Frequently Asked Questions
Our goal is to assist homeowners who own teardowns in selling their homes to developers while still getting top dollar for the value of their lots.
We are able to accomplish this by (1) involving multiple developers in a competitive bidding process and (2) 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 most frequently asked questions we encounter concerning how the program works. Just click on any question to see the answer.
Below each answer is the Before and After photos for a particular lot sale of ours. You can click on the After photo and be directed to the property page for the new construction project under Our Homes.
If you have a lot, a teardown or a smaller, older home anywhere 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 methods:
- Email: Mike(at)RealEstateEdge(dotted)com
- Phone or text:310.729.4255
- Contact form below
Q1: How is the sale of a lot or teardown 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.
To eliminate this cost, we market the property off the MLS through our commission-free lot sale program.
Q2: How do you market a lot or teardown without charging the property owner a commission?
We solicit bids directly from all the reputable local developers without actually posting your property’s listing on the Multiple Listing Service. This way we avoid involving a second (buyer’s) agent who would otherwise have to be paid. And we waive our commission as well!
The result is the seller saves the typical 5% commission while still having the property exposed to all the local builders so they can bid on it. As an example, on a $2 million lot, the seller who accepts an offer from a developer under our program would save $100,000 in commissions.
Q3: As a realtor listing a residential property, aren’t you required to post your listings on the MLS?
No, that’s a decision that is strictly up to you, the property owner. In fact, the listing agreement specifically addresses the seller’s right to opt out of the MLS.
Q4: If you are not taking a commission, then how are you compensated?
We request that all builders who wish to bid on your property first sign a “listback agreement” (a proprietary agreement developed by Real Estate Edge, Inc) where they agree that, if they are the winning bidder, we will be the listing agents on the new home that will be built on your site. In this way, we are compensated on the ‘backend’ when we sell the newly-built home.
The result is a win-win for everyone – you maximize your equity by saving on commissions when the lot is purchased by the developer, the developer gets a property that he can profitably develop ‘on spec’ and we’ll eventually have a brand new home to sell at our standard commission rate.
Q5: Doesn’t the listing agreement itself specify a percentage or dollar amount of compensation that would be owed to you upon a sale?
Per the language of the California Association of Realtors’ listing agreement -
The amount or rate of real estate commissions is not fixed by law. They are set by each Broker individually and may be negotiable between Seller and Broker (real estate commissions include all compensation and fees to Broker).
So, under our program, we simply specify the Seller pays no commission so long as the winning bidder for the property gives us a signed “listback” agreement, as described in Q&A-4.
Q6: I've gotten many direct solicitations from developers offering to buy my lot without a realtor's commission. What's the advantage of working with you?
The key advantage to our program, beside the fact that we don’t charge a commission to the seller, 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, exposing your property to a number of developers in this way is much more likely to produce the best offer for your lot than just accepting a single unsolicited bid.
Q7: How do I know what my lot is worth?
We have extensive experience evaluating developable land in the South Bay. We employ a multi-pronged checklist and we’ve accumulated a comprehensive database of lot sale information in the beach cities for determining value.
We start by analyzing recent sales of similarly-situated lots which we will present to you in the form of a Comparative Market Analysis or CMA.
Of course, no two lots are exactly the same so adjustments to value, up or down, will undoubtedly be required. And while the primary two drivers of value are location and size, those two factors actually encompass a whole host of valuation components that must be taken into account, from which city (and where within the city) your lot is located to things like orientation, proximity to the beach, view or view potential, lot size and configuration, zoning, building height limit, school quality and proximity, whether the lot is level, upsloping or downsloping, the presence of protected trees on the lot, whether it’s a corner lot, whether it is on a heavily-trafficked street and many other factors.
Fortunately, you can rely on our 40+ years of combined valuation experience, as evidenced by our considerable track record of lot sales in the beach cities (see our Lot Sale Program page for a list of our successful sales), to help guide you in assessing your property’s land value and in setting a target price for your lot.
Q8: What if I don't like any of the builders’ offers? Am I nonetheless required to accept one?
No. With regard to any offer, you must be satisfied with all of its terms, which include other variables besides price, even if price is often of greatest importance. If you’re not satisfied, 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.'
Q9: 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 (which is undisclosed to the potential buyers) in order to ensure 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, which price is known to potential buyers. But, as indicated above, the seller is not required to accept any bids, even if they equal or exceed the list price.
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 offer falls short of the seller's expectations, the seller does not have to accept it.
In the final analysis, as noted above in Q&A-8, the seller has the ultimate power to accept or reject any and all offers received.
Q10: Is it possible for you to both market my property to developers and also list it on the MLS for maximum exposure?
Yes, but then sales commissions come into play because the property will now be posted on the MLS. In our view, it makes more sense to first determine the lot value for your property and use our off-market commission-free strategy to see if there’s a builder who will purchase your property at that price (or higher, if there are multiple interested builders) before putting the property on the MLS where you might obtain a higher gross sale price from a non-builder/private party yet still end up with a lower net price due to the typical 5% sales commission.
Q11: 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 the 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 29 days or less 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 equity. This will require experience and expert negotiation, two attributes that we feel we bring to the table for our sellers.
Q12: 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.
Q13: Besides maximizing my equity, what are the ‘convenience’ benefits that your program offers?
Selling a home can be a difficult and trying experience. Repairs, upgrades, open houses, strangers walking through your house, yard signs, 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 a traditional sale.
Furthermore, as noted previously, we are very expeditious in the implementation of our program and generally require only 3-4 weeks to procure for you a top-dollar offer.
Through our network of developers, our privacy-enhanced sales program and our zero-commission competitive bidding strategy, our satisfied clients enjoy both the hassle-free comfort of a quick sale and the assurance that they are maximizing the sale price of what is quite likely their most valuable asset.