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Who knows your home better than you do? Not only have you actually lived in it, but you know all of the home’s great features. You’ve put years of TLC into it. So it may seem like a waste of money to pay someone else thousands of dollars to sell your property. Especially if you’ve done your homework and have a pretty good idea of how For Sale By Owner (FSBO) works.
However, have you considered all of the other factors that go into FSBO? Below, Freshome takes a look at the pros and cons of selling your home without a realtor.
Advantage: Saving Money
FSBO can eliminate the middle man. Image: RichLegg/Getty Images
The most obvious advantage is the amount of money you could potentially save. “Typically, a realtor charges a 6 percent listing fee: 3 percent to the buyer’s agent, 3 percent to the listing agent, and selling by owner waives this fee,” explains Amanda Graham, a real estate agent at MacDonald/Becker/TTR Sotheby’s International Realty in Washington, DC. “Also, the homeowner is in control of the price and negotiates with the buyer for the terms they want,” Graham says.
But isn’t the homeowner in control of the price anyway? Yes, but according to Mark Cianciulli of The CREM Group in Long Beach, CA, homeowners may be influenced by their realtor’s opinion. “However, in this situation, the homeowners will be able to have complete control over pricing and can price the home for whatever they want,” Cianciulli says.
Advantage: Control
Homeowners can control every aspect. Image: tabs62/Getty Images
“When homeowners sell their own home, they can do as much or as little marketing as they wish. They have full discretion over how the marketing materials will look,” Cianciulli says.
The homeowner is the most knowledgeable person regarding the home. This, he says, puts them in a great position to communicate this information to potential buyers. For example, if you installed a new sunroom, you can explain how it helps to lower your heating bill in the winter.
Homeowners can also control the schedule. For example, you may prefer to coordinate your schedule with potential buyers to show them the home at a time that is mutually convenient. Also, you may not be in a rush to sell the home as soon as possible. Under these circumstances, Graham says the FSBO route may work for you. When homeowners have put a lot of work into their homes, such as adding architectural details, they may want to wait for a buyer with a similar appreciation.
Fred McGill, CEO and licensed agent at SimpleShowing in Atlanta, GA, believes that FSBO is a great approach for some homeowners. “For example, if you’re comfortable with the process of selling a home because you’ve done it once or twice before,” he says it could be an advantage to sell the home yourself at your own pace.
McGill also thinks it could be a good idea when selling certain types of properties. “In a homogeneous area — like a condo or townhome community — where pricing is similar across the entire community, this makes it easy to simply list the home FSBO and then grab the overflow traffic from other listings in your same neighborhood,” he explains.
Advantage: Legal Help is Available
You don’t have to go it alone. Image: Andy Dean Photography/Shutterstock
In addition, McGill says this method may work for people who aren’t afraid of the legal aspects of the contract. “This includes attorneys, in particular, and other folks in the legal field who are comfortable with contracts, amendments and exhibits,” he says.
If you’re not an attorney, and you’re uncomfortable navigating the legal aspects, you can hire an attorney. Jeff Van Fleet, an attorney at Woodhouse Roden Nethercott in Cheyenne, WY, says that selling your own home might seem challenging. But he believes that with the right team, it shouldn’t be a problem.
“An attorney can draft a buy and sell contract, generally for a flat fee, as opposed to the commission that real estate agents charge,” Van Fleet says. “And like a real estate agent, an attorney can only represent the interests of one side,” he explains.
“Buyers may approach the seller with offers involving a real estate agent, including a request for compensation in the form of a commission,” Van Fleet says. “As the seller, you are the master of the contract and you can choose the terms you desire, including the option not to work with an agent,” he explains. “If the buyer wants to engage the services of a real estate agent, let the buyer pay the real estate agent.”
Van Fleet says that your attorney will partner with a title company to arrange both the title work and closing. “The process is straightforward for experienced attorneys,” he says.
Disadvantage: Statistics
Realtors tend to sell homes for more money. Image: Andy Dean Photography/Shutterstock
While there are numerous advantages to FSBO, we found as many reasons why it may not be a good strategy. “The idea of saving thousands of dollars on commission by selling your own home can be tempting and, for a few, it may even make sense,” says Jo Ann Bauer, realtor at Coldwell Banker Residential Brokerage in Scottsdale, AZ.
But she thinks the majority of homeowners will lose money using this approach. “According to the National Association of Realtors, the typical FSBO sale in 2017 (the latest year with full data) was $200,000, compared to $265,500 for agent-assisted home sales,” she says. “When we do the math, it’s easy to see that even with paying a commission, homeowners, on average, earn more money from the sale of their home by hiring a real estate agent,” Bauer explains.
And homeowners might not even save as much money as they think on the commission. Cianciulli says you’re only saving money on the listing agent side. “Most homeowners think they are going to save 5 to 6 percent of the sales price, but this isn’t true in the majority of cases. They still have to offer a commission to buyer agents to bring their buyers to the home,” he says. “Additionally, many sellers are so hyper-focused on saving some commission dollars, yet they end up netting less money because they end up selling the property for less than they would have with a seasoned realtor.”
And that’s because there’s a learning curve if this is your first or second time selling your home without a realtor. “I guess the question is: do you really want to risk making mistakes that can cost you time and money on such a large transaction?” Cianciulli asks. So, what are some of the complications that can arise? “Dealing with unpermitted work, issues with chain of title, requests for repairs/price credits during escrow, financing issues and atypical financing structures are just some of the potential obstacles,” he explains.
Disadvantage: Subjectivity and Underestimating Work
Homeowners tend to be defensive regarding their home’s flaws. Image: Steve Debenport/Getty Images
There is also an emotional component involved in selling your own home. When valuing and negotiating your own home, Cianciulli believes that it’s almost impossible for sellers to be objective. And this type of emotional reaction can hurt sellers in more than one way. “As sales agents, we need to be able to reposition a property if current strategies aren’t quite working perfectly. One of the ways to know this is by getting honest feedback from potential buyers or their agents,” says Steven Gottlieb of Warburg Realty.
But if potential buyers are afraid of offending or insulting the seller, they won’t provide candid comments. For example, you may think your property is worth more because it has a large, unfinished basement. A buyer, though, may not want to pay more if they also have to transform the basement into livable space. “The selling agent acts as the buffer for this, and should be able to tell a seller helpful feedback — even if it’s unpleasant — to re-market the property by accentuating the property’s attributes and downplaying the handicaps.”
Sellers may also underestimate the amount of work required. “Just sticking a sign in your front yard will likely not generate the traffic and interest in your FSBO for which you hope,” warns Bauer. She admits that a seller can pay a flat fee to brokers to publish their home on the MLS. “However, the owner is responsible for all the marketing, photos, property descriptions, inquiries, open houses, showings and vetting of potential buyers,” Bauer says. “For most FSBOs, the time and effort it takes to move from deciding to sell themselves to realizing a successful close prove to be too much. Many end up eventually listing with a real estate agent.”
Disadvantage: Overestimating Ability to Sell
Selling a home is not as easy as it looks. Image: Ariel Skelley/Getty Images
After a lot of hard work, you may realize that you’re in over your head. In fact, this is what happened to Michael and Jessica Walden of Walden Custom Renos. The husband and wife duo had twelve years of experience flipping houses. They tried a variety of ways to sell their products, including the use of a popular sell-your-own-home website. “With the website, we had tons of viewings over a two-month period, and there were lots of questions and long visits — but not a single offer,” they told Freshome. “However, within 24 hours of listing the same house with the top selling agent in the Durham region, we had three offers from six viewings and sold for over asking.”
They admit that listing with an agent will generally cost between 4 and 6 percent of the sales price. However, they believe the results are worth it. “This comes with free advertising in local papers and online, as well as access to the Rolodex of other agents with clients ready and wanting to buy.”
And there are other potential challenges you may encounter when trying to sell the home yourself. “Our team has inherited listings from people who initially tried to sell with a limited service broker or on their own and the result is almost always the same. Most don’t sell,” according to Matt Miner, co-principal and real estate broker at the Get Happy at Home team of Coldwell Banker Bain in Seattle, WA.
For one reason, Miner says realtors are leery of homes being sold by the owner. “They are often very challenging transitions with a much higher probability of failure,” he says. “When we inherit these sorts of listings, we end up selling the home for much more than they were unable to sell.”
Other Considerations
Be sure to do your homework. Image: docent/Shutterstock
One alternative to using a traditional agent or doing an FSBO is using a company like SimpleShowing. “Our company, and several other ‘digital/online’ real estate brokers like us, offers a service that goes beyond FSBO but is less expensive than a traditional agent. With these types of companies, there are no upfront fees for sellers and they only pay $5,000 at closing,” McGill says.
Also, even though Van Fleet (as an attorney) handles FSBOs, he recommends paying a real estate agent to do a comparative market analysis. “Do not rely on website-generated estimates or county assessments to price the home as this fails to account for the real-life conditions of the market and is frequently incorrect.”
In addition, he does not recommend the legal forms of purchase that you can find on the internet. “These forms are usually a bad choice for a legal transaction such as selling a home, as they generally fail to incorporate local and state requirements — and the consequences could be dire.”
Van Fleet also provides advice on earnest money. “There is a trend in the market to make offers with a small amount of earnest money,” he says. As the seller, Van Fleet says you are in charge of the contract — and you can and should request additional earnest money.
“The earnest money often becomes the center of legal disputes, so make sure there is enough money to deter a buyer from improperly backing out of the deal, or that the earnest money is enough to cover your legal expenses if litigation is necessary,” Van Fleet advises.