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What?? Give Buyers a Discount!?

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What?? Give Buyers a Discount!?
by Robert Irwin

For every "by owner" seller, there's a would-be buyer. And when talking with some of those buyers, I'm frequently asked, "Should I seek a big discount from the seller?"

The implication here is that because a seller is working without an agent, he or she should be willing to give the buyers the savings. For example, on a $300,000 house a 6 percent commission would be $18,000. When selling "by owner" that's $18,000 less that the seller has to pay out. Buyers can do the math and they are asking, shouldn't that be theirs?

Of course, most sellers are quick to answer, no - not a dime! They know that selling "by owner" takes some work. They are handling all of the advertising, marketing, documentation, and closing that an agent would otherwise do. If they're doing the work, why shouldn't they reap the rewards? Why do the work AND give the buyer a discount?

The answer, of course, comes down to leverage and who has it. From a seller's perspective, it means how badly does he or she need to get rid of the property? And what's the market like at the time of sale?

In recent months with prices softening in most areas, it's been a buyers' market. Put your home up for sale "by owner" and, if it's reasonably priced, you might get more than one offer or you might not. In other words, the buyers hold the leverage.

But, times change. Certainly no one can predict the future, but it appears that mortgage interest rates are rising and that the number of available buyers who can qualify to purchase even at the current prices we've recently seen is diminishing. In other words, more markets may not be able to sustain themselves at their present levels. When that happens, there will be even more homes for sale, and a lot of people trying to sell "by owner."

Now the leverage, so to speak, is on the other foot. A seller who wants to sell when there is a high inventory may have to consider giving the buyer a discount. It may be the best way to get a quick sale. But, I hear "by owner" sellers say, what about all the work I put into handling the sale? Sellers, remember, you can more easily give a discount than those who have listed. Because you're not paying an agent, you have the money saved on that commission to pass onto a buyer. Keep in mind that those who have their properties listed might have to give a similar discount AND pay an agent!

TIP

Sellers, also keep in mind that you don't have to discount the property the full cost of a commission. You can discount it, for example, by a third. On our $300,000 house noted above, why not give the buyer a $6,000 discount? That's still substantial. And you get a $12,000 savings as the seller. Of course, depending on the market conditions, you might need to give a deeper discount to get that sale. As I said, it all depends with whom the leverage lays.

Robert Irwin is the most prolific real estate writer in America having produced over 100 published books in the field. His TIPS & TRAPS McGraw-Hill series has sold well over a million copies and his FOR SALE BY OWNER KIT and FIND IT, BUY IT, FIX IT and other books have been strong sellers for Dearborn.

In addition Irwin writes a regular real estate column for The Wall Street Journal online and is introducing a new weekly column for Owners.com.

Irwin has sold his own property "by owner" and during over 30 years in the business has been a broker and consultant to lenders, agents, buyers and sellers.

He can be reached through his website RobertIrwin.com.


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