Selling a Home Alone

By Marc Auerbach

I am a dedicated do-it-yourselfer, and so when it came to selling my home, I naturally considered selling it on my own. The Silicon Valley market was no longer hot, but it was still warm. I was convinced that selling a well loved and highly improved home like mine would happen in a maximum of two weeks, and without the aid of an agent. 8 weeks later I accepted an offer with only a 40% probability of making it through close of escrow.

 

Why Fizbo?
[For-sale-by-owner (FSBO pronounced fizz’-bo)]

I reply "yes" to brokers who surmise that I am doing a for-sale-by-owner to save the commission. But that’s not the whole truth. The truth is, as some real estate agents suspect, I don’t really think that the services of the real estate profession in the hyper-inflated Silicon Valley market are worth the cost. In California, exchanges of residential real estate traditionally pays a 3% commission to the seller’s agent and the same for the buyer’s agent. A total of 6%. On a typical home in America, the median price for which is $150,000, this amounts to $9,000 in commissions. When I bought my home in 1990 I paid $200,000 with $12,000 paid in commissions. 13-years later I was selling the same 800 square foot home on a 5,400 square foot lot for a half million and the commissions were going to be $30,000.

There are two key questions that many people including myself ask about this figure:

  1. Is the real estate profession really adding $30,000 worth of value to the transaction?
  2. Why is the work they do a percentage of the cost of the home at all?

As a person who has been in one form of marketing or another for the past 24 years I had to ask the question, with a $30,000 budget could I sell my own home? Even though I was fully prepared to pay the commission of a broker who brought me a buyer, thus reducing my savings to 3%, or in my case $15,000, I still thought that was a heck of a lot of money and I was sure I could do it for less.

Although it should have been irrelevant to my calculation, I couldn’t help comparing the value I had put into the home versus what an agent-assisted deal would take out. I estimated I had put about $40,000 worth of improvements into the house. Because I did most of the work myself I thought it the equivalent of an $80,000 renovation. I never expected to get every penny of that money back, and in the end I estimate I was only able to get about $14,000 of added value out of the improvements. I couldn’t help but contrast the effort and hard work I had put into the house, lovingly maintaining it and even restoring it beyond its original state over 13 years, with that of a broker who in the matter of a few weeks would suck the equivalent amount of money out of the deal without even perspiring.

4.3% is the national, average appreciation for real estate in the recent past, so the real estate industry takes better than one year’s appreciation out of the typical sale. I know that real estate agents have an entirely different view of this and I’ll speak to that later, but for now it is simply a fact that despite my own admission that this was irrelevant to the equation, I still couldn’t help feeling that expending even 3% was just too darn much.

Well what does one get for $15,000? The first thing that happens to a fizbo that places an ad in a newspaper is a wave of calls from eager, novice brokers trying to get an exclusive listing. Since it seemed to me reasonable to have as many brokers as possible see the property in hopes that they might later have a suitable buyer, I invited each one of them to come over and pitch me on their services. In this way I got to hear the marketing plans of some 2 dozen brokers.

I have to say that their plans were uniformly unimpressive when measured against, in my mind, a $15,000 budget. Some said they would distribute flyers in my neighborhood, some would do cold-calling to area lists, and some would construct an online virtual tour. Of course, a lawn sign, and someone to hang out at your open house, flyers and perhaps a few photos on the agency website are standard, but these are relatively inexpensive as I will detail. My bottom line assessment is that what one really gets from hiring a broker is a key to the inner-sanctum of the exclusive club of agents. Put bluntly, most agents are reluctant, and some outright opposed to selling or buying from fizbos. What an agent can do is open the door to other agents who have clients. In my estimation this admission ticket was too pricey at $15,000.

Finally, why is the commission a percentage of the sale at all? This makes no sense to me whatsoever. The amount of work seems little different for a $150,000 home or a $500,000 home. And in an inflated market like Silicon Valley’s, the appreciation in the price of homes means the price of the real estate services is rising faster than inflation as well. In my case, using the $12,000 that was paid in commission in 1990 dollars as a baseline, in 2003 dollars I should have expected to pay a commission of $17,000. Why then should essentially the same service now cost $30,000, a 76% real dollar increase? And this even assumes that 6% of the sale was the right percentage in 1990.

These are the real reasons I chose to sell my home on my own. Yes saving $15,000 to $30,000 is a large chunk of money by anyone’s standards, but I was still going to net a small fortune from the sale, even if I used an agent. By using an agent I could have simply moved to my new home and waited for the money to arrive. But with the same Silicon Valley hubris that permits someone to claim better knowledge of selling dog food with only a website and a sock puppet, I was out to prove I knew better. I was out for fizbo martyrdom.

 

"Sign, Sign, Everywhere a Sign"

After committing to the way of the fizbo, the next step was to get my marketing act together. My list included a website, a single sheet brochure, newspaper ads, a multiple listing service (MLS) listing and a sign. For guidance I also bought the book "How to Sell Your Home in California" from NOLO press. It cited anecdotal evidence suggesting that a lawn sign was the most effective form of advertising. It is also one of my pet peeves that fizbo signs are mostly very unprofessional looking. Often a fluorescent orange sign purchased from a hardware store with a phone number penned in black marker and taped to a tree or nailed to a fence.

My first approach was to find a local sign shop in the yellow pages. They offered a flimsy sign printed on corrugated plastic and their open house tent signs were made from PVC piping. Not the high quality, agent-look that I was after. And surprisingly expensive at over $100 for the one sign and $50 a piece for these crappy looking tent signs. I took to the Web and found Realty Sign Xpress in Albuquerque, New Mexico (www.realtysignxpress.com). They were great. They produce real signs for legitimate real estate companies, printed on metal. They had a 5 sign minimum, but it was the same price as one sign from the local print shop.

I designed a generic looking sign and even had a "rider" made. A rider is the smaller sign that hangs off the main sign. My main sign proclaimed "REAL ESTATE" and then in smaller type "For Sale by Owner" all in bright blue and red. This sign fooled several brokers who didn’t look closely and just thought it was just another brokerage. I purposely made it generic because I had to order 5 and I envisioned selling them on eBay after I was done. The rider read "ask for MARC AUERBACH" and my phone number which 13-years earlier had been assigned as the rather businessy looking 973-1600. I also ordered 3 A-frame open house signs and an open house rider for the main sign. The turn around was great and in no time I had all my signage for just $331.94 all tolled including shipping.

Next was the post. I wanted a professional looking, white, wooden sign post. I contemplated making one myself, but what would I do with it after I was done? Again I turned to the yellow pages and spied the last listing under real estate supplies—Pacific Post. No description, no display ad, no indication of what they did, so I called. A message told me to fax them the location for the post and when it needed to be installed. For $25 plus $5 a month they put a perfect white post in my lawn. For an extra $10 they even added the Lucite "Take One" literature holder. On the appointed day it sprung up, straight and proud on my lawn. I hung my sign, rider and stuffed my literature in the box, and my home was for sale.

Next I placed an ad in the San Jose Mercury News. My meager, 4-line ad cost $395 for two weeks. By booking for that period instead of just weekends I was able to "take advantage" of an offer to an additional 2-line listing in the open house supplement for $25. The supplement ran Friday, Saturday and Sunday.

Since I have some experience with websites, I was quickly able to create a 5-page site with all the information and an extensive tour. Anyone could easily do this with some scanned images or a digital camera and using any number of websites that offer rudimentary free hosting and Web tools. You can see my site here.

The big hurdle was the multiple listing service (MLS). This is the crown jewel of the real estate profession. Anyone can access a basic view of it through www.realtor.com. But to put a house for sale on the MLS you have to have a relationship with a licensed Realtor. When a buyer asks to see homes in a certain area, this is the universal tool that agents use to locate housing with the desired features and in the desired price range.

Recently, and because of the rise of the fizbo, there are services that will list you on the MLS for a flat fee (typically $500 in California for a 6-month listing). I did a search for these on the Web and there were hundreds of them. As in all cases when I don’t really have a specific site in mind I do the only thing possible; I judge the book by its cover. In this case every homepage looked like a trashy, dime-store romance novel. Alluring, provocative offers in lurid, bombastic color schemes and the cheesiest text imaginable. All of them touting testimonials from "real" customers claiming to have sold their homes in a single day, saving thousands of dollars. None of them really told me, before I forked over the cash, what I was buying or what I would have to sign. I picked the least objectionable one, entered my MasterCard number, and winced--I really did--as I clicked the submit button. I was absolutely positive that this was going to be a big rip-off and that I would soon be filing a claim with MasterCard to stop payment and refund my money.

A short time later Marquis Financial, an outfit in Los Angeles, contacted me to say that they would act as my broker. As I mentioned, one has to have some sort of broker relationship to get on MLS, and the weapon of choice to accomplish this is an "open listing" agreement. This is the opposite of the much more common exclusive listing agreement that locks you into a specific brokerage. Although it is just a device to get on MLS, reading it made me nervous and convinced me that what was really going to happen was that anyone who saw my listing on MLS would call Marquis and Marquis in turn would forward the interested party to me, but in so doing would want their 3% cut. It seemed clear to me that this was the real scam. Even though I marked-up the open listing agreement heavily before I returned it signed to Marquis, I was sure that I was signing away not only $15,000 in commissions but also the $500 fee. I imagined the ignominy of explaining to friends that I was a failed fizbo who had actually ended up paying more to sell on my own than if I had used an agent. Thank goodness my fears were unjustified. Although I am now somewhat dubious about the value of the MLS listing for many fizbos, Marquis turned out to be a responsive and honest partner in selling my home.

Of course, one has to clean the house and give it good "street appeal." Some agents will recommend elaborate "staging" where an interior decorator turns your pedestrian home into something that looks like a crash pad for John Malkovich. Personally I think these efforts go to the absurd requiring the homeowner to sink thousands of their own money into full paint jobs and new lawns. But then I would think that—I’m a fizbo. To stage my home, I moved most of the furniture and contents to my new house and left the place mostly empty. This was a good strategy in an 800 square foot home to increase the apparent size, give prospective owners a chance to use their own imagination, and I suspect also to wow them with an uncluttered environment. It plays on that fantasy that, "if I move I’ll have a chance to get rid of all that stuff, be a different person and unclutter my life in the broadest possible terms." To which I reply, "you can’t simplify your life by adding anything to it. And that includes a new home."

The last, but certainly by far the most important element in selling a home is the price. Using online sources for competitive prices in my area, and a collection of weekly postcards sent by area brokers, I synthesized a price. A price that was way too high. A classic fizbo error.

But I don’t think the pros do it much better. Over the course of my fizbo experience I was told by agents trying to get my business that my home could be sold for as much as $600,000, and by agents representing sellers that it was only worth $490,000. Some had a strategy of pricing homes low to try and induce multiple offers, in expectation of ending up with a sale price above the asking price. Some wanted to price it at market, and still others felt that they could sell it at higher than market based on the high quality of the renovation. Not much science here.

I knew the minimum price in the neighborhood for even a scraper (a property bought to raze the old house and build a new one) was around $490,000 to $500,000. I knew that a 2 bedroom, 1 bath (2/1) at 800 square feet was small, but gosh it was such a gem. The only other property in the area was ratty 3/1 that was offered for $524,000, and there were many town homes and condos that were selling in the $500,000 to $600,000 range. I reasoned that many buyers would prefer a single family, detached (SFD) home, especially since my lot would permit future expansion to 2,400 square feet above ground plus a basement. Factoring in my self-appraised improvements of $80,000, I set my price at $575,000.

With all the pieces now in place it was time to have my first open house and sit back and enjoy the fruits of my labor. It was the weekend after Valentine’s day, spring was in the air reinforced by the scented blooms of the wisteria-laden pergola in my backyard. Since I like to bake bread, and aware that real estate lore has it that houses have been bought and sold on the aroma of fresh baked goods hot out of the oven, I had a couple of loaves ready to go.

 

My First Open House

I had good traffic both days. My sign-in sheet filled up quickly and I received many compliments on my home. But Monday came and went without any offers or calls from buyer’s agents. Many things became crystal clear. First, that Monday 6 other homes came on the market in my immediate area. All with at least 3 bedrooms, and some with 2 baths, but none of them asking more than $538,000. Second, 80% to 90% of the traffic was coming from the sign out front. Only one person said they saw the ad in the newspaper. A couple said they saw it on the MLS. But my sign-in sheet told the sorry. "How did you hear about this house?" Sign, sign, sign, sign, sign, sign, sign…

So why wasn’t all this traffic good traffic? To understand you have to know that Santa Clara County is one of the premier school districts in California, and within Santa Clara, Cupertino is the most highly rated. And even within Cupertino, there is a pecking order for schools. I had people call me about the house, but upon learning that is was not associated with Monta Vista High School, they simply were not at all interested at any price.

The problem for me was that the vast majority of people cruising my neighborhood were doing so in SUVs and minivans with one or two kids in the back, trying to get them into Cupertino schools the following fall. They needed a minimum of 3 rooms and this wasn’t it. In fact on several occasions I got looks of astonishment from people who didn’t know it was a 2/1 and would ask me incredulously, "where is the other room?" They seemed to imply that when I remodeled I must have removed the 3rd bedroom.

Thomas Jefferson, when he was building his home in Monticello, lived for 13 years (the latter three years with his wife) in the 210 square foot Honeymoon Cottage which still stands today. America’s need for interior space has grown dramatically over the years, increasing by 50% between 1970 and 2002 from 1500 square feet to 2,320 square feet, even as the average family size has decreased. While this is certainly a sign of affluence and the rate of home ownership has never been higher at 68%, the problem is that it seems to know no bounds, resulting in sprawling fields of monster homes, commute congestion, and an ironic diminution of the quality of life both in terms of time and health.

But I digress. I immediately dropped my price to $538,000. This I thought was a much more comfortable price. It made it a clear trade-off between quality and quantity, and it meant my home would be included in searches that looked between $500k and $550k, where previously I would have been excluded. I also felt that no one would be embarrassed to offer me a much lower price. At $575k making an offer at $500k, let’s say, might have been off-putting for some people. In fact, my bottom-line price was to net $450,000. I was ultimately prepared to accept an offer as low as $470k with a 3% commission if I had to. I didn’t think it would get to that. I thought I could dump the home, if necessary, at $490,000.

Pricing was one thing, but the problem remained how to get more of the customers who were suited to this house to come visit it? Ideally these would be young, single professionals like me (well single and professional anyway), young couples or a parent or parents with a young child. After the dot-com blowup who knew if any young professionals had any money left at all? I certainly wasn’t going to take Webvan stock in payment.

MLS was good and I expected net-savvy buyers to find me there. But was it enough? One problem in this area is the fragmented nature of the valley, broken up as it is into small suburban towns like Cupertino, Los Gatos, Mountain View, Palo Alto, Sunnyvale, Redwood City, etc. Each is its own community, with its own local paper. Young, professional singles who might be looking for homes that were similar in size to my own in Palo Alto, and Mountain View were considered looking on the Peninsula, whereas Cupertino was usually lumped into South Bay and San Jose. As I checked into each one I didn’t find an easy way to reach the whole potential market.

Then I remembered Craig’s List (http://www.craigslist.com). The antediluvian, text-based classified ad system for the Bay Area. I’d never really used it, but it was definitely the hip, tech-savvy, omnidirectional vehicle I was seeking. I zoomed over and in a few minutes had an ad on Craig’s. I think it’s worth pausing at this point to compare the four main advertising vehicles I was using.

 

 

MLS
(Multiple Listing Service)

SJ Mercury News

Craig’s List

Lawn Sign

Cost

$495 for 6 months + $100 insurance fee at closing.

$395 for 2 weeks + $25 per weekend open house listing

Free

$164 (for 5 of them) + $40 for the post.
$371.94 all in.

Response

A dozen

A couple

A dozen

Hundreds

Size of ad

Limited. Auto generates description from checked fields.

4 lines

Hundreds of words

"Ask for Marc" rider sign plus data sheets

Graphics

One small photo. Additional graphics can be provided by listing agent, but not done in my case

None

Yes can be embedded with HTML tags

Yes, has a Lucite box with one-page data sheet or anything you choose

Web Links

Controlled by listing agent and can only link to agency

None, not even when the ad appears in the online version.

Yes. Email links and links to external websites. In my case it linked to a full online tour

No

It was clear to me that in my situation the Mercury News was a complete waste of money, that the MLS had marginal value, Craig’s List was promising and free, and that the real force, as NOLO had presaged, was the sign. I suspect that in a neighborhood where the other homes for sale are similar and attract the same sorts of buyers, that one might forgo listing on MLS entirely.

I really liked the idea of Craig’s List and I thought the model was an excellent one. In fact, only a short while after putting the ad on Craig’s List I got an email from Ricardo and Celeste saying, "we want to buy your house." They came and looked the next weekend and it exceeded even their heightened expectations from the online tour. However, they wanted 100% owner financing that I was not prepared to do, but what was exciting was the story.

From the beginning I really wanted to write up my experience as a fizbo. What better ending than to have a young, professional couple buy it without using MLS and perhaps using no brokers on either side of the transaction? No commissions whatsoever. The perfect ending to my own little saga, and a powerful anecdote for fizbos everywhere. They merely needed to clean up their existing home sale in Florida, and arrange the necessary financing and they were in. I was ecstatic.

Still a week went by with no offers. Not from Ricardo and Celeste, not from anyone. 2 weekends later, I was still getting good traffic and many people who said they would make an offer but nothing ever materialized. I had told agents who called that I was prepared to give it two months before I turned the property over to a pro, but I never believed it would be that long. I had expected to sell in two weeks, close in 30 days and be out of the state by mid-April. Of course, the economy was weak, the war was looming in Iraq, and tax day, April 15th, was coming up. Even after the latter two events passed nothing was happening.

I dropped my price to $508,000

 

Fear of Fizbos

Agents hold stereotypical views of fizbos. I talked to many agents about this and even got a lengthy email on the subject, which I think, speaks for itself:

I have to say that all the agents (well maybe save one) were extremely courteous and helpful to me. While it’s true that they were generally trying to get my exclusive listing, I really think they were genuinely friendly, hospitable people. For example, one thing that wasn’t covered at all in anything I read about selling a home was the "broker tour". This is an open house exclusively for brokers. More than one broker mentioned that I needed to get my home on "the tour" about which I knew nothing. They were kind enough to explain that in the MLS screen that a listing broker sees there is a checkbox for "tour." I relayed this information to Marquis.

On the appointed broker tour day I had my home open. I had no idea how long the broker tour lasted (I found out later 9:00 to 1:00pm.) so I hung around the whole day from 9:00am to 4:00pm. No one showed up. Zero. Zilch. Not one. It was a very disappointing moment. I later explained this to another agent who then asked me if I’d offered any goodies? I said no, and she told me of a comment box that is also used by agents to offer enticements to brokers to come see a particular listing. Armed with this new information I again had Marquis list me on the next week’s broker tour. I had hot coffee, orange juice bagels and cream cheese. I even had to-go cups. I must confess that in line with my own stereotypes about brokers I had purchased chocolate chip and blueberry and other flavored bagels that I would never buy for myself.

This time 3 brokers showed up. One who had a specific buyer in mind, who she later brought by to show the house, but that didn’t result in an offer. I was left with a mountain of unappetizing bagels and a lot of coffee and OJ. The point remains. Brokers were willing to patiently explain even these inner workings of the system that might have helped me sell on my own and dashed any hopes of exclusive agency with them. I think they did this because I didn’t meet many of the criteria that are laid out above for fizbos.

Several brokers did report that fizbos regularly hang up on them at the mere calling to inquire about their home. This attitude is not only discourteous, but also shortsighted. No matter how slim the chance, the broker one hangs up on may be the one who has the perfect buyer for the fizbo home.

I myself do not have a chip on my shoulder about agents. In fact I think they play an important role in many situations. For example, when I moved from southern California to Cupertino I knew nothing of the area, and an agent was very helpful in showing me around and helping to purchase the house I was now selling. The same was true when I bought my new home. My feeling is simply that the system has a one size fits all rate structure, where more variation and options should be provided. Data from the National Association of Realtors (NAR) shows that the typical buyer moves within 10 miles of their old home. Does the average person really need a broker to show them around? I also feel that the World Wide Web has made available to the lay person the information that formerly made agents such a valuable arbiter in the process.

To my fizbo way of thinking this is not dissimilar to the situation of travel agents, with the MLS akin to the SABRE reservations system. Travel agents still provide an important service for some people and especially for complex itineraries, but many more are able to access the system directly. Sure, some people end up in San Jose, Costa Rica instead of San Jose, California, and one English couple ended up in Sydney, Nova Scotia instead of Sydney, Australia, but overall booking is cheaper and easier for the vast majority of flights.

There is another aspect of the analogy I find particularly apt. Like the old travel agency model, the user of the service doesn’t pay the costs directly. In real estate the seller customarily pays both the buyer’s and seller’s commissions. This is a recipe for economic inefficiency. This practice is institutionalized in the MLS system that requires one to "commit" to the buyer’s broker’s commission rate when listing the property. With all other properties listed at 3% who is going to risk the sale of a house by even suggesting a reduced commission of a quarter or a half point? Not only that, but I doubt this is even a matter of discussion in many deals. It is ironic that from my vantage point, the generally free-market endorsing real estate profession does not seem to be eager to admit market forces into the setting of commission rates.

The National Association of Realtors reports that 71 percent of homebuyers used the Internet in their search for a home during the first quarter of 2003, but the vast majority of them then turned to an agent to help buy the home. Why? I suggest it is because it is not clear what the alternatives are, and if the seller is paying anyway, why should they bother?

There are some chinks in this armor. Zip Realty, now a division of Yahoo! offers to rebate 0.85% of the sale to the customer. Not quite flat rate pricing, but a start. And many discount brokers have popped up that offer to sell a home for a discount rate. Even Coldwell Banker has opened Blue Edge Realty in Pennsylvania and Illinois offering a 2% commission and the slogan, "Pay Less. Keep More."

 

My First Offer

At $508,000 I immediately started to get offers.

One Friday morning, dressed in pajamas, I just happened to open the front door to get some fresh air and check the weather. I was startled to see two young, attractive women standing on my front deck. At first I thought they were postal employees dressed as they were in blue and red sweater vests. They said they were just looking at the house, and I invited them in.

This is another lesson for fizbos; you have to be ready to show your house and yourself at any time. I ushered them in and we toured the house, which they liked. Everyone liked my house. One of the young women said that she was really shopping for her father who lived in a rental house nearby. Although I expected the father the next weekend, it wasn’t until several weeks later, and the weekend of the drop to $508,000 that he and his daughter showed up. He didn’t speak any English and so he left without my knowing exactly what he was thinking.

The following Monday I got a call from an agent saying they represented the young woman and her father, and that he would like to present an offer. I said that was fine. He then named a low-ball price and asked if I would take it? I was taken aback by both the offer price and having it conveyed verbally. Trying as best I could to stifle any emotion in my voice I said, in a calm and off-handed way, that I would only respond to offers in writing. This was strictly a ploy on my part. Having an offer in hand was great leverage. Since I expected 3 or 4 offers from my reduced price, I certainly wanted to present the image that I could afford to pass on some of the other offers.

He asked me if I preferred any particular offer form. I said I did not and he then asked if I had any forms. Given the way this was going I wasn’t shocked, but I was still surprised. He was the agent. Didn’t he have the forms? I did, I said, but he said never mind he would find one. Well this put me off right away. When he did show up with the offer, he dropped 5 copied pages off on my breakfast table without any presentation, assuring me that I could counter the offer. Essentially telling me the offer was too low. He didn’t even have the standard disclosure for California advising the buyer and seller of the role of agents in the transaction.

The offer was for $455,000.

This was not a serious offer. There was no financial disclosure with it and the photocopy of the escrow check was simply made out to "Title Company." Either they couldn’t afford more or worse, that’s all they thought my house was worth. I knew it was worth more simply to tear down. Still, to string out the offer process, I asked them to resubmit it with the right title company and evidence of financial wherewithal. During the days of exchanges with the agent, he was hard to get a hold of, had no cell-phone and worked out of his home where his wife answered the phone in a residential tone. I was certain this deal was going no where.

 

The Tao of Fizboizm

The selling process mostly took place during weekend open houses, where I stood around baking bread, the scent of wisteria wafting in through the open patio doors, in a pristine house where people came through admiring and complimenting me on my work. I’ve had worse jobs. On the other hand, the weekdays were quiet, waiting for the phone to ring, holding back any spread of entropy, and keeping the house perfectly ordered so that it could be shown at a moment’s notice. There was lots of time to contemplate abject failure, a sudden collapse of the housing market or some disaster like an earthquake. This was fueled by the entreaties of the agents. Although it was rewarding and advantageous to have them in to look at the house, it took a stiff spine to continue despite the barrage of statistics thrown at me as evidence that eventually I would capitulate and have to turn my home over to an agent, so why not do it now?

There were many joys to counter these oppressive moments. One of the unexpected pleasures of being a fizbo was meeting all the people who come through my home. This is often held up by the real estate industry as a negative to being a fizbo, but for me I came to see it as a big positive. Many people from the neighborhood stopped by and it was good to see them, many embarrassingly enough for the first time. Well-wishers came by and some even brought food. They also got to see what a carefully remodeled Stern and Price home could look like, and I know at least two couples who were inspired enough to tackle their own remodels.

One fellow, Raj, who saw my website and who was having trouble with his radiant heating system came over to checkout my forced air furnace. He had been told that he would have to mount everything on the roof including ugly ductwork. Once he saw my installation he understood how it could be made to work and emailed me later to say that his new heating system was being installed without roof mounted components.

I got several prospective fizbos who came by to check on my experience as a fizbo. I even sold my used signs to one of them.

Most importantly to me, I was a real-life demonstration of small is beautiful. I remember during a change to the R-1 zoning in Cupertino a real estate agent called our tiny ranch houses "ticky-tacky" and said they should be encouraged to be torn down and replaced with new (monster) homes. Now I was exposing people to the simple beauty, and practicality of a small house. Many people remarked on how nice and big my yard area was, somehow forgetting that the more of one’s land that is taken up by house, the less there is for garden. I was also able to reinforce the almost lost mantra of California living – it’s the outdoors stupid. With such beautiful scenery and lovely weather most of the year who wants to be indoors? California homes, from craftsman style to Eichler, were all designed to use the outdoor spaces as extra rooms.

All these interactions, extraneous as they were to the sale and from an agent’s point of view, potentially disruptive and time wasting, were to me an essential part of the community experience. A chance to say goodbye, a chance to share experiences, a chance to pave the way for a new owner and member of the community.

To be sure, there can be significant emotional strain as hopes of offers do not materialize, low-ball offers come in, having to deal with every sort of person, and just dealing with the monotony of waiting for something to happen. It can be easy to go from thinking of it as a grand adventure to being the thing that keeps you from a grand adventure. To combat this I needed to stay focused on what it was I was trying to achieve. I was able to use the experience as an object lesson in living in the here and now. This was a concept that I had never fully understood. In the go-go years of Silicon Valley I didn’t even believe in it. The here and now was a boring place full of impediments to the good life that only the future could realize. Rising each morning, bleary-eyed, I raced off to work on the future that was always beyond my grasp. Velocity breaks reality. Now I summed up my new found fizboizm as the following. Today I am selling a house. Later I will be living in a new house. There is no reason to rush from today to later.

 

My Second Offer

On a rainy Friday before the price reduction weekend, again dressed casually, there came a knock on the door. I opened to find two rain-soaked women and a tall, rather goofy looking gentleman. Once again I took visitors on an impromptu tour of my home. The tall guy was the agent. He handed me a card that had his name and number hand written over a generic agency card. The two women were very impressed and complimented me on my taste. However, I was quietly affronted when one woman, who I would later learn was the sister of the buyer, peeked into the room I used as a home office and announced, "this will make a good closet." The buyer did smell like she owned a lot of clothes. During the tour the tall guy just stood in the living room.

An hour later, another knock on the door. They were back. Another whirlwind look at the place as if to assure themselves that it really was as good looking as they remembered, and off they went.

On Saturday at just before noon, and shortly before my open house was to start at 1:00pm the phone rang. It was the same woman calling from her long, black, late model Mercedes parked just 50 feet away. I would later learn she was a pharmacist. She wondered if she could come in for a third tour. At the door I greeted the original pair and three other older versions of themselves. No agent. The pharmacist, already familiar with the layout led the pack on a frenzied tour of the house. As small as it is there is a short hallway and they scurried down like mice and peer into the bedrooms and bath.

At the end of the tour they gathered in front of me. The pharmacist with the obvious approval of the others said she would like to make an offer. I explained the fizbo thing, but knowing she had an agent, told her that her agent could make an offer. To which she volunteered that the tall guy wasn’t really her agent. He was just showing her one of his properties down the street when while driving back she spotted my sign and, "asked what about this one?" Of course, he knew nothing about it, but undeterred as she obviously was about a lot of things, she just walked up to the door and knocked. She was well aware that she could save 3% if she dealt with me directly and mentioned she was eager to do so.

Here I made a perhaps terrible mistake. What I should have done was hand her the rather simple standard two-page contract that initiates a binding home sale in California. Yes it’s a lot shorter than most real estate company forms which are designed not just to cover aspects of potential liability, but also I’m convinced, designed to make it clear that transferring real estate is a very difficult business and should be left to professionals. The not so subtle message is, don’t try this at home.

Instead of handing her the form, and potentially completing my fantasy transaction with no brokers, I told her that she might prefer to have a broker. At the time I didn’t know she was a pharmacist. I only knew that she wore pungent cologne and seemed in a big hurry. I misjudged her I think, as not being fully capable of handling the whole deal herself. I’ll never know. I gave her the card of a very nice broker I had met who had offered to do the paperwork for a mere 1%. I let her go thinking that I would get a call from this agent in due course.

On Sunday I got a call from an agent named Dick. Dick says he would like to look the place over for a buyer. He doesn’t identify the buyer. That evening Dick shows up. He’s an older guy and he smells vaguely of decay. He admires the house on a quick tour, complimenting me on my home. He leaves, but not before being very insistent on confirming the commission rate as 3%. He seems pleasant enough. By this time I had the first, low-ball offer in hand, and I mentioned this to him. Not the prices of course, just that another offer existed.

During this whole time I was trying to coax Ricardo and Celeste into making a written offer. Since they had already said they are willing to pay $508,000, theirs was the best theoretical offer I had. But theoretical purchases are worth their weight in helium.

I have to say that during this period it was quite an emotional roller coaster ride. By all accounts I am a pretty levelheaded person, and I have the luxury of being single, working from home, few responsibilities and fortunate to not be carrying two mortgages during this period. It’s just me and my cat Fang. I found I was second-guessing myself a lot, and had several nights of less than refreshing sleep. Fang did his best to help. He had learned that when people came to the open house, there were suddenly a lot more hands to pet him with and he would excitedly awake from his nap and rush after people meowing and flopping down in front of potential buyers and showing his belly. These gaudy capitulations were good icebreakers for most.

On Monday Dick called to say he would like to present an offer and would I go to his office the next day at 11:00am to receive it? It is then that he confirmed that the offer is from the pharmacist. This annoyed me immediately because she had not gone to a discount agent as I had suggested.

I am also aware that it’s a common bargaining ploy to try to have home field advantage. But I didn’t really think this was going to phase me. When I showed up Dick still smelled sour but he was wearing a neatly pressed white shirt and a nondescript tie. We moved into a conference room while we traded small talk.

We sat down and Dick took me through some market data. He showed me some comps (comparable home sales) from which a computer model had derived a figure of around $400 per square foot of house. Applied to my house this yielded a sales price of $320,000. This was plainly absurd but he gives me this dumb look like that’s what the computer model says. This was nonsense because the price of land is not linear, and there is a threshold just to get in the game. In my estimation this was $490,000 for just a bare lot with no house whatsoever. Obviously Dick was trying to set my mind for a low offer that he wanted to make seem as generous as possible.

Dick carefully arranged the offer papers face down and presented them back-to-front like a card trick. Done in this way the price on the first page came up last and the duration of the offer came up first. He explained to me that this was a "presentation offer". That is the offer was good only while we sat in the room. This really infuriated me because I knew he was playing me like the fizbo he expected me to be. To him it might as well be "fizbozo." I think I made no show of emotion and urged him to proceed. We went through some other details and finally we got to the offer, $489,000.

Dick looked for my reaction but went on to say that he was not even sure that the house would appraise at that amount, and since getting the house appraised for at least that much was necessary to complete the deal, it was an important point. In a pitiable display of trying to justify his commission, he went on to ask rhetorically if I knew how deals got done? "Because I go out with the appraiser and convince him the house is worth that much." Well that was a hell of an admission if true and not mere posturing. As if every appraiser were an Andy Fastow in waiting, ripe for an over-valued pricing construction to keep the deals flowing.

Okay, $489,000, it wasn’t terrible, but I was in no position to accept at that moment. For one thing the offer was written up on Peninsula Regional Data Services (PRDS) standard offer form that I hadn’t seen before. For another, I was still irked that it was a presentation offer. I said that I needed time to think about it and asked for an absurd 10-days to look it over. Dick reacted as if I’d asked him to remove his clothes and run around in the parking lot naked. "Absolutely not, no way, that’s never done," he said in what I suspected was a chameleon-like ability to feign irritation. He started gathering up the papers as if he was going to leave. "If you are going to reject the offer then that’s the way it’s going to be."

"Dick, I’m not rejecting the offer, I’m simply asking for more time to study it. What if I wanted to counter?"

"You could stay in this room as long as you like and write it up."

I laughed and said, " I can’t do that. I have to go mail-in my taxes."

He didn’t seem to have an answer , but suggested 48-hours and said he would ask his client.

I left, and by the time I had driven the 3 miles home there was a message that said the 48 hours was agreed to and that I could come pick up the contract.

 

The Truth, The Whole Truth, and Nothing but the Truth

One of the great pleasures the observant fizbo has in selling his or her own home is the opportunity to see real estate agents and their habits. Based on my experience only, I would say that real estate agents display a wide variety of amusing traits, and they are prone to a myriad of myths and misperceptions about buyers and sellers.

The most amusing thing about many of the agents was the degree to which many seemed to be cut from the same cloth of real estate selling, and I imagine self-help books. This was never clearer than in the cold calls I got from dozens of agents seeking my exclusive listing. All these calls went nearly word-for-word like this:

Marc: Hello this is Marc.

Agent: I see you have a home for sale. I talk to a lot of buyers and sellers in your area and I would like to know how I can help?

Me: Well, I am working with cooperating brokers so if you bring me a buyer, I will be glad to pay you a commission.

Agent: Oh you are working with cooperating brokers. That’s great. Tell me Marc, on a scale of 1 to 10 how motivated are you to sell your home?

Me: I’d say a 9.

Agent. Great, great. That’s great. Now tell me Marc, how long do you think you will try to sell your home on your own before you hire a powerful agent like myself to help sell your house?

Me: Well, I’m pretty committed to giving it about 2 months.

Agent: Really? Two months? Are you aware that 98% of for sale by owner properties end up using an agent and that the 2% that do sell, sell for less money than those sold by an agent?

Me. So I’ve heard, but I’m pretty committed to selling the home on my own.

Agent: Well suppose I could show you a way to sell your home for more money using an agent would you be interested in hearing about it?

Me. Well, yes of course. You are welcome to come by anytime.

Agent: So if I were to show you how you could sell your home for more money net to you by hiring me would you be willing to engage me as an agent to do so?

Me. No.

Agent: No?

Me. No, I’m pretty committed to taking the full two months to see if I can do this on my own, but if you’d like to come show me what you can offer, I’ll be glad to listen and evaluate it.

Agent: Okay, let’s set up a time.

 

I had this conversation, over and over with agents. It got to the point that when they would slip up, I would fill in the blanks for them.

I’m sure the conversation is so carefully scripted, to avoid lawsuits. For example, were very careful not to say "I represent a lot of buyers and sellers in your area" but the more nebulous "I talk to". This is likely due to another characteristic I found about real estate agents, they are paranoid to the point of distraction about getting sued. And dealing with a fizbo just heightens the sense of anxiety.

And where does the "98% of fizbo sales end up using an agent" data come from? According to the National Association of Realtors (NAR) only 25% of fizbos ended up using a real estate agent. Walter Molony, from NAR Public Affairs, didn’t know either, but he thought a number that high wasn’t consistent with their data that found 35% of fizbos would definitely sell on their own again.

The claim that using an agent will net more money from the transaction is no doubt based on the data, of dubious value, from the NAR press release,

… homes sold by a real estate agent captured a higher price.  The median selling price of a home sold directly by an owner was $137,400, while the median selling price of a home sold by an agent was $175,000.

This is the source of the claim that if you use an agent to sell your home you might be able to sell your home for 28% more. One doesn’t have to scratch too deep to see this makes no sense at all. As NAR confirmed, there is no accounting for similar homes in similar neighborhoods. The number takes in all the homes in their survey. The numbers aren’t net of commissions either, so one should reduce the reported sale price of fizbo sold homes by between 3% and 7%, the commission saved, even with all else being equal. Interestingly enough, NAR asks no questions about commissions on their survey. And finally, if it were true, why wouldn’t buyers be flocking to fizbos if they could buy a similar house for 22% less? On my house that would have equated to a savings of $110,000. Still this figure is touted on the NAR website as,

According to NAR rates of fizboizm peaked at 18% in 1997 and have declined since but seemed to have stabilized around 14% in 2002. NAR cites complexity of the transaction, the time required as the major reasons for the decline. Still in 2002 5.57 million existing homes changed hands in the United States. The 14% equates to 778,000 homeowners successfully completing a fizbo transaction. And NAR does not collect data on the buyer’s side. What might be called a "purchase solely by oneself." A pizbo?

More importantly, while some agents may indeed do many deals in a year, the vast majority are doing very few. How much experience does the average broker really have if they are only writing one or two deals a year?

Another perception that is not borne out by my experience is a broker’s belief that every buyer has an agent. This was simply not the case. In fact what surprised me most was the large number of people who had no agent, and even more surprising the number (at least a half dozen) who came looking without their agents knowledge and then later asked their agent to contact me. For all the offers I eventually received, in no case did the broker see the house before the client.

There were many, including myself as a buyer, who used the Internet to check on homes even though I had an agent. If some buyers are doing all the legwork to find a home, what is the agent doing? They would probably say negotiating the deal, navigating the offer process, holding the deal together, doing the paperwork and making sure the deal doesn’t wind up in future litigation. Well I’m sorry, I can hire a lawyer to do that more cheaply. I know it’s an unusual thing to say, but yes, in this one case a lawyer is possibly the low cost solution.

In another surprising twist, some brokers did admit to me that they thought selling property was really simple and straightforward, and that I should have no problem. But, if I did want to have someone just look over the paperwork they would charge a small fee. I was offered this service at between ½% and 1% of the deal. So even if you are going to use an agent, if you find the property and you are ready to make an offer, then for a lot less money as a buyer, you can higher a real estate professional to do the paperwork. As a seller I would have gladly taken the savings off the price. After all, I was only interested in the net price to me. If I’ve offered to pay 3% for a buyer’s broker, but the buyer comes to me with a ½% fee, I would certainly be willing to take 2-1/2% off the price. In fact I stated as much to several buyers.

One agent was nervous about dealing with fizbos because she was convinced that they had special powers enabling them, once an offer was made, to hold that offer indefinitely as leverage for future deals. I pointed out that if the deal had expired, to represent that it hadn’t was unethical and likely illegal. Still she persisted that this was the case and no amount of logic could dissuade her. She was likewise convinced that if one made an offer to a fizbo that they would then learn the name of the buyer and cut the agent out of the deal. This runs contrary to my experience where buyers are anxious to keep a broker on their side, especially when dealing with a fizbo.

During one offer process, a senior broker was convinced that because I had an MLS listing, Marquis had to be listed on the sale agreement and co-sign the forms. Marquis, without getting a cut of the sale was not about to sign on to the deal, and rightly so. It took a few go-rounds to clear up the situation. This points up two things. Even experienced agents don’t know everything, and fizbo transactions are rare enough to be poorly understood by many agents.

Conventional wisdom in the real estate profession has it that if your home doesn’t sell in four weeks, remove it from the market and re-list it later. I’m not sure if this is a good strategy in general and I’m even more suspicious of it for fizbos. This thinking, it seems to me, is based on the idea what’s new is novel and desirable. That is, you have the best chance of selling your home in the first rush of excitement when it initially comes on the market, like a debutante’s ball. Statistically this is true. If there are going to be 1000 homes sold in your area in the coming month, and some of those buyers are holdovers who didn’t purchase in the previous month, then a combination of new buyers and old buyers to look at your home might create the appearance if not the reality of a frenzy. Frenzy is a good thing for a seller and has been the norm in Silicon Valley for the past several years often resulting in multiple offers and selling prices above the asking price. Another frenzy effect is for customers to make "as is" bids without any inspections and very few or no contingencies. This creates a very clean deal and minimizes the possibility of litigation in the future. These conditions exist for fizbos and non-fizbos alike in the first month.

The other reason for removing a home from the market after 30 days is to avoid the dreaded appearance of being yesterday’s bread. This theory has it that if no one has purchased the house in so many days, then there must be something wrong with it. I was told time and time again that the second question a buyer asks after "how much" is "how long has it been on the market?" Agents trying to maximize their time, and having tried to show a house without success a couple of times may give up on it and focus on the homes they think are the most saleable. If a fizbo is bad, an aging fizbo is poison.

But my first month passed without an offer so what was I to do? Take it off the market? I didn’t have time for that, and I wasn’t sure that my MLS deal would permit me to remove my house and re-list it later. I began to think of the logic of removing the house from a fizbo’s point of view. By taking the house off the market I removed it from the view of all the new people coming on the market. I didn’t know it at the time, but NAR reports that the vast majority of people are, on average, in the market for 8 weeks. Nor did I know that the average DOM (days on market) for a house in Cupertino had hovered around the 50 day mark for a decade, and that it was even higher for Santa Clara County generally. I had already cultivated some prospects, and although a professional agent wouldn’t have put up with dealing with "tire kickers" who hadn’t gotten financing first, I was still willing to work with them.

If the sign was the main attraction, and few agents were showing my home anyway, what did it matter if it stayed on the market? I was reducing my price, and prepared to reduce it further, and was emailing those reductions to my sign-in list. It didn’t seem to make sense to loose that continuity. Since I was mostly dealing with new people, I didn’t broadcast the price changes by crossing out the price on my flyer and handwriting a new one or putting up a "REDUCED" rider sign above my for-sale sign. I didn’t have one in any case, but I didn’t feel that advertising the fact was necessary. And yes, a few people did ask how long it had been on the market, but what of it? They ask the question, and maybe they will factor it into an initial offer, but if they truly want the house is this really going to be an important factor in the final analysis? I’m not convinced.

 

The Negotiation

As I looked over Dick’s contract and compared it to a standard one I had and to the one in the NOLO text, I found a lot of things I didn’t like. I crossed out sections on my copy of the offer and wrote up a counter-offer document detailing the new language and other changes. In all cases I didn’t make up any legal language, just borrowed it from other contracts. Because I was pissed at Dick for giving me a presentation contract, I had added a change reducing his commission to 2%.

On Wednesday night Dick calls me to ask what’s up, as the deadline was the following day. Playing a bit of the power game myself I had not contacted Dick at all. We agreed to meet at the deadline time of 11:00am, again at his office.

I started by giving him all the required disclosures. I did this to show him that I knew what was required, and to preempt any leverage he might have hoped to gain by having to patiently explain to me all the forms I had missed. It was a favorite tactic of agents to justify their worth to throw out various obscure forms as a way of convincing people that this was a job only a skilled agent could do.

To further diminish his status as expert I pointed out that on two areas of the offer mistakes had been made. One page was missing an initial, and the closing date was all messed up. Minor issues to be sure, but still who’s the pro and who the fizbo? I also casually mentioned that the agent who originally showed up with the pharmacist called to ask if I’d received any offers. It was immediately obvious to me that he was trying to find out if he had been cut out of a commission. I told Dick that his guy shouldn’t have done that. It was very unprofessional. Dick acknowledged this and that he did have a commission dispute with this fellow who had done him a favor by showing Dick’s listing to the pharmacist while Dick was unavailable. Through no fault of either of them the visit turned into an offer on my property.

This time I presented the contract from front to back. I give him his copy and he took one look at it and flew into a minor conniption. "You marked on the contract. You wrote on the contract. You can’t write on the contract. 27-years in this business, no one has ever written on the contract. You can write whatever you want on the counter offer, but you can’t write on the contract."

You would have thought that I had taken a Sharpie to the Shroud of Turin. Ignoring for a second that Dick himself wrote on the contract extending it for 48 hours, I had only written on my copy and not on the original. As far as I know, it’s perfectly permissible to mark-up any contract, have both parties initial it, and you are done. Again, Dick started stacking up the papers saying this was totally unacceptable and he could not present this to his client. I reminded him that he had a duty to present the counter offer to his client, and that he could advise her to reject it, but ultimately it was her decision, not his. He was still agitated but we made our way through the various and less important changes. There was no objection to my countering at $501,000. This was pretty straightforward. But all the other changes to the contract caused great consternation.

It became clear to me that Dick would not allow any changes to any of the language outside the areas of the contract that were provided as blanks to be filled in. This was quite different from my experience at negotiating contracts in business where there were always substantial changes to the language. Dick argued vociferously to the effect that the contract was a carefully honed instrument, modified each year to protect buyer, seller and agents from litigation and that this current version was the acme of its form and could not be bested. In fact it was why his office (a large, national broker) used this form exclusively and not the California Association of Realtors standard form. I asked what he would do if he were representing a seller who got an offer on a different form? He maintained he would require it to be rewritten on a PRDS form.

As we talked more, I came to understand that his concern over changing the form was two-fold. First, he would have to explain to his boss why for this tiny fizbo contract (by valley metrics) was he messing with the standard language. Second, the PRDS form, having been used many times by this branch was understood by the lawyers, and certainly they did not want to chart new legal territory by tweaking a formula with which they had so much prior experience.

It was clear that if I wanted Dick to be an advocate for the contract with the pharmacist, I would have to abandon any language changes. Nonetheless we plodded through my document, Dick idly doodled the word "no" next to each item on his copy. Then we got to his commission and he exploded. "You can’t do this. I’ll have you sued. I’ll have your agency delisted. This is outrageous. I don’t have to put up with this." And once again he started stacking up the pages as if to leave.

"Dick, this isn’t a requirement, it’s a counter offer. The commission is an item in the agreement. You don’t have to agree to this. You can counter back with something different."

"When you put 3% on the MLS you agreed to pay 3%. You can’t back out now."

"Yes, I agreed to 3% at $508,000. You are offering $489,000. If you offer $508,000, then it’s 3%. If you can change the price, why can’t I change the commission?"

I don’t remember that he had a good answer for this. But there was a general calming down, and I said I would rewrite my counter on his form. At this point I struck out all my changes including the commission which I just put in there to tweak him, and ended up with a very clean counter offer for $501,000.

I gave them over the weekend to respond because I was sure that I was going to get other offers, and I wanted to be able to say I had an active counter offer. This was a pretty transparent ploy, but there didn’t seem to be any objection.

The whole thing took an hour and a half and Dick said I was making him earn his money. Yup, I thought, $15,000 for 1.5 hours work. Not bad.

And I while I got this story out of it, the one about an agent who was a bit over the top, I’m quite well aware that Dick got a story too. His is about how he saved a client from yet another "fizzz-bo" that had no idea what he was doing.

 

Paper Chase

Buying a house is not really about wood. It’s about cellulose. I think over the life of a house more trees must be destroyed to support that transaction paperwork than went into the original framing of the home. In California the standard, minimum contract is just two tightly spaced legal pages. The PRDS and California Association of Realtors contracts typically run 5 or 6 pages. Other forms I’ve seen can run 12 pages. But these are just the tip of the iceberg. The real paper is generated by the disclosure forms. Here is the list of what must be certified in California prior to a sale:

Lately there is an additional form related to mold that states that if the buyer can’t get anyone to insure the home due to fears of mold, the buyer can back out. Some contracts will require separate and additional forms for mold, water heater bracing, and fire alarms. And then there is the mother of all disclosures the 6-page, hundreds of check boxes, PRDS Supplemental Disclosure Form. "Have you ever seen an insect in your home? If yes, please describe in detail what you did about it." I’m joking, but it is not unlike that.

The seller is also required to give to the buyer, and the buyer must acknowledge receipt of, the following three publications:

The latter two are easily located on the Web in PDF format that can be simply sent electronically to a company like Kinko’s and printed up. The first one is a more interesting story. This public document, written and updated at public expense is only available, in its entirety, to the lay person through the California Association of Realtors. This even though it is required by law to give a copy of this book to a potential buyer.

Incredibly, the Department of Toxic Substances Control (DTSC), the responsible agency, has a PDF file up at the placeholder location for this document on their website. It is ridiculous to post a PDF with instructions to call and leave an email address to receive the PDF file one is seeking rather than doing the obvious thing and posting the PDF file itself. When I inquired with DTSC about this, I was told that it was part of an "agreement" with the California Association of Realtors who, as one might expect, is reluctant to do anything that would aid and abet fizbo transactions anyway.

Despite this long list of paper, much of it is handled by one stop shops like JCS and Property I.D. One agent brought over the stack of paper from her last transaction. It was about 6" thick and legal paper length. It was plainly an intimidation effort, but in the end I was the seller, and I was the one who had to read, understand, fill out and sign these forms.

 

Out of the Blue

It was Easter weekend but I still had good traffic. On Saturday morning I got a call from Stanley who said he might like to make an offer on my home if it was still available. I explained to him that I had received two offers and I that I had countered one that could be accepted at any second so he’d better hurry. I couldn’t really place him. I thought he might be someone who hadn’t even seen the house yet.

At this point I had given up hope on Dick and the pharmacist. I was thinking, if I were her and I really wanted the house, $501,000 is not that far from $489,000 and knowing I had another offer and was confident enough to give them 5 days to respond, I would have taken the offer or countered right away. All these scenarios were running through my head. I felt like Iago with a thousand schemes and plots going through my brain. But unlike his character, I had no illusions that I was in control of the outcome.

I got another couple of good leads over the weekend, and Ricardo and Celeste emailed me that they had completed their Florida transaction and were getting their financing information together.

But once again, by Monday morning no one had called. Not Stanley, not Ricardo, not Dick, not the solid leads that came in over the weekend. I started hitting the phone. I spoke to one and left a message for another. Stanley said, "yes, yes, I'll have them get right on it." I didn't know what to think after I hung up. This guy knew I had two offers. He knew I told that I had a counter offer outstanding, and that they might accept at any minute, thus locking him out. I was bewildered when he so absent-mindedly said he would get right on it. As if he had just spaced-out on his to-do list: "eggs, milk, finish memo, make half million dollar offer on house, walk dog." I thought it was such a flaky reaction I dismissed him as some sort of kook.

Nonetheless, while I was out running an errand, an agent left a message saying she would be presenting an offer on Stanley’s behalf in the morning. IN THE MORNING! I'm really incredulous. No one is in any hurry to buy anything, and I fear people may be starting to hunt for bargains. I could feel the whole California housing market collapsing around me.

When I called her back she said she had no idea there was any urgency and that she would fax the offer terms to Stanley and his wife with instructions that if they liked it, they should sign it and fax it directly to me. However, the fly in the ointment was that their offer would be contingent on the sale of their home. I thought I now remembered Stanley as a tall, distinguished gentleman, with a petite Asian wife. They came in on the first or second weekend, and immediately had their agent get in touch with me. I sent her my disclosure form. When I didn't hear from them I figured that the disclosure dissuaded them or they had chosen a different home.

Because I expected a fax, I didn’t pick up when Stanley called to explain that he was faxing his offer. The next call was the fax. The thing was so blurry from being faxed twice that I could hardly make out the offer price. $504,000 I thought.

The next call was from Dick asking if we could have another conference the following day. I hadn't expected to hear from him at all and certainly not late in the evening. I asked if he couldn’t just fax me the papers, and he said no, I better come in. My bet was that he knew that I was seeking other offers and since I had not called to rescind my counter offer, he thought I didn’t have another offer I could sign. If I were he, I thought, I would then make a new offer lower than $489,000.

Finally a different agent called to say his buyer wouldn’t be making an offer after all. It had been a wild day.

By 10:00am the next morning, I had a clean copy of the Stanley offer in hand. The great thing about it from a story angle was that the offer was from the same agency but a different office as the one that employed Dick. But this other office was using the California Association of Realtors (CAR) form, contrary to Dick's assertion that they only used the PRDS form. The CAR form was not only more readable, it contained provisions and removed language that were in many cases the changes that Dick had refused to even contemplate.

I called Dorothy, Stanley’s agent, and we had a good chat. The home they wanted to sell was in Morgan Hill (a pretty desirable area), she claimed the price they had agreed on to sell the home was aggressive, and that she fully expected to get an offer within a week or two of listing it. In fact she was going over to check a few things out before they put it on the market.

The contract already contained a wipeout clause. If I got a better offer I could give them 72 hours to clear the home sale contingency and other contingencies and if they could not, I would be free to sell to someone else. Dorothy was open to rewriting the contract with the a few minor changes including a contingency that they have a bona fide offer in hand by May 24th.

Meanwhile, Ricardo and Celeste emailed me back and said they had an agent, and although it was a big step, they might be ready to make an offer. An offer from them would mean that I would have two qualified couples who really liked my house, and I might have to choose which to accept.

I became fearful that the pharmacist might actually accept my counter. Just as I prepared to send Dick a counter offer revocation notice, the phone rang and it was Dick telling me that his buyer had withdrawn her offer. It felt great to be able to say, "that's funny Dick, I was just about to send you a revocation notice."

About 7:00pm that evening an agent called wanting to show my house in a half-hour. I agreed and 30 minutes later Ricardo and Celeste showed up with their agent. He didn’t impress me as the sharpest tool in the shed. We gave him a tour—he was the only one who hadn’t seen the house—and they left saying to expect an offer in the morning.

The next morning I had to leave by 10:00am to get to Morgan Hill to take a look at the house Stanley is going to try and sell. At 9:30am Ricardo and Celeste’s broker called to say he had left the contract with them to sign and to expect it by fax in 20 minutes.

It was coming down to the wire. If I got the fax, I had to call Stanley and tell them I’m sorry, but I got a better offer. Still this would be better than having to break the contract later.

Federal housing anti-discrimination laws prevents sellers from picking their buyers on the basis of race, sex, religion and just about any arbitrary standard. Still, and this is a fizbo hazard, when you meet people you can’t help but imagine which ones would be a better fit for your home. Of course, you can’t really know. The people who admire your wood ceilings may tear your house down 10 days after closing. You can’t really tell, but everyone imagines. I have to confess that the thought of having a dashing, attractive, cosmopolitan, Latin-American couple occupy my house was appealing in addition to the fizbo story benefits. I was disappointed they had hired a broker, but I was unsure what the contract would offer as a commission as I’d made the same pitch to them about discounting the price of the house in proportion to a reduction in the amount going to the broker. I was glad, however, that it would be an easy and legal decision to make as their offer would have no home-sale contingency and was likely to be at a higher net price.

At 10:00am I once again expected a fax so I didn’t pick up the phone when the broker called to say that Ricardo and Celeste had had second thoughts and they weren’t going to submit an offer after all. The agent was himself surprised, as the offer was written and he was sure they were going to spring for it.

In an interview much later with Ricardo he told me that yes, he had actually signed the documents, and was about to fax them to me, when he and Celeste decided to go take a look at a property their agent had suggested. They ended up buying that property instead.

So off I went to Morgan Hill and signed the other contract. I entered escrow, but just barely. Barely because of the house sale contingency, and something Stanley said that was disconcerting. While they did sign the contract, he said his wife was already having a major case of buyer's remorse. Not what you want to hear from someone who should be excited about a new home. I gave the deal about a 40% chance of success based on a 50% chance of them selling their home in a reasonable time and an 80% chance that we would make it through the disclosure contingencies on my property and that they would stay in the deal. I planned to continue to show my house for the following 3 weekends, and try to get a better offer. It was really a pretty strong position for me, as I would have an ongoing deal I could reference to strengthen my bargaining position with any future buyers.

 

Unfettered Inspections

Surprise, I don’t really believe that inspections are that valuable either. The termite inspection (officially the structural pest control report), $100 paid for by me, took all of an hour and consisted of prodding some edges of the building and looking in the visible spots in my house, which are not many, for moisture or other obvious signs of infestation. Are there termites in the beams? In the studs? In the sills? One wouldn’t know from this report. The reports were divided up into "Section I" findings where infestation or damage is apparent and "Section II" findings where the conditions might lead to future damage. One of my complaints about the PRDS contract was that it required the seller to fix all Section I damage. The CAR and other contracts leave it up to negotiation between the parties.

Many agents asked me if I had done the termite inspection early on, and when I said no they advised me to do so. There are two strategies here. One is to get the report and fix all the Section I, and possibly the Section II damage, in advance of putting the home on the market. Naturally the agent wants to remove as many objections as possible, and I agree in part that it was a fizbo mistake to not at a minimum get the report in advance. Whether to get it fixed or not is another matter. The problem with waiting till you are in contract to do this is the clock is ticking, and you want to have the work done and signed off ASAP. Guess what? The same inspection company provides you with a quote for them to do all the required repairs on time. If you use someone else they won’t guarantee the work, and there may be a big delay getting back to re-inspect.

Not only do they have you over a barrel, but my main complaint is that it leads to expensive patching ($65/hour) of minor problems without really considering what might be best in the long run. In my case there were two areas of concern: the carport, and the pergola supporting the wisteria which could all be "fixed" for $1,780. The inspection found the same area of the carport roof needed replacement that I had had replaced 13-years earlier when I purchased the house. The report also proposed some minor fixes to the fascia boards, but in so doing the roof was going to be damaged. The price did not include the repair of areas damaged or exposed during the repair.

It was recommended that the wisteria covered pergola, the envy of every visitor, be radically cut back for further inspection of the supporting framework. 12 years earlier, when I removed the corrugated plastic covering to permit the wisteria to grow through it, I deliberately did not paint or repair the crudely built structure. I wanted it to age and decay naturally. The wisteria eventually covered it, and it is a stunning site. The proper thing to do was not repair it, but when the time came replace it with something entirely different. The same was true of the carport. Perhaps the next owner would want to enclose it, tear it down to permit an expansion or just let it rot some more.

In my opinion, the $1,780 would be poorly spent for stopgap repairs and would be better spent against major overhauls of lasting benefit. In the end I had the carport roof redone entirely, including new gutters, for under $2000. I did nothing about the pergola.

I’ll throw in here that all the offers came with a checked box stating that the seller would pay for a home warranty not to exceed $350 in price. To me this is another parasitic expense on the periphery of a deal. Who is going to quibble over this on any size transaction? It makes the buyer feel better, and thus smoothes the transaction for the seller but I question its economic benefit. As the expression goes, "I felt like I was being pecked to death by ducks."

Next came the building inspection, $400 paid for by the buyer. I admit it was gratifying to have the inspector tell me that my doors, after 5 years, operated better than some new construction he had seen, but is it really worth $400 to have someone tell you the doors and drawers work properly? I think it’s important to have things checked that you personally aren’t in a position to judge. Having witnessed the inspection of my home I have to say it was a cursory inspection at best. Worse, it wasn’t based on my rather explicit disclosure. Nor did the inspector have the termite report in front of him. In my opinion, it would have been much better to have paid to have the inspector evaluate the non-permit work and give an opinion about the renovation, rather than to have him check for proper grounding of the outlets. The latter being something anyone can do with a simple tester available at any hardware store.

Stanley was present during the inspection and his wife showed up at the beginning. I could have printed a copy of my disclosure and given it to Stanley and the inspector right there. Why didn’t I? The same thing that motivates so many of the actions in a real estate transaction. Fear and greed. Fear that the transaction will unravel. Fear that the Holy Grail, close of escrow, won’t be reached and that big, fat check for a quarter million dollars won’t end up in your bank account. At bottom fizbos are merely human. In the end, real estate transactions are fundamentally an adversarial process.

 

Mi Casa es Su Casa

Well I did it. I beat the odds and I sold my house on my own. 5 months, about $1500 in expenses, and $2000 in repairs later I saved $15,000 in commissions. If it’s true that a broker could have sold it in two weeks, then I might have had to make one less house payment and saved another $1100 or so. Still, it was as if I had sold the house for $517,500. Maybe I could have gotten more, but I’m not sure of it. I certainly don’t think I could have gotten $580,000 for it as some agents had suggested. And although I paid the buyer’s agent 3% I did so on a lower selling price, saving a little bit more money and lowering the sale price for tax assessment purposes.

The end was arduous as my buyer’s took longer than expected to find a buyer for their home and to close their deal. In one final validation of the worth of fizbos, it was the buyer’s agent who was missing a form, and who had neglected to send me any of the signed disclosures, requiring a 31 page, last minute fax to close the deal. My paperwork was flawless and on time.

Would I do it again? You bet. Especially now that I have some experience with it. I don’t think the fizbo route is for everyone, and for every circumstance, but if you are personable, patient, can keep your house and yourself clean and presentable at least one weekend day, and willing to undertake it, it certainly can be done. It’s not nearly as hard as many agents would make it seem, but neither is it a cakewalk the way most fizbo books and websites portray.

I paid $595 for an agency to manage my MLS listing. In doing so it seemed to lock in the 3% payable to the buyer’s broker that might have otherwise been more negotiable. I’m not sure I would do that again, but if MLS would allow fizbos to manage their own online space, then I might pay more. Perhaps $1000 or so. It would have to be as flexible as Craig’s List, but it could be worth it. Perhaps Craig’s List should start charging? I did send them a handsome donation for merely being there.

While agents do provide a service in deciphering and navigating the myriad of forms, it is not a true value added. As with tax forms, do we want real estate agents to become like tax accountants, paid to undo a mess of legislated complexity instead of adding true value to the home sale? In rewarding agents for doing this we build in a lobby that will argue for increased complexity. The fear of litigation is turning the people who should be advising sellers and buyers with forthright candor about pricing, inspections and other important issues into mere paper pushers.

In my experience, including those beyond the scope of this article, the quality of real estate representation varies widely from the true and valued professional to the rank hack who is more an impediment to the sale than an advantage. Increasing the professionalism and uniformity of the real estate profession would seem to me to be a much need emphasis of the National Association of Realtors and their local affiliate organizations.

I do think that the increased ability of buyers and sellers to meet via the Internet instead of via a broker is likely to be a serious challenge to traditional sales in future. In fact, I am surprised it isn’t more of one already. Especially in states like California where title companies do a lot of the heavy lifting, and standardized forms exist. During this process I also sold my car. While some brokers would prefer to think of selling homes as an art and loathe to think of it as anything akin to a commodity transaction like used car sales, I would point out that buying a home is a not that uncommon an occurrence for much of the population. And cars, like homes are often not a simple, utilitarian transaction. Like homes, there is a component of the sale that is irrational. Selling my car was quick, simple, and mediated by the Internet. I don’t pretend that buying a home could be that simple, but it could be made far simpler.

One simplification that would be a big benefit to fizbos would be to consolidate all the necessary disclosure forms and documents into one package. Another improvement would be for brokers to publish the rates for all their services including just to check over paperwork. It seems to me that people are using the Internet to find homes; going to see them on their own, but are simply unaware that they can do the transaction alone, with a lawyer or, if they choose a broker, that they can get a discount. I think an easy solution to this is to require the buyer to pay for their own broker and not have the seller absorb the costs. If the buyer has to pay I guarantee they will shop around.

In the end I am calling for something that every industry seems to have in abundance—choice. Choice to use an agent or not. Choice to use a full-service broker or only document checking. Choices made simple by standard disclosure of rates and ensuring that those benefiting from the service pay for the service.

In an age when much of the previous boutique businesses like travel agencies, stock brokers and even face-to-face banking have largely been supplanted by consumers managing much more of the process from the comfort of their own homes and warmth of their own laptop computers, it seems folly to think that real estate transactions will remain an exception to this trend. This may be seen in the NAR statistics. 57% of purchasers wanted an agent to help find them the right house while only 11% wanted them to help with the negotiations, and the same for helping them with the paperwork.

I fear that the current trend of the industry is contrary to that of a persistent yet nascent fizboizm. That is, the construction of a labyrinth of paperwork, fear-mongering, and an assumption of status-quo pricing that seems destined to someday call for the outlawing of the ability to sell one’s own home on the grounds that it has become too difficult and too complex for the average person. In my opinion we should be heading in exactly the opposite direction. In my experience, the average person in many cases, perhaps most cases, is perfectly capable of selling their home on their own.