2012 May 8th

Is That Hoboken Condo For Sale by Owner?

It May Look Like It Is But What If It’s Not?

This past Saturday my buyers told me they were going on Sunday to see a property at an open house which was a “For Sale By Owner”, or FSBO”.  I took a look at the flyer they had picked up for it.  Guess what?  Even though it looked like a FSBO and was written like a FSBO it was most definitely NOT a FSBO.  The flyer actually had an MLS number on it.  But there was no agent name, no brokerage company identified, nothing else that would indicate that this seller was represented by a real estate agency.

I recognized the address from seeing the property hit the MLS as a new listing  just a few days ago. That means that the sellers had, in fact, entered into a formal contract with the listing agency to pay them a 5% commission in exchange for selling their home.  Furthermore, the agency, by putting the property on the MLS, had contractually agreed to give half of that 5% commission to any agent who brings a buyer for this home.

I decided to accompany my buyers to the open house.  Outside the property was a very home-made looking “For Sale” sign with no identification of the brokerage or listing agent.  It looked very much like what you’d see on a FSBO.  Inside were the husband and wife with a bunch of cookies on the table and more of the same flyer.  They were showing people around and answering questions.  No listing agent in sight.

So why does all this matter?

The biggest mystery to me though, is why would a seller ever be willing to pay 5 or 6% to list a property with a purportedly “full-service” brokerage and then prepare his or her own marketing materials, signage, and host their own open house?  That is one very un-savvy seller.  If you’re paying tens of thousands of dollars for service from a brokerage you should get it!  These sellers must be clueless.

This all seems to me to be very deceptive and possibly unethical.  Is it an attempt by the broker to trick buyers into thinking there is no agent involved and the sale is being handled directly by the owners? Will this broker, who gets the sellers to do all the work, swoop in and pocket both sides of the commission?

Does this sound kosher to you?

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  1. JC

    Not kosher, sure…but these sellers need to take some responsibility here to demand the services they pay for. Also, who knows, maybe they negotiated with the broker to list on MLS for 1% and they handle the rest of the selling process. Just because its listed on MLS doesnt mean a guaranteed 5% commission is paid, or does it?

  2. Craig

    The only sure fire way to know what was going on in this situation would have been to ask the owners if they had an agent while you were at the open house. Here’s my question: if it turns out it was FSBO and the sellers have no intention of paying commissions to buyers’ agents, how is that situation dealt with? Does the buyer’s agent steer her clients away from that property, or does she step aside from the transaction, or do the buyers have to pay their agent’s commission out of their own pocket? I’ve always wondered how such situations work because I assume FSBO can be tricky when an agent is involved on the buyer side.

  3. Lori

    Maybe I wasn’t clear. It IS NOT a fsbo. They ARE listed. That is the whole point. I did actually ask the owner – she said oh, yes, we have an agent. He’s from out of town. I asked how she found him and she said on the internet.

    Understand that in Hoboken we do not typically act as buyer’s agents when we work with buyers. The buyers don’t sign any contract with us. If they find something through a friend or neighbor or buy a fsbo, we get nothing. There is no legal or contractual obligation for them to pay us. We agents all know that’s the deal.

    We are not technically an agent at all. If you look at our contracts or the incredibly poorly written consumer information statement we are required to give customers, it says we are “transaction brokers”. That’s just another name for a sales person. This whole concept is a huge legal fiction, in my opinion, because as soon as we start acting like an agent (giving advice, making representation, etc.) the law will create an implied agency.

    If I know my buyers are looking at what is really a fsbo, I step aside and let them do their thing without me. Sometimes, an agent will ask the seller if the seller would be willing to compensate the agent if the agent brings a buyer. Sometimes the seller says yes. I’ve had this happen too.

    Hope that all makes sense.

  4. Lori

    JC – the MLS is a contract among brokers. According to the listing terms right on the MLS this property is a 5% total commission with 2.5% going to the other agent and, believe me, that listing agency is contractually obligated to pay 2.5% to the agent who brings a buyer or there will be arbitration/litigation!

    This was NOT a discount brokerage deal. They do exist. A seller pays a flat fee (about $1,000) simply to get the property listed on the MLS and then pays the buy side of the commission (usually the typical 2.5 or 3%). In that case, the seller makes the appointments, shows the property, negotiates the sales price, handles the ton of work that comes after a buyer is found. That is not what’s going on here. This seller is paying full price.

  5. Lori

    Forgot to mention that the photo of the property the agent posted on the MLS is SIDEWAYS!

  6. JC

    well….clearly the sellers broker is not acting ethical and the seller doesnt know better or doesnt care. Lori, are you reluctant to represent buyers in a FSBO transaction? What if seller absolutely agrees to pay 2.5% to buyers broker?

  7. Lori

    Yes, it’s a very strange situation. The sellers ought to wise up. Maybe they should start reading real estate blogs.

    I will “represent” a buyer in a fsbo if I get paid, of course. But I don’t work for free. If there is truly no compensation, I wish them luck and move on.

  8. JC

    Im wondering about FSBO with legit compensation for buyers agent..do you think other agents steer clear? Do agents believe in protecting the tradition of using an agent to sell and in turn refuse to work with or bring their clients to FSBO? I’ve just always wondered what agents think about FSBO.

  9. Lori

    I think if we (agents working w/ buyers) are paid we will show fsbos. The other problem is that the sellers rarely know how to handle the transaction so we end up doing their work throughout the deal so that it closes. It’s a big pain but no different than working with a listing agent who is incompetent.

  10. JC

    thanks

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