It comes as no surprise that many home sellers want to get around realtor commissions and pocket as much of the money for themselves. Who could blame them?
But most people tend to understate the role the realtors are playing in the process of selling a home. There is much work to be done, often too much for a busy individual who’s never sold a home before.
So, how is selling your own home different depending on whether you do it alone or with the help of a professional realtor? Let’s explore your options together and see what the pros and cons of each approach are.
For Sale By Owner vs Realtor
For Sale By Owner or FSBO for short, is exactly what it sounds like. It means that the owner foregoes real estate agencies and just attempts to sell the home on their own. That also means you get absolutely no benefits of working with an agent, but also keep all the money from the sale. We’ll point out some of the most important differences between the two approaches and then give you a couple of tips about how to sell your own home if you still want that.
What you get when you hire an agent to sell your home is someone who knows all about marketing, price comps, open houses, negotiations, and legal matters. On top of that, you are also paying that person to work on selling your home full-time. Realtors do everything in their power to make a sale and earn their commission.
If you feel like you have the necessary skill set to do everything we just mentioned on your own and do it better than real estate agents, you should try and sell the property yourself.
Marketing the Place
All recent surveys show that buyers prefer to look for homes online. Some surveys go as far as to say that a whopping 90% of home buyers searched online when they were in the process of buying a house. That’s a substantial number of people who heavily relied on the internet to find a new home.
That’s where having a realtor will come incredibly handy. All real estate agents have exclusive access to the Multi Listing Service (MLS). It’s a database of all the homes that are currently for sale and one of the strongest tools at a realtor’s disposal. If you’re selling a house, you want it listed on MLS.
However, since you don’t have access to the listing as an FSBO, you’ll have to find an agent who’s willing to rent you the access for a limited time. You’ll have to pay the agent a fee that ranges anywhere from a hundred to a thousand dollars depending on how long you get to keep your home listed on MLS.
As a homeowner, you can find other websites that perform the same services such as Zillow or Redfin. They’re either free or cheap to use, but they don’t have the reach or trustworthiness of MLS.
Using the right online service is not the only aspect of marketing, however. Realtors also have vast networks of clients with whom they established relationships and to whom they can market your home. While the owner can have an impressive network of connections, that’s usually not the case. With a smaller network come fewer serious buyers and a lower sell price.
Can You Pocket the Realtor’s Commission?
It certainly is attractive to think you’ll be pocketing the realtor’s 6% commission for yourself. And it’s possible — so long as you match the price that the realtor would sell your house at.
If you sell your home for $200,000 but the realtor could have done it for $220,000 you’re already at a net loss. You’re pocketing less money than you would if you had just paid for a realtor to do their job. Our example is also not very realistic. Agents can often sell a home for much more and the price difference between for sale by owner vs realtor is usually much bigger.
It all comes down to how skilled you are at setting the right price and negotiating for it. You need to do price comps, pay for additional costs such as property listings, and pay to stage your home. Take all of that into consideration when determining the price you’d like to get.
Also, keep in mind that even if you do decide to sell your home without an agent, the buyer will still probably hire one. And it’s you, the seller, who pays for the services of both party’s agents. So, even if you try so hard to avoid the realtor’s commission, you’ll still very likely have to pay 3% for the buyer’s agent. Adjust the price to include that fee and protect your earnings.
All in all, unless you’re 100% certain you’ll be able to match the agent’s price (or do better), you’re in for a disappointment. Sellers need to realize that cutting out the middleman isn’t just about pocketing their share, it’s also about taking on all of their responsibilities as well.
Time Is of the Essence
How busy are you? Is it a problem to leave work to show prospective buyers your home? Will it be an issue to take a call from a buyer during a meeting? How hard will it be for you to host open houses?
If your answer to every single question above is “not at all,” then you’ll probably have the time to sell the home on your own. Otherwise, you’ll be risking your career or making sacrifices in your personal life that you could have just avoided by hiring a realtor.
Know the Law
We come to the most important aspect of hiring a realtor. Agents know everything about every little detail of state laws regarding the transfer of homeownership and what your duties are as the seller.
Failing to follow the letter of law when selling your own home could land you in trouble. You could get sued for not disclosing crucial information about the home, or you may fail to provide all the required legal documentation which can also result in a lawsuit. People selling their own homes are not expected to know all this, and to prevent such mistakes from happening, some states mandate you have a real estate attorney present when closing the deal.
Selling Your Own Home: What to Expect?
From all of the above, you can deduce that selling your own home is not for everybody. It’s the furthest thing from, and unless you meet all the criteria we mentioned, you should let a realtor take care of everything for you to avoid losing money or worse, getting in trouble with the law.
If you still want to proceed on your own, here are a couple of things to keep in mind to improve the odds of making a sale.
We already mentioned some websites where you can advertise your home. You should check them out because selling a home in newspapers or with a “For Sale” sign are relics of the past.
Then make all the necessary repairs and stage the home for viewing. Without a realtor, it will be up to you to upsell your home and make it as appealing as possible. That goes for both the interior and the exterior of your home. Visit a couple of other people’s open houses to see what designs are appealing at the moment and spruce up your pad accordingly.
Visiting open houses is also good preparation for hosting your own open houses as you’ll get to hear questions that buyers frequently have.
Above all, you’ll need to be just the right amount of patience. Be impatient, and you’ll sell your home to the first buyer that comes knocking, usually for a lower price. Wait for too long, and the price of your home will begin to deteriorate.
To Sell or Not to Sell on Your Own
There are reasonable arguments to be made as to why you shouldn’t sell a home without a realtor. Too many sellers don’t take the process too seriously and end up with far less money than what their home is worth.
But it’s also fair to not want to pay for all the realtor commissions. Luckily, there are new and innovative ways of selling a home such as finding companies that want to take it directly off your hands without fees, at competitive prices. Ultimately, it’s up to you to decide which route to take, so make sure you’re well informed and prepared before you do.