"Meat-in-the-Middle" Toughest for FSBOs

"Meat-in-the-Middle" Toughest for FSBOs - Part III

Source: Julie Garton-Good ©2001

It's happened. Your sale as a FSBO has fallen apart. But wait---perhaps there's something to be salvaged (like the buyer!) If only you could hire the professional, third-party help you need to piece things back together. You can. In today's fast-approaching world of unbundled, a la carte real estate services where one-size-no-longer-fits-all, you can hire the professional expertise you need and pay what it's worth.

Here's how---in five easy steps:

1. Determine what help you think you need. Is it renegotiating with the buyer? (typically an agent's forte) Is it locating a more affordable loan program to keep the buyer in the sale? (a lender's area) Asking questions like these will help guide you (promptly) to the best source(s) for help.

2. Decide what degree or depth of help you need at this time and may need later in the transaction? Do you merely need to solve a short-term problem (like finding a new lender) or would you feel more secure (and confident that a closing would eventually occur) if you handed the transaction off to a third-party to orchestrate for you? While there's no problem taking it step-by-step with a professional for what you need, when you need it, answering this question up front might save you money over the long run. (As illustrated in Step #4 below.)

3. Contact the party that can assist you. For example, if you require an agent's negotiating skill, gravitate to an agent you've used before, have heard recommendations about, and/or one you were impressed with when he met with you about listing your property. Since fee-for-services is just now blossoming in the real estate industry, you might need to wait for the agent to 1) ask his/her principal broker if he can perform these services for you; and 2) determine what he would charge you and how it would be paid. Unlike the old, archaic real estate listing/selling model designed around a percentage commission built into the sales price, a la carte services allow the consumer greater control, are more flexible and cost-effective, and can be negotiated into a variety of payment options. (We'll cover this in depth in Part IV of this article to follow.)

4. Negotiate fees and a written contract with the professional for the services you need. Here's where unbundled, real estate fee-for-services really shines! Let's say that you've found the buyer but know that you're not the "Donald Trump of Negotiating". You could contract with the agent solely to negotiate with the buyer; or have him negotiate with the buyer AND prepare the due diligence paperwork (property disclosure form, etc.) and explain it to the buyer; or do all of the preceding plus bring the sale to a successful close.

Now for the biggie---what to pay and how to pay it. My first rule of thumb for consumers is compensate the professional as you would others in similar, related professions. For example, a real estate agent could receive an hourly fee in line with what a real estate attorney would charge. A real estate appraiser doing fee-for-service work could garner fees similar to what a CPA would charge.

My second rule of thumb for consumers contracting for fee-for-services real estate (as coined by Ben Franklin) "Don't be penney-wise and pound-foolish." Let's say that you've contracted with the agent to render five hours of negotiating work at (used only for the purpose of example) $100 per hour. It's successful, you're buoyant, ready to tackle the rest of the sale. Stop. Be realistic. How many other pieces of the transaction may be similarly beyond your capability? Could it be more realistic to bite the bullet right now and negotiate with the agent to take the sale all the way to a successful closing?----perhaps paying a reduced percentage fee? Or a flat fee? Or an hourly fee with a flat-fee cap? Or perhaps even negotiate a rebated fee back to you for services not required to close your sale as a FSBO? (See how fun this fee part can be?) The moral is that even though hourly fees may initially appear cost-effective and enticing to FSBOs, being unrealistic about the depth of help you need could churn hourly fees into an albatross more costly than any percentage commission you'd expect to pay in a full-service broker arrangement.