Commission-Free Lot Sale Q & A

Our goal is to assist homeowners who own teardowns to sell their homes to developers while still getting top dollar for the value of their lots.

We are able to achieve this goal (1) by involving multiple developers in a competitive bidding process and (2) by not taking a commission or brokerage fee from the seller when his/her property is sold.

Our commission-free lot sale program has proven to be very popular with clients.  Below are answers to the questions we most commonly get about how the program works.

 Click on any image on the right and you'll see photos and a description of the new home that we sold (or will soon be listing) that replaced the pictured teardown, except the top photo which is a lot we just recently sold (new home coming in 2018).

Q:  How is the sale of a lot or teardown any different from the sale of any other property?

The sale of a lot or teardown can be handled like any other residential property by listing it for sale on the Multiple Listing Service (MLS).  However, this will dramatically increase the single largest component of a sale transaction's costs, namely commissions, since listing any property on the MLS requires that a commission be paid (typically 5%, although this is negotiable).  That commission is split between the listing agent and the buyer's agent.                                                                      

Q:  So how is it possible to sell a lot without paying any realtor commissions?

We solicit bids directly from all the reputable local developers without actually listing the property on the MLS.   This way we avoid having to pay a second (buyer's) agent.  And we waive our commission as well.

The result is that the seller of the lot saves the typical 5% commission while still having the property exposed to all the local builders so that they can bid on it.  As an example, on a $1.5 million lot, that's a $75,000 savings to the seller.

Q:  If you are not taking a commission, then how do you get paid?

We request that all builders who wish to bid on the property sign a "listback" agreement with us, where they agree that, if they are the winning bidder, we will be the listing agents on the new home they will build on your site. In this way, we are compensated but only on the 'backend' when we sell the finished product. 

The result is a win-win for everyone - you save on commissions when the lot is purchased by the developer, the developer gets a property that he can develop 'on spec' and we'll eventually have a brand new home that we can sell to the public at our standard commission rate.

Q:  As a realtor selling a residential property, aren't you required to post it on the Multiple Listing Service?

No, that's a decision that is strictly up to the homeseller.  In fact, there is a specific waiver form that allows the seller to opt out of listing his/her property on the MLS.

Q:  And your broker, RE/MAX, doesn't charge any fees either?

That's correct.  In fact, under our program, there are NO realtor-related fees (and that includes no RE/MAX brokerage fees) to the seller. 

Remember that, under the standard brokerage business model, a broker like RE/MAX is really, for the most part, just a collection of independent contractors, like us, and is entitled, by its independent contractor agreement with us, to a portion of the commissions we generate.  But we determine, in agreement with the seller, what that commission is (as noted above, commissions are negotiable) and RE/MAX must abide by that agreement.

So if we contract with a seller not to charge a commission (so long as the developer who buys the property agrees in advance to let us list the new home (s)he will be building), then we don't necessarily have to charge the seller of the lot a commission upfront and that means that RE/MAX will also have to wait until we sell the new home to be paid their fees (out of the sale proceeds) under our independent contractor agreement. 

Q:   I've gotten many direct solicitations from developers offering to buy my lot without a realtor's commission.  What's so different about your program?

The key advantage to our program is we solicit bids from a large number of reputable local developers so you are virtually assured of receiving multiple offers on your property.  This enables us to create a competitive bidding situation.  The typical response would involve our crafting, on the seller's behalf, what's referred to as a seller multiple counter-offer asking those builders who are bidding on the property to submit their best and final offers.

Obviously, multiple competing bids are far more likely to produce the best offer for a seller's lot than just a single unsolicited bid.

Q:  What if I don't like any of the offers?  Am I still required to accept one?

No.  With regard to any particular offer, you must be satisfied with all of its terms, which include other variables besides price (even if price is of greatest importance); if not, you do not have to accept that offer.

Some of the other terms that come into play when selling real estate include financing, contingencies, length of escrow, whether or not the buyer will pay the seller's nonrecurring closing costs, whether the buyer will grant the seller a rentback, etc, and all of these terms must be acceptable to the seller as well.

As we often say, the seller always has the ultimate power of 'no.'

Q:  Do you set a 'reserve price' when soliciting bids?

A reserve price is the lowest price acceptable to the seller at an auction.  While we often characterize our program, in a shorthanded way, as an auction, it is really not an auction in the traditional sense because, in an auction, the subject property must be sold if it attracts bids; hence the need, in many cases, to set a reserve price in order to insure the seller that the winning bid will not be unacceptably low.

In our case, there is a listing agreement and, in order for that agreement to be valid, there must be a list price.  But, as indicated above, the seller is not required to accept any bids, even if they equal or exceed the list price. 

Also, we will often, in consultation with the seller, employ a strategy of setting a list price a little below market value in order to attract the greatest number of bidders because, typically, the more competing bidders there are, the more likely the price will get bid up substantially over the list price.  But even after all the back-and-forth negotiations with the various bidders, if the highest bid price falls short of the seller's expectations, the seller does not have to accept it.

In the final analysis, the seller, as noted above, has the ultimate power to accept or reject any and all offers received.

Q:  I would like to sell my home now but I'll need to stay in it for a period of time after the sale.  Is that possible?

Yes.  There are actually three options.  Option 1 would be to agree to a long escrow with the buyer (builders like long escrows as it gives them the time they need to develop their building plans and have them approved by the city without carrying the property on their books).  If you need funds prior to closing, we can negotiate for the winning bidder to release all or a portion of  his/her deposit to you non-refundable after any and all contingencies are removed prior to close of escrow.  How long an escrow and whether and how much of the deposit should be released to you prior to closing are all points that we will negotiate on your behalf.

Option 2 is a license to remain in possession for up to 30 days after close of escrow.  This is covered by the California Association of Realtors' (CAR) "Seller License to Remain in Possession Addendum."  Again, we would negotiate the terms of this short-term occupancy agreement with the bidders on your behalf.

Option 3 is a longer term "Residential Lease After Sale", or what we typically think of as a "rentback" agreement.  If you need the full purchase price at close of escrow but also need to stay in your home for a period of time afterwards while you make other living arrangements, then, just as with Options 1 and 2, we would negotiate the terms of the rentback on your behalf with the various bidders.

In the final analysis, we want to find the best solution for you that will make your transition to your new home as smooth as possible while still maximizing your return vis-a-vis the builders who are bidding on your property.  This will require experience and negotiation, two attributes that we feel we bring to the table for our sellers.

Q:  How long does it take to implement your program?

Our no-commission lot sale program does not take very long at all, typically 3-4 weeks.  At the end of that time, you will know the highest price you can get for your teardown from the local builder community in terms of its land value.

Q:  What are the 'convenience' benefits that your program offers?

Selling a home can be a difficult and trying experience.  Repairs, upgrades, open houses, interrupted meals, yard signs, drive-bys and inspections are all part of the traditional home sale.

However, we understand the market for "lot valued" properties and know how to extract the maximum price for your lot, without all of the above inconveniences normally associated with selling.  Remember, a lot sale is an "as is" sale, which means there are no repairs or termite work required.

Furthermore, as noted previously, our listing period is short and there is no seller-paid commission. 

Through our network of developers, our privacy-protected sales program and our zero-commission competitive bidding strategy, our satisfied clients enjoy the hassle-free comforts and assurances associated with knowing they are maximizing the sales price of what is quite likely their most valuable asset, their real estate.

If you have a lot, teardown or smaller older home in the beach cities and would like to learn more about our commission-free lot sale program, please contact us using any of the following:

  • use the form below,
  • email Mike and Sachi  (address: Mike@RealEstateEdge.com), or
  • phone or text using (310) 729-4255.

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