Those of us who have gone through the process of selling a home have witnessed the reality after closing on the sale of a home seeing the number in our pocket dwindle lower than we had anticipated. The fees just kept on coming. By the end, we are sitting there wondering if this was the right move? In many situations, the realtor winds up with more of a profit on our home than the seller does.
In order to get some of the benefits of a positive housing economy, many homeowners consider a For Sale by Owner (FSBO). According to Zillow research, 36% of sellers attempt to sell their homes themselves. Although, this is not the percentage of those who follow through with it. The National Association of Realtors (NAR) states that FSBO’s accounted for 11% of home sales in 2018.
Going through a For Sale by Owner is tempting, but there are some things you should consider before making that decision. We have broken down the pros and cons of FSBO vs a real estate agent. We then offer some advice to help you save money with an agent or protect yourself with an FSBO. Finally, we have some final thoughts as to why you could consider a For Sale By Owner.
Of course, is the #1 reason why homeowners do FSBO as opposed to using an agent. Saving thousands of dollars on a home sale is an enticing motive. There are many expenses regarding selling and moving before we are even talking about paying the costs of the realtor’s commissions. So, getting some relief on the selling costs could make or break the deal.
More control over timings, showings, negotiations, pricing, selling tactics, and information. There are moments when you need to coordinate between the buyer, their agent, the seller, and their agent. If you remove one middleman, then you can offer more flexibility.
I am sure there’s a little motivation from some real estate agents to withhold some information about the other realtor or the buyer to reduce the risk of anxiety.
Experienced realtors know the process. So many of them may be a little more mechanical or passive on the negotiations. Squeezing that final $1000 out of the buyer’s pocket in their minds would cause more risk to the sale.
No. You probably aren’t an expert realtor, but you are an expert on the product – your home. With this advantage, you can speak knowledgeably and passionate about it. This can be a good strength when selling the home. Your experience can give the buyer’s agent some convincing power to pass on to the potential buyers. Every home has a history and a story to go along with it so use it to your advantage.
If you don’t have a lot of time on your hand to be patient for a sale, then you could run into some trouble selling. According to Brandon Gaille an FSBO home takes 19 days longer to sell than with an agent. I get into this a little more below, but this stat may even be worse considering that many FSBO homes are transactions between family members and forego much of the back and forth of a more public sale.
A home buyer could hesitate at the thought of trusting the homeowner as opposed to a realtor who may seem to have more at stake professionally if things go bad. Also, realtors may not show FSBO since they are very protective of their securing their future and careers or for other reasons such as legal risks dealing with inexperienced sellers.
Preparing your own paperwork can be tricky, so not having the expertise to navigate all the legal and regulatory requirements that come with selling a home can cause you problems down the road.
It takes some time and patience to go through the process of showing the house. Sure, you might be successful setting up an open house and spending the day hosting and actually get a few offers out of that; but why do that, when you have so many other things to do? What if this goes on for weeks or months? Bleh! Repetitive small talk can wear you down over that time.
Scammers and bargain shoppers keep an eye out for FSBO. With bargain shoppers, the money you may think you are saving with FSBO may actually be split between you and the buyer, further reducing the very little benefit you are making by forgoing the 3% sales commission. But bargain shoppers aren’t your biggest worry here, it’s the scammers who are more experienced at this than you are. I’ve heard of stories of fake title companies and escrow that were set up to defraud people of their property and money. Don’t be that guy/gal.
Some stats say that the average price of a home of FSBO sells for an average of $40,000 less. National Association of Realtors says that the average price of a home of FSBO sells for an average of $30,000 less than with an agent. Although, here is my two cents on that stat. Take statistics with a grain of salt when the study is done by the beneficiary. Many FSBO are sold between family members or passed down from parents to children and given the ‘family’ discount purposefully. I personally have friends that were sold a home in a wealthy neighborhood at almost half the price by their parents. Another thing to consider is that FSBO homes do have some wiggle room to come lower on the price because they are not paying $6,000 in realtor commission fees, so that would drive that number down as well. There is another study done by the National Bureau of Economic Research that states, “We do not find support for the hypothesis that listing on the MLS helps sellers obtain a significantly higher sale price”. So, what do you believe? Well, believe in the fact that you aren’t an expert on pricing and the market.
Getting someone who understands how to calculate the fair market value of your home and set a price for it can make thousands of dollars difference. If you set your home for $200,000 you may miss out on an opportunity for someone who is willing to pay $210,000.
Not only are they experienced in pricing and the timings of reductions, but they are also experts in knowing what features, upgrades, maintenance, & staging requirements are necessary to sell your home the fastest and at the highest bid.
Not only do they have their own client base that are looking for homes that are already in their back pocket, but they have access to a network of other resources and agents who know someone who….”. The agent also has access to the MLS and other marketing resources to get the max exposure for your home. The higher priced the home, then the more advanced marketing initiatives.
Most of us do not like going to a car sales lot and dealing with salesmen because it’s just a stressful situation. We don’t want confrontation, and we don’t trust or know that the one sitting across from us has our best interest. So why do that with even more on the line with the sale of a home? Realtors could probably tell you right off the bat how the other side is going to reply with your offer. They’ve done this dozens or hundreds of times. Aside from getting a paycheck, they don’t have personal emotions attached to this transaction, so they are best equipped all around to do the best job for you. They also have your interest in getting the best deal as well considering their commission is based on a percentage of the sale price of the home.
They know what’s coming and aren’t surprised by the paperwork that pops up. When they get that 20-page document in 8 point font, needing initials on every page along with five signatures. They probably don’t even need to ask what it’s for or even read what’s in it.
Total realtor fees are typically 6% of the sale. So, a $200,000 home would take $12,000 out of your pocket. Considering all the other costs involved with selling, then this is undesirable. But this isn’t reality since 6% covers the buyer and seller commission costs. You still must pay for the buyers’ agents commission. So, really, you’ve saved $6,000 instead of $12,000.
Sure, you could be selling a $500,000 home and forking out $30,000 in commission costs, but you are pretty much at their mercy when it comes to all communication, paperwork, and showings. If they are sick, on vacation, or dealing with another client, then you are going to have to wait. $30,000 is almost half of the average annual income in Florida, but still, your realtor isn’t going to wipe her schedule and sit by the phone just for your call.
NAR states that 48% of sellers would definitely use their realtor again. In my opinion, that customer satisfaction rate seems low and gives me low confidence in the quality of agents to choose from. Many realtors know that the probability of you choosing a new realtor is unlikely in the midst of all that’s going. Starting back at the beginning of getting a new agent can just complicate and delay things when you could just deal with it for the next 45 days. There is motivation to serve your best interests for future business and referrals, so keep that in mind.
Whatever option you feel best suits your needs, there are options and tools available to you to help you to get the best of both worlds. There are tools and resources available that allow you to save money using a real estate agent or ones that protect yourself financially and legally through a For Sale By Owner.
You could try to negotiate the commission percentage. Certain factors could give you more power in your hands such as the price of the house, competition in the market (offseason times are best), the potential for recurring or future business, referrals, or multiple sales with you. There are other features that Agents like for convenience as well, such as a lockbox, early vacating, and the promise to buy with them. Sites like Upnest.com and Listwithclever.com offer you ways to shop real estate agent’s ratings and commission fees.
Using a non-traditional option for a real estate agent that uses either a flat fee or some other payment structure. Redfin pays their agents a salary and then a 1% commission on the sale. There are other flat fee companies out there as well such as rexhomes that have agents to assist you. As a warning, you are not getting the hands-on or handholding experience you would with a traditional realtor.
Marketing your house is something that you miss out on, so you can publish your house on Zillow, Realtor.com, and Trulia. Don’t forget Facebook and Craiglist as well.
Use these sites specifically for listing a home for sale by owner:
See if it’s possible to get listed on the MLS. There are some sites out there that offer a flat fee to get your home listed. Many home buyers use aggregates that scour the internet for new postings and having your house on the MLS should get some attention.
In your advertising announce that real estate agents are welcome. Some people think that an FSBO means that the seller only wants to do business without an agent.
Get a real estate attorney so you can help yourself and other parties as well.
Look professional as possible by taking professional photos, a quality yard sign, good staging, and complete descriptions. Finally, find others who have done it and get their advice.
If you fit into one of these categories below, you may be more suited for FSBO as opposed to one who doesn’t fit any of the qualities below.
You have more time than money. Sometimes things come up in our lives that force us out of our home sooner than later. So, if selling your home with a realtor would put you underwater, and you have no other option but to sell, then you may consider an FSBO to reduce the financial strain on your life.
Winning or losing on the deal is no big deal. This is not saying that ignorance is bliss because, in this instance, it’s not bliss. Don’t throw out the homework and take it lightly. Remember, there are buyers looking for an investment for their family. So, be prepared to be serious.
You’re very savvy. You are knowledgeable about legal and financial stuff and you’ve done some real estate research.
You have had professional training. This is the best of the best. You know what you’re doing. Go for it. Yeah!
You are selling to a close friend or relative. One of the greatest deterrents to FSBO is the amount of trust both parties need to commit to. Yes. Things can always go sour with business in the family, but scamming you is not generally a thing to worry about in the family, right? I’d recommend getting a real estate attorney to draft the paperwork and be on your way to saving those thousands in commission fees.
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