Former FSBO CEO sells home the traditional way
Founder and former CEO of ForSalebyOwner.com, Colby Sambrotto listed his 2,000 square foot New York condominium on his own through online classified ads and FSBO sites, but after six months, he opted to hire New York broker Jesse Buckler who immediately advised a price change as the listing was not attracting the right buyer.
After giving up on the DIY route, Sambrotto’s decision to hire a broker led to attracting multiple offers, closing for $150,000 over the original asking price. The Wall Street Journal reports the listing sold for $2.15 million including a 6% commission.
Many FSBOs turn to Realtors
The news stands as an enormous validation of the real estate profession and while some may tease, it is no laughing matter and the former FSBO CEO made a good financial decision.
AGBeat columnist Herman Chan said, “If people want to take a stab at For Sale By Owner (ie FSBO), go for it. But well over 80% of FSBO’s eventually have to list with an real estate agent to get their house sold. It’s harder than it looks!”
Not a new dilemma
Marlow Harris, Seattle Residential and Investment Consultant at Coldwell Banker Bain Associates told AGBeat, “The ForSaleByOwner.com founder’s dilemma is one we see quite often and is not unusual. Trying to sell your own property yourself or using a discount brokerage, is not the solution for everyone. Unusual properties, properties in the higher price range, these are more difficult to sell and often require specialization.”
Harris continues, “We see these choices across the board, from single family homes to huge housing developments. For instance, Vulcan, one of Paul Allen’s companies which has invested heavily in Redfin, does not use Redfin to market their many condominium projects. They use traditional real estate firms such as John L. Scott, Williams Marketing and Matrix Real Estate, finding that the do-it-yourself approach to real estate just doesn’t work for these types of sales.”
Ken Montville
August 3, 2011 at 6:55 pm
What a hoot! I wonder if the listing agent is getting a testimonial out of ol' Colby. 🙂
This blog post should be front and center in every listing and pre-listing presentation out there.
Roland Estrada
August 3, 2011 at 7:37 pm
Excuse me while I wipe a gleeful grin off my face. The ultimate irony!
Paula Henry
August 3, 2011 at 7:55 pm
It's not as easy as it appears! Truer words were never spoken.
Roland Estrada
August 3, 2011 at 8:01 pm
Now if only Redfin would file for bankruptcy. Ahhh yes, sweet dreams indeed.
suz
August 5, 2011 at 1:14 pm
Lovely that you would wish bad on others.
J Philip Faranda
August 3, 2011 at 8:52 pm
Think of all the money this guy made hawking his FSBO program to unsuspecting consumers who lost time, money (maybe even their house), most of whom ended up using a broker anyway. Karma…
Mona Hayden
August 3, 2011 at 10:05 pm
I have a home for sale in northeast Louisiana and every realtor I've talked with has wanted to list it at $90/sf (across the board here, no matter what condition or amenities the home has). The property is on 4 acres with a barn with concrete floor, a greenhouse, a pool, and backs up to a finger of a lake. The house is small (1600sf) and in impeccable shape but $150,000 is nuts. Not all realtors are the same so don't gloat too much!!!
suz
August 5, 2011 at 1:12 pm
You can sell anything if its under price. They just want the easy commission.
Kansas City Real Estate
August 4, 2011 at 12:10 am
Awesome. Although this story would have been a lot bigger a few years ago. Less and less people see the value in FSBO in my area after the market downturn.
Michael Pierce
Steven McPherson
August 4, 2011 at 4:59 am
Just because you own a Real Estate listing site doesn't mean you know how to sell them, as he found out, with all his connections seems to me that he could have sold it pretty fast, "oh well, live and learn"
Laurie Matthias
August 4, 2011 at 5:32 am
This is going along with me to every FSBO I contact!
Verma Barnett
August 4, 2011 at 7:04 am
For those who thought being a realtor is a joke…think again.
Glen Nelson
August 4, 2011 at 8:50 am
Interesting story, but some facts are conveniently being left out.
First, not just FSBO sellers have issues selling their homes. How many times have agents failed at a listing. Equally as common as a FSBO seller not having success.
And with the potential of saving a 6% commission on a home, plus applicable taxes, he would have been looking at a savings of roughly $135k (based on 5% tax). Yes, the asking price received $150k more in the asking price.
However, that commission if this gentleman had to earn this income to replace it, would have been have brought the the total number to roughly $189k, base on an average tax income bracket. This means, that no matter how you slice it, he could have saved $189k, and I don't know about you, but I think most of us would 6 months to save $189k.
Furthermore, he ended up losing $49k on where his existing price would have been, even with the increased sale of $150k.
Again, most of us for $49k, would have given this a shot.
Finally, I don know this probably won't get posted, but despite what this message may spell out to your agent readers, I am not anti-agent.
I believe firmly that if a home seller wants to try to save the types of commissions that are in the marketplace today, then they should be applauded. I also believe this is where an agent can work closely with a FSBO home seller, in that if they don't sell, they know that they have a capable agent to look after their home sale.
My message here is that we shouldn't be mocking individuals for being part of the ever growing FSBO marketplace. I think agents need to be more supportive and work much closer with these people.
All the power to him for trying to save $189k!!!
Glen Nelson
August 4, 2011 at 8:54 am
Apparently the article got me quite pumped up, and I forgot how to use the English language in my letter. I guess the next article will say how FSBO company owners can't write a letter.
Jeff
August 4, 2011 at 4:42 pm
No, you missed the point. He didn't loose a dime because the house would not sell and now it did. Seems like some people, even though proven wrong can't get over it. Have fun with your next FISBO.
Matthew Rathbun
August 6, 2011 at 7:04 am
"Ever growing FSBO Marketplace": I'm not doubting your statement, but can you show me any data to back that up? In my market, we've seen a significant decline in FSBO. I've always worked well with FSBO, because frankly I'm a DIY kinda guy. But in the past two years it's been almost impossible to find any.
Those I do find on the FSBO websites, are really just agents advertising their listings there.
It would be interesting to know what the rate of increase or decline is for Unrepresented Sellers and has their success rate remained the same or differed in the past several years.
Linda Cork
July 17, 2016 at 7:52 pm
Here’s one of the fallacies in your logic: that the seller by selling FSBO would be “saving 6% commission”. That supposes that had he hired a listing agent for a 6% commission, that listing agent would not have been paying part of that 6% to a cooperating broker who brought a qualified buyer to the transaction. Absent the listing agent, the homeowner selling FSBO will have to decide whether and how much to offer a cooperating broker who brings a qualified buyer to the transaction. Whatever the homeowner decides to offer to the cooperating broker who represents the buyer, it would have been part of that 6% commission, so you’re really only “saving” the portion of the commission that would have gone to the listing agent, you’re still going to have to pay something to the buyer’s agent or you’re going to be severely limiting your pool of potential buyers to only those people who are unrepresented. Limiting your pool of buyers in that way, limits competition and as we know, less competition for any commodity can lead to a lower price. Or if you have a seller who simply refuses to pay a commission to a cooperating broker, the buyer who hired the agent would simply factor that fee into the cost of purchasing the property and the price would be lower by that amount.
So let’s look at the numbers that really tell the story. To begin with, the real estate agent priced the property $150,000 over what the homeowner had priced it, and got a buyer. From what we’re told, there were multiple offers, so that typically will result in a full price offer with few, if any seller give backs. So the sale price was 2,150,000.00 and that makes the 6% commission $129,000.00. Let’s suppose the agent split that 50/50 with his colleague representing the buyer. So the listing agent would be getting paid $64,500 and the buyer’s agent would be getting paid $64,500. The seller’s proceeds before the mortgage payoff and the closing costs that are typically paid by the seller would be $2,021,000.00. The split may well have been different, different agents offer different rates to cooperating brokers, but it doesn’t affect the price paid to the seller because it’s been negotiated in advance in the listing agreement.
Now let’s look at the FSBO scenario, but let’s pretend that the homeowner’s luck turned, and he found a buyer before hiring the real estate agent to list his property, and as luck would have it, the buyer wanted to make a full price offer. But wait! The buyer had an agent and that agent expected to be paid. Either the homeowner calculated that into his cost of sale and was planning on compensating the buyer’s agent for bringing him a qualified buyer and managing the buyer’s side of the transaction for the duration of the sale, or the buyer would have needed to factor that cost into his cost of purchasing the property. Let’s assume the seller understood that buyers don’t generally turn up without representation and that it was to his benefit to pay an agent who could produce a buyer who was qualified and would complete the transaction, so the homeowner offered a 2% commission. That would be $40,000.00. If the seller was fortunate, the buyer’s agent had agreed with the buyer to accept whatever commission the seller was offering as full compensation, but if the buyer and buyer’s agent had agreed to a set fee based on a percentage of the sale, 3%, for example, the buyer may have asked for a seller subsidy to cover that portion of the buyer’s closing costs. But even if the buyer didn’t do that, the math doesn’t lie. The seller’s proceeds, before the mortgage payoff and the closing costs that are typically paid by the seller, would have been $1,960,000.000 if the commission paid by the seller was 2%.
Now, the buyer’s agent might have been paid a bit more or a bit less, or maybe there ended up being no buyer agent at all. Even in that unlikely scenario the selling price was already $21,000.00 below the seller’s proceeds after the commission had been paid to the real estate agent who listed and sold the property for $150,000.00 more than the homeowner was trying to get for the property. So the point is, even if this is FSBO property sold to an unrepresented buyer for the full price the homeowner was asking, that homeowner would have missed out on an extra $21,000.00 that his real estate agent was able to achieve for him by properly positioning the property in the price range where it was most likely to find a buyer.
It’s that simple. Hiring the real estate agent to list the property professionally increased the proceeds to the seller by $21,000.00 over what he would have received if — and only if — he had been able to sell his property on his own to an unrepresented buyer for the full asking price. Was it worth paying the real estate agent to get the seller that extra $21,000.00? Heck yeah! Who doesn’t want to get more money for the sale of their property? Was the commission money that the seller “lost” by hiring the real estate agent? No, it’s just the cost of hiring a professional to do the job right.
As for your statement “First, not just FSBO sellers have issues selling their homes. How many times have agents failed at a listing. Equally as common as a FSBO seller not having success.” That’s just not supported by facts. Statistics show that between 75% and 95% of FSBO listings end up being listed and sold by a real estate agent. The number of listings that expire without being sold in my area is around 4% so it is not “equally as common”, not by a long shot.
All that said, if a person has the desire to sell their house on their own, they certainly ought to give it a try. They might be one of the fortunate ones who are successful, and if they aren’t, there will always be a professional real estate agent willing to help them get the job done when they’re tired of trying on their own.
E Patrice Hayes
August 4, 2011 at 10:35 am
It's so sad when people have to learn the hard way and imagine how hypocritical he seems to all the unsuspecting FSBOs that have tried this service! This Information of Value will be sent to every FSBO I come across that swears by doing everything but hiring a professional!
Ruthmarie Hicks
August 4, 2011 at 11:31 am
As Phil says – Karma….Karma can be a real b$*#h at times! Anyway – it was NEVER that easy.
I think that trashing other people's careers has become a favorite indoor sport. One big target these days is school teachers. Granted they are heavily overpaid compared to professors in our market (that is probably more local than global) – but having taught at local universities – I can tell you that teaching is harder than it looks. Same is true for real estate sales – another favorite target.
We all think the other guys job is "easy. The one thing I learned from 15 years as a scientist is that nothing is as simple as it seems. Maybe we should stop back-seat quarterbacking and admit that NOTHING is as easy as it seems – and look in the mirror when we cast stones at others.
Like Phil said – Karma….
Joe Manausa, MBA
August 5, 2011 at 5:04 am
What a great article. This is one heck of a message for the "for sale by owner" community, as it takes a whole lot more than a listing on the internet to get a home sold. Nice job.
Joe Loomer
August 5, 2011 at 9:45 am
I think it's important to note that the agent he hired knew exactly what was wrong, and how to fix it. The owner was not familiar with the marketplace and who his target audience was.
@Glen – you failed to mention the amount lost during the failed attempt to sell by himself. Consider the amount of mortgages, taxes, condominium fees, utilities, garbage collection, maintenance, and repairs incurred during the failed FSBO listing. What if his family moved and he had to stay there until the condo sold? What is that worth? How many showings did he have to leave his job to go to? We don't even know if he received any failed offers during that time. Did he also incur the cost of movers, inspectors, appraisers, contractors, attorneys, or other professionals in anticipation of a succesful close of escrow – only to find out last-minute that his buyer was not qualified (Something any agent worth their salt would have determined BEFORE showing the property)?
Some costs cannot be tallied.
Navy Chief, Navy Pride
suz
August 5, 2011 at 1:06 pm
The key is price and exposure whether its with realtor or FSBO. Had he of marketed with the right price, he would have sold it himself. Its all about his own greed. Getting top dollar for the property. Lowering it as much as the agents commission ($50,000) he would have sold it because he would have been below market. Most agents put the property in the MLS and sit back and wait for someone to see it and sell. If an owner insists upon a certain price, the agent cant move either. You can sell FSBO but you have to educate yourself and market it with the right price. Everyone in real estate is your friend and why shouldn't they be, you just agreed to give them $30,000-$50,000 dollars. They will tell you anything you want to hear for the commission.
Jonathan Benya
August 6, 2011 at 12:24 pm
Suz, Did you read the article properly? Mr. Sambratto tried to FSBO for $2 million dollars. After 6 months, he gave up and hired a broker. The broker sold the home for $2.15 million, or $150,000 MORE than the owner tried to sell it for on his own.
That means the owner made MORE MONEY than he would have had he sold it for his original asking price. The agent got him an addition $21,000 in his pocket. What's that say about the value of hiring an agent?
Buyer
December 19, 2011 at 3:04 pm
Wow.. Agents seems to be so hostile on this site. It's no wonder there seems to be a stereotype around agents. I hope you treat your clients a little better than subjective readers of this article!
I've also re-read the article a couple times, but I can't seem to find the bit talking about how the original FSBO price was $2mil. I take the article as reading that the agent listed his place @ 2mil which could be anywhere compared to what the FSBO was.
Ruthmarie Hicks
August 6, 2011 at 11:07 pm
@Suz – So what work are YOU overpaid for – so we can all tell you what a lazy sod you are? Karma..payback can be a pain ya know.
Fred Romano
August 7, 2011 at 7:40 am
I'm sure joining this conversation will be a time suck… That being said, I need to speak up. I don't think there is an "official" MLS in Manhattan, so I can't even imagine how agents operate there…
But for the majority of us, there is the MLS which is the central hub for our listings, I am sure you will agree on that. What this article fails to point out is that many FSBO's don't just list on "by owner" websites, they actually get on the MLS through discount or flat fee brokers.
This fact is quite important and IMO changes the statistics. Because when they list on the MLS they are no longer a FSBO, they are represented. Whether it be "entry-only" or "limited service" they are still represented on the MLS and their home listing is still syndicated to all the same websites as any other agents would be.
So my question to you… If this New York Manhattan condo was on the MLS (if there was one), would it have sold? Would the seller have been able to pull it off and save the listing commission? Or would he have been black-balled by local agents because he listed with a "discount" broker? And WHY would they have black-balled the seller's listing?
I guess my point is… I can't understand why an agent would have any problem with a seller that lists their home with a discount broker on the MLS. Are they just pissed off that they are trying to save money? Are they jealous that they didn't get the listing? Or do they think that by black-balling the listing they are helping to "preserve" the traditional broker structure?
Any which way you look at it, they are acting "unethical" and just looking out for their own pocketbooks, not in the best interest of their [buyer] clients (remember it's listed, so they cant solicit the listing… but I am sure they do anyway).
I have been successful running my flat fee brokerage for 5 years now. And even through the bad economy we are still successful. Our clients appreciate the services we offer, and even though some of them don't sell (like any other agent), they still praise our efforts to help folks save money selling.
Look, I can completely understand the "Anti-FSBO" attitude, and I agree that people shouldn't just FSBO, they should get on the MLS and offer agents (working with the majority of buyers) a commission to bring them a buyer. What I don't understand is the attitude that you "need" a full service broker to sell. Can someone please explain this?
Sundaybell
August 7, 2011 at 1:13 pm
When it comes to getting the most money out of your real estate portfolio…hiring a professional Realtor is your best choice. So instead of going it alone and eliminating your potential buyers, learn how to negotiate commissions effectively and get the services you need from a Realtor.
Sundaybell
Keith Dickerson
August 22, 2011 at 2:02 pm
I actually try to help FSBO's when I can, especially in this market. I understand it's nothing personal against Realtors, they are simply trying to save money. Unfortunately they don't understand that it's not only the multiple listing service, but it's the dozens of websites that you need to get this exposure. It's also knowing your market, pricing it CORRECTLY (not under pricing it), and networking with others in your industry that eventually gets the home sold. Yes, you can under price anything and sell it, but isn't that defeating the purpose of hiring a realtor? It's important to know "HOW" to hire the right realtor but often we see that most people simply don't. They hire realtors that don't have the experience and sales history to earn the listing instead of doing their homework. We take over a lot of listings that simply couldn't sell, and sell them within a reasonable time frame.
I applaud FSBO's but dont care for "ForSaleByOwner.com". I believe they give a lot of false information and take money up front no matter if it sells or not. I don't believe in that philosophy, no incentive.
Karen E. Nadeau
August 26, 2011 at 12:59 pm
What I find most distressing is the lack of understanding many consumers have about both what the professional Realtor's role & responsibilities are and what it takes to get a home sold. First, as in any profession there are great, good and not-so-good agents. A great Realtor is the best combination of a marketing pro, excellent negotiator and project manager. Few sellers possess this combination of skills. I certainly understand the desire to save the commission. However, for the past several years, statistics have shown that sellers get a higher sales price (on average around 15%) and sell their home more quickly when using a Realtor. If sellers are just testing the water and don't really need to sell, then FSBO might be a great option.
A home is usually the largest single asset that many consumers have. They should do their homework first; talk to friends, co-workers and neighbors to identify local agents that they were pleased with. Interview the short list and get a commitment to a pro-active marketing plan that will get your house maximum exposure. The agent-client relationship should be interactive and dynamic partnership. After all, both parties are working towards the same goal. However, consumers often don't heed the advice of the Realtor they are working with regarding realistic pricing, repairs needed, staging, etc. and then wonder why they aren't getting results. Oh, by the way, in addition to the 3 skills mentioned earlier, Realtors provide big shoulders and a ready ear.
Wendy
September 4, 2011 at 3:06 pm
Part of the problem with a lot of consumers' perceptions is the impression they get when reality shows like "million dollar listing" have hipsters making million dollar commissions in a weekend. If only they saw all the pain we go through for even the smallest transactions!
psychic los angeles
January 23, 2012 at 6:30 pm
wow i was lol'n at the title what a read. classic
Darryl Baskin
July 12, 2012 at 8:18 am
@Fred Romano Great comments and questions, Fred. I think your answer is that “Disocunt Brokers” aren’t really discount, they are “reduced service”. The reduced service (which saves the seller money) translates into an increased work load for the selling agent. My buyer agents cringe at the thought of selling a listing with a discount broker because they have to spend several hour more explaining things to the seller (not their client) and doing work a full service listing agent would normally do. The real kicker is that reduced service brokers aren’t around to help the (in our area) aren’t around to help the sellers fix their problems or solve dilemmas and when something doesn’t work out like seller wanted, the seller blames it on the Buyer’s agent. It has happened so often that the is a permanent bad taste in the mouths of my best agents. Theoretically, discounting can work but the market expectations havent quite adjusted yet.
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CJ
January 12, 2017 at 8:48 am
I enjoy the gleeful arrogance (and ignorance) by the agents here. Just like politicians thinking you are performing a great service. Each one of you think you have the magic formula to selling a home, when it is no different than selling a car or other high ticket item. I have seen successful agents not even be able to sell their own homes. Not only that buy homes listed by agents for well over a year. It is about the buyer and what the buyers want. I also bet there are MANY of you that pay for the services that provide the personal information of owners on cancelled listings and end up reaching out to next of kin and others at the hopes of landing a listing.