How to Sell For Sale by Owner in NYC
The most important thing home owners need to realize when they try to sell For Sale by Owner in NYC is that they can’t avoid all brokers completely. If you try to exclude brokers and write “no brokers” or “principals only” on your FSBO web listing, you by default will turn away all buyers represented by agents. As it turns out, buyers’ agents represent over 75% of total buyer traffic, which is not surprising considering there are 30,000 real estate agents in Manhattan alone.
If you try to sell For Sale by Owner in NYC and either actively avoid or get ignored by buyers’ agents, your listing will receive exposure to just a small fraction of the total pool of buyers. This lack of exposure has ramifications for how many offers you may receive, the quality of these offers and whether or not you are able to find a buyer at all.
This lack of comprehensive exposure to buyers is why FSBO listings in NYC are generally considered to be ‘off-market.’ Ironically, being off-market (ignored by the majority of buyers) is not the intention of the majority of FSBO sellers in NYC, as most of them realizing that offering a commission to buyer brokers is important for marketing efforts.
The challenge for a FSBO seller in NYC does not stop once she or he realizes that it’s important to offer a competitive commission to buyer agents. This is because FSBO listings are usually ignored by buyer agents, even if the seller is offering a buyer broker commission. We explain all the reasons why in this article, but in short, FSBO sellers are notorious for being unrealistic, hard to deal with, prone to renegotiate the buyer agent commission and generally unreliable when it comes to paying out a commission at closing.
That being said, why would a successful buyer’s agent take the risk of working with a FSBO seller when there are plenty of other traditional, agent-managed listings in RLS with a contractual offer of commission to buyer brokers?
Why Are Most Buyers in NYC Represented by Agents?
If over 90% of home buyers start their search online, why do most buyers still choose to be represented? The fact that most buyers start their search alone on the internet these days is a prime reason why most homeowners decide to try to sell For Sale by Owner in NYC.
Most sellers are not fully aware that the overwhelming majority of buyers still end up submitting offers through a buyer’s agent, even if the buyer started her or his search online without a buyer broker or if the buyer found the listing without the assistance of a buyer agent.
You would think that the internet would be able to seamlessly connect buyers and sellers of real estate without a middleman, as it has for so many other industries already. So why do buyers’ agents still exist? The reason is quite simple if you step back and think about it.
Remember when we mentioned there were 30,000 real estate agents in Manhattan alone? Collectively, real estate agents represent the biggest sales-force on the planet, offering a customized, high-touch concierge service at no cost to buyers about to make a major life decision they usually have little experience with. Keep in mind that sellers in NYC customarily pay all commissions, including the fee paid directly to the buyer’s broker.
When a veteran buyer’s broker offers to send you great ideas that have just come to market, organize your open house tours for the weekend, submit offers, negotiate on your behalf and provide you with general, market and property specific advice for free, no strings attached, it’s really hard to turn down. And keep in mind, the pitch may very well be made to you where it’s most effective, in person at a social event by an agent who may even be your friend.
Now perhaps it’s starting to make sense why savvy real estate search websites funded by equally savvy venture capitalists never seem to be able to eliminate real estate agents. Unfortunately for home sellers, buyers’ agents in NYC are here to stay for the foreseeable future. Barring the invention of highly capable, robotic AI with the full range of human emotions, it will be extremely difficult to eliminate buyers’ agents in the near future.
The commission model in NYC is changing, just not as drastically as one would hope.
The real estate commission model in NYC is not going from 6% to 0% since we’ve established that buyers’ agents aren’t exactly in danger of being made extinct. Instead, the model will be transitioning from 6% to 3%, and with additional reductions on the buyer side through buyer agent commission rebates.
Unfortunately for the sellers, in order to remain competitive with commissions offered in traditional For Sale by Agent listings, they will have to continue to offer 2–3% to buyers’ agents even if they are selling For Sale by Owner in NYC. If a seller offers less or nothing at all, inevitably buyers’ agents will steer their clients away from the listing, assuming they even decide to gamble on letting their clients see a FSBO listing in the first place.
The biggest savings for home owners trying to sell For Sale by Owner in NYC is on the listing broker side of the commission equation.
While ‘Flat Fee MLS’ listing companies have been around for decades, the next generation of listing syndication companies like Hauseit have dramatically increased the effectiveness of buyer agent engagement for FSBO home sellers.
Traditional Flat-Fee MLS listing companies and the discount brokers who associate with them have the same problem as a non-MLS syndication services: everyone knows that a Flat-Fee MLS Listing is effectively a FSBO. While this may not matter to the seller or to unrepresented buyers, it may matter to the traditional buyer agents who are not necessarily be enthused about bringing their buyer to a quasi-FSBO transaction when there are plenty of other traditional, agent-managed listings available for sale which aren’t openly trying to disrupt the traditional commission model.
Moreover, the fact that many Flat Fee MLS Listing photos are watermarked with the Flat Fee company’s logo make it completely obvious even to the most unsuspecting broker. As a result, the seller likely experiences no reduction in broker solicitation and harassment versus if she had just sold For Sale by Owner in NYC herself.
Hauseit solves this issue by discreetly listing your home with a traditional partner broker who has none of the reputational issues which may plague a discount or flat fee listing broker. All partner brokers are full-service, traditional agents who engage in full-commission work and have good relations with the wider broker community.
Your home will be listed on over a dozen major real estate search websites like StreetEasy, Zillow, Trulia and The New York Times. More importantly, your listing will be co-broked in your local interbroker database (RLS and RLS vendors like OLR for NYC customers) so your listing gets the full attention of buyer’s agents and represented buyers.
It’s very important to be on more than just one real estate search website even if you’ve managed to list on your local brokerage database. This is because over 90% of home buyers start their search online by themselves. You want to have every opportunity to capture a potential unrepresented buyers so you can save on the broker commission completely, even though the most likely outcome with the Flat Fee Listing Service is that your buyer will be represented.
Are Professional Photographs Necessary to Sell My Home?
Yes. It is absolutely critical that you have professional photographs taken if you want to sell your home for the highest price possible. After all, why would you skip on a $300 investment when you are likely selling a million-dollar NYC home?
Keep in mind that your home will be competing against professionally marketed listings by traditional brokers, all of which will have sparkling professional architectural photography showing off each listing in its best possible light. Don’t even think about snapping a few sloppy photos with your cell phone camera to save some pocket change. The risk is simply not worth it.
Photographs are a key driver of the first impression buyers formulate of your home. Why would you turn them off with sloppy unprofessional photos that your mom took with her flip phone camera? Low quality, unappealing photographs mean less traffic to your open houses and fewer showing requests. This is especially sad when you actually have a great home that’s otherwise properly priced!
Lastly, while it’s not required to professionally stage your home with high end sample furniture, you should at least make sure your home is clutter free and clean for the photos and during any showings. That last thing you need is for people to perceive your property as less valuable because of your random personal junk lying around which has nothing to do with the actual property for sale!
If your property is vacant and you are not planning on physically staging your home, you may also want to consider virtually staging some of your listing photos. Research has shown that virtually staged photos sell real estate faster than photos of vacant properties. Especially when it comes to the first photo of your listing, a virtually staged professional photo can have a dramatic impact on the level of traffic your property receives.
Should I Price My NYC FSBO Listing Lower Than the Market?
Yes. The primary reason you should list your home lower than market value is because you can undercut the asking prices of traditional sellers who have less flexibility on pricing due to the exorbitant commissions they’ve contractually agreed to pay. Furthermore, you have the freedom to list and sell at whatever price you choose without an onerous, traditional Exclusive Right to Sell Listing Agreement around your neck.
A traditional Exclusive Right to Sell Listing Agreement customarily binds a seller to pay 6% commission as long as a “ready, willing and able” buyer is found at the mutually agreed upon listing price. That’s why traditional agents always belabor the point that it’s critical you set a realistic, initial listing price. Their incentive is to make you agree to a listing price that has a good chance of finding at least one offer so they can legally compel you to pay them their traditional 6% broker commission!
In stark contrast, an Agent Assisted FSBO home seller has the benefit of testing market demand and receiving offers without being compelled to sell and pay a commission just because an offer is received at the initial listing price.
Why Do Brokers Harass FSBO Sellers in NYC?
The reason that selling your home through a traditional For Sale by Owner in NYC listing is not advisable is that it’s blatantly obvious to the entire world, especially the 50,000 licensed real estate agents in NYC, that you are selling by yourself without professional assistance. Because your contact information and identity are readily available online, real estate agents view traditional FSBO sellers as one of the best sources of leads for new exclusive sale listings.
Selling your home through a traditional FSBO listing in NYC suggests that you are completely new to real estate and may not have an understanding at all of how the real estate market works. Therefore, we suggest you learn in advance the most common mistakes FSBO sellers make before you begin.
Real estate agents routinely try to break the confidence of traditional For Sale by Owner sellers by telling them common real estate agent lies in addition to truths such as the fact that they are not getting full buyer exposure because they are only listed on Zillow.
Really bad real estate agents will go so far as to lie to traditional NYC FSBO sellers that they want to bring a buyer to see the apartment, only to show up unaccompanied (without a buyer) solely to pitch the poor FSBO seller on their full-commission listing services. In some cases, a predatory broker will bring another agent to the seller meeting who actually pretends to be a real buyer.
The only way to minimize non-stop broker harassment and solicitation is to list through an Agent Assisted FSBO where you will be paired with a traditional, REBNY Member Firm who will discreetly list your home for a small, one-time flat fee.
Alternatively, you can have a top-rated, traditional full-service real estate agent do everything for you for only 1% commission through an Agent Managed Listing.
What Are For Sale by Owner Fees in NYC?
For Sale by Owner fees in NYC are dramatically reduced versus a traditional sale. This is because you will avoid paying the standard 6% commission to sell your home with a traditional broker. If you have an existing mortgage for approximately 80% of the purchase price, 6% of the sale price translates to almost a third of most people’s total home equity.
Assuming 80% loan-to-value on your existing mortgage, your home equity is 20% of the sale price. Therefore, 6% of the sale price in broker commissions alone is almost one third of your total home equity!
What Are for Sale by Owner Fees for Marketing Your Property?
This depends on whether you are pursuing a traditional DIY approach or whether you are smart enough to consider a Flat Fee MLS listing to supplement your buyer exposure.
For Sale by Owner Fees — Traditional Approach
Just because you’re forgoing any broker assistance whatsoever does not mean your marketing will be free. You will still have to pay to advertise on popular internet search websites, hire a professional photographer and pay for a new floor plan.
As of this writing, it costs $599 to list For Sale by Owner on StreetEasy for 4 weeks. The cost jumps to $799 if you want your listing to be “featured” on StreetEasy during the 4 weeks.
Each real estate search portal will have their own requirements and costs, and you will have to individually list on all of them if you want complete exposure to all potential unrepresented buyers.
Under the traditional approach, there will not be any way for you to engage buyer’s agents and the 75% of buyers who are represented by agents. Your marketing will be limited to the ~25% of buyers who do not end up working with a buyer’s agent.
For Sale by Owner Fees — Agent Assisted Approach
Just because you are getting access to the RLS through a flat fee broker does not mean you are giving up control of your home sale process. Not only will you receive all inquiries from brokers and buyers, you will receive the same level of attention from represented buyers as you would have if you paid 6% to a traditional broker.
We advise home sellers to sign up for a Flat Fee RLS Listing which not only will give them the full cooperation of buyers’ agents but will also be cheaper than listing individually on websites like StreetEasy directly.
Be careful of MLS listing packages from websites that claim to cover the entire, continental U.S. and promise to list you in your local MLS wherever you might be. These websites are extremely expensive, costing up to $1,000 per listing package and completely irrelevant for the unique NYC market. How can they list you in your local MLS when NYC does not have a primary MLS to begin with?
Hauseit’s partner brokers are all REBNY member firms who will list your home in RLS (REBNY Listing Service), which is the equivalent to the NYC Multiple Listing Service. REBNY is the dominant broker trade association in the NYC area with over 16,000 current members.
Since you are choosing to engage all buyers whether they are represented or not, you will need to offer a commission to buyers’ agents. You are only obligated to pay this commission if you choose to sell to a represented buyer. You can choose to sell to an unrepresented buyer, in which case you wouldn’t owe anything at closing.
What Is the Typical Buyer Agent Commission in NYC?
While there is technically no standard real estate buyer agent fee in NYC, the most common range is from 2% to 3% of the sale price. Most listing agents will tell you that 3% is the gold standard and most common commission amount being offered. However, seeing 2.5% commission in RLS being offered to buyer’s agents is increasingly common.
While the commission amount being offered is at the full discretion of the seller, there are some risks associated with offering a commission less than 2%. Buyer agents may ignore your listing if they’re not happy with the commission amount being offered. In some cases, buyer agents are brazen enough to contact the listing agent by writing emails saying “I can’t work for 2%” or “our firm policy prohibits working for anything less than 2.5% in that price range.”
How much commission you’re offering to buyer agents is especially important if you are competing with lots of other listings or if you are selling in a neighborhood or price point which is a buyer’s market. If, on the other hand, you’re selling a highly desirable unit, an argument can be made to offer a below average buyer agent commission.
Can You Negotiate the Buyer’s Agent Commission in NYC?
No. You cannot renegotiate the buyer agent commission after it has been listed in RLS and a buyer’s agent has already inquired on your listing. After all, the premise under which the buyer broker contacted you in the first place was presumably because of the commission amount being offered.
That being said, you are free to change the commission offered in RLS at any time which will affect new future showings. Keep in mind that just because you can’t negotiate a commission already listed in RLS doesn’t prevent you from negotiating on the price. You can always counter with a higher price to a represented buyer to make up for the commission which you will be paying!
What Are for Sale by Owner Fees for Closing?
For Sale by Owner fees (closing costs) are the same as what traditional sellers pay except for the reduction in broker commission paid. That means even though you’ve dramatically reduced your seller closing costs, you will still need to pay NYC & NYS Transfer Taxes, a co-op flip tax (if applicable to your building) as well as your real estate attorney fees and other miscellaneous closing costs.
Considering that attorney fees usually consist of a one-time flat fee of a couple thousands of dollars, most of these other costs will be minuscule compared to the 6% broker commission which you’ve just saved!
For a complete breakdown of real estate closing costs in New York City, please consult our comprehensive closing cost guide for NYC.
Read the Full Article: https://www.hauseit.com/how-to-sell-for-sale-by-owner-in-nyc/
Disclosure: Hauseit and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.