Estimated reading time: 9 minutes
Home sales with the assistance of a real estate agent take place about 93% of the time, according to a survey taken by the National Association of REALTORS® (NAR) as recently as June of 2023. Does that mean that those using the services of an agent had it right? Or does that mean that the remaining 7% had better reasons for taking the FSBO (For Sale By Owner) route? Let’s examine both approaches as well as the advantages and disadvantages of each path so that you can make a well-informed decision about the best way to sell your home.
WHY SELL YOURSELF?
For the home sellers choosing the do-it-yourself path, some of the reasons given for trying to sell a home without an agent include:
Save Money
Almost half state that saving money on commissions was the deciding factor in going it alone. While commissions have always been negotiable and vary by region and company, the historically average commission rate for selling a home has been in the 5-6% range.
On a typical $300,000 home, that’s a savings of $15,000 or more. While other closing costs will still be required, the commission paid to a brokerage for selling a home is usually the largest cost, and not having to pay it could mean more in the seller’s pockets.
Can Do it myself
Whether the market is favorable for sellers (low supply, high demand or a “Seller’s Market”) or simply feeling like they can do just as well of a job as a licensed agent, a little over 1/3 of the For Sale by Owners cited this reason as the primary purpose for trying it on their own.
Already know the buyer
About a third of the time, the For Sale by Owner already knows the potential buyer, saving time and money in the process of selling the home. In this case, there is no need to advertise the home, entertain multiple showings, wait for a buyer to come along. If time is of the essence and the buyer is known, savings can be had.
Source: Zillow
WHY USE A REAL ESTATE AGENT?
While it may be enticing to save on commission, about 93% of the time, people choose to use an agent. Why use an agent, and what does the selling agent do to earn their commission?
Sell for More
Would you be surprised to learn that using a professional real estate agent to sell your home will most likely result in a higher profit? While a For Sale by Owner won’t have to pay the 5-6% commission, they sale price is usually significantly less. In 2023, for example, The National Association of REALTORS reported that the 2023 median home price of a FSBO property was $310,000 but using an agent increased that median price to $405,000 – a whopping 30% higher! Even after paying a commission, a seller will most likely come out far more ahead by using an agent to negotiate higher prices.
More Exposure
Local MLS’s represent the backbone of the real estate industry in the United States and seller’s agents are members of the MLSs in their respective geographic areas. This means that the listing for your home will appear not just on the MLS site but every brokerage site that conducts business in that market. Further, the listing will automatically appear on Realtor.com, local brokerage websites, and any other syndicated websites the MLS association participates with including Zillow.com, Homes.com, and more. In short, having your home in the MLS will maximum exposure in many websites throughout the country.
Advanced Marketing
An experienced, thoroughly prepared agent has resources already lined up for professional photography of your home, both inside the home and on the entire property. Drone video footage, floor plan diagrams, and virtual tours are some of the more advanced marketing techniques a typical agent will have at their fingertips and generally at a lower price.
Objectivity
For obvious reasons, a professional real estate agent will be more objective about a home than a For Sale by Owner and, as a result, will be able to price it more accurately and present it to the market in ways that downplay flaws while highlighting those features today’s buyers want and need.
Reduced Legal Liabilities
Because agents are members of the local MLS and also NAR, this helps them and you reduce legal liabilities if you list with an agent by maintaining E&O (Errors and Omissions) insurance. They also have access to all documents and contracts approved by local MLSs and NAR to address a variety of legal requirements involved in the home sale and closing process. Experienced agents will make sure that any appropriate contingency clauses are added not just to a potential buyer’s offer but also any counter-offers made by you in the process. Lastly, experienced agents will make sure that anyone viewing your home or property is vetted and accompanied by professionals.
THE BUYER MINDSET
Whether a homeowner decides to sell with an agent or not, potential buyers, or the “Buyer Pool” should always be kept top-of-mind. While pricing a home accurately for the current market gets buyers interested, staging a home and adding curb appeal can make a break a potential offer. Before buyers can view the property, however, it must be marketed to as wide an audience as possible. And since 97% of all buyers use online tools to search for properties, making sure that your home is listed online with quality photos and complete information is vitally important.
Zillow.com remains the most visited real estate site – almost double that of the next largest – Realtor.com. Zillow will allow a FSBO to post their home for sale, but Realtor.com will not. A For Sale by Owner seller will need to research in which websites the home should be marketed then create the listing so that millions of potential buyers nationwide can see and review the property in detail.
Another lesser-known fact of the home selling process is that when buyers learn that a property has been on the market for a long time, they naturally assume that the seller is more anxious to sell and they make accordingly lower offers. Unless you are lucky enough to be in a market where houses sell in hours, the drastically reduced exposure as a FSBO increases the likelihood that the home remains on the market for a longer period of time, generating fewer visits and offers. To learn more about how higher days on market leads to lower prices, read this article. To sell the home more quickly, a For Sale by Owner should consider getting a Comparative Market Analysis (CMA) completed by a local real estate agent, at a minimum, in order to arrive at an unbiased and competitive price. Another option is to get an estimate from a company that purchases your home outright. Keep in mind, however, that their offer price is lower than fair market price. Lastly, because the buyer knows that it’s a FSBO property, they may automatically make a lower offer, often 5-8% lower, with the knowledge that the seller is not paying an agent commission.
Companies that buy houses for cash aren’t the best fit for everyone. If you’re hoping to get the highest possible price for your property, it’s better to work with an experienced real estate agent and go through the traditional sale process. It will almost certainly take longer, but you’ll benefit from an agent’s professional expertise and earn more in profits.
Source: Bankrate
WHAT DOES IT TAKE TO SELL YOURSELF?
If you would like to sell your home without an agent, the following tips and action items may be very beneficial.
Preparing the Property
- Understand how to stage a home for maximum appeal.
- Make your home stand out with some tips for curb appeal.
- Understand your current local real estate market.
- Know what buyers are looking for.
- Get a complimentary CMA from a trusted agent.
Marketing the Property
- Obtain professional photographs.
- Gather room sizes, total square feet, taxes, and other details most buyers look for in a listing.
- Write a great description of the property.
- If needed, obtain drone footage or have a virtual tour created.
- Research websites and post your property.
Documentation
- Fill out and have available appropriate disclosure statements for any buyer to review.
- Have available any HOA requirements.
- Have available any warranties for the structure, improvements, or major systems in the home.
Showing the Property
- Be available for phone calls, emails, and questions.
- Understand how to properly vet buyers to ensure they can afford the property.
- As a safety precaution, only show the home in the presence of another person you trust.
- Be sure you know what to say – and not to say – when answering questions about the home. Understand what a “Material Fact” is and what is required to be disclosed in your state.
- Keep a record of who has seen the property, including names, dates, times, and any comments. If you do decide to list with an agent later, you may be able to avoid paying a commission if one of those buyers comes back.
Offers & Negotiations
- Have legal contracts – offer to purchase, counter-offers, and more – available to use when ready to negotiate an offer. If you cannot obtain these, make sure you understand what constitutes a legal contract.
- Have an attorney ready to review any paperwork to ensure you are protected – even if your state and local regulations don’t require an attorney to complete the sale.
- Research title/escrow/closing companies and understand what paperwork will be required to close.
- Understand how and where to deposit any earnest money. If you’ve chosen a closing company, they most likely will be able to handle this for you.
Working with Inspectors & Appraisers
- Be prepared to be onsite at your property for ALL inspections & appraisals.
- Understand what can be done if an appraisal is not favorable.
- Know the comparative sales and listings of the neighborhood in case you need to challenge an appraisal.
These items represent most of the work necessary to sell your home, but there could be other items depending on if the house appraises, if you need to make improvements based on an inspection, and more. There are numerous sources of information about For Sale by Owner, but this article should cover most of what you will need to know. As always, consult with an attorney for legal advice and know that I will be happy to help should you decide to sell on your own. Contact me for a free, no-obligation CMA or advice on how to prepare your home for the market.