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Should real estate agents FSBO their own home?

By October 12, 2017 No Comments
Should real estate agents FSBO their own home?
REPOSTED DIRECTLY FROM INMAN NEWS. THIS CONTENT HAS NOT BEEN MODERATED BY WFG NATIONAL TITLE.

As a real estate agent, you work hard to buy and sell homes for your clients every day. When it’s time to put your own house on the market, there’s no one more qualified than you to handle it, right?

“The reason we tell sellers to list with us is because we are the experts. If that is true, we should be able to sell our own home better than anyone else,” said Virginia-based Keller Williams Realty agent Michael Remy.

But when agents get ready to sell, there are a few options at their disposal that, by general industry opinion, range from frowned upon to gold standard.

On the one end are those who opt to go pure for-sale-by-owner aka FSBO (no MLS listing, no brokerage involvement). Somewhere in the middle are the agents who list their own homes without side-skirting their brokerage or the MLS and offer a fair buyer’s agent commission.

Finally, there are the agents who hire another agent to list their home like any other seller.

Industry pros tend to agree that the latter two routes are both acceptable, though in some cases having a neutral adviser can be especially advantageous should the sale become messy or emotional.

And many agree with the sentiment of Aaron Wittenstein, whose “biggest pet peeve” is agents who go total FSBO while preaching the value of the profession.

Leading by example

Wittenstein is the leader of agent Facebook Group Lead Gen, Scripts and Objections, and as someone who does a lot of prospecting, he reports that many of the FSBO sellers he reaches are agents.

Listing as FSBO and bypassing the MLS is an attempt to save money in the form of agent commission and brokerage fees. Many argue that if agents themselves are circumventing these industry norms, what kind of message does that send to real estate consumers?

“It’s kind of a slap in the face to the industry when you’re an agent that’s not marketing it like a proper listing agent would,” Wittenstein said, which means going through a brokerage, offering fair buyer’s agent compensation and listing it in the MLS.

Jim Weix, president of The Real Estate Company, agreed. If an agent wants to lose all credibility with neighbors, friends and potential sellers, all they have to do is hang out a FSBO sign, he said in a separate Facebook group conversation on Inman Coast to Coast.

“It absolutely compromises our industry and the integrity of that agent in particular,” said Paul Franklin, an agent at Re/Max At The Coast.

Ensuring an objective transaction

Agents hammer FSBO pitfalls — citing the benefits of agency, the daunting paperwork, agents’ connections to buyers and how avoiding the MLS limits marketing exposure — some of which would be mitigated by an agent’s professional expertise.

But aside from these well-known gripes, some say there’s also an emotional element to selling your home that can cloud a FSBO agent’s judgment.

During the housing crash, Nevada-based Re/Max agent Sandy Gabrielli said she was able to stay objective and keep emotions out of negotiating short sales. But when it came to negotiating her own mortgage loan modification, she was brought to tears and lost objectivity.

“I have represented quite a few current and former agents. It’s like everything they knew is gone, and I have to counsel them like any other client. I wouldn’t FSBO,” Gabrielli said.

The defining line for many agents is whether a seller goes entirely FSBO with no brokerage or MLS involvement or uses a mix of methods that include the MLS and properly marketing the home.

There is a difference between putting a FSBO sign up and selling it yourself as a licensed agent, said North Carolina-based agent Lisa Revis.

“I sold my own home but listed in MLS just as any other home and disclosed I was owner and agent,” she said.

Legal implications

I asked Northern Virginia real estate settlement attorney Karen Daily Ekofo about the legal implications of agents going the FSBO route. (Full disclosure, Karen is married to Billy Ekofo, Inman’s director of event content).

“Even in a FSBO situation, the agent is still required to observe all federal laws, regulations and state laws regarding the agent’s duty,” she said.

In Virginia, as well as other states, the agent would need to disclose that he or she is a real estate agent to potential buyers.

FSBO agents also couldn’t use the brokerage name, signage or advertising if the broker is not party to the transaction, and clearly, couldn’t collect a commission if that were the case.

“The agent also still has to do all the disclosures required under federal and state law (non-discrimination, fair housing, lead paint disclosure, avoiding fraudulent statements or misrepresentations, etc.),” she said.

And the agent would need to observe all requirements of the contract including home inspection repairs, lender required repairs, executing documents, etc.*

Still on the fence?

If you’re thinking of selling your own home as FSBO, consider these points:

Think about the ethical implications. “Just go over your listing presentation and see where FSBOing your own home would punch holes in it,” said Gabrielli.

• Don’t offer a subpar buyer’s agent commission. 

Consider whether using FSBO signs is ethical. “Trying to do as FSBO with by owner signs etc., seems to unethical,” Revis said.

Check state and federal laws.

• Check with your brokerage for any rules or benefits regarding FSBO or selling personal property. “I know that many brokers offer an agent benefit of running the sale of a personal property through the brokerage for an admin fee. That way the agent gets protection — e.g. E&O — and the brokerage claims the sale in their volume reports,” said Leslie Ebersole, leader of the Brix Group.

• Disclose that you are an agent as well as the owner to any potential buyers and their agents.

Consider putting your home on the MLS. (FSBOs can do that for a flat fee, or no fee at all).

• Check your E&O insurance coverage. “The agent would also need to consider some other ripples that their decision would cause. For example, will such an activity be covered by the agent’s E&O insurance?” Ekofo said.

How to handle an agent FSBO

Regardless of your opinion on the topic, agents going the FSBO route is becoming more and more common.

Wittenstein said about 5 percent of the FSBOs he prospects are agents selling their homes as FSBOs. Other agents in the conversation agreed that they’re encountering it more and more in the field.

How does Wittenstein respond when he calls an agent FSBO?

He said he’ll say something like: “Really, so you’re a current agent? I’m confused. So you know as well as I do that the best way to sell a house is the MLS. Why do you have it up by FSBO?”

They usually say to save money.

To which he replies, “Well, when you’re ready to do the right thing, I’ll be here for you.”

*(Disclaimer: this is not intended to be legal advice. Agents should seek the advice of independent legal counsel in the particular state/locality where the agent is licensed.)

Email Dani Vanderboegh

The views and opinions of authors expressed in this publication do not necessarily state or reflect those of WFG National Title, its affiliated companies, or their respective management or personnel.

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