FSBO vs. The Realtor

I often get asked about discount brokerages and if I will lower my commission to compete with them.  My answer is generally no.  I'm not a discount Realtor, but I am an honest and fair Realtor.  As someone who believes to be a fair person; my fees reflect this.  A discount brokerage does not.  They throw your listing up on MLS and leave it to you to sell. No service, no plan of attack, you’re left to fend for yourself and end up getting lost in the shuffle with desperate measures to surely follow - and I do speak from experience.

Let's first discuss a full service Realtor, what they do and the breakdown of a typical sale. Take for instance a home that sells for $600,000 and brings in a $15,000 check for the real estate agent when it sells.

From that commission check, deduct the following:

- 40% goes to our friend the CRA = $6000

- 10% goes to brokerage = $1,500

- Photography, website, virtual tours, advertising materials, etc.  = $2000 (roughly)

- The listing agent also has to pay Toronto Real Estate Board Fees, the Real Estate Council of Ontario, fees here, fees there, continuing education, wear and tear on the car, etc.

This nets the agent $5,500. 

You may be considering changing your career, but take into consideration that it takes roughly a month or two to sell a home in the GTA and not all listings get sold and not all buyers buy.  In unfortunate circumstances, the Realtor will have it where the deal ends falling through and all that time ends up being a loss.  It's worth noting that Realtors get paid once the deal closes, anything before that, Realtors work for free.  

Look at it this way, you bring your car to get fixed and get billed $100+ an hour for something that is worth 1/10th the value of your home.

The Benefits of a Realtor (I will use myself as an example because I can’t speak for most of the Realtors out there)

- As a registered Realtor, you are covered under RECO insurance program protecting you from deposit loss, fraud, insolvency and misappropriation of funds.

- Cover errors and omissions.

- You get a realistic value of what your home can sell for.  Not too high to scare away the buyers, nor too low of a price to lose profit.  Breaks down to your Realtor will have current market knowledge.

- I know exactly where to market and advertise your home for maximum exposure, therefore bringing more buyers to the table.

- You get qualified buyers and more of them. 

- I’m in touch with numerous other agents to get your home maximum exposure.

- As a Realtor, I have insurance to that protects both the Seller and the Buyer.

- I’m not emotionally tied to the home, therefore thinking more clearly and will remain calm even when you're not.

- I'm able to show you how to turn a $25 can of paint into a can of paint that can boost the value of your home by $25,000.

- I work with some of the best people in the business to make your experience a hassle free one.

- I have education and field experience in marketing and advertising which enables me to utilize every available advertising technique possible.  This is something you have to see.

- You receive a video tour with custom professional photography on all major websites.

- You receive quality service with daily/weekly reports accessed via this website with your own unique login and passcode.

- Open house with advertising.

- Free staging advice

- This is a full time job for me not part time.

- I am also aware of the legal requirements & liabilities to both seller and buyer.  Without this knowledge, buyers may end up inheriting some serious and costly issues which they will either end up being responsible for, or which the seller may be liable for. Only someone with proper training in Real Estate Law can offer proper protection from liability. A For Sale by Owner (FSBO) website and seller self-representation generally offer no such protection

For Sale By Owner Websites and Discount Brokerages:

Statistically, homes that are sold by discount brokerages, or FSBO's are averaged to sell 16% under true market value.

Why is this? 

- Buyer's viewing homes on the FSBO side understand that you're saving on Realtor fees and would like to benefit from that rather than you. 

- The sellers are emotionally tied to their home, if they can't detach themselves from the home emotionally and if you aren't well versed in the art of negotiation, it could cost you dearly.

- Probably the most serious drawback of a For Sale by Owner is the lack of protection for both the Seller and the Buyer. All Realtors in Ontario carry Errors & Omissions Insurance to protect sellers and buyers in the event of a mistake, misrepresentation and so forth. Individual home owners or the "we list" type websites do not.  For example, if you're selling your home privately and you make an error on the square footage of the property or some other detail and subsequently get sued by the buyer, you have no protection, whereas if you're being represented by a Realtor, the Realtor would get sued and their insurance generally would cover any loss. A single mistake could end up costing you far more than a Real Estate commission.

- Let's say you want a 4 level split style home, with 3 1/2 bathrooms, minimum 1200 square feet, built after 1990, with a fireplace, hardwood flooring and a walk out basement facing south. Now, go to any newspaper or For Sale by Owner website and try and find only those homes which exactly match these criteria. Chances are you'll spend all day reading each listing, calling each owner and end up getting thoroughly frustrated.

- Since a majority of buyers use a Real estate agent to help find a home, most Realtors won't take their buyers to homes that aren't listed on the MLS, the vast majority of potential buyers will never even see your house if it's listed for sale by owner.  Basic statistics will tell you that you will typically get more money for your house when there are more potential buyers.

- If your home doesn't sell, or goes stagnant on the market for a long time, who will beat the pavement to get it sold?  CommFree? Property Guys? Joe Blows discount real estate shop?

Let's look at the numbers.

A $600,000 home for sale by owner, if it sells, statistically would sell for $560,000ish.

The discount brokerages or FSBO companies have a different array of fees, mostly are around $500-$1500+ with very little to no service.  What you see is what you get with no above and beyond.

You get mediocre service, you sink a bunch of time into it that you probably don't have, you deal with flaky wishy washy buyers, incredible frustration and on and on.

That ends up being, $40,000 less than what you'd sell it for with a Real Estate agent, a whole bunch of aggravation and less of a chance that it will sell.

Now I ask you this.

Realtor vs. FSBO, who would you choose?

jay vroom