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FSBO a No Go!

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This blog prides itself on the quality of real estate information we deliver each and every day. We try to gather empirical evidence to validate the positions we take. We do not use just an anecdotal story to make a point. We also do not get caught up in the sensationalism of the moment. However, today will be different.

We can't resist commenting on the story which recently appeared in the Wall Street Journal regarding Colby Sambrotto, the founder and former CEO of forsalebyowner.com. It seems the founding father and lifelong evangelist of the concept of selling your home without a real estate agent was forced to hire a broker to sell his home after failing at what he preaches others should do.

After failing to sell his NYC apartment on his own as a For Sale By Owner (FSBO), Sambrotto hired a broker and paid a 6% commission in order to get the job done. His personal experience helps refute some of the myths Sambrotto has been espousing for over a decade. Let's look at two of those myths:

Myth #1 - You Will Pocket More Money Selling on Your Own

Most FSBO sites say you can save the commission by selling on your own. What happened in Sambrotto’s sale?

From the WSJ article:

“The broker, Jesse Buckler, said he told Mr. Sambrotto the apartment in the Lion's Head building on West 19th Street near Sixth Avenue was priced too low and wasn't drawing the right buyers.

By May, it went into contract, he said, after attracting multiple offers. It closed in the last few days for $150,000 more than the original asking price.”

Myth #2 - The Internet Alone Can Sell Your Home

Many have said that, with the introduction of home search on the internet, hiring an agent is no longer a necessity. What happened to the FSBO guru when he attempted to only depend on the internet?

From the WSJ article:

“Looking to move his family to the suburbs, [Mr. Sambrotto] said he carefully staged his apartment for sale himself, and put it on the market. But after using a mix of websites to publicize his apartment, he said he had only ‘middling success’ and switched to a broker because many buyers were so reliant on brokers.”

Bottom Line

There is a reason the real estate industry has been around for centuries: it performs a valuable service.

P.S. We are putting together an infographic on this story for later this week. Check it out on Friday.

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55 Responses to “FSBO a No Go!”

  1. Maggie Pollich Patch August 9, 2011 at 9:12 am # Reply

    As an agent it is great to read this….but, what I get most from his experience is what we preach all the time…..you HAVE to know your market for both pricing and marketing….that is why we are the professionals!

  2. Ha, I love this! I saw the article and had to chuckle a bit, now Mr. FSBO knows why real estate agents have been around so long, because we actually work for the commission! We are worth it! Well, some of us…

  3. Mary Ray August 9, 2011 at 1:39 pm # Reply

    Great blog article! This is exactly why you always want to hire a Realtor. One who knows the market and pricing. A realtor has the tools and skill to get the job done!

  4. Mark Brian August 9, 2011 at 1:59 pm # Reply

    The old saying “Practice What You Preach” comes to mind……

    How many people used Sambrotto’s website and did not sell at all or sold after an unnecessarily long time on market for less money?

  5. Derek Eisenberg August 9, 2011 at 3:14 pm # Reply

    There is no question that most buyers look to an agent and that agent driven listings offer access to more portals of exposure than FSBO listings. For example while FSBO sites can get you access to Realtor.com they cannot get you access to local IDX feeds or in areas like Manhattan where IDX is not prevalent, broker driven portals like http://www.ny1residential.com.

    However this does not prove a seller needs anything from an agent other than exposure. It in no way says that Mr. Sambrotto could not have negotiated or shown the unit on his own. Consequently, the best avenue for do-it-yourselfers is a flat fee mls model like http://www.mls2u.com. With this type of service, a fsbo seller can get his/her property in the MLS or in Manhattan RLS and/or OLR and save half the commission while still retaining control of the transaction.

    Also, I would not be surprised if Mr. Sambrotto’s real estate broker violated NY Dept of State Agency rules on broker confidentiality by commenting on Mr. Sombrotto’s deal. There may also be Graham Leach Bliley issues as well.

    • Steve Harney August 9, 2011 at 4:41 pm # Reply

      Hi Derek,
      Great points!! However, the broker also got the seller an additional $150,000 ($30,000 net after commission). So obviously the agent did more than help with exposure. He also helped with pricing.
      Regarding the question of agency, the article clearly states that “Mr. Sambrotto confirmed the details of the transaction..”. Regarding Graham Leach Bailey, I believe this statement is a reach at best as I do not believe the broker qualifies as a “financial institution” under the guidelines of the rule.

  6. Brian Morgenweck August 9, 2011 at 3:50 pm # Reply

    And then there was the one about the surgeon who anesthetized himself before he operated…on himself.
    Industry folks are gonna’ get lots of mileage out of this one, I’ll bet! (I know I will! ;) )

  7. Ellen Boyle August 9, 2011 at 3:56 pm # Reply

    The law allows a For Sale By Owner to act as a REALTOR. The same law allows anyone to act as a dentist if they need to pull out their own tooth. Remember Tom Hanks in the movie “Castaway” when he needed to remove a bad tooth. OOCH! Selling a home is a job for a professional as well we all know. The stats from the Profile of Home Buyers & Sellers proves that those who use a REALTOR to market their home, net more than FSBOs. We need to get this word out to the public. Now more than ever with home prices dropping, it’s out responsibility to help keep the markets up.

  8. sam August 9, 2011 at 5:44 pm # Reply

    I do believe Realtors provide a valuable service, but 6%+ commission? That is pretty ridiculous. Only in recent times have we introduced a buyers AND sellers agent. While I can see merit for a sellers agent (but not at 3%+), a buyers agent should be viewed simply as concierge service. If you know the area and are comfortable buying a home there is really no need.

  9. Helen August 9, 2011 at 8:24 pm # Reply

    I love it, I love it, I love it! I re-blogged, re-tweeted, re-facebooked! I know you can lead a horse to water…but this time he actually drank. Oh, thank you, I needed this!

  10. Stephen McCardle August 9, 2011 at 9:48 pm # Reply

    This is awesome info. It goes to show the real true value of being a REALTOR.

  11. Amy Kyker Allen Tate Company August 10, 2011 at 8:45 am # Reply

    Great article. I believe he saw the value in using a realtor!

  12. Carol Clapp August 10, 2011 at 9:42 am # Reply

    In economic hard times many may look for the “good deal” or the best way to “save money” The important thing to keep in mind, is… did we really get a good deal or did we really save money? Is there a reason for the saying “you get what you pay for?”

    Real Estate is not simple; there are a lot of laws governing real estate. Realtors have to earn a license and keep up with continuing education and spend a lot of time in the community.

    How many “Non Realtors” know what to do to make sure properties are in good condition, are free and clear of debt, know what fees to expect when buying or selling just for starters… Sure most people can find out. A home is typically the largest personal purchase or sale an individual makes. Without the proper research/training knowing what the right price is can be difficult; without the proper research/training red flags may be difficult to spot. It’s not like most people buy or sell homes everyday or even once a month, typically it’s a couple of times in a lifetime. Are you getting what you pay for?

  13. Aaron J Rosen August 10, 2011 at 7:23 pm # Reply

    I know I shouldn’t find humor in the misfortune of others… but this is hysterical, shocking, and yet at the same time doesn’t surprise me at all! During such a difficult time of trying to sell a home, why would you try and attempt to sell your own home on your own? That would be the same as going to war without any military training. Obviously the point was proven, if you hire a broker (expert, professional, specialist), you’ll save yourself time, money and a headache!

  14. Tim Woodcock August 11, 2011 at 9:17 am # Reply

    That is the first time I have ever heard of a FSBO not selling because the price was too low !! They are usually priced overpriced by a greedy seller trying to pocket the money they would have paid to a professional realtor ! In this case it sounds like the condo was grossly underpriced thus having a negative effect on the attraction of a buyer. And this guy was a FSBO guru ? Hmmmm…..

  15. Ricardo August 12, 2011 at 1:49 pm # Reply

    Hold on. If agents are so comfortable with their role in the market, why not OPEN UP MLS searches to the world? No problem, right?

    • Steve Harney August 12, 2011 at 7:18 pm # Reply

      @Ricardo,
      Most MLSs already have consumer search capability.

  16. Mike August 14, 2011 at 9:18 am # Reply

    Please. The FSBO guy is prol rolling in cold hard cash, what does he care? Obvioulsy this is embarassing, but still. Realtors love to see this article. They can stop 2nd guessing thier services for a month or two. 9 out of 10 people I talk to said thier Realtor put a sign in the yard, put them in MLS and went to the beach. Listing agents do nothing. Stop lying to yourselves. You get the homeowner to price it right or lower than others and buyers agents will sell it. Your talking NYC market here….whatever, its a whole different animal. In Anytown USA, listing agents are a scam and alwayas have been. MLS and price sell homes, society has been brainwashed that listing agents are “experts”. Society has been insulted and brainwashed to think its rocket science to sell a home. Any average american can do comps on Zillow and Trulia these days. If your home is worth $100K and you list it for $80k its gonna sell if your undercutting the competition, doesnt take an Realtor to do that.

    Being a listing agent is a long term marketing scheme. 1. List a home….MLS, Realtor.com and 3 fuzzy horrible pictures. 2. Go to the beach. 3. Buyers agents show and sell. 4. You put a SOLD sign up. 5. Send out mailers to the entire community that says “I just sold 123 Street, Im a home selling guru, list with me!” 90% of the public buys that and says “Wow, this some Realtor”

    There is no argument to this. Just admit it and move on.

  17. Intheknow August 17, 2011 at 2:16 pm # Reply

    Some of the irony is that the Realtors defend themselves aggressively yet, I bet most of you would not have shown this property because its a short sale. If a Realtor, truly, had their clients best interest in mind they would show them all properties available, not just those listed in the MLS. Many Realtors do not want to show these properties as they fear more work. Many Realtors also do not truly know the market. I would say 90% are just looking to close the deal. Most will not even disclose info or past sales that would deter a buyer from making a less aggressive offer. I see it happen all the time. In short, there is not as much I told you so going on as the posts would lead you to believe.

  18. Intheknow August 17, 2011 at 2:21 pm # Reply

    Meant because its a FSBO not short sale

  19. Monica August 18, 2011 at 1:49 am # Reply

    Of course we will defend our PROFESSION! The negative comments are personal views. To those not so pleasant comments here is a question: Plumbers require a license, would you fix it yourself if you had a major pipe burst at your residence?

    Commission rates are negotiable. Remember these words, “you get what you pay for”. As a Listing Agent I take great pride in my services and availability to my sellers.

  20. Perfect Storm August 24, 2011 at 4:41 am # Reply

    I sold my home 10 years ago, the realtor had it for months, kept bringing in low ball offers and kept not sharing with clients the flaws in the home that were know to the realtors, this really pissed off buyers! Ended up finding the buyer my self who offered me 5% less than my asking (still more than I expected to take) and I settled with the realtor for 1/2 their commission $7000! My lawyer got $1400 and he did 10x more work than the realtor!

    What a waste, I will never fall for that again.

    • westbendrealtor.com March 28, 2013 at 12:48 pm # Reply

      Sounds like you found one of the “bad” Realtors that do their best to ruin a great industry. Unfortunately, there are a lot of them out there, which is why interviewing several prior to picking one is a good idea.

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