Sell a Home: Cash Listing Services

The second of a three part series exploring an owner’s options when they decide they want to sell their real estate. Today our featured property is a pergraniteel condo trying to get out at their 2003 purchase price.

4 SPRINGFIELD Irvine, CA 92604 kitchen

Irvine Home Address … 4 SPRINGFIELD Irvine, CA 92604
Resale Home Price …… $349,000


I was dreamin’ when I wrote this
Forgive me if it goes astray

But when I woke up this mornin’
Coulda sworn it was judgment day

The sky was all purple
There were people runnin’ everywhere

Tryin’ 2 run from the destruction
U know I didn’t even care

‘Cuz they say two thousand zero zero party over
Oops out of time
So tonight I’m gonna party like it’s 1999

1999 – Prince

Sell a Home Series

Today is the second of three parts where I examine the
conditions, circumstances and options owners face when they want to
sell their homes:

Sell a Home: For Sale By Owner

Sell a Home: Cash Listing Services

Sell a Home: Conventional Brokerage Listing


Cash Listing Services

I still consider Cash Listing Services under the umbrella of FSBO
because the owner is acting as their own agent even though a broker is
now involved to some degree. When FSBOs realize they can’t
beat the system, they set out to find a way to minimize their costs
working within the system.

There are many brokers out there that run MLS listing services. For
anywhere from $250 and up, a broker will list your property on the MLS
and eliminate the 3% buy-side commission. The level of support after
that varies, but as you can imagine, it is not very much. Someone
probably looks over documents (someone should, their license is on the
line), but there is little assistance in filling the documents out.

On the plus side, this does get the property on the MLS which
overcomes the primary weakness of FSBO; lack of exposure. Greater
exposure generally makes for a higher sales price, or to be more
precise, greater exposure increases the probability of encountering the
buyer willing to pay the highest amount for a property.

A klutzy FSBO may find a premium cash buyer at Starbucks, but the odds of that happening are about like hitting the lottery. The greater the individual exposure a property receives, the greater the likelihood that the right buyer is going to see it.

In addition, exposure increases the likelihood of multiple offers, a
situation that serves to further motivate buyers. The FSBO who finds
the best buyer in a non-competitive process will find that buyer less
motivated to bid higher and that same buyer feels no urgency to close.
The lack of a exposed bidding process means the buyer is not motivated and feels no urgency and thereby the buyer is less valuable to the seller. A buyer obtained through a high-exposure process will be a more motivated and more valuable buyer.

Cash Listing Services take cash!

Most services require an up-front fee for listing properties on the
MLS. They don’t care whether or not an owner enters into a transaction
as long as many FSBOs want to try (don’t be surprised if I launch an
FSBO listing service as a separate venture. The service has client
value if done properly.) The small fee stops most FSBOs because they
loathe spending money, even $300 if they have no guarantee of success.
This is also an area of enticement to the Dark Side of full commission
brokerage (using an agent is the failure of an FSBO if you accept their
mindset); full commission brokers will not charge any fees unless they
close a transaction. That is the alignment of interests that makes the
commission system work.

How much commission to pay?

Once you enter the world of cash listing services or discount
brokers, you can pay less than the full 6% most listing agents demand.
The question is how much less?

If you list with a cash listing service (or a relative), you pay for
the listing, so you cut out 3%. You can set the commission at whatever
level you feel motivates buyers agents who work the MLS. If you get
cheap and put 1%, clients of buyers agents will still see the property
on the MLS, and I am sure the buyer’s agent will work just as hard for
1% as they would for 3% in a normal transaction…. Do you see the
problem? Human nature gets in the way.

If you are a motivated seller, you might take advantage of a cash listing agent (why not spend the money when you know you
are going to sell the house). You can set the total commission at 4%
and have it all on the buy-side. This will entice every buyer’s agent
on the web to see your property; human nature again.

The next level up is a discount broker which is another version of
the reduced service and reduced price model. You can get commission
down to 4.5% (1.5% list and 3% buy), and there are various grades of
discount brokers going up to 6% full-commission brokers. These may be
good alternatives to sellers with various levels of expertise to help
the process along.

Seller is responsible for MLS marketing presentation

How much of a problem this is depends on the sellers skills in
marketing and their attention to detail. An MLS presentation has few
data points, so each one is important. The sellers who list with these
services (it may be the servicers fault as well) do an amazingly poor
job at presenting their properties; the descriptions are short,
inaccurate or missing entirely, the pictures are of low resolution,
poorly staged and poorly lit; in short, everything that can be wrong
generally is wrong. Again, many have skills here they can exploit, but
with FSBOs the MLS presentation quality — or lack thereof — speaks
for itself.

Advertising outside the MLS is still the seller’s responsibility

Being cost conscious, most FSBOs do not undertake a meaningful
property awareness campaign (many full-service brokers don’t either,
but that is another issue). Some will take out a Craigslist ad or other
classifieds, and some will print up fliers, but their efforts will be
measured in the hundreds of people and the tens of potential buyers —
none of which may be interested in the property. Most sellers don’t
have the resources or the expertise to reach a large number of buyers
and make a real difference in their efforts outside the MLS.

It is costly to reach people by conventional means even for the
established brokerages. Print media is dying, and most people look to
the internet today to find real estate (National Association of
Realtors studies show 84% of buyers now use the internet as their
primary method of finding properties). How is a novice FSBO going to
navigate those waters? Most don’t try.

Full-Service Brokerage

Tomorrow, I am going to explore the good and the bad of the full-commission model.

Cash Listing Services are a good option

There is money to be saved here, and this method does overcome the main problem of FSBO, lack of exposure. In fact, for the very motivated or those that must sell, this is probably the best method because it allows the seller to increase the motivation to buyers agents while reducing their overall cost. For the motivated with some expertise, this is the way to go.

4 SPRINGFIELD Irvine, CA 92604 kitchen

Irvine Home Address … 4 SPRINGFIELD Irvine, CA 92604

Resale Home Price … $349,000

Income Requirement ……. $72,264
Downpayment Needed … $12,215
3.5% Down FHA Financing

Home Purchase Price … $324,000
Home Purchase Date …. 10/30/2003

Net Gain (Loss) ………. $4,060
Percent Change ………. 7.7%
Annual Appreciation … 1.2%

Mortgage Interest Rate ………. 5.00%
Monthly Mortgage Payment … $1,808
Monthly Cash Outlays ………… $2,390
Monthly Cost of Ownership … $1,780

Property Details for 4 SPRINGFIELD Irvine, CA 92604

Beds 3
Baths 1 full 1 part baths
Size 1,230 sq ft
($284 / sq ft)
Lot Size n/a
Year Built 1977
Days on Market 11
Listing Updated 11/9/2009
MLS Number H09119075
Property Type Townhouse, Residential
Community El Camino Real
Tract Wdjb

STANDARD SALE!! NOT A REO & SHORT SALE. Totally remodeled kitchen with new kitchen cabinets, granite counter tops new stainless dual sink, new micro wave, new gas oven,new powerful garbage disposal,new interior paint,laminate flooring throughout,newly installed Mirror closet doors. Close to Irvine high,Heritage park, UCI.Ready to move in!!! Very motivated seller. Make an offer !!!

Today’s featured property was purchased back in 2003, and despite the artificially low interest rates, this property is going to sell 6 years later for no gain. The owners have been conservative with their mortgage, so if they can get this asking price, they will escape with some equity.

24 thoughts on “Sell a Home: Cash Listing Services

  1. wheresthebeef

    We still have a ways to go before we hit bottom. A 30 year old 1200 sq ft townhouse with zero curb appeal is listed for the bargain basement price of 349K.

    I was recently in Houston, Tx. For 349K, you can get a brand new 4000+ sq ft mansion with every upgrade known to man located in a very nice part of town.

    The Irvine premium counts for something…but not that much.

    1. movingaround

      I agree – but there seem to be a lot of people living here in CA that don’t really realize the life they could have if they left here. As long as there is that sort of seclusionist (is that a word?!) attitude I think prices will not go as far down as Houston any time soon.

    2. IrvineRenter

      You get pergraniteel in Irvine condos. That must add $10,000 or more in value. As for the other $200,000 in premium, well… Irvine is different, you know?

      If this is a bottom, even for the low end, it is an artificial bottom engineered with payment affordability. The only thing keeping high end prices up is a lack of available inventory.

      1. tonye

        Seriously, though.

        The argument that you can get a mansion in (fill_in_the_blank) for the price of a condo in Irvine is logically invalid and boring.

        (1) There’s always a reason why (fill_in_the_blank) is cheaper than Irvine. Mostly, people would rather live in Southern California than in (fill_in_the_blank).

        (2) There’s always going to be a place cheaper than (fill_in_the_blank). Wanna live in Outer Mongolia? I hear you can get a very large yurt with two herds of yaks for the price of a one bedroom condo in (fill_in_the_blank).

        (3) There’s always going to be more expensive places than Irvine and SoCal too.. Want to try Paris?


        1. IrvineRenter

          The real argument is more nuanced than that.

          If McMansions in Orange County typically trade for a 2-times premium to(fill_in_the_blank), why are they suddenly trading for an 8-times premium? Does OC real estate magically hold value?

          The substitution effect is going to return these premiums to historic norms, and it will happen by the high end coming down more than the low end stabilizing or going up.

        2. wheresthebeef

          Like IR said, the real argument is way more nuanced than that.

          OC has always been expensive compared to (fill in the blank). It’s gotten to the point where it doesn’t make sense for certain people to live here anymore…college grads, young people wanting to start a family, the true middle class, etc.

          This might not make sense to some of you people sitting on mountains of bubble equity. But do yourself a favor and poll some recent local college grads and ask them if they plan on staying in OC for the long haul. I can almost guarantee you the answer will be a resounding NO mainly due to the insane cost of living.

          And that is the road we are going down.

  2. Geoffrey Chaucer

    The property description was a total yawn until “new powerful garbage disposal.” Yee-haw. I’m coming to the open house and I’m bringing chicken bones.

    1. tonye

      It’d better be a one horsepower unit. Those things reverse direction everytime and -oddly- can be quiet.

      Yes, I want to buy a place with a “powerful” garbage disposal. I got two in my kitchen. One is 1hp but the other is only 3/4hp. I think I should upgrade to 10hp units. They can take the whole chicken in one gulp. 😉

  3. thrifty

    Another approach in the FSBO armamentarium is to post a for sale sign with “broker cooperation” on it in the front yard (or wherever an agent would post their sign). This is based on the assumption that anyone (agent or customer) looking in the area will drive by and see it while looking at other properties. This narrows the prospects to those who are interested enough to actually visit the area. Were I an agent, I’d take the time to call and get the skinny on the property and the commission offered. If I didn’t like the terms, I can pass. In my view, any agent unwilling to make a quick call probably isn’t worth dealing with. This would potentially allow more flexibility in the price if a buy contacts you directly.
    The matter of complexity of the buying process has already been addressed earlier – have a real estate attorney draw up the contract. Their fee is a pittance compared to the 6% RE commission. Have you ever noticed the fine print on the standardized multi-page purchase offer? It notifies you that this is a legal contract, that the RE agent is not an attorney and if you want legal advice you should consult an attorney.
    Think of it this way – you’ve got a home worth $500K-$1M. You put in 80 hours from start to finish selling it and paid an attorney $1500 (or less). At 6%, you’ve just paid yourself $356-712 per hour.

    1. IrvineRenter

      The cost effectiveness of using an attorney to get the documents correct is accurate. It goes back to my observation yesterday that FSBOs are generally unwilling to spend a few dollars — even very efficient dollars — to help with the sale.

  4. matt138

    I personally know a top producing agent. She makes (and spends) a ton of money and doesn’t know shit about fundamentals, but she is a killer when it comes to sales and negotiation. I wouldn’t take any advice from her, but I would gladly pay the full 6% commission for her to sell my house.

    1. bltserv

      Thats so true about the top producing sales people I have ever dealt with. They are just sharks. They may know very little about the product or the internal details of the transaction. But they understand the art of “Hustle”. And customers pick up on that quickly. Business is and will always be the path of least resistance. Salespeople are BORN. Its never going to work for the booksmart crowd.

      1. newbie2008

        Ignorance in selling is a big plus to avoid the bad feeling or being morally wounded in participating in selling a bad product at inflated prices.

        If you knew that a person is has a 85% chance of defaulting on a loan, whould you approve or expidite its approval? What about a 95% chance of defaulting? Along as its not your personal money and your paid off the top, the RE/Banking industry encouraged and are still at this RE credit scam.

        BTW, I have met a few educated and moral sales people and business people, but that’s a few compared to most who are either challenged in one or both areas.

  5. phil

    Awesome topic! I have a few of comments/questions on this I hope can prompt some further discussion.

    In the age of Redfin, getting on the MLS seems like the prime step in having market exposure. Other media purchases seemingly get very little bang for the buck.

    On the topic of FSBO style selling, if one pays to get on the MLS but wants to minimize the buyer commissions (to say .5% or 1%), how does that work? If I want to reach Redfin type buyers who do all the research themselves, the buyer side commission seems irrelevant. Can a buyer Realtor (let’s say a Redfin agent) really stop their client from choosing my home if it’s the best one for them?

    On the flip side, if I’m a buyer and want to cut out the buyer side Realtor (taking that commission off the price of the house), how do I make that happen? The main difficulties appear to be the previewing of the homes and ensuring the seller Realtor doesn’t assume the buyer side commission becomes a windfall to them. I can do all the research myself and typically the seller’s Realtor is on the hook for most of the liability anyway. Why should I pay a buyer Realtor?

    I know Realtor’s will be cringing at these questions, but if I can do all the legwork, they _should_ get cut-out.

    1. IrvineRenter

      “Can a buyer Realtor (let’s say a Redfin agent) really stop their client from choosing my home if it’s the best one for them?”

      Not directly, but when the person you are looking to for advice is lukewarm at best about a property, buyers are not likely to go against their agent’s advice, and few agents will pursue the property aggressively.

      Commissions can be set at whatever you want and the listing agent agrees to. A cash listing agent will put any commisson amount you want — they don’t care, you are paying them cash for the listing.

      It is much more difficult to cut out the buy-side commission. If you are a broker or salesperson, you can take that side of the transaction, but if you are not, the only option you have is to go to a discount broker. Any buyer who approaches the listing agent is simply making that listing agent a double commission. You would think it would help facilitate a 3% lower price, but human nature says otherwise.

  6. tonye

    On the FSBO… I imagine that buyers would want a break on the price too, huh?

    I guess a smart FSBO seller might want to advertise a “lower price” to the buyer if they bypass the real estate agents and go directly through a lawyer and escrow.

    On that, would a buyer see lower trash charges? Are those trash charges ingrained in the RE process?

    Again, a smart FSBO seller might want to set the process transparent and save money for both buyer and seller. Using the internet might make a lot of sense… put the house on the MLSB and add a link to a website that describes the house and the financial advantages for the buyer.

  7. OC Progressive

    Another great post!

    I had a really frustrating experience with full service realtors selling a rental property we owned.

    There were some problems getting the loan approved, and our realtor and the buyer’s realtor were much more interested in closing the deal on time, and did not relay information between the buyer and me.

    It would have been mutually profitable for both buyer and seller to postpone the deal, but the realtors had their own financial agenda. I was furious when I got the full story from the buyer and confronted my listing agent.

    The last property we sold went as a direct sale to the tenant, where we split the commission and had a great local escrow company working with us.

    We got an independent appraisal that was confirmed by the lender, and we sold the property for 3% below the estimate, so everybody won.

    I had a realtor review the contract, and offered to pay him a flat $1,000 fee, but he couldn’t make that work, so he did it gratis.

    The 6% model is absurd, and we need multiple options that reduce the cost of the transaction. But I have to say that the title insurance racket is even worse than the real estate racket.

        1. tonye

          No, no… you already paid for title insurance the first time you financed. So, why can it transfer to the second lender.

          I mean, what’s the point of title insurance? To make sure the title is clear, right? So you already paid someone to start with, why do you have to pay again?

          1. thrifty

            Try using that argument with the next lender you borrow from. More specifically, try getting the person who fills out your application – and far removed from the approving body – to o.k it.
            Do you know if fannie, freddie or ginny mae require a currently issued policy with any loan they buy – and guess who your lender will be selling the loan to? Can you imagine trying to get documentation of a policy that’s 20 years old?

    1. thrifty

      I agree the 6% model is absurd. It is my understanding that it began after WWII when U.S. median home prices (admjusted for inflation were around $37,000.

  8. Mesa AZ CPA

    There is no doubt that title insurance is a racket. Unfortunately, it is required by the lender so what are you going to do?

  9. southoftheboarder

    6% for SoCal RE is too high of a fee considering the inflated price and work involved.

    Daily Real Estate News | December 1, 2009 | Share
    Commercial Loan Defaults Highest Since 1993
    The default rate on commercial real estate loans held by banks hit 3.4 percent in the third quarter, up 0.52 percentage points from the second quarter, according to research firm Real Estate Econometrics.

    At 3.4 percent, the default rate is the highest it has been since 1993 when it hit 4.1 percent.
    The default rate on apartment buildings is even higher, reaching 3.58 percent, up from 3.14 in the second quarter.

    Real Point Chief Economist Sam Chandan says not all banks’ books of commercial business are in trouble because some with large exposure to commercial real estate managed their investments well, including conservatively analyzing loans and holding the borrower accountable for payment.

    Source: Reuters News (11/30/2009)

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