Dear PoP – Do I Need a Realtor?

Photo by PoPville flickr user ekelly80

“Dear PoP,

I bought a one bedroom in a coop four years ago and now I am trying to sell as I am leaving town. I’ve just finished renovating the kitchen and bathroom and all advice says I could price at $315k. My question is: why do i need a realtor? the 6% that i will pay realtors to facilitate the sale translates to about $21,000 and would eat up any potential of making money on my place. actually, my question is: wouldn’t a buyer prefer to pay $11,000 less than market value for my place without a realtor, effectively splitting with me what would be wasted on a realtor otherwise? I know there are a few other fees associated with a sale, but they are all pretty minor in comparison to the 6% realtor fee. seems like a lot of money going to realtors that could be better used in a tough market to lower the price of homes for the buyer and give sellers a better chance to break even or walk away with a small amount of money.”

Back in January we spoke about whether or not folks recommended using a realtor for purchasing a house. But what about for selling a place, specifically the situation above? What would you recommend in this situation?

62 Comment

  • ah

    The realtor does actually provide some service, like showing the place at open houses and promoting it to other agents with clients interested in buying. Of course, that may not be worth $20k. On the other hand you may get a lower price as a result (with more hassle/longer wait), making the net difference smaller. In addition, a buyer may have an agent, in which case the savings is only 3% (presumably to you, but you can’t “share” the savings with the buyer).

    Also, at least negotiate a 5% commission.

    • Buyers Agent. Buyer pays the agent out of their increased mortgage cost. If your house sells for $315k, the mortgage has to be $325k (or whatever 3% is) to cover the RE agent.

      Everything is negotiable. The likelihood this happens depends on the market and your negotiating skills.

  • +1 on negotiating the commission. You should be able to do 5% easy, that’s what we did.

  • I am NOT that experienced in selling a house but from what I HEAR realtors control the MLS like Nazis. No realtor, no MLS listing. I guess you could put it on redfin or something…

    • MLS loses in importance everyday.

      At $315k level you should be able to find a ton of buyers willing to bypass a RE agent.

      You can also make the buyer pay the RE commission for their house.

  • also, without a Realtor you cannot advertise the property to as large of an audience. Realtors are able to load your property into a database that other realtors use to find properties for clients. Without this, your property will not be seen by any realtors as they do not often search for properties outside of their own database.

  • MLS, couldn’t recall the name when I wrote original post. That is the database I am talking about and you MUST be a due’s paying agent to use/post on/access it.

    • A lawyer can do everything you need a RE agent to do with the contract for a few grand.

      If you’ve bought a house, you can sell a house.

      If it’s the first time you ever bought a house, you should use a RE agent.

  • It’s easier to sell without a Realtor if you have a single family or row house. An apartment or condo is simply not going to get the visibility you need, especially if you are already kneecapped by not being able to list in MLS. I would recommend finding someone you like and, from the start, negotiating a 4-5 pct commission.

  • Craigslist baby! Trust me, put it up with images and you will get hits like crazy.

  • You can do it yourself and put it on the MLS search the web you will find a company to do it for a few hundred. you might have to pay the buyers 2 percent commission.

  • Sounds like realtors have set up a nice little monopoly for themselves…

    Sounds like there’s a huge market for a web-based realtor-free alternative to selling homes 1-on-1. You hear that realtors? I know ruby on rails and I’m coming to get you!

  • There are a crap ton of “Fee Based” companies proliferating where you pay a set price to get access to MLS. The internet is wonderful.

  • I used an agent and it was well worth it. My agent knew every little thing about the contract, how to price it, how to deal with other agents and buyers and banks, etc. etc. There is no way I would have known how to do all that stuff, nor would I have wanted to muddle my way through it.

  • I guess the question is how much risk are you willing to take on that (1) you’re self marketing will work and (2) that you won’t screw up the transaction? I bought and sold a home this past year, and the 5% I paid my realtor was money well spent.

    • How do you measure that it was well spent? $20k is a lot of money.

      What’s the worst thing that happens? You have to find a new buyer? Get selling your house for dummies.

      • If other buyers are like I am, they avoid properties that are FSBO. I basically filtered those off my list when I was buying based on the experiences conveyed to me of the hassle of dealing with owners selling their houses.

        • yes, but who conveyed those hassles? a realtor? …its a a a…conspiracy.

        • Wouldn’t it make more sense to… look at properties you’re actually interested in, regardless of seller? That just seems bizarre to limit yourself like that, if what you’re looking for is a home.

      • I measure in value extracted from the transaction and in time value savings to me.

  • Negotiate on your commission. Make the seller’s agent (your realtor) take a 2% commission and make sure that the buyers agent gets the full 3% commission. Realtors are desperate to have listings and will agree to a 2% commission in a heartbeat. Also, you want the buyer’s agent to get the full commission so that they are motivated to sell your place to their client.

    And price that thing aggressively. It’s better and faster to have multiple solid offers to choose from. Look at your price per square foot and compare it to comps.

  • I have bought and sold many properties. I currently have two on the market using a flat fee MLS, where I paid $195 to put it on the MLS ( and then agree to pay whatever sellers commission I want, which I agree to pay the full 3%. Based on that, I would say,

    — This approach worked very well in the past but in this market is a little harder. One house is on the market 100 days+ and I *do* think that having a listing agent may have helped drive traffic to the house. Not saying it would have sold, but possibly.
    — Re comments above – you will not likely sell your house on CL, and if you do, the buyer will likely have an agent anyway or will demnd the 3% rebate (in lieu of commission) anyway.
    — Realtors may not steer clients to houses which use a flat fee MLS, even if you pay full commission.
    — If you have a difficult property, (neighborhood or condo issues), a listing agent will likely be worth it.

    FWIW, Im not a realtor and rarely use them.

  • I’ve bought two houses w/o the aid of a realtor, and I’d be hard-pressed to tell any reasonably intelligent buyer that there’s a reason they should pay 2.5-3% of the total transaction to be represented as a buyer. That said, I haven’t sold a home before, but I would not be inclined to go it alone. I would want the exposure of the marketing and someone who has all the form contracts.

    If you’re reasonably comfortable with your 315k price, why not take some nice photos and just try posting it online @ Craigslist + visible signs outside the building, etc. and see what happens? Worst case scenario is that you get an agent after deciding that doesn’t work. Failing that, doesn’t Redfin work off a much lower-than-6% commission? I’d say it’s the online search engine of choice in DC these days.

    • ah

      While that may be true, if the seller has an agent anyway the only question is whether the seller’s agent gets the full commission or splits it with the buyer’s agent. In other words, having an agent as a buyer costs you nothing and doesn’t make you less attractive to any seller already using an agent.

      • That’s a false choice, ah. Certainly, it’s what the real estate agents will tell you to keep open the opportunity for the commission double-dip and/or to preserve the conventional wisdom for when they are buyers’ agents (“hey, it costs you NOTHING. Why not??”). While it certainly is true that the contractual relationship is between the seller and the listing agent and they are under no obligation to change that agreement and lower the overall commission or how it is to be dispersed if the buyer doesn’t have an agent, I’ve made my offers based on the lack of commission to a buyer’s agent and made perfectly clear that this factors in a 2.5% savings to me, based on the lack of an agent, on which my offer depends.

        Essentially this forces on the seller’s agent the choice of whether he would rather lose the sale than the double-dip on the commission. Very few will make that choice and ultimately I’ve been successful in getting the agency agreement between the seller and the agent altered as a buyer. Writing an articulate letter on the point, demanding that the agent pass it along to the seller, and pointing out how everybody wins (I get my price, seller is in no worse position, and the selling agent actually gets a slightly higher commission if I cap my demand at 2.5% off) has been very convincing in my experience.

  • I’m an agent and have to ask from where is this $315k price opinion coming? I’d bet that it’s too high.

    And you don’t need to pay 6%. Many agents will do it for less.

    If you do chose to use an agent then I’d recommend finding the ‘right’ agent. Interview them and make them work for the commission. Most people spend more time choosing a car than they do choosing an agent.

    Depending on which jurisdiction you’re in you can also have a limited service agreement with an agent for a fixed fee.

  • 2 years ago I sold my condo with out a realtor. i bought an MLS number from a company that sells them (~$300), and offered any buyers agent a 2% commission. It sold in less than a month and I got more than what I was asking for. for a seller, i think a realtor is a waste of money.

    • two years ago was a completely different market, so I would think anyone could sell a property w/o a realtor.

      I would definitely recommend using one, but like others have said, negotiate the commission.

  • The reason MLS has the monopoly is that the listings are up to date — everything on Redfin, Zillow, etc. is something like 7 days old. That’s the hook.

    • Actually, Redfin IS up to date. We have a house on the market, and Redfin is updated with changes on the MLS in less than a day.

  • I don’t understand why people renovate their kitchens right before they move because a) the renovator doesn’t get to enjoy it and b) the buyer probably won’t really like your Home Depot special. Did you get a granite slab and plywood cabinets? Yeah? I could do that too and to my taste, now I have to spend 3k ripping out your tastes that we traded 20k for. You gave 20k to Home Depot, I gave 20k to you. IT DOESN’T RECOUP THE PRICE.

    Clearly some people think it makes the home move faster, but if you’re more concerned about marginal costs (6% commission) then why renovate also? You could list the place for 40k less and it would move even faster.

    • typically, you get more than your money back by renovating before you sell.
      thats why people do it.

      • Typically you don’t. You’re lucky to break even. In 2007 you probably did get full return plus a little profit, but it’s not 2007 anymore Dorothy

      • Thats not correct at all, I think the nation average on return in investment on kitchen renovations is something like 75%. Obviously, if your kitchen is hideously bad and/or you do a very budget conscious upgrade you can make money. I’ve heard spending more than $25,000 on a kitchen upgrade is foolish – I think the real number is about half that. Granite, high end appliances, and extremely costly custom cabinetry do not recoup their costs upon sale. Go midgrade on the appliances, design your own cabinetry and buy it from one of the Ready-to-Assemble places and have a contractor (if you need to) put them in, avoid costly stone counter tops…

        Do this before selling if you have an extremely beat up or dated kitchen that would turn buyers off. If the place is already moderate updated, clean, basic, then dont spend a ton, maybe some new cheap flooring and some paint when you’re going to sell.

        • I am highly skeptical of rules of thumb like this in the case of older properties like most of us are dealing with. Maybe that 75% rule works for someone trying to sell their 1985 town house in Annandale but the range of conditions of existing properties in the city is way too variable for a rule to be at all useful.

  • anonymouse_dianne

    I just hired a realtor to sell my place in BeDuCi. As I am writing this, he is hiring contractors to paint, fix the floors, clean, etc. I trust he is earning his keep. BTW I fixed up my kitchen 10 years ago, and refuse to do anything new to it for exactly the reason as stated above. If they want granite slab and better cabinets they can do it themselves.

  • PT Barnum: There’s a sucker born every minute.

  • why hire anyone?

  • My parents have sold their own homes for over 40 years. A lawyer can do the paperwork easy peasy for a small fraction of what you’d pay a realtor.

    The only thing you really have to think about is visibility and whether you have the energy and time to market the home yourself.

    Personally, it makes me physically ill to think of handing a realtor $15k of a home sale profit.

    • but you’ve got to realize that in many cases, that $15k becomes worth it really quickly… say your mortgage is $3k a month, and the realtor is able to get you just $10k more than you would have been able to on your own (due to staging, pricing, marketing, negotiating), and able to sell it 2 months faster than you could on your own (due to those same factors), there’s your $15k plus $1. and in many cases the savings are even more pronounced than that.

      stats say that over 80% of all fsbos end up listing with a realtor. if nothing else, using a realtor saves you the carrying costs for every month you try to sell as a fsbo before eventually listing with an agent.

      • Finally, the voice of reason. The numbers really lay down a strong argument. Plus, consider not having a realtor saves money but adds time and effort — two intangibles with value beyond just monetary considerations.

        If you could choose between yourself selling your house or someone with brass balls, as they say, who would youchoose? Realtors know better than anyone else how to push other Realtors around.

  • If you’re not in a hurry to sell, might as well try listing it yourself. Just be very smart about how much you list it for. I’d aim low and try to start a bidding war.

  • I found this to be a very helpful report — a joint FTC/DOJ report on the real estate brokerage industry from 2007. Admittedly, it is a dry read and does little to answer the OP’s question, but it’s a helpful resource to understanding realtors and what value they do/don’t add.

  • Your first sentence says you are leaving town. Depending on your time frame, it might be worth to just bite the realtor’s bullet and have someone sell your house for you.

  • pretty easy to guess which respondents here are realtors…

    • I’m not. Not everyone that’s pro-Realtor is one. The reality is that most people aren’t capable of acting as their own Realtor in a ultimately beneficial way. Most people who try screw it up royally. As anon 4:07 says, “stats say that over 80% of all fsbos end up listing with a realtor.” It’s not a conspiracy at work here, it’s the reality of the situation. Reality ain’t always pretty, but only fools don’t accept it.

      Take your job, for instance. Could someone walk in off the street and do what you do on on the level that you do it after a basic tutorial? I think it’s really presumptuous to assume that someone can just buy a couple books at Kramer’s and immediately acquire the diverse skill set that makes someone a champion Realtor.

  • I Would love to see you all take your own root canals, do the head surgeries, repair the car, fix the bike, repair plumbing, we could go and on..

    RE is an 200+ years old business, the strongest entity in US.

    If it was that easy to facilitate there will not be any realtors.

    Please read the FSBO statistics compaired to the RE data and you will see that at the end even w/o compensation you end up with less. In some, just some instances you make it out OK. if it was 2004-2006 i’d say do it, in the market of today you need a RE and pay 6+% to sell profitably!

    my $0.02

    • I do fix my car I dont own a bike, I do some of my own plumbing, and wait… did you just equate selling a house to doing a root canal or brain surgery!? You must be a realtor if you have that kind of inflated sense of self worth. Look, you need a reality check… being a residential real estate agent is basically white collar unskilled labor. Face it.

      Still, they do seem to be worth something – though I’m not sure 6% of the sales price is the right amount. Maybe 1 or 2…

      • All good points. Selling crap is not skilled labor. I’m sure some people are better at it than others — just like operating a plunger, or putting ads on craigslist. But just because some people do it full time doesn’t make it difficult.

  • I bought a house for the first time a little over a year ago. I used a realtor, but will never rely on one again. That is not to say my experience was necessarily negative. My realtor seemed competent, but I do not think that the services provided by the realtors on either side of the transaction warranted 6% of a 550k purchase.

    With all of the data that is available, any marginally capable person should be able to figure out the comparables for a home in which they are interested. The same goes for making reasoned decisions on home inspectors, contractors, and every other facet of the home buying process.

    Realtors have a vested interest in protecting an outmoded business model that is rapidly dying. While I don’t think it’s as critical an issue for a buyer, it is beyond my comprehension why a seller would, in my example, pay $33k in needless fees to a corps of quasi “professionals,” when you could get superior service from a licensed attorney for a miniscule fraction of that amount.

    The strongest argument that can be made is that you need a realtor to market your property and find a buyer. You quite simply do not need them for any other aspect of the transaction. However, in this city, with the technological and legal resources available to a seller, that’s a sucker’s deal.

    And, just to add one further point. The process of buying and selling real estate is indeed daunting to a newcomer. However, there is actually nothing about it that is really all that complex from any perspective, legal or otherwise. Tedious, certainly. However, I’ll engage in a little yeoman’s work to save 33k any time.

    If you are looking to buy or sell a property in D.C. that is in a sought after area, you are only paying a realtor to be the bulldog you don’t want to be, and you’re paying a hell of a lot for that bulldog.

    In a popular area in D.C., you can figure out what a property is worth without a realtor’s assistance, and you can find a buyer without a realtor, no problem. I would have paid 550k to the folks who sold me my place using only real estate attorneys without batting an eye, and they’d have around 30 grand extra in their pockets today.

    Might be a different story in Topeka, but you don’t need a realtor in D.C.

  • While I’m no fan of realtors in general and I would even consider NOT using one.

    But, I love the mentality that the .05% of people who DONT use realtors are the super savvy smart ones and that everyone else who uses them are suckers, stupid, and lack the skills necessary to function.

  • Pay the $200 to list it on MLS, offer 2% to the buyer’s realtor. If it doesn’t sell in 45 days you could always go with a realtor – although even then I would negotiate their commission down.

    There is no need to offer 3% to the buyer’s agent – 2.5% is increasingly the standard.

  • I think it’s a timing issue more than anything. If you have to get out a good agent will get you the exposure and have helpful ideas that might speed things along and be worth the %. But if you have time why not try and sell it yourself? The worst that can happen is that you end up hiring an agent down the road. Unfortunately most people don’t have the luxury of taking their time.

  • I bought my first house decades ago with a realtor and made the mistake of selling my first house with a realtor too. I say mistake because I ended up spending 6% to sell a 400K house. I haven’t made that mistake since. I don’t care who you are, a 24K “commission” to spend a grand total of 30 or 40 hours spread over a couple month period filling out forms, holding open houses and returning phone calls is absolute insanity run amok. I mean, think about it, why are you paying someone $600 bucks an hour? The worlds most sucessfull brain surgeons or lawyers don’t command that, why should some guy who took a 3 hour internet course to become a “realtor”?

    Here is the real crux of the matter:

    1. Realtors aren’t legally liable for jack. That 10 page agreement they make you sign before doing you the favor of taking you as a client is 9 pages of legal indenification and 1 signing page. If the deal falls apart, something happens etc, they aren’t liable for crap.

    2. Settlement companies do all the work, and you can hire any one you wish. All the realtor does is get someone to sign a template form, and then hands it over to a settlement company. They are the ones doing all the research (liens, deeds etc), arranging the payoff between lenders etc. The realtor does nothing in this regard, other than maybe send an occasional “are you done yet” email.

    I actually thought 6% commissions would have really gone the way of the brick and mortar travel agencies a few years ago, but the national realtors association has spent hundreds of millions in court fighting to keep their stranglehold on the multiple listing service.

    Luckily, companies like Redfin (which I would reccomend you use if you aren’t going to do it yourself) are making in roads, but it is tough.

    On top of that, realtors avoid taking their clients to FSBO’s like the plague. I have a good friend in DC who has been a realtor for decades and he admits as much…its a turf protection thing.

    If its a “comfort factor” thing for you, then I recommend you take a couple shots of booze and get over it.

    There is nothing mystifying about selling a home, especially now with the internet.

    • “Realtors avoid taking their clients to FSBO’s like the plague.”

      This is a strong argument for getting a Realtor — vastly increased exposure. Whether it’s fair or not is a different issue. Just an observation.

      I’d like to add for all the geniuses out here who brag about their FSBO experience: the only reason you can potentially profit from running a FSBO is because 99.9% of people use Realtors. Their commissions inflate the prices of every home in this country. Doing your own FSBO is effectively de-inflating the price to it’s sans-Realtor level. You’re profiting off the fact that most people are not able or willing to attempt a FSBO.

      Now, if you encourage other people to do a FSBO, you’re actually decreasing the profitability of an FSBO. So while it may be good for you personally to do a FSBO, it’s actually not smart to encourage others to do so. 😉

  • Where is it located. I’m looking.

  • I’m a realtor. Go ahead, try to sell it FSBO. It’s a pain. I represented a buyer in a FSBO deal and one was enough. It’s a full time job on top of your full time job. Most owners have no idea how to navigate a contract, confirm the potential buyer is actually qualified and can get to closing, etc. etc. A lot of people can’t do it. You think you can because you think you know the market and what it entails. Most of the time, you don’t. It’s our job to know the market, the comps in the area and how to market effectively. Throwing it up on Craigslist or paying a flat fee to put in in the MLS is not marketing effectively. If you don’t want to work with a realtor, that’s your choice. But don’t expect it to go smoothly. Every real estate deal in today’s market is a pain in the ass. It could be because of the lender, tenants, your price, special assessments or underlying mortgages. You have no idea what realtors do in order to get a deal closed. That should be considered before there’s a unilateral decision that we’re not helpful.

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