-or-less split the commission I saved, and each side saved about $11,000. In a typical FSBO sale like this one, both the seller and the buyer win.

Part 3

Wednesday, September 10, 2008

My FSBO Testimonial (Part 3) - Receiving an Offer

After I put up the "For Sale" sign and posted up my Ads on the Internet and the classified boards in several supermarkets, one thing started to happen - I started to received calls from many realtors, about 1 per day on average.

I actually enjoyed talking to the realtors. I asked about their experiences in working in the industry, and also they opinions about the slowdown market (at the time of writing, the Canadian housing market was still holding on).

As for the Internet advertisements, I learned that Craiglist, Google, and Facebook were pretty much ineffective as far as selling my house was concerned. Many replied from Kijiji, all because they were curious about the price, which I had deliberately left out from the ads. All my leads ended up coming from the sign in front of my house. They saw my sign and my phone number. Then they called me. Come to think of it, serious people would naturally check out the area when they look for a house.

Another phenomenon I have observed was that people usually called in the weekends. This was the time they would drive around the area to hunt for houses. So I set aside my Sunday afternoons to open my house for showing.

I put up my sign on a Friday. The next day I was outside my house patching up the exterior wall of my house. A family in their SUV stopped by and asked me if I could show them my house. I told them my house was not really at that time, but they could come back in 3 hours. They did. Serious buyer would not mind setting up an appointment and coming back another time.

The family liked the house very much, except for (guess what?) the colour of the carpet. It seemed that they were not too desperate to buy a house at that time, but the wife anyhow gave my an offer of $540,000. I said what? $20,000 less than my asking price. Sorry, that was too low. It was only the second day so I had no rush for a deal. We both exchanged contacts and agreed to keep in touch. They never came back again.

The next Saturday I was out in the park and another potential buyer called. They told me that they lived in the same area, and were thinking of moving up to a larger house. I then arranged a time on Sunday for showing.

They showed up on time on Sunday. They walked around the house very quickly. It seemed that they had done some research and were quire familiar with the layout of the house. They did not comment on the colour of my carpet, but instead the carpet itself because they preferred hardwood floors. They complained about the absence of a central vacuum system and any landscaping at all. They looked dissatisfied with my house, but was willing to give me an offer, a low one: $525,000. They were real negotiation experts!

I yielded and offered them $540,000 as a return. This was the unacceptable price the previous family offered me, but this family was still unsatisfied. I told them that was well below my bottom line. So we exchanged contacts and the negotiation ended there.

The same night they called me back. They wanted to look at the house a second time. There was hope again. I arranged a showing the next evening. Again, they arrived punctually. They walked around the house checking everything in details.

At the end, they asked me to lower my price further. Since they already gave away the sign that they really liked the house and were willing to strike a deal, I refused. I assured them that was already a bargain price, and indeed it was. After adjusting the lists of exclude and include items, we stroke a deal!

This was only a verbal offer. Both sides were to get our lawyers engaged to iron out a formal deal in the form of a written contract.

Part 2
Part 4

Tuesday, September 9, 2008

My FSBO Testimonial (Part 2) - Meeting the FSBO Guy

It was still 4 months away from the closing of my new house. A usual practice was to put the house up for sale no earlier than 3 months before the closing. So I had about a month to go. I thought, who not try to sell the house myself first?

I and my wife spent a few nights tidying up the house. I then took a few photos and put up some postings on Kijiji and Craiglist. The next day, someone replied to me by e-mail. He was a regional sales representative from an FSBO company, and he told me they had a promotion in my area. The basic package which normally costed $300 was now free. Free stuff, I thought. So there was nothing to lose! I registered in their website right away and posted my listing there.

A few days later, the same guy called me and asked me when would be a good time for him to come and put up the sign. The free package also included the sign?! That was awesome !

The FSBO agent came the next day to put up the sign. We had a lengthy chat. He tried to up-sell me with a $600 premium package, which costed only $300 on promotion. I said I would pass since I was still sceptical about the whole FSBO process. He then began to remind me the ridiculously high commissions realtors were charging and the comparatively small works they had to do. Indeed, I agreed with him very much. He also told me some recent success stories of his clients. He frankly told me that he did not earn a penny from me because of the free promotion. All he was hoping for was that I would sell my house successfully. Then he could put up the "Sold" sign, which in turn would act as an advertisement for them.

I gained a lot of confidence after talking to the FSBO agent. I felt more determined to sell my house by myself. Now the "Private Sale" sign was up, I knew the other realtors were watching, and some would be waiting for the day when I would give up and call them.

Part 1
Part 3

My FSBO Testimonial (Part 1) - Interviewing the Listing Agents

It was the month of June. My new house was closing at the end of the year. It was time to think about selling my current house.

This was my second time selling a house. I sold my townhouse almost 6 years ago and moved into this house. At that time, I did not know any real-estate agent. I hired the first one who cold-called me. His service was not too bad but I believe he could get me a better price. This time, I promised myself I would interview more agents before deciding whom to hire.

Selling a home without an agent was an unfamiliar concept to me. I heard of one relative who managed to sell her house privately 2 years ago. She got an offer right after her first open house. It saved her about $30,000 (CAD) in commission, but then she was low-balled. She could have sold it easily with a much higher price. Still, I kept this option in mind for consideration.

My wife found out the first agent from a flyer delivered to our mailbox. It was her commission rate of only 1% that attracted us. The agent had been in the industry for 4-5 years. As a common practice, she gave us a Competitive Market Analysis (CMA) report. She estimated our house would worth $52,000 - $58,000. A range as wide as this didn't really mean much really. She had a concern with the dark colour of our carpet, and also the fact that we could not make our home available in the weekdays due to my wife's home-based business. Since our closing day was still months away, she recommended us to start selling it not until a month-or-so later. We honestly told her that we would attempt doing a private sale for a month first, and we would go to her if we failed. When I asked about other agents in the area, she told me the agent who just sold another house on my street had more than 20 years of experience. So I interviewed that agent next.

This experienced agent turned out to be a very honest guy. He told me that he could do open-houses for me only if I wanted, but frankly he told me that open-houses were really for the agents themselves to hand out business cards and redirect buyers to other houses if needed. He also made a few suggestions on how I should position my furniture. He had the same concern about the carpet colour. As for the weekday unavailability, he said it was unfortunate, but we could create a virtual tour instead to try to compensate for it. He did not give us an CMA but he showed us a few neighbour houses currently on the market from his computer. He estimated that my house would sell around the same price as the other house he sold on the same street, which was slightly below $540,000. He offered me a rate of 1.25%. Again, I told him my plan was to do a private sale for a month, then find an agent if I failed. When asked about other agents, he recommended one who also specialized in my area.

This third agent actually worked with another agent as a team. She used to be a sales agent for the builder who built my house and other houses in my area. She witnessed most of the new purchases of our houses and basically knew all the floor plans by heart. She and her teammate had been working as independent agents for about 5 years. They also did not like the colour of our carpet. In fact, they strongly suggested us to change my carpet! As for the weekday unavailability, they recommended my wife to temporarily moved her business to somewhere else. This would be somewhat impossible for her. They charged a 2% commission but it included consultation by a home-staging professional. They also gave us a CMA report. They asked me how much I though my house would worth. I answered at least $550,000. They doubted it. I told them my plan was to do a private sale for a month, then find an agent if I failed. They asked me if I could let them know even if I decided not to hire them, and tell them the reasons, so that they could make self-evaluation.

I found all these agents I interviewed very professional. I kept their contacts and planned to call them up a month later. Meanwhile, I had a month to wait. So I decided to investigate this concept of FSBO, something still unfamiliar to me at that time.

Part 2