COMMISSION FREE Real Estate?

[A3rdWorldMan]

Hi, all…

I’m soon going to be listing my house, and I had a question…

Has anyone heard of Free to See? They’re a national company and a franchise just opened up in my area. They claim to be “commission free,” collecting a weekly fee to list, market, show, and broker my property, then when the house goes under contract, my financial obligation ends.

I gotta believe that if it costs me $100 a week to list my home (asking $325,000), even if it’s listed for a year, it’ll still be WAY cheaper than the 6% commission I’d pay an agent… Been to their website freetosee.us, and I don’t see why it wouldn’t be worth it…

Am I missing something? I want to use them – looks like they’re gonna save me a ton, but I’m afraid there might be a “catch” that I’m not seeing.

[RESteve]

In my specific locality, nearly 90% of buyers are represented by a real estate agent to purchase (because it's free). These agents are not browsing national classified sites, or FSBO magazines to search for homes. They search the MLS. If you're listed there and priced right then you should be good to find buyers.

If you feel that your home will find a buyer through the site, then by all means, take the risk. I'm always leery about paying for something that isn't proven to give me what I want. What do they say about the buyer's agent commission; who pays that?

[metaylor9]

I agree with Steve, like it or not buyers are conditioned to "search the MLS" for homes to buy. You might have been able to sell it like this a couple of years ago when buyers were scouring neighborhoods for any home that was not sold. I guess it depends on how motivated you are to sell...if you have time to burn and don't need to sell your home in a certain time frame it might be worth the risk.

[erogers]

Hi, all…
...even if it’s listed for a year, it’ll still be WAY cheaper than the 6% commission I’d pay an agent…

And I bet that's exactly what they're hoping for. Listed for a year...no sale. Heck, listed 2 years...no sale - even better! Get my drift?

With a REALTOR at least you don't pay anything unless you get results.

Why don't you go FSBO if you don't feel you need a REALTOR?

[Northern_IL]

Any outfit that takes money without results is bogus in my opinion. It doesn't matter to them one way or the other if your house sells or not because the "pay is the same".

The 6% you mention is negotiable. I can guarantee you that there are agents out there that will bring that number down. As someone else mentioned, it comes down to motivation for you. If you're in no hurry to sell, then take your risk. Just keep in mind that if your house doesn't sell, not only are you going to go back with a full-service agency, you'll be out your $100 a week too.

In addition, there are two sides to a transaction. What's the buyers agent getting here? A buyers agent will be looking for their cut on this deal. 2%? 3%?......that 6% isn't looking to bad about now is it?

[BrandonSternfield]

There are two ways to look at this, and the debate has been going awhile. Allow me to make an analogy to help illustrate.

You have two contracting firms for construction. One is paid per job (ala 6% total price), one is paid hourly (ala 100 a week). The one paid per job will try as hard to do it as fast as possible, though there may be a lack of quality sometimes. The hourly will spend more time making it a better product, but will take longer to do it.

Granted, that is the extreme assumption of both, but that's what you are faced with. When a realtor has a 3-6% waiting for them, they want it sold regardless of that warm fuzzy feeling you get when you help someone. For $100 a week, they could literally do nothing, and just talk about fish not biting, till they lower your home to a small enough price that they could sell it without effort.

Or they can be really good, and sell it 1-3 weeks out. No way to know for sure. But at least with a normal real estate commission, you're guaranteed that you only pay them if you sell.

[Saodavi]

Yeah, I'd do FSBO too before paying somebody to not do anything ... especially a company that I (a Realtor) have not heard of. There are plenty of other sites like "Buy Owner" (sp?) which can market your FSBO home relatively cheaply.

A second point I'd like to make is that not everybody can or wants to keep their house on the market for years at a time. Usually people need to sell for a reason. Perhaps they're moving (duh), outgrew their home, or have other needs which are more important than saving $15,000.

And finally, there's opportunity cost. By choosing a method which you know will take longer to sell, you're paying more in mortgage payments than you otherwise would. Statistically, the longer you stay on the market, the lower your selling price will be. Thus the "savings" you gain from not using Realtors can be negated by longer holding costs, lower sales prices, and whatever fee's you're being charged by "FreeToSee".

That's my 3%.

[A3rdWorldMan]

Thanks... Actually, I called 'em a little while ago... and I raised these very questions when I spoke with them.

He assured me Free to See guarantees performance in all duties of real estate brokers as well as the Realtor's Code of Ethics -- showing, advising, marketing, promotion, negotiating, contracting - as well as all of the preparations for closings with the appraisal, title, inspector, surveyor, banker, etc...

In fact, he IS a Realtor as a member of The National Association of Realtors just like many of you. He simply does not charge a commission... this is something very different -- even different from other FSBO companies -- I think I like it.

He said he wants me to work with him directly and closely with buyers who have an interest in my house because I know my house better than anyone in the world right now. And he'll be there to help me, guide me and protect me. He wants to INCLUDE me and negotiate on my behalf with me.

He said that it's ok for me to talk, email and discuss my house with buyers because he's not afraid of losing a commission in the sale. THERE ISN'T A COMMISSION TO PROTECT HERE. I like that. It seems that brokers in the past have somehow dropped the ball in the communications between buyers and sellers and now that's not happening. I'm included here.

And he's MORE motivated to sell houses quickly. Because he guarantees all of his marketing services, he doesn't get paid if he doesn't perform. And frankly, if he doesn't sell my house, I'm NOT going to refer my friends who have houses to sell to him. Let's face it ... he's got to sell houses to get more listings because listings is where he makes his money. If he's not selling these houses, who would want to hire him?

So if I can reduce the asking price of my house - get more people to see it - close in the sale faster - well I'm way ahead here. It's true that if I sell my house in the first week - I'm telling everyone that it cost me a hundred bucks or so, instead of $18,000. It's that simple.

MLS - no problem. It's in there. I asked who pays the buyer's commission? He said who signed the contract for representation - and if someone needs funding to pay a buyer's agent, well then negotiate it in the offer. If my affiliation with him sells the house directly then that's that. Last time I checked, it was the buyer who decides the home the buyer wants to buy.

Seems simple to me. I think I'm gonna give it a go... Shall I let you know how it turns out?

[Saodavi]

The reason my clients are not allowed to talk to the other party is to keep them from saying/doing something stupid that will undermine their position in the negotiations. It happens all the time. Clients should NEVER talk to the other party directly. That's why they hired a professional. Because they KNOW they don't know what they're doing. Could you imagine of your attorney told you to go ahead and work directly with the other party? You'd be toast. This guys is too lazy to do any work. His business model requires a LOT of customers for him to make a living. He really can't give you good service. He's duping you in advance by telling you that he's going to "keep you involved in the process" but really, he's excusing himself in advance so that you won't be disappointed when he doesn't do anything. The Microsoft tagline "It's not a bug, it's a feature" applies here.

Also doesn't have to do with commissions. Commissions are determined by a CONTRACT. If I have a Buyer Rep agreement or a Listing Agreement, I'm getting paid regardless. I can sue (and win) if they don't pay up. The "commission" argument is a smokescreen. It's a non-existant "straw man" argument designed to distract you from the real issue; that he doesn't want to get very involved in the transaction ... he wants you to do most of the work. He probably dreams of clients like you .... or this is a very elaborate add campaign.

Secondly, he's NOT motivated to sell quickly. He's paid by the week (or whatever). Like an hourly employee, he makes more money by NOT selling your house and by taking longer. Furthermore, getting referrals for doing a good job is not unique to his business model. All commissioned sales persons and all small businesses in general desperately need and seek referral business for jobs well done.

Thirdly, you are now talking about reducing the price of your house so it will sell more quickly. I'm assuming this is because there is no commission. While it's true that a cheaper house will move more quickly you're basically in the same financial position. You're giving up $18k in Realtor fees so that you can lower the price by $18k and sell it quickly and cheaply without paying a commission. What's the point? If I'm walking away with the same amount, I'd just as soon pay a professional to to all the work for me so I wouldn't have to fool with it.

Also, it's not necessarily the buyer who decides what home to buy. The buyer will buy the home they want but they will likely choose from the list of homes that their Realtor has found for them. If you don't make that cut, you don't get your house shown at all ... and by extension, it doesn't get sold. Realtor's sell houses.

Buyers Agents Commissions. The Buyer Rep Agreement generally says something along the lines of "Buyers will pay their agent 3% but the Agent will first seek to obtain payment from the Seller". Thus Buyer's agents use the fact that almost all Sellers are paying their commission so the agents services is effectively free to the Buyer. The Buyer doesn't want to pay a cost normally paid by the Seller out of their own pocket. Thus they will agree to only be shown homes in which the Seller is paying the commission. Again, your house will not be shown under these circumstances.

It's obvious that you've bought into this sctick pretty hard so there's not a whole lot of sense discussing it. Your approach is not uncommon to those unfamiliar with the real estate industry and that agent is taking advantage of your lack of knowledge. His pitch is geared directly toward the common misconceptions if the business and you're buying into it ... as expected.

However, we would all be very interested to hear how things turn out. Be sure to stop in periodically and let us know how it's going in terms of showing, offers, etc.

Good Luck!

[A3rdWorldMan]

I'm gonna address your points one more time here, and then be done, I think. Didn't mean to stir the kettle... Was just hoping for a little input...

"The reason my clients are not allowed to talk to the other party is to keep them from saying/doing something stupid that will undermine their position in the negotiations..." (And risk losing MY commission)

"...but really, he's excusing himself in advance so that you won't be disappointed when he doesn't do anything." If his marketing and broker services are guaranteed, or I don't pay, then why would he not do what I'm paying him to do?

"...getting referrals for doing a good job is not unique to his business model. All commissioned sales persons and all small businesses in general desperately need and seek referral business for jobs well done." Who said it was? If YOU don't sell my place quickly, I'm not giving anyone else YOUR name either... So you're BOTH motivated to sell my place quickly.

"While it's true that a cheaper house will move more quickly you're basically in the same financial position." You made my point for me here.

"...it's not necessarily the buyer who decides what home to buy." Of course it is. Do you buy anything you don't want to buy? Especially something that costs $300K?

Re: Buyer Agent Commissions: "The Buyer doesn't want to pay a cost normally paid by the Seller out of their own pocket. Thus they will agree to only be shown homes in which the Seller is paying the commission. Again, your house will not be shown under these circumstances." This has been my beef with commission based real estate agents in the past... You guys shouldn't get to control the transaction -- who sees which home, who shows what home, who buys from whom, who sells to whom... I'm paying you 16-20 grand to just take the entire process out of my hands, and trust that your doing it for MY OWN good? I just don't know about that. I'd prefer to be involved more deeply than that.

"It's obvious that you've bought into this sctick pretty hard..." And the more you try to convince me otherwise, the more I'm convinced I'm on to something...

Personally, I've been burned by Real Estate agents too many times to count, and am searching for ALTERNATIVE ways to list, market, and sell my home... I knew when I posted this topic that I was walking into the snake pit while wearing a suit made from white mice, and the reaction I got was expected...

Thanks for the input, though... I'll let you know how it goes.