I Was Told This Is Illegal. HUH?!
I am very new to this pursuit and to this BB/forum. If I have any glaring misconecptions, or if I sound like an idiot, I beg your pardon.
My wife and I have a single family property, which we bought below MV a couple of years ago, fixed up and now would like to sell. We have plans to buy a family member's house, again below MV, and repeat the same routine. We made the decision to sell it without the aid of a broker, or agent. We also have read a couple of books which touch an REI, (Multiple Streams of Income by Bob Allen, Rich Dad, Poor Dad by Robert Kiyosaki, and a few I can't remember the titles of). We called some "we buy real estate ad numbers" to see what they would say. Only one person seemed to think there were possibilities in our property, all the others were looking for fixers. This gentleman viewed our home and then told us we were in the wrong market and should try to sell it to a conventional buyer. He then offered to broker it for us at 7%. He told us that if we listed an ad in the paper we would have little to no qualified prospects. We would get calls from, "the people I run into every day, other than the overnight millionaire, Carlton Sheets wannabes, who don't have a license, which is illegal in the state of Oregon". My wife and I recognize that he was probably just trying to use intimidation as a sales tactic so he could make his 7%. However, we have been interested in REI as a supplemental source of income and now we have doubts about the legal issues involved. Any advice would be greatly appreciated. <IMG SRC="images/forum/smilies/icon_confused.gif">
[ Edited by bwalker13 on Date 02/09/2004 ][ Edited by bwalker13 on Date 02/09/2004 ]
Are you asking is it illegal to sell your house FSBO, ie, through the paper or some other FSBO listing service?
I always bookmark these kinds of threads because I'm interrested to see what the majority of responses might be.
But...the obvious observation to me would be that you could probably negotiate a <7% commission to sell your property conventionally.
I doubt that your "investor", using these heavy-handed techniques, could do better than a realtor.
He also seems to be implying that anyone without a RE license can market and/or buy your property
If I've ever seen a BIG RED STOP SIGN, this is it!
It also seems to me that you have time on your side.
You've already bought a property below FMV and have an opportunity pending.
You're on track for learning more about REI based on your reading and studies.
I may be lacking info but this sounds fishy enough that I would be extreemly leery.
[ Edited by perfecto on Date 02/09/2004 ]
I know selling it FSBO is legal. What he seemed to be implying is that REI without a realtors license, or without a brokers license is illegal.
I don't know Oregon RE law. I don't know of any states where you must involve an agent when selling your home. Some states require you to involve a lawyer, but not an agent. Call a few mortgage brokers and ask them. Better yet, find someone here on TCI from oregon and ask them.
Most investors look for 30% margins. Most homeowners think they're getting a good deal if they get $5K in equity. List it in the paper, use directional signs to the home, list it in "for sale by owner" magazine. If you do call those "We buy houses" signs, ask if they buy "subject to". If they do, they may be able to help you. If they don't, let em' be.
bwalker13,
Glad to meet you.
So this agent rather than present a postive image of what he could do for you decided that he should tell you a lie and yes try to intimidate you. Oregon is no differnt than any other state when it comes to creative real estate investing done within the confines of the state statutes it is perfectly legal.
I am not saying an investor can help you but I would leave your options open and listen to what some of them have to say.
If you should decide to use an agent, check their credentials, ask how many people they have on their client list looking for houses, not the old I will list it in the MLS routine and hope for the best.
Ask the agent how many properties they have sold this year or last year, not how many their office has sold, you ran into a listing agent, their job is to get the listing.
When agents call me of my sell ads wanting a listing, these are some of the questions I ask among others, before I say I am an investor then I get the, what you are doing is illegal I am turning you in to the Board of Realtors.
My reply has always been go ahead I am not a member of the Board of Realtors.
John $Cash$ Locke[ Edited by JohnLocke on Date 02/09/2004 ]
Quote:I know selling it FSBO is legal. What he seemed to be implying is that REI without a realtors license, or without a brokers license is illegal.bwalker13,
From reading your post, I have a different take on what you were told. It seems that the investor was referring to "Carleton Sheets wannabes" as a euphemism for those individuals who may actually be practicing real estate without a license based upon incomplete information gleaned from a TV guru's course.
As long as you are a principle in each of your deals, and buying for or selling from your own account then you should not worry about a RE licensing requirement. Your local jurisdiction may require a business license if you are engaged in an active real estate business (even though it is for your own account).
First, I am not a realtor but if you want top dollar when you sell then you should consider using a realtor and having it listed in MLS. Maybe use a realtor that will walk you through the process as you want to learn. But since you are not familiar with appraisals, surveys, terms of the purchase and sales contracts, lending requirements, etc there is a lot of things that could break the deal that a professional could fix or have avoided.
Second, sounds like you have a nice property and are not in a hurry so you will not get a good response from the "We buy houses" crew. I write letters and get people like you calling me. I tell them that I need houses that need repair or people with situations. You need to market your house to the retail buyers (note #1 above).
Third, have no idea what the guy was saying is illegal. But it is not illegal to sell a house FSBO. But my suggestion would be to at least interview a couple realtors that are top performers for your area and find out what they would ask for the property and what are the properties weak and strong points. You might be surprised that they could get you more than 6% what you were going to ask and get it to you more quickly.
Brenda
Brenda,
I would consider using a realtor if I thought there was some aspect of selling I couldn't handle. If I ran into a tricky negotiation for instance. However FMV for this property is about $145k. I would like to net at least $130k. I am asking $135k. This particular investor knew what I wanted to net, so he wanted to list it at $140k w/an exclusive contract that would give him 3% if we brought in the buyer. When my parents sold their $200+k home, they had a similar deal and the realtor did precisely nothing. It was still their newspaper ad that brought in the buyer and the broker made 3%. caveat emptor In the end realtors have experience that I don't, but other than that they are just human beings like myself. They have no magic.
Who really is the bottom line in a real estate deal when the smoke clears and can get you every peice of paperwork required to close the deal when selling FSBO or a creative real estate investing method.
This is the place all realtors go, a place where eventually all investors wind up?
We are all paper shufflers to an extent the usung hero of all this is your local Title Company they clean up the Realtors mistakes and the investors mistakes and will be more than happy to explain what you need an how it is needed to do a closing when you find a buyer.
Tell me one agent or investor who does not use a Tiltle Company or Attorney for the final closing.
We are all just a bunch of paper shufflers. Some more creative than others.
John $Cash$ Locke
I agree with the comments that if you own the property, you can sell it as a FSBO and don't have to use a RE agent or broker. If the "agent" was trying to tell you it's illegal for you to FSBO, sounds like that person should be packing groceries for a living and not be RE licensed (no offense intended to grocery packers).
There may be another alternative here, somewhere between FSBO'ing and listing with a RE agency. Whether this would work for you depends on supply & demand and if you feel confident that you could generate real buyers for your property yourself, but would like some assistance with aspects of the transaction (like preparation/negotiation of purchase contract, making sure buyer is qualified, conveyancing details, handling inspections, if any, etc). You could hire some quality agent in the area to handle specific tasks (but not find a buyer for you) at some mutually agreeable fee.
This is off point, but knowledge is power.
Do you need a real estate broker to list and market your home, then coordinate the closing? While it's entirely possible to do this yourself, you should know that serious (conventional) buyers use real estate brokers.
Folks who call on FSBOs are bargain hunters. They think that they are saving money by purchasing without paying the the 'middleman' . They'll expect a discount from the property's as-is, fair market value, too.
If you want to pay yourself to do the work of a broker.... fine. It'll be a good learning experience.
I'd bet that you would net the same by selling yourself, or using a broker.
Just my $.02
When I run the numbers $140k less 7% is $130k. If I sell it myself $135k and no commission, is $135k. It would cost an additional $5k if I used this broker. I think I'll heed the advice of Mr. Locke and contact the Title company I dealt with when I bought the property. If I go for months without an offer, I can always contact a broker later. (Wouldn't you for 5 grand)?
Wouldn't you be surprised if three realtors all told you that your property was worth $147 and that they already had a client looking in the area.
My point is that you have nothing to lose by interviewing the realtors and seeing what they have to say.
Also, if you property was worth 140k, why would you sell it for 135k?
If you are going to sell it yourself, make sure they have an approval letter from a lender for the specific amount of your asking price.
Brenda
Bwalker,
Also remember there are listing agents out there that will list the house for a flat fee. you will probably end up paying 3% to the buyers agent but there is also that chance that someone found your house on their own. The listing agent option also saves you a little money.
Excellent point bgrossnickle. However, saying "It's worth $147k and I have people looking in your area", is not the same thing as selling it for $147k. In my admittedly short experiences w/ realtors, who viewed their job as opening the lock box and saying "this is the living room", I became rather jaded toward the profession. I have also met many who jack up the price and wait hoping for a fatter commision, with very little work.
I am sure that there are some out there who have a more active selling approach as opposed to MLS and wait.
The point of $135k as opposed to $140k is a faster sale. It gives me better positioning over the competition. Also If I lose $5k selling it myself, that would seem preferencial to losing $10k so someone else could do it (and potentially do nothing). The other drawback to an MLS and wait approach is that the thing the prospect will most likely do/ have done before/after veiwing my home is look at my competition's home. I have a lot of marketing experience in the construction trade so I know how to write copy. It still is probably worth exploring the options, but I think one of the reasons people like me tend to mistrust realtors is because of all the bad ones.
bwalker13,
I like your spunk, hold onto your guns.
The house sells itself, your ad draws them to the house. Make up a flyer detailing all the great things about the neighborhood. Schools, shopping, parks etc., things that will appeal to your buyer. When they call start pre-selling them on the phone, with the information off the flyer, then invite them to come by and say hello. Who know the area you are in better than you?
When they arrive and they start talking about where their furniture would fit in the house, stick a fork in them they are done.
Have a Buy Offer and Sales Agreement (Get one the title company uses) ready, collect a deposit from your buyer made out to the Title Company. Give the deposit check and signed Buy Offer and Sales Agreement to the Title Company and they will set up the closing with everyone.
Financing this one is simple too, locate a few mortage brokers, tell them you are selling your property yourself and you will have more support from them than you could ever imagine. These are the same ones that the agents go to when they need their buyer funded.
Give your buyer the mortgage brokers card and let them contact the mortgage broker or have the mortgage broker of your choice contact them, whatever the buyer is comfortable with.
If you have 3 agents with buyers for $147K, you have Larry, Moe and Curly at your door. Watch out for Moe he likes to poke you in the eyes.
John $Cash$ Locke
Why not call some local mortgage brokers find out if they have some pre-approved clients who are looking for houses in the area your house is located. It may facilitate a faster sale.
Some comments here...
Bwalker13:
While I wish you success in FSBO'ing, I would also point out that you may be mistaken if you think that potential buyers who see your house won't compare it with the competition just because you haven't put your house in the MLS. People comparison shop. If "real" buyers are looking for a house in a certain area, in a certain price range, and with certain amenities, you can bet your $135K price that they've done their homework. They may even be able to describe your competition better than you if they've seen the inside of the competing properties.
It's unfortunate that you've had some negative experiences with RE agents. If you were inclined to hire them in the future, I would suggest asking some critical questions in your interviewing process.
JohnLocke:
As you and I have discussed previously (and as I would hope you recognize), every business and every profession contains people who are lazy, incompetent or dishonest. That is human nature. However, I have always found that judging a whole group by some of the individuals in it is ill-advised and erroneous thinking, only leading to self-fulfilling prophecies. Unless I misunderstood your post, I feel that broadly and generally characterizing RE agents/brokers as "Larry, Moe and Curley" is inappropriate not to mention inaccurate. Nobody likes to be called names. Surely you can understand that.
NancyChadwick,
I was wondering where you were.
First someone said what if 3 agents had buyers with $147K, my analogy to this would be a 3 stooges comedy. I was only speaking of 3 hypothectical agents, you brought in the rest of the real estate agents not me. Is there something you want to let us know about?
So why would you take offense I said there are a few good agents out there in a post I made several months ago.
If you followed this post you would know that the agent who contacted this poster lied to him and mis lead him about investors, so you want to jump on me rather than the agent who represents your industry.
Defend your industry as I will defend mine and rightfully so.
But don't accuse me of catagorizing all agents as Larrry, Moe and Curly. Read the post, see what one agent said to this person.
By the way at your next realtors meeting, if you hold your hand up to your nose you won't get poked in the eyes. Just a heads up.
John $Cash$ Locke
Quick additional comment if you were even slightly considering using a broker/agent (but it sounds like not.) Anyways, have you considered Help U Sell or similar "discount" broker/agents? They do "for sale with owner" and collect a flat fee (I believe someone referenced a similar concept above.)
I know here in San Diego, a $200K house (hehe, if you can find one) will cost you about $4995 as the flat fee with most of our local offices. My friend owns one of the franchises here. The HUS agent is a licensed agent working under a broker, they do all the same work plus they have their own house marketing systems, the only diff is that you host/conduct your own open houses. The HUS agent does all the work otherwise.
Just my 2 cents. Good luck!
JohnLocke,
I have read the prior posts and I did read your post including this statement you made:
"If you have 3 agents with buyers for $147K, you have Larry, Moe and Curly at your door."
Not categorizing agents as stooges? Really, John!
I do not defend and have never defended dishonesty in anyone, regardless of their profession or business (including the agent who lied to bwalker13). Success bought with dishonesty is not worth the price.
Nobody likes to be called names. Surely you would understand that.
Nancy,
OK!
So are you coming to the TCI Convention? You would definately be an asset in helping spread the word of what a great industry we are in.
John $Cash$ Locke
JohnLocke,
Actually, I'm not going to the convention. I agree that real estate is a great profession and business. Sort of like baseball. One has to step up to the plate and remember to just meet the ball, not try to kill it.
Nancy,
Well said. I was really hoping to meet you.
Next time I will use, Babe Ruth, Ty Cobb and Joe DiMaggio.
John $Cash$ Locke
Like listening to a couple of old marrieds...........certainly more fun than a wardrobe malfunction anyday.........
Teehee
Okay everybody to there corners!!
This thread got off topic.
The MLS is like a newspaper subscription. If you do not subscribe you cant see what is in it.
Realtors are SALESMEN! Thats it nothing more. Some have an up-line some have a down-line. Some sell ads (listings). Some sell what others are selling(product-houses)
Hind sight is 20/20. The bottom line is it will cost you 6% or so to use this form of advertizing and service. if you have the experience and can advertize cheaper then so be it. If not then thats okay too.
As long as you are making money then one cannot cry over spilt milk. Do another deal!!!
_________________
B.G. & Wheeler D. LLc Inc. and Trust
(A division of: Half Vast Enterprises)
"Most american millionairs today (about 80%) are first generation rich"[ Edited by WheelerDealer on Date 02/10/2004 ]
Elf,
I've been a bit curious about Help-U-Sell. Athough I don't plan to sell any properties in the near term, I'll never pay someone 6% to do so. 6% was fine when a house cost $150K, but there's no way I'm paying that kind of scratch for houses that cost on average about 400K.
-e-
Edited to ensure that I was within compliance to TCI rules.
[ Edited by econrad on Date 02/10/2004 ]
7% is just plain a bad deal. If you look at all you WILL find a realtor who will list for 6% then if you keep looking you'll find one who will list for 5% then maybe even 4% (Iv'e met one) Natually you should always shop around. Why do you think a car salesman or door to door or in house salesman wants a commitment right now and tomorrow the great deal is off. Or when you go to a free seminar the deal is really good but only today. They know if you shop around you'll find a better deal.
Besides my next door neigbor sold his house in 9 days by putting up a sign and a small classified ad in the paper. Someone here said the people who look in the paper are only looking for killer deals, I disagree slightly. I think if someone is shoping for a house they will be looking at as many as they can whether it's on the MLS or not. my $0.02
Josh
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You guys are great! I love this BB/forum. All the advice is helpful in the extreme.
Nancy Chadwick I appreciate your defense of realtors. I will make the intellectual leap of assuming you are one.(?) I think that investors consider realtors a tool in the arsenal like any other tool. However, (to use your phrase), "real" sellers, like me, hear something like this. "I have no doubt that I can sell your house. All I ask is ten grand and a commitment from you that I get some piece of your deal, (whether I sell it or not)." I would be willing to cut him in, if his exposure was even close to commensorate with mine. But he asks for a commitment from me without a net. Tell me what other business works like that.
Now, I have no illusions that my home will be shopped, but there is a different mindset behind a prospect who is searching through ads. You mentioned that they will be looking for a "good deal". I believe that is what I am offering. If they are interested enough to make an offer, yet do not like the price that is where negotiation and creative finance come in. If I feel that I am in over my head, I can always bring someone with more experience in at that point. And if it come to that, I would hope that it would be someone like you.
I've sold several houses FSBO without a problem. Just make sure you use a good attorney and the rest you can take care of yourself!!Saved myself over 40K
First thing, 95% of all Realtors are incompetent.
If you have a Realtor that approaches you with a "buyer" for your property, tell them that you will give them a "one time showing" agreement whereby you will pay a reduced commission if they show the property to a particular buyer and you accept an offer from that buyer within a certain time period following the showing.
redeals,
I thought I fired up Nancy Chadwick wait till she see's your post.
John $Cash$ Locke
Some thoughts here...
Maw:
I would just add that with real estate transactions, I always recommend that people use real estate attorneys. You don't want to be paying (one way or the other) to educate an attorney who does not have substantial real estate experience.
Redeals:
Your suggestion that FSBO's give a particular agent or broker the limited right to show and sell the house is often done. In fact, I've seen many flyers sent to real estate offices by FSBO's looking to get exposure for the property they were trying to sell.
However, I question your broad, sweeping statement that 95% of realtors are incompetent. In the US alone there are over 975,000 realtors (and probably another 25-30,000 non-realtors who are real estate licensed). This means, if I've done the math right, that you've had business encounters with 926,250 realtors in all 50 states and that those 926,250+ encounters support your conclusion that 926,250 individuals are incompetent.
That's simply amazing. You should explore the idea of running for political office. Then you wouldn't have to back up your broad, sweeping statements with facts and even get paid for making them.[ Edited by NancyChadwick on Date 02/10/2004 ]
bwalker13,
Please know that I do not, in any way, endorse or defend the actions of the person who lied to you. If the liar is a real estate agent or broker, that's far worse. I also do not advocate laziness in all forms, whether practiced by agents or anybody else.
If you feel you can successfully sell your property without any marketing services from an agent, then by all means, go forward. My suggestion to "farm out" stuff like conveyancing was based on the fact that FSBO's often sell the house themselves but then turn the deal over to an agent to handle the various other things that need to be done. In exchange, the seller pays a much smaller fee.
Nancy,
Here is how a politician would say it.
95 percent of agents give the rest a bad name.
John $Cash$ Locke
Quote:
On 2004-02-10 17:25, JohnLocke wrote:
Nancy,
Here is how a politician would say it.
95 percent of agents give the rest a bad name.
John $Cash$ Locke
John,
And that politician would lack credibility. That statement still computes to 926,250.
Nancy,
I told you there were some good ones out there, the way I figure it, this still leaves 55,575 agents doing a good job.
All is not lost.
John $Cash$ Locke
JohnLocke,
Any time you want to ship me the names of those 926,250 incompetent realtors, I'm all ears.
Mostly sound advice up above. Couple of comments.
I'm a MA Realtor, and agree with SOME of the above. Realtors use a different 95/5 rule .. 5% of the Realtors do 95 of the business. And that may not be far enough
The laws are different in each state, but I am relatively sure that the agent was telling you that an unlicensed person cannot broker a transaction, of course you can FSBO your property.
But don't focus on the $$ amount of the commission.... I go up against discount brokers all the time .. lower $$ means they will bring you a lower sales price generally. Around here the average selling price is $500K with a 5% -6%commission. So naturally, most buyers consider selling on their own first, but 80% end up listing with an agent. Likewise, don't buy a price .... many agents will tell you they will sell your house for more than they can, to lock you into a contract.... others give you a low price so they can turn it quick and get paid.
You should: interview at least 3 competent Realtors. Call 3 offices and ask for the highest producing Realtor.
Have them do a Market Analysis for you that explains their marketing plan and why they would suggest their price. Hire the Marketing plan and the Agent .. not the price they give you.. the best agent and marketing will bring the highest and best price. Compare that with what you can sell it yourself for .. and go with the one that brings you the most net dollars. Probably best off trying yourself for a month and then listing, slightly higher than the expected sale price ( Yes .. even honest Realtors can be low if the one-in-a-million Customer walks in ) if you do not get the right response.
End of Jan.. we just closed a deal for a former FSBO that had attempted to sell for 12 month on their own. Under agreement in 2 weeks with 25K more in the sellers pocket after our commission than they were able to get in 12 mos. No offense.. if I can't sell if for more than 5% more than you can.. I'm in the wrong business.
Good luck
[ Edited by mikedefran on Date 02/10/2004 ][ Edited by mikedefran on Date 02/10/2004 ]
Ditto, keep your options open in all your dealings...discount what people say and pay closer attention to what they do... never overlook an opportunity to sell thru a broker or direct...the money's green in either instance.
I sell all my properties in the newspaper or with FSBO signs. You can also call a mortgage broker and ask if they have had any one call to be qualified for a mortgage in the area of your house. If they say yes GREAT, If they say know ask them if they would be willing to qualify buyers for the house. They get paid by doing the mortgage you get your house sold faster. The money you were going to pay an agent could be used for buy the closing costs for your buyer. But you must be careful of any Mortgage Brokers who are going to charge you a fee.
Just another option to think about
Lori
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