The Flynnаt 155 West 18th Street
Condo in Chelsea
All things being equal, what do I stand to save besides the 5-6% commission, in a FSBO transaction? This is assuming an all-cash sale to a known party, few or no contingencies, etc.
That's about it.
You save the cash, but obviously are then doing all the work. But you are saying that you know the buyer?
Yes. Known buyer, all-cash transaction, short closing, etc. Already familiar with property as renter. Am asking what this is worth in the big picture; ie how much more would I need to get listing with a broker to make it worth my while.
Well that is easy: anything is excess of the commission (subtract hassle). I guess this can work, but how are you deciding on the price? In a hot market I think that the seller has more to lose in this scenario.
Your question doesn't make any sense. The right question is, could you get more for the apartment if you marketed the property to other potential buyers? If the answer is no then you don't need a broker to sell the unit to your current renter. If the answer is yes, you can hire a broker to test the market or you can test the market without a broker and still save the 6%.
Obviously if I stand to gain substantially by marketing to other buyers this is the route to go, whether I use a broker or not. This was why I said 'all things being equal.'
It seems neither feasible nor ethical to list with a broker, draw the highest offer, then take the place off the market and try to sell to my renter for this price. But I do have a substantial offer (within 3-4% of what I'm guessing top-market is, based on recent comparables in the same building).. and from a known entity.
Also, it's been my impression that most FSBO listings are slightly less per sq foot when compared with broker listings.
I hate brokers.
You have cash, an easy transaction, and you do not have to deal with a "broker".
Who could ask for anything more?
Yes, go ahead and get greedy, see if you can get an extra 6% from another buyer to cover the broker costs. Of course, you will need to carry the unit longer to test the market, and you will surely lose your cash buyer.
You would definitely need a fair market analysis of your place. Find a broker you are friendly with and get a real idea of what it would sell for. Again, try to find someone you know, not just any broker who will say anything to list the unit. Many brokerages also have an exception clause for a potential buyer that has already been identified by the seller before the exclusive was signed but typically that is a very short period of time. Do your due diligence as thoroughly as you can. The major market trend in the last 1.5 years has been neighbors purchasing adjacent units at a premium because of that rare opportunity and its been very advantageous for those sellers.
If you sell to your renter you will never know what market really is so you either have to 1) agree to a price and and know that you may not have extracted top dollar, 2) list it and sell it to the highest bidder, or 3) list it to find out the market price, have your renter match that price. 2 or 3 can be done with or without a broker. 3 is sleazy but I'm sure it has been done many times before.
"You would definitely need a fair market analysis of your place. Find a broker you are friendly with and get a real idea of what it would sell for"
This is a load of crap. A broker doesn't know anything more than what tpushbklyn knows and probably less. Ultimately, the market sets the price (comps in the building are a starting point). A broker doesn't have a clue what will unfold with the market for any given unit.
tpushbklyn--This is a good question. I have worked with many sellers who had previously been on the market as FSBOs. These were almost all sellers with really great apartments or townhomes that were not moving as FSBOs. In almost every case I didn't move the price and in almost every circumstance when we put the listing out as an exclusive it sold usually at or above ask in a very short amount of time.
Most FSBOs close well under 6% off their ask as they are only reaching a tiny bit of the market-mainly buyers not using brokers. There are some really savvy educated buyers that may not find brokers necessary--which is fine but I would say in most cases buyers without brokers are either just getting started looking and do not want a broker as they are not ready to make a decision or they think that they could do better than the broker, that they will automatically get the 6% off -which is not necessarily true especially in this market. These people often lowball FSBOs. Most legit brokers will not bring their buyers to a FSBO. The other issue that comes up is deals falling through, before they listed with me several of my former FSBOs had offers on the table that never panned out either the buyers weren't qualified or ready to follow-through.
Admittedly, the market right now is very different-if you have a good home, priced correctly it is 'possible' to sell as a FSBO BUT you probably won't get as a high a price as you will with a broker. Inventory right now is so tight that in certain areas homes are generating prices much higher than they would have even a few months ago. Your cash buyer may be your best option but you would be very wise to at least meet with a broker or two and find out what they realistically think they could get for your home. If you do this definitely make certain the broker has the numbers to back the price they could get you and are not just throwing something out there to get the listing.
If the numbers they gave you a similar to the offer you have on the table you may want to take the offer.
However if the numbers they present are substantially higher you may want to go with a broker. You could always give your potential buyer a chance to come up to the market price prior to listing. If they are serious they will. It is very convenient for buyers to want to do a deal off the market because without competition you cannot drive up the price and it could turn out to be a more advantageous deal for them.
It is worth it to figure out the best price you could get for your home before you take an off the market deal.
Nicole Elyse Paikoff
This isn't really a FSBO, but rather a private sale. The only trick is getting the price right. In this market you may be using comps, but if they are even a few months off that could be significant for you.
If you are still uncertain, interview three brokers. That will give you a sense of what you could get. Maybe in end you decide you like one and what they have to say. There is nothing unethical about having someone pitch you their services and it would be prudent for you to hear them out.
On FSBOs, I don't buy what npaik says. Once you've been through a few bidding wars you know the game and broker seems to offer very little added value.
Ottawanyc- It is much less common to get a "bidding war" as a FSBO. Per the reasons I explained, you are reaching a tiny segment of the buyer market, therefore less competition among buyers less people willing to "bid." Co-broking is the way most people get the best price in NYC-you get the most exposure on the market and generally the most qualified potential buyers. That being said everyone is entitled to their opinion.
Npaik: I think that there are many variables. If you are selling a standard unit in a very desirable area then it is not hard to figure out what you should get and people know what to pay. There are many buyers out there who are savvy enough to put in an offer on their own and won't be deterred by needing to go it alone. But yes you will lose some buyers.
you could do a FSBO and then offer 3% to the buyer's broker saving you 2-3% in commissions. then you open up your home to a lot more buyers. i agree with ottawanyc that in a very desirable area it is not hard to figure out what to buy. you don't need to be savvy to go on streeteasy and look up listings.
This isn't a typical FSBO situation. I'm not asking for the pros and cons of trying to list, show, and sell on my own. The process isn't exceptionally difficult after a price has been agreed upon, and I have a competent real estate attorney. The question was, are there other costs I stand to save conducting the sale myself, besides the 6%?
This isn't a 'buyer without a broker' either .. he has a broker and has been looking, but being my renter and having discussed making a deal before, would not be obliged to use the broker for this transaction. It's a one shot deal with a known, financially secure entity, the only true risk being not realizing full market value. And within that context, having a 6% buffer and recent comparables in the same building seems like a fair gauge. I understand nobody knows for certain what a hot market will dictate, but is there not such a thing as getting too greedy, too .. even in this market?
A couple of things to consider. Flip tax, if any, is usually paid by seller so check that out. Other thing is that this should be a easy transaction for the lawyers so there should be some savings there.
Yes I'm aware of the 2% transfer tax .. but what can a broker do about this except request that the buyer cover it? I can do the same and negotiate it in to the price.
it's a no brainer. if you feel the price is right, fair market, you're really not losing anything except for headaches. on top of that, the additional money you will bring in can end up being used up by having the apartment vacated and the numerous showings and delayed closing.
Yes, if you think price is fair go for it. I would still want to bring in some agents to get their thoughts, but the lack of having to deal with all the crap associated with selling is very compelling.
a broker said, "Most legit brokers will not bring their buyers to a FSBO."
I daresay that this broker's definition of a "legit" broker is more of someone that is involved in market collusion, conspiracy and price-fixing. think about it.
"Most legit brokers will not bring their buyers to a FSBO."
I also found this humorous. Being legit has nothing to do with it. Getting paid does. As a broker there is no incentive to bring buyers to a FSBO. This has nothing to do with being legit. I also don't buy that you narrow your buyer pool with FSBO's. NYC apartment hunters are a savvy bunch. I used a broker but ended up buying a FSBO unit that I found on my own.
"The question was, are there other costs I stand to save conducting the sale myself, besides the 6%?"
"I understand nobody knows for certain what a hot market will dictate, but is there not such a thing as getting too greedy, too .. even in this market?"
This is classic if I keep asking the question maybe I can convince myself of the answer? YOU have to be comfortable with the price you get from your renter. No one on this board can make this decision for you. No matter what price you sell it to the renter for you will never know how much you could have fetched on the open market. If that will bother you for the rest of your life you had better put it on the market. Otherwise, be happy with cash in hand and move on.
Juice: I think you are underestimating the number of people who are incapable of thinking independently and would only rely upon a broker. Then there are also foreign buyers. So I think you would lose a decent number of potential buyers. Again, in sellers market this matters less.
gcondo and Juiceman: Perhaps 'Legit' wasn't the best word -what I meant was brokers with real buyers who have some experience will generally approach a FSBO only if the property is one of a kind and priced correctly. I have brought clients to a few FSBOs but they were one of a kind apartments and unlike anything on the general market. Many of the FSBOs will offer a buy side commission. As this is a seller's market some more brokers may be looking through FSBOs but this is not the usual. Most brokers are not going to go for an apartment that is similar to several others on the market that is listed by the owner - there is too much risk. What I meant by 'legit' is brokers who have solid buyers opposed to ones where they claim to have 'supposed buyers' so they could get a listing. I hate to think this is the case but I have heard about this from FSBO sellers.
tpushbklyn: Other than the broker commission financially no. If you are comfortable with the price you should go for it but definitely have a good RE attorney :)
Actually, though admittedly rare, there are some brokers that have taken their clients to FSBOs, myself included. If you do right by your clients it will come back to you.
Juice, point taken. I was thinking out loud and that serves little purpose other than soliciting opinions. I do think there are advantages outside the 6%, ie collecting rent up until the deal goes through, not having to stage or vacate the property, etc.
"Actually, though admittedly rare, there are some brokers that have taken their clients to FSBOs, myself included. If you do right by your clients it will come back to you."
Indeed. When I bought FSBO the broker I was using took the news graciously and wished me luck. I have since referred two buyers to her.
"Most brokers are not going to go for an apartment that is similar to several others on the market that is listed by the owner - there is too much risk."
That may be true when inventory is at 12000, but not right now. I would definitely sell FSBO in this market but I would offer 3% to a buyers agent.
"ie collecting rent up until the deal goes through, not having to stage or vacate the property, etc."
Very good point. Don't take my comments as "you shouldn't think out loud", your situation is unique and certainly stressful. The decision you are making can drive you crazy if you let it. Best of luck, let us know what you decide.
Juice, if you bought on your own, why would you offer 3%? I think this decision is actually the hardest when doing an FSBO. I still can't really see what value added seller agents offer in this market.
Otta, fair point. For me as a buyer it all worked out great without brokers,, but as a seller I would offer the 3% to buyer agents to broaden the interest in the apartment. When selecting the buyer however, paying the 3% vs. not would factor into who actually got the apartment.
It sounds like the only thing you're regretting is not being able to test your market value on the open market. If that's it why not spend 400 bucks and properly market this thing with a firm like Hauseit etc? They'll list you for 3 months I believe on RLS and a dozen major sites (StreetEasy, Zillow, etc)