Real Estate Eastern Oregon Frequently Asked Questions (FAQ)
Having operated a FSBO service business since 2000 and being an appraiser and broker since 1976 we are aware of some common questions asked by our customers and clients.
Q. What services and products does our company offer?
A. We offer all the services and products sellers and buyers need to sell and buy real estate without employing a full service brokerage. For sellers we offer an extensive internet ad, professional yard sign, flyer box, and directional sign for a one year term with a nominal extension fee after one year. In addition, sellers have the option of submitting ads to newspapers and other printed advertising sources from our website for additional exposure. Also, for those sellers willing to work with brokers they can e-mail flyers to brokers of their choosing. Buyers can view extensive information about each offering from the convenience of the internet and immediately contact the seller by e-mail or phone. Our e-mail alert feature notifies buyers of offerings as soon as they are submitted to our website. For buyers and sellers needing help in preparing sales documents and assisting in the closing process we offer Broker Assisted Transaction (BAT) service for a flat fee through Lilly Real Estate, Inc. Alternatively, transaction documents are available on our website for those who choose to do their own paper work.
Q. Do we offer one package or can our services and products be purchased individually?
A. Absolutely. Our complete package, which is includes internet ad, yard sign, one direction sign, one sign insert, and flyer box is priced at $299.95 for a one year term. Annual renewal fee is $29.95 Our products and services can also be purchased individually. For example, if all a customer wants is an internet ad or a flyer box these can be purchased separately
Q. Who owns the signs, flyer boxes, etc..
A. The customer owns them.
Q. What happens if a customer lists the property with a broker?
A. If an exclusive right to sell listing is signed with a broker customers are asked to remove their internet ad and signage because an exclusive right to sell listing transfers to the broker during the listing period all rights to sell the property. If an exclusive agency or open listing is signed with a broker you may continue to use our services because owners retain the right to sell through their own efforts without the obligation to pay a commission.
Q. What are the advantages of marketing your real estate on your own?
A. Savings is by far the biggest advantage. Our customers have saved an average of $7,000 since we began our FSBO business in comparison to those sellers who hired a broker. Typically owner direct properties sell faster than those listed with a broker assuming appropriate pricing. The reason owner direct properties usually sell faster is because sellers are not faced with a brokerage commission and as a result are able to sell at prices below broker listed properties. I have observed over the years buyer’s offers would be accepted if only a commission did not have to be paid. Convenience is another advantage because you schedule your own appointments to fit your schedule not that of a broker or buyer. Marketing on your own is often times less stressful because you are not relying on a broker and you know how much marketing effort is being put into marketing and you also have the benefit of direct buyer feedback. When it comes time to discuss price and terms with a buyer you communicate with the buyer direct and reach a general agreement before writing a sale agreement rather than a broker submitting offers and counter offers back and forth. An owner is the best qualified person to show his property and can answer buyer’s questions immediately.
Q. Do broker listed properties sell for more than owner direct marketed properties?
A. Although the National Association of Realtors maintain Realtor listed properties sell for an average of 16% more than FSBOs there is no evidence in our market this holds true. The fact of the matter is properties usually sell at a price within their market value range rather sold by the owner direct or listed with a broker. Typically broker listed properties have commissions added onto the price a seller will accept. For example, say a seller wants to net around $200,000. In order to net $200,000 the seller will accept offers around $213,000 which includes allowance for a 6% brokerage commission. If on the other hand the seller has not listed his property with a broker, he can accept $200,000 and realize the same net proceeds at closing.
Q. Why doesn’t my property sell?
A. Inappropriate pricing is the number one reason a property does not sell. Properties that are overpriced will linger on the market no matter how much marketing is done. Most buyers are knowledgeable about property values because they are active in the market and have looked at other properties and usually have a good handle on current market prices.
Q. I found a buyer, now what?
A. Briefly, complete a signed sale contract and take to a local escrow company along with the buyer’s earnest money. You can obtain these forms on our website. In addition a seller must complete a seller disclosure statement (available on our website) and for homes built before 1978 a lead based paint disclosure statement (available on our website). Both statements must be given to the buyer for their review. Numerous issues can arrise during the transaction process, but generally the title company and lender will assist you through the process. Alternatively, we offer a service we call BAT (Broker Assisted Transaction through Lilly Real Estate, Inc.) in which we handle all of the paper work, open up escrow, and coordinate the transaction/closing process for a flat fee.
Q. Should I have an open house?
A. Open houses may produce a buyer, but usually do not. Brokers have open houses not only to market a property, but to make contact with potential buyers and to give their client the impression they are working hard to sell the property.
Q. I have a buyer, but they need to sell their current home first.
A. This is a very common situation. As a seller you do not want to take your property off the market because another buyer may emerge. On the other hand, you don’t want to lose a qualified buyer who needs to sell another property to complete the purchase of yours. A seller can accept a buyer’s offer contingent on the sale of another property and continue marketing by attaching a 72 hour contingency to the offer. This allows the seller to continue marketing and if another buyer is found, the first buyer is given 72 hours or other time period agreed to, to remove the contingency. If the buyer cannot remove the contingency the sale is terminated and the seller is free to sell to the 2nd buyer.
Q. When is an appraisal needed?
A. For accurate pricing an appraisal is recommended prior to determining a reasonable asking price. If a buyer requires a loan his lender will usually require an appraisal which must list the lender as the client. In some instances the seller’s appraiser may be able to modify the appraisal to meet the requirements of the buyer’s lender rather than having a new appraisal done.
Q. What happens when the lender’s appraisal is less than the sale price?
A. Depending on how the sale agreement is worded, the buyer may have the option to terminate the transaction or the price may be re-negotiated. Usually, the seller is not obligated to change the sale price just because an appraisal is less than the sale price.
Q. When should a home inspection be done?
A. It is a good idea for a seller to have a home inspection prior to marketing. In this way repairs can be done prior to any sale agreement and a copy of the report can be viewed by serious buyers. By having a pre-marketing home inspection repairs issues can be repaired before marketing or addressed in the sale agreement. Even if a seller has a recent home inspection report, buyers may still want to have their own done and are given a set amount of time (usually 10 business days) to have inspections done. If the results of the inspection are unsatisfactory the buyer can terminate his offer and is usually refunded his earnest money. Alternatively, the seller and buyer may agree to negotiate the cost of repairs and continue with the transaction.
Q. What happens if a broker wants to show my property?
A. For those sellers willing to work with brokers a seller’s fee agreement should be signed prior to any broker showings. The fee agreement identifies the property, the seller, the broker’s buyer, the amount of compensation you agree to pay if the broker completes a sale, and the time period of the agreement. Normally brokers will want around ½ of their normal full brokerage commissions. Full brokerage commissions generally range from 4% to 7%. Alternatively you may negotiate a flat fee. Remember brokerage commissions and fees are completely negotiable. The seller’s fee agreement applies only to the buyer specified, meaning a seller cannot sell to the named buyer during the time frame of the agreement without being liable to pay a broker’s fee.
Q. What are the different types of broker listing agreements?
A. Open Listing: An open listing lets an owner sell their property by themselves and is a non-exclusive agreement. An owner can execute open listings with more than one real estate broker and pay only the broker who produces a buyer that makes an offer that is accepted by the seller and successfully completes the purchase. Usually the broker represents the buyer only. Normally the owner will pay only a selling broker’s commission. If the owner finds the buyer he will not owe any broker a commission or fee.
Exclusive Agency Listing: This type of listing gives one broker the exclusive selling rights among all brokers and the owner also retains the option of selling on their own without paying a broker commission. All brokers must work through the listing broker who represents the seller. If the owner finds a buyer on his own, no commission is due the listing broker. If the listing broker or another broker produces the buyer, then the owner is responsible for paying the agreed to commission in the listing agreement.
Exclusive Right-to Sell Listing: This listing agreement is the most common among brokers because the owner gives the broker all rights to sell a property during the duration of the listing agreement. The broker represents the seller. Traditional full-service brokerages prefer this form of listing contract because it puts them in complete control of marketing and assures them compensation if they or another broker completes the sale of the property. It is common for owners to exclude certain potential buyers from the listing. If the seller knows individuals who may want to buy their property, they can exclude these people from the listing agreement. This means if one of the excluded parties purchases the property no compensation is due to the broker.
One Party Listing (Compensation Agreement): A one party listing signed by a seller gives the specified broker the exclusive right to sell the property to the buyer named in the agreement for a specified time and the amount of compensation payable to the broker if the buyer completes the purchase. This type of agreement is commonly used by brokers when they have a buyer interested in a property that is not listed with them or another broker. The broker usually represents the buyer only.
Q. Why are broker commissions so high?
A. The standard brokerage commission is 6% of the gross sale price. The true impact of a broker’s commission is more accurately measured by using your equity position rather than gross sale price. Calculate. Net sale proceeds and not gross sale price is after all the bottom line.
The traditional brokerage industry is antiquated and the structural configuration of the industry results in excessive costs to consumers. From the broker side of the table commissions are reasonable due to the division of the commission pie. Usually four brokers are at the table when the commission pie is delivered, each entitled to a serving. Assuming a $200,000 sale and a 6% commission, the commission pie totals $12,000. The office of Broker A, who listed the property, gets ½ or $6,000 and the office of Broker B, who sold the property, also gets $6,000. Now each office has ½ of the pie. In each office two brokers share their half of the pie. The owner of the office (usually called the principle broker) takes his slice say ½ or $3,000 and the listing or selling broker gets the remaining $3,000 slice. On the other side of the table is their “client” who paid for the entire $12,000 commission pie required to feed the four brokers.
The size of the pie needed to support the middlemen (brokers) in the traditional brokerage industry is excessively large in the eyes of the consumer. With the internet the need for middlemen has diminished and as the real estate e-commerce industry matures and improves, the number of middlemen in a transaction will decline and as a result commissions will also decline.