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.
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:
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
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.
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.
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
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
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.