Avoid the Scam

Now that you have advertised your home as a "For Sale By Owner"(FSBO), you have become the prime target for hundreds of Realtors® that specialize in listing For Sale By Owner (FSBO) properties to get a commission. Many of these Realtors® are very good at talking Sellers into doing things that may not be in the Sellers best interest. We recommend you continue reading to avoid the possible loss of valuable time and possibly thousands of dollars.

THE CULPRITS - The industry calls these real estate agents "Listing Agents" because they put almost all of their effort in obtaining listings but almost no effort in personally working with Buyers. Once your signature is on the listing agreement, they will place your property on the Multiple Listing Service (MLS) and move on to the next FSBO.

THE APPROACH - In almost every case, the initial contact from the "Listing Agent" starts as:" I've got a Buyer that may be interested in your property. May I preview your home so that I know it is what my Buyers want?" In almost every case the "Listing Agent" has NO interested Buyer. What the Listing Agent really wants is the opportunity to meet the Seller face-to-face and present their "SALES PITCH" for a listing.

THE CON - Most of these Realtors® are very charming and convincing. They claim they have the ability to sell a home faster and for a higher price than anyone else. They have special programs, a list of ready Buyers, home tours, radio programs, and the list goes on. They explain that in order for them to dedicate the massive amount of time and effort they need to effectively market your home; they need to make sure they will be compensated. They need a listing agreement with a 6% to 7% commission.

The reality is that these “Listing Realtors” almost never sell their own listings.  If all their special programs worked to find the Buyer, then the listing realtor would also be the agent of record for the Buyer.  By reviewing the records that the MLS maintains on their members, it can be clearly seen that this is almost never the case.  All those fabulous programs the “Listing Agent” has for the most part are a sales pitch to get you to list with them.
 
THE HOOK - The “Listing Realtor” purport that since they have all of these special programs they can actually sell your home faster and for a higher price. By simply adding their commission on top of the price you want, you will still receive the same amount. According to them, you will have the convenience of them representing you, the home will sell faster, and you won't get a penny less. Why wouldn't anyone go for this deal, IF IT WORKED?

THE REALITY - There are only two things that make a measurable impact on selling a property. First Price and Second Exposure. Unfortunately if a Seller falls for "THE SCAM", they just sacrificed the factor of price. Because the commission has now been added on top of your desired sales price, the property is less of a deal to a prospective Buyer. The commissions must also be taken into account when you negotiate with prospective Buyers. Commissions up to 7% leave you little room to drop your price or pay closing costs to entice the Buyer to purchase your home instead of your neighbor's.

Most sellers don't realize that there is an effective ceiling at which a home will sell, and that is the appraised value. When the Buyer seeks financing the lending institution will always require a certified appraisal. If the sales price is higher than the appraisal, the lender will not loan on the amount that is higher. In such a case the Buyer has the right to terminate the contract and get his earnest money back. Since it is unrealistic to think that a Buyer will pay more than appraised value the Seller only has 2 options. Do nothing and lose the Buyer or drop the price.
 
The Listing Agent knows this, but they also know that it is difficult for the Seller to get out of the listing contract. Once the home is listed, the Realtor has typically six months for the Seller to get desperate and drop their price to reflect the market price. The reason they are willing to go through this charade is that the Realtor knows that they would not have gotten the listing otherwise. Now that they have gotten the listing, they only have to wait.

THE ANSWER - Decide before you are contacted by any real estate agent what your plan is and what your response will be. Are you only able and willing to sell your property "For Sale By Owner"; or would you consider paying a realtor commission to place your property on the MLS.   If you list on the MLS will definitely have greater exposure but it will come at a considerable cost.  Our recommendation is that if you feel you need the exposure of the MLS let us recommend a company that will put you on for a considerable discount with no reduction in service or exposure.
THE RESPONSE - When any real estate agent contacts you, we recommend responding in either of these two ways. You can save a lot of time without risking the loss of any opportunity.

A) If you have decided that you ARE NOT willing to pay a commission.
Realtor - "I have a Buyer I would like to ----------------------------------"
Seller - "At this time I have decided that I am not willing to pay a commission. If and when I decide, I have a Realtor® that I have already chosen to list my property on the MLS. If your Buyer is still available then, I would be happy if you brought your client and you would receive the standard 3% commission.

B) If you decide you ARE willing to pay a 3% Buyers Agent commission.
Realtor - "I have a Buyer I would like to ----------------------------------"
Seller - "I am willing to pay you a 3% commission if you bring me the Buyer.  I am not however interested in listing at this time on the MLS.  If you have a Buyer I would be happy to sign a For Sale By Owner Commission Agreement with their name on it paying you the standard 3%. 
Realtor - "I really need to preview your property before I bring my client"
Seller - "I can understand why you would feel that way; and I would be happy to let you preview my home. However, I would like to again say that I am not interested in having my home listed over the MLS.  If, and when, I decide I want to list my home, I have a Realtor® that I have already chosen.  When you come, I would be happy to sign a For Sale By Owner Commission Agreement for 3% with your Buyers name on it, however, I do not want to have any sales pitch on listing with you on the MLS.  If that’s agreeable then please do come and I would be happy to show you my home.
If the Realtor® do have a "Real Buyer", they will be happy to oblige. If they are sneaky "Con Artists" looking to give you a sales job, this should get rid of them.
FSBO Commission Agreement - We recommend using the contract you can print off of this website.  It is designed to protect the Seller and only pay a real restate agent if they find and accompany the Buyer.  By using this contract, Agents that do have a "Real Buyer" are compensated and thus motivated to bring Buyers, but "Listing Realtors" that have no Buyer and only a sales pitch are eliminated.  We would recommend faxing this form to the Agents and requesting they fill in the name of the prospective Buyer. Also ask for a loan approval letter for the prospective Buyer. Any Buyer working with an Agent should have a loan approval letter or you should question the experience and ability of the Agent.