Homeowners in NYC have it rough. In addition to being harder in NYC than anywhere else in the country to sell your home without an agent, NYC homeowners pay some of the highest seller closing costs in the country due to the combination of high sale prices and high real estate commissions in NYC.
While a 6% broker commission may not sound too bad to average US homeowners where the average US home value is ~$250,000, the typical broker fee of 6% in NYC equates to roughly $60,000 in fees on a $1 million home sale.
Considering that average seller closing costs in NYC are between 8% to 10% of the sale price, it’s not surprising that many sellers faced with these daunting costs explore the idea of selling FSBO. That being said, the first thing you should avoid doing as a seller in NYC is to rush off and hastily post your home “for sale by owner” or FSBO on Zillow with photos taken on your cell phone.
Traditional FSBO sellers in NYC have some of the lowest success rates in the country. One reason is that over 75% of buyers in NYC are represented by agents. These agents only work with listings that are posted in the RLS Broker Database by fellow agents which are offering a buyer’s agent commission.
Even if you are willing to compensate a buyer’s agent as a FSBO seller, the majority of buyer brokers won’t see your listing if you’re not listed in RLS. Those that happen to find your listing online will not be motivated to contact you, as FSBO sellers are generally considered to be unreliable, unrealistic, difficult to work with and shady when it comes to actually paying a buyer agent commission.
Another reason why FSBO sellers in NYC overwhelmingly fail is because they are routinely harassed and fed misinformation by vulture real estate agents whose mission is to convert FSBO leads into full commission paying sellers. This relentless solicitation can break the confidence of even the most resilient FSBO seller.
Most prospective FSBO sellers don’t realize that they can eliminate these common pitfalls with selling FSBO while still saving up to 6% in broker fees simply by using an Agent Assisted FSBO (Flat Fee MLS) Listing Service.
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This may seem counterintuitive at first, but posting an email and phone number online is a common trap which first time FSBO home sellers often fall for. NYC brokers and agents can’t wait to see their daily list of new FSBO home sellers who they can cold call to pitch their services.
Believe it or not, there are marketing companies that scour FSBO listings on The New York Times, Zillow and StreetEasy for the contact information of new FSBO sellers.
Marketing companies then sell these lists, complete with seller contact information, to brokers who are short on listings and desperate for new business.
But the broker solicitation and harassment doesn’t simply stop at just emails and incessant phone calls. Many real estate agents desperate for your attention will go so far as to pretend to have a buyer and ask to visit your home with their ‘buyer’ only to show up without a client to pitch you in person on listing with them and paying a full commission.
For these reasons, it is best advised to not broadcast to all of the NYC real estate community that you are attempting to sell your home without an agent unless your ultimate goal is really just to get attention.
Another mistake NYC homeowners typically make is to reach out to every single real estate agent friend when they’re thinking about selling. What usually ends up happening is they’ll feel guilty about not handing their business to one of their agent friends, and most if not all of these perfectly healthy relationships become strained.
This is even more likely to happen when a homeowner ends up deciding to sell FSBO without hiring any listing agent at all!
Not all real estate brokers are bad for FSBO home owners attempting to sell their home without a traditional listing agent in NYC. According to the National Association of Realtors “88% of buyers purchased their home through a real estate agent or broker—a share that has steadily increased from 69 percent in 2001. Buyers who definitely would use same agent again: 73%.”
What this means is that your home will only receive the attention of a small subset of buyers if you refuse to work with buyer agents. Therefore, much of your success as a FSBO seller is determined by your ability to market your listing to represented buyers.
Why Are Most Buyers Represented in NYC?
The main reason why home buyers typically use a broker in NYC is because there are just so many agents advertising that their services are ‘free’ for buyers. This is technically a factual statement because sellers customarily pay all commissions in NYC, including the fee to a buyer’s agent.
One could argue that the services of a buyer’s agent are not ‘free’ because the cost of the commission is ultimately built into the sale price paid by the buyer. However, this analysis fails to incorporate the fact that commission structure most sellers agree to doesn’t offer any meaningful savings if a buyer happens to be unrepresented. In other words, there’s little or no benefit to a buyer or seller for ‘going direct’ and working directly with a listing agent without involving a buyer’s agent.
If the seller has to pay the same total commission anyway, why would any reasonable buyer pass up the assistance from a seasoned buyer’s agent offering to help coordinate viewings, offer free advice, prepare and submit offers, negotiate and work on the condo or co-op board package?
Whether due to laziness, a distrust of dual agency or the realization that most sellers have a fixed commission structure, most home buyers will agree to a “free option” of advice, search, scheduling and negotiation services of a buyers’ agent. What’s worse is the main real estate search websites are complicit in encouraging this inter-mediation.
If you’ve ever searched for a home on a major real estate search website, you’ll notice that the default contact option when requesting more information on a listing is often a buyer’s agent instead of the listing agent. In essence, major online real estate websites make money by selling buyer leads to other real estate agents through this placement feature on most online listings.
The sad truth is these are large public companies focused on revenue, and revenue for them often comes from real estate agents’ advertising fees. And these agents are happy to pay up because there is so much money to be made off of homeowners in the form of earning buyer agent commissions.
The traditional real estate listing agent in NYC charges a home owner 6% all-in under a typical Exclusive Right to Sell Listing Agreement. Most agreements stipulate that the listing agent keeps the entire commission if the buyer is unrepresented. Furthermore, the total commission is usually split (co-broked) with a “co-operating” broker if that broker procures the buyer. This means you may want to offer a buyer agent commission which is comparable to what’s being offered by competing listings.
However, for a NYC homeowner looking to sell their home without an agent you’ll also have to tackle the issue of credibility of your commission offer. Brokers will tell you that buyers’ agents prefer to deal with other brokers. There is some truth to that.
Think about it from their perspective. They can either show their buyer clients a property which is properly co-broked in their local interbroker database (i.e. RLS in NYC) by a listing broker they may have even worked with before, or they can show their client a property listed FSBO by a homeowner who likely hates brokers, is of unknown professional quality, whose listing is likely to be priced way too high, and who will likely take any opportunity to circumvent the buyers’ agent and go direct to his client. And this is assuming the FSBO seller has even offered a commission to buyers’ agents when she or he decided to sell her home without an agent.
Needless to say, a buyers’ agent won’t be showing their client a FSBO property that is not even offering any commission on the buy side. This is often why FSBO properties are classified as ‘off-market,’ as they are not receiving the attention of the 75% of buyers who are represented by buyer brokers in NYC.
Contractually Co-Broke Your Listing in the RLS
Fortunately, you can ameliorate this issue experienced by almost anyone looking to sell their home without an agent in NYC by utilizing a Flat Fee MLS Listing Service.
A Flat Fee listing advertises your home on all major real estate websites and all relevant local inter-broker databases for a one-time, flat fee. Your listing receives the benefit of maximum direct buyer exposure on over a dozen major real estate search websites such as StreetEasy, The New York Times, Zillow and Trulia as well as exposure to represented buyers through the RLS Broker Database and all RLS vendors such as OLR (Online Residential) plus brokerage specific databases like Taxi and Limo.
Best of all, your home is listed by a traditional listing agent, many of whom normally charge clients 6% for the privilege, so that your listing will receive the attention it deserves from buyers’ agents.
If you want to sell your home without an agent in NYC, you’ll absolutely need to make sure your home is competitive versus professionally marketed, agent listings. That means investing a few hundred dollars in professional real estate photography that will present your home in the best possible light to buyers.
It’s remarkable what can be done with modern photography, digital re-touching and virtual staging these days. If you’re snapping your listing photos with an old cell phone camera, be warned that your listing will be ignored by many buyers who are automatically turned off by low quality photos.
It’s well known by buyers that photos usually present the home in an extra flattering light. As a result they usually discount the home a little from the photos they see online. However, what does that mean for your cheap listing’s low resolution cell phone camera photos? If the home looks that bad in the photos, how bad is it in actuality?
As you would expect, being cheap and refusing to invest a few hundred dollars in professional photography for a million dollar home sale is one of the worst and most common mistakes that NYC FSBO sellers make. It’s also a red flag to buyers and buyer agents that the seller may be difficult to deal with at best, and delusional at worst.
If you’re too lazy to look at comparable properties and research past sales in your building and neighborhood to price your own listing, then we highly advise you to ask a few local real estate agents to give you a free home evaluation.
Like most NYC home owners, you constantly receive postcards from local real estate agents in the mail offering free home valuations and other useless garbage. It’s shocking how much paper and postage is wasted by these traditional agents blasting out postcards with nothing different or valuable to say.
However, since you are interested in properly pricing your property with the least amount of effort, consider calling a few of these agents to give you a free comparative market analysis of your property’s market value. Of course, the real price is you’ll have to likely meet them in person at your home and listen to them pitch you for an hour to two to list with them.
Some of them may even be overly aggressive with sales coaches having taught them to “never leave an appointment without a signed listing agreement.” Just be nice and use their free pricing analysis.
A note of caution however: The majority of listing agents tend to inflate their preliminary valuations of your home in order to maximize the chances you’ll list with them. If you feel like the price an agent is telling you sounds unrealistic, call them out on it and ask them to substantiate the valuation!
Please be aware that there is no dominant MLS in NYC because the prevailing broker trade association in NYC is a private organization called REBNY.
REBNY operates a similar inter-brokerage shared listings database called RLS (REBNY Listing Service) that functions much like a MLS does in other parts of the country.
Which MLS is Appropriate for NYC?
Make sure you watch out for FSBO websites that claim to cover all 50 states and still be able to list you in your local MLS. Those websites are a recipe to waste up to $1,000 on a listing package that may advertise your listing in an irrelevant upstate MLS plus a handful of free websites that are irrelevant for the NYC market.
For example, many of these “national” for sale by owner websites will list you on the NY State MLS plus a handful of other national real estate search websites which are not very relevant for NYC.
Only Hauseit will make sure your home is listed in RLS and all RLS vendors (i.e. OLR, Nestio, etc.) and brokerage specific databases (i.e. Taxi, Limo etc) as well as relevant local NYC real estate search websites such as StreetEasy and The New York Times.
No. Openly discounting commissions has been proven not to work over the past few decades. Yet surprisingly, Silicon Valley constantly funds new half-baked ideas proposed by outsiders who think the solution to lower real estate commissions is to loudly promote low commissions.
Unfortunately, over 90% of real estate transactions in NYC happen between a listing agent and a buyers’ agent. There are 30,000 licensed real estate agents in Manhattan alone and all agents need the cooperation of other agents to be able to close deals.
As a result, anytime someone begins loudly promoting discounted commissions, they immediately take a hit to their reputation and incur the resentment of other brokers. How awkward do you think the closing table will be if everyone around that table knows that one of the agents is undercutting the entire industry and literally risking the livelihood of the other broker present at the closing? It must also be embarrassing for the discounting agent who must feel and receive a ton of pressure from other agents.
Fortunately for home owners, the next generation of FSBO listing syndication companies like Hauseit are pioneering the Agent Managed FSBO approach. Home owners are paired through a 3rd party marketing company like Hauseit with traditional, full-service REBNY Member Firms who never openly discount and have their reputations intact.
As a result, sellers benefit from the same economic upside as selling FSBO while receiving the same exposure as a traditional listing without any of the stigma or risks associated with partnering with a broker who openly discounts.
Originally Published: 10/14/15 | Updated: June 20th, 2019
Disclosure: Hauseit® and its affiliates do not provide tax, legal, financial 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, financial or accounting advice. No representation, guarantee or warranty of any kind is made regarding the completeness or accuracy of information provided.