Hire a Realtor or Sell Your Own Home?
The pros and cons of “For Sale by Owner”
As you contemplate listing your home as a “For Sale by Owner” property, you probably have a growing curiosity about the role you will play as you wear two hats – one as a home owner, and the other as a newcomer to the world of residential real estate sales and marketing.
The reason that is most frequently given for selling a home without professional help is the significant potential savings of Realtor commissions. Good arguments can be made on both sides of the equation, but the important thing is to explore your options beforehand. Don’t worry or stress-out about it. If you start off selling your house by yourself and decide it’s not your cup of tea, you can always change your mind and call a qualified agent.
What’s in a name?
The nickname used to refer to folks who sell their homes themselves sounds like a brand of carbonated soft drink, to those who are not real estate professionals. FSBO (pronounced “fizz-bo”), stands for “For Sale by Owner”, and now that you know the lingo, you can use the term to impress your Realtor friends.
Show me the money
If you go the FSBO route, you can save yourself a serious chunk of change. The broker commissions on real estate sales vary from one jurisdiction to another, but are generally in the 5-7 percent range. Hire a pro to help you sell a home for $225,000 – which is close to the median price of a home in the USA right now – and chances are you will pay somewhere in the neighbourhood of $12,000.
Good News for FSBO’s
The biggest advantage compared to 10 or 15 years ago is that you can now participate in the official Realtor property database or Multiple Listing Service (better known as the MLS). For a set fee, you can upload a detailed advertisement along with photos of your property to the MLS and gain immediate computerized access to potential buyers, to let them know that your property is on the market.
Because professionals use the same source of information to buy and sell houses, inclusion in the MLS helps to even out the playing field. No longer do you have to fish in your own small pond. By joining the MLS, you get to cast a wide net for every fish in the sea.
You will have to go through a licensed Realtor in order to list your property in the MLS, and pay fees associated with the service. But if you’re selling a house, the MLS is worth every penny.
The Hybrid Version
Step it up a notch, and you can get additional benefits and services. For example, you can hire a so-called “discount broker” to help with your sale. Not only will this entitle you to an MLS listing, but it will give you a menu choice of other professional services, for things such as making appointments, conducting tours of your home, and writing legal contracts for purchase offers. You do part of it yourself, and pay a pro to do the rest.
Even if you sell your home by yourself, you may incur expenses of 4% or more in order to find and secure buyers in a competitive market. For instance, most buyers work with Realtors (you probably used one to buy your home), and if you are open to working with Realtors, most of them will be happy to reciprocate by bringing qualified buyers, but will expect to be compensated for their efforts. Even if you find your own buyer, you will probably pay for advertising, marketing, and legal advice along the away.
Another way to incur costs is to “leave money on the table” at closing. You may attract a buyer but then not get the best deal for yourself, because you lack professional sales experience and negotiation skills.
Time is money, and for buyers to view your house, someone has got to be home to show it to them. A Realtor normally handles this chore, but if you sell your house yourself, you will have to answer calls and e-mails, book appointments, and conduct tours of your home for prospective buyers. Most folks look at property on weekends, holidays, and after work in the evenings, which can really cut into your own free time. If your time is valuable, you might prefer to hire a professional.
Even if you use a full service Realtor, it is a good idea to run things by a real estate attorney. But Realtors are trained to deal with many legal issues, and if you have an experienced real estate broker on your team, it can save you considerable trips to the lawyer’s office.
Before you sell your home, you need to draw up contracts and then negotiate every step of the transaction through written offers and counter-offers. This may require frequent consultation with attorneys, and the legal fees could offset your FSBO savings. You might need to negotiate the dates for completion of inspections, loan approval, and closing. There may be a lien on the property you didn’t know about, or an issue with an easement that could become a deal-killer. Without quick and professional resolution of these types of problems, you could lose the sale or even end up in court for violation of a contract.
Freedom of Choice is the Bottom Line
The choice to hire a broker or go FSBO is an important one, but one well worth checking out if you plan to sell your home. And money is a compelling factor, but only one consideration. Interview Realtors, get advice from friends who have sold their own property, visit some FSBO listings and observe how the home owner handles the situation, and then do what feels right for you. Then enjoy the adventure, confident that you did your homework and made an educated and informed decision based on a realistic evaluation of all the pros and cons.