This is the story of how I sold my home through a flat fee broker. I’m sharing this so that anyone who might someday sell a house—you, perhaps—can learn from my experience. My tale includes many twists and turns and a few missteps, but it’s all true. I hope you find it helpful.
It’s late October, 2014 and I’ve decided to sell my home of the past twenty-one years. The house is located in the foothills west of Denver. Sited on two wooded acres at 8,100 feet above sea level, the property features a winding stream, ample privacy, and wonderful views. Four decks deliver ample outdoor living space. The master suite includes vaulted ceilings, a cavernous walk-in closet, and a remodeled bath. The great room boasts skylights, wrap around windows, and a wood burning fireplace. The house was built in 1992. I bought it for $215,000.
I’m selling because Mrs. Moose has inherited a house in Boulder (she shares title with her brother). It’s within easy walking distance of pubs, restaurants, and grocery stores. The backyard features a productive garden. The phone number has been in her family since 1964. This all is nice, but in my view, the home’s best features are the nearby bike paths and hiking trails.
The Expense of Real Estate Agents
Around here, traditional real estate agents charge a six percent commission. By local custom, the seller’s agent receives 3.2 percent of the sales price and the buyer’s agent receives 2.8 percent. If no agent represents the buyer, the seller’s agent pockets the entire six percent.
This customary commission scheme can be lucrative. For example, when a $400,000 house sells, the seller’s agent receives $12,800 and the buyer’s agent receives $11,200. In an overheated market, like the one that now exists around Denver, a newly listed property can go under contract within a few days. If a seller’s agent works ten hours to sell a $400,000 home, he or she earns $1,280 per hour.
I don’t object to real estate brokers getting paid—everyone deserves to make a living—but I do object to heavy profiteering at $1,280 per hour, especially when it’s at my expense. I can see rewarding a realtor who introduces me to a buyer—that’s why I’m offering any such agent the standard 2.8 percent. However, any seller’s agent I hire introduces no one. Once a property lists in this overheated market, it almost sells itself (provided buyer’s agents are incentivized to show it). So now that we’ve decided to move, I know I don’t want to hire a traditional seller’s agent—they’re way too expensive.
November, 2014: I Look for a Flat Fee Broker
At this point, what I really want is to hire a non-traditional flat fee listing broker. These professionals charge much less than 3.2 percent. A friend of mine sold her house this way with great results. For a flat fee of $1,000, her broker listed the property, advised her about offers, guided her through the post-contract process, and helped her with the closing.
I want to work with the same guy my friend used. But when I call he says he doesn’t serve the foothills. Nor does he know of any flat fee brokers who do. The yellow pages list one cut rate firm in my area, but it charges $3,000—three times what my friend paid. If a broker makes me that much broker, I might as well sell the house myself. So reluctantly I change course.
December, 2014—January, 2015: For Sale by Owner
I’m on a mission. At the library I check out two books about selling a home myself, a process known as “For Sale by Owner,” or FSBO (pronounced “FIZBO”). The books are House Selling for Dummies by Eric Tyson and For Sale by Owner by Robert Irwin. Both prove helpful.
Armed with newfound knowledge, I start down the FSBO road.
For starters, I shoot dozens of house photos. As a photographer, I’m inept. But for each room, I take multiple shots from several angles. Almost always, at least one looks good enough to use.
As a place to share my best photos, I buy a dot com domain in the name of my home’s address. Using a free WordPress theme, I prepare a virtual guided tour. An introductory page directs viewers to photos of the home’s exterior, master suite, great room, kitchen, basement, and garage. Another page shares details about the property. A final page provides a contact form. This website costs me $91.39.
I create a sales brochure using Microsoft Word. My design provides a house photo, a short list of features, the website address, and my cell number.
I pay a local realtor $250 to conduct a Comparative Market Analysis (CMA). She tours the property, reviews recent neighborhood sales, and estimates the fair market value. Based on her CMA, she suggests a price between $380,000 and $395,000.
I learn about the Multiple Listing Service (MLS). The MLS is a private marketing database run by local brokers for their own benefit. For sellers, it’s the single best tool for promoting properties to buyer’s agents who seek homes for clients—and lucrative paydays for themselves. Several websites arrange MLS listings in my home county. The most reputable charge about $300. As I mull over which to hire, I begin looking for a sign.
January 13, 2015: A Sign (Actually Two of Them)
FSBO signs cost about $30 new, so I visit Craigslist. I see an ad for a $15 metallic sign with an attached box to hold brochures. The seller lives only a mile away. I drive over. He says he doesn’t need the sign anymore because—you guessed it—he’s hired a flat free broker. I pay the $15. As I’m leaving, I notice the broker’s blue sign in the front yard. I jot down his website and phone number.
Back home, I log onto the internet. The property I just visited lists for $1.7 million. At that price, customary commissions for the seller’s agent would hit $54,400. The owner will be saving a huge chunk of change. Even though this listing’s flat fee broker works in Fort Collins, which is ninety miles from my mountain house, I hope he might know someone in the foothills who follows his approach. It’s too late to call today, so I’ll call tomorrow.
January 14, 2015: I Phone a Flat Fee Broker
Our conversation goes like this:
Me: “Hi there. I saw one of your signs. I have a home to list in the foothills. Do you know any brokers who might sell it for a flat fee?”
Mr. Flat Fee Broker (Mr. FFB): “I can do that.”
Me: “Really? It’s a long ways from Fort Collins.”
Mr. FFB: “I’ve sold several houses up there. I cover the entire front range and foothills—all the way from here to Castle Rock.”
Me: “That’s great. How much do you charge?”
Mr. FFB: “I offer three levels of service. For a one month listing it’s $399, for a three month listing it’s $549, and for an ‘until sold’ listing it’s $699. Whichever you pick, you get the same basic package. You get listed on the MLS and also on all the major property websites like Zillow and Trulia. You get a professional sign in your front yard. You get a combination lockbox that holds a key so agents can open the house for showings. You get professional photographs and a brochure. You get advice during the negotiation and contract process. And you get referred to a local title company, which handles the closing.”
As Mr. FFB makes his pitch, I do some calculating. Under the FSBO approach, it costs me $300 to list on the MLS and no one helps me. For as little as $99 more, Mr. FFB not only lists my house, he throws in a truckload of support. This hiring decision seems obvious.
Me: “I’m sold. What happens next?”
Mr. FFB: “I’ll email you a listing contract. After you sign, we can schedule a meeting at your house where I’ll take pictures for the websites and brochures. Then I’ll list you on the MLS.”
January 14, 2015: Listing Contract
That same day, Mr. FFB emails me his contract, which is a form approved by the Colorado Real Estate Commission. The document allows Mr. FFB to act as a “transaction broker.” This means he can collect for himself the 2.8 percent bounty I’ve offered to any agent who brings in a buyer. This arrangement seems fair because it grants Mr. FFB a potential upside beyond his lowball fee.
I’m not sure how long the house will linger on the market. Although conditions favor sellers, I’m not overconfident. For safe measure, I choose the contract’s $699 “until sold” option. I sign the papers, email them back, and we later arrange to meet at the house.
January 20, 2015: I Meet Mr. FFB
As promised, Mr. FFB tours the house and takes photos. Based upon the home’s condition, which he calls “pristine,” he’s confident it will sell within thirty days. He’s conducted his own review of the market and suggests a listing between $380,000 and $420,000. His estimate surpasses the local broker’s CMA, but I give her more credence because she works nearby and he doesn’t. After a short discussion, we decide to list for $399,900, which splits the uprights of Mr. FFB’s estimate.
With the listing price set, we drop a spare house key into the lockbox and hang it on my front door. We also place Mr. FFB’s sign at the head of the driveway. I stuff the sign’s box with my own brochures (Mr. FFB’s brochures won’t be ready until tomorrow).
The sign displays two telephone numbers: one for Mr. FFB and one for me. This way, either of us can receive calls and schedule showings. Mr. FFB suggests that I let any calls go to voice mail. This way, I can confirm the phone number is for a legitimate agency before I reveal the lockbox code.
January 21, 2015 10:00 am: MLS Listing
My house goes live on the MLS. Today I hear from two buyer’s agents: one schedules a showing for that afternoon; the other schedules for the next day.
Mr. FFB’s brochure arrives via email. It’s nice, but I like mine better so that’s the one I’ll use.
January 21, 2015 5:30 pm: Offer 1
The first couple to tour the house offers $400,000—that’s $100 above my asking price. Naturally, I immediately wonder whether the property is underpriced. Should I have listed higher?
January 22, 2015: Offer 2
Mrs. Moose and I visit the house. The Offer 1 broker meets us and delivers a letter from her clients saying how much they loved our place. I take this as further proof that the market favors sellers. Things are so overheated that buyers vie to sway owners with gushy sentiments. l like knowing someone appreciates my home, but I’m not swayed. Call me Mr. Spock.
At noon we receive Offer 2. There’s no personal letter, but it’s for $405,000—$5,000 above Offer 1. That’s all the sentiment I need.
Offer 2 contains something I’ve never seen before, which Mr. FFB calls an “Escalator Clause.” This clause states that if I receive other offers of $405,000 or more, Offer 2 will keep jumping by $1,600 until it reaches a maximum ceiling of $426,000. Seeing the Escalation Clause, I’m now convinced that the CMA underestimated the market. Mr. FFB looks more knowledgeable than ever.
Mr. FFB calls the Offer 1 broker. Without disclosing the new offer’s precise terms, he explains that a higher offer was received and asks whether her clients will up their bid. She says she’ll check.
As the day progresses, I field more telephone calls from anxious brokers. I’m told that local inventory is low and few homes exist at my price point. Some callers seem distressed.
At 8:15 pm I receive a polite email from the broker for Offer 1. Her clients aren’t interested in a bidding war. They withdraw their offer.
January 23, 2015: Offers 3-4
I handle five calls for showings today. We receive two more offers. Offer 3 for $404,900 includes a gushy letter. Offer 4 for $405,000 includes a gushy letter as well. Offer 4 triggers the Escalator Clause, so Offer 2 rises to $406,600.
January 24, 2015: Offers 5-6
Today is Saturday. I hope a large number of weekend shoppers will appear. But I field only two calls for showings. In the early afternoon, we receive Offer 5 for $399,900 with the requisite gushy letter. Mr. FFB calls the broker and explains that several higher offers are outstanding (again, he doesn’t disclose the amounts). Later that afternoon, the same broker submits Offer 6, which ups the proposal to $417,500. This triggers the Escalator Clause again, so Offer 2 jumps to $419,100.
January 25, 2015: Offer 7
It’s Sunday morning. During the past four days, the house has been shown ten times and we’ve received six offers (two of them from the same prospect). We could keep testing the market, but we think we’ve waited long enough—especially since so few visited the house yesterday.
Thanks to the Escalator Clause, the top bid is Offer 2. Technically, its deadline for acceptance expired yesterday, but the buyers remain interested, so their broker submits Offer 7 for $419,100. I sign it before noon.
The fully signed contract to purchase sets various deadlines and a closing for February 25. These deadlines involve my listing of defects, the lender’s appraisal, the land survey, the loan’s finalization, and a property inspection. Buyers can back out of the contract if any of these events don’t go as they like.
January 29, 2015: Home Inspection
Buyers hire a home inspector. He supplies a short list of unsatisfactory conditions. Buyers want me to repair a skylight, an outside vent, and two GFI outlets. These I can handle. But they also want an expert to certify that the roof will last five more years. Mr. FFB says that since my roof dates from 1992, no such certification is possible.
I call a roofer who agrees with Mr. FFB. After hearing the roof’s dimensions, he tells me a replacement will cost $5,000.
I now have a decision to make. I want the contract to close, but I’ve also spent a ton of money preparing the house for sale. I’ve paid for new south-facing windows, new finishing on the wood floors, septic system repairs, and more. I don’t want add on $5,000 for a new roof.
I’m also willing to bet that buyers won’t back out because of this issue. Housing inventories are low. If they don’t buy this house, it might take them months to find another that’s acceptable. Moreover, even with the price of a new roof factored in, they’re still paying less than the $426,000 they signaled they were willing to pay in the Escalator Clause.
I could be betting wrong, but the truth remains that this market is overheated. If buyers back out, I think someone else will pay about the same price. After talking it through with Mr. FFB, I agree to perform the requested repairs, but I don’t certify the roof. We’ll see what happens.
February 4, 2015: Inspection Issues Resolved
My bet pays off. Buyers accept my repair proposal. The deck is cleared for closing—or should I say the roof is cleared?
February 13, 2015: A Moving Experience
We moved most of our stuff during the many trips up to the house for cleaning and repairs, so not much remains: bedroom and dining room sets, two couches, and an elliptical machine. Two guys drive up in a truck and fill up. They drive away and unload everything at our new home. They do a good job so we tip big. Their fee before tip is $537.
Our old house is now empty space. Would that move Spock as much as it’s moved us?
February 18, 2015: Final Repairs
Today I perform repairs with our trusted carpenter. This takes most of the day and costs $450.
February 24, 2015: Almost a Closing
The buyers have other business on February 25 so they’ve asked to move closing up one day. I’ve obliged.
At 3:00 pm Mrs. Moose and I meet the buyers to walk through the house and show them how everything works. It’s the first time we’ve met each other. They’re excited and we’re glad for them.
At 4:00 pm we drive to the title company’s office. Consistent with his usual practice, Mr. FFB lets the title company handle the closing and doesn’t attend. When we arrive there’s bad news. The buyers’ lender has missed the deadline for wiring funds. All documents are ready to sign but there’s no money. The funds won’t arrive until tomorrow.
I take the position that I’ll sign everything except the warranty deed, which is the document that transfers ownership. I hand over the keys. The buyers were planning to camp at the house in sleeping bags and I’m not about to deprive them of their first night in a new home. I’m not that much like Spock.
February 25, 2015: Closing Concluded
The funds arrive. I retrieve the check and sign the deed. Despite the lender’s hiccup, the closing is successful. Our mountain home belongs to someone else.
March, 2015: Lessons Learned
First the good news. Had I hired a broker for the customary 3.2 percent, I would have spent $13,411.20. Instead, I spent only $1,049.39: $91.39 for the website, $250 for the CMA, and $699 for Mr. FFB. Net savings: $12,370.81. That’s a great result.
In hindsight, however, I might have saved more. Let me count the ways.
1. Superfluous Website: $91.39. The website was viewed about 900 times, but given the overheated real estate market, it probably wasn’t necessary. Mr. FFB posted photos on Zillow which were viewed over 1,400 times, outdrawing my website by a wide margin. On the brighter side, the buyers remarked at closing that they loved my website and enjoyed sharing it with friends. So I’ve got that going for me. Which is nice.
2. Superfluous CMA: $250. If I’d found Mr. FFB sooner, I never would have paid for a CMA. In retrospect, Mr. FFB had a better sense of the marketplace. I overspent here.
3. Excessive Flat Fee: $300. Given that the property went under contract in just five days, I definitely should have accepted Mr. FFB’s $399 offer for a thirty day listing. But I don’t begrudge him the extra $300. He achieved a great result and $699 was less than the $1,000 my friend had paid for similar service.
4. Excessive Incentive for Buyer’s Agent: $4,234.80? At closing, the buyer’s agent skimmed off the promised 2.8 percent, which gave him a payday of $11,734.80. Given the low housing inventory, I believe I could have secured the same overall broker interest if I’d capped this bounty at $7,500. But I’ll never know for sure. And I can’t be disappointed with how this all turned out.
One more thing. Is there anyone out there who wants to buy a $15 FSBO sign? I don’t need it anymore because—you guessed it—I hired a flat fee broker.