For Sale By Owner vs. a Realtor
After making the decision to sell your home comes the tough question of whether to use a real estate broker or sell your home on your own. Many people consider the choice to sell their homes themselves. While it is said that this method of home sales can save the owner money in commission fees, it should be noted that usually the money saved in commission is spent in other areas. Typically an agent’s commission for a home sale is approximately 5-7%. However what many people do not realize is that it will cost them at least that to see that their home closes properly. There are many costs that the average home owner does not know about that are covered in the sales process by a realtor.
The sale of a home is a major undertaking and is not to be taken lightly. It is kind of like taking on a second full time job. The marketing of a home itself can be a costly and time consuming process. A realtor has a great selection of advantages when it comes to marketing a home. Usually they will have a previously established web presence. This is vital in ensuring that your home receives proper coverage and exposure. The first time that many prospective buyers see your home will be on the internet, not only on the realtor’s site but on the local MLS as well. This is one aspect that is difficult to attain when selling a home yourself. Realtors also have the advantage of being able to work within a professional network that sellers alone don’t have access to. In getting your listing publicized, agents market your property to other real estate agents as well as to the general public. The National Association of Realtors(NAR) reports that “in many markets across the country, over 50% of real estate sales are cooperative sales; that is, a real estate agent other than yours brings in the buyer.” But this couldn’t happen very easily if you didn’t have your own agent, making sure other local agents know about your home for sale.
Your agent also has a network based on his/her years in the field. The same NAR study shows “82% of real estate sales are the result of agent contacts through previous clients, referrals, friends, family and personal contacts.”
Finally, open houses, which can be draining to host yourself, become the responsibility of the agent. You don’t have to be there nights and weekends, opening the door to strangers. Plus, many buyers don’t even feel comfortable looking at a home in which the current owner is present, so now you no longer have to be. Most importantly though, buyers brought into an open house by other agents whom your own agent has contacted are more likely to be serious, pre-qualified for financing, and ready to buy.
The process of selling a home is fraught with complicated details, and because it is a legally binding contract, pragmatic sellers would want a representative looking after their interests. The paperwork alone could be enough to overwhelm a busy person, who along with selling a house, has a job and family to deal with. A Realtor ® completes this paperwork for you, and helps you evaluate offers and counter-offers. Agents also suggest what kinds of concessions are fair and which aren’t—considerations that vary based on the time and place at which you are selling—and make sure you do it all legally. A bullet-proof contract not only protects you, it also smoothes out the process, making a successful escrow more likely. How much more likely? HomeGain reports a 1,000 participant survey in which data show sellers did “50% Better in getting their homes sold using a Realtor® than selling on their own.”
The main area where a realtor’s experience comes into play is during the contact negotiations and execution. Agents are trained in the proper execution of contracts and all aspects of closing a home. This part of the selling procedure can be extremely confusing and expensive. There are numerous lawyer and notary costs that can easily inflate a sellers cost beyond the small saving on commission. Also, take into account the fact that a large percentage of people who attempt to sell their homes on their own, eventually end up listing with an agent when their home does not draw the necessary attention to sell in a timely manner.
Add to this the fact that homes sold with an agent typically close for thousands of dollars more than homes sold by owners and suddenly an agent becomes a fairly attractive concept. Remember, it is likely that a professional agent will be able to dedicate more time to the sale of your home than you. After all, you have to work yourself, and for an agent, selling your house is the work.
If you are still considering selling your home yourself, take a closer look at the process so you can make the right decision…
Preparing Your Home for Sale
Most homes will require some preparations before they can be listed for sale. If you work with a real estate broker, your agent will walk through your home with an eagle eye and will inform you of make-ready steps you should take. These steps essentially can help your home to sell more quickly and for a higher price. The process involves identifying issues that a potential buyer may have with the home, and as the home’s current owner, it can be difficult for you to see all of your home’s flaws that you pass by on a daily basis. However, some sellers do have the ability to perform this step well on their own. Another idea is to ask a few friends and family members for unbiased assistance.
Selecting a Sales Price
If you are like most homeowners, you have a fairly good idea what the value of your home is. You may keep tabs on the tax value, and you may pay attention to what other homes in the area are selling for. However, you may not realize that a real estate broker will pay attention to the inventory that is available on the market at the time the house is listed for sale. These factors can help you to more accurately determine if you need to ask for slightly more or slightly less than what you may feel the home is worth. Pricing a home correctly initially is critical. New listings generate a buzz, and you want the home to be priced correctly when it is initially listed to ensure you get a great offer quickly. You should be aware that it may be easier to a sell a home in a seller’s market if the list price is not quite accurate.
Marketing Your Home
If you think that the fee you pay to a real estate broker largely is profit for them, you may reconsider after you take into account all of the marketing costs associated with listing your own home. To most successfully market your home, you will need to invest in a sign for the front yard and possible signs on nearby major thoroughfares directing traffic your way. The sign in your front yard will require flyers to be made, and the stock of flyers needs to be kept full. You may need to pay a fee to list your home for sale on major websites, and you should consider the benefits of paying for a virtual tour service. In addition, you should consider holding an open house regularly until your home is sold. This involves cleaning the home regularly, buying scented candles, cookies and more. The cost to market a home for sale can be significant, and this is especially true if you don’t already have a “for sale” sign, full-color printing capabilities for flyers, a discounted rate with a videography service and more.
Negotiating With a Buyer
All of the above steps ultimately lead up to the point when a potential buyer makes an offer on your home. You have the option to accept the offer as-is, or you can negotiate to get a better deal. In addition to initial negotiations, negotiations may also be required if the appraised value comes in low, if the property inspection indicates the need for repairs and more. If you have great negotiation skills, you may not find this process challenging. However, if you feel that you may not be able to hold your own in an intense negotiation, it may be best to use the services of a real estate agent.
The fact is that some homeowners have the skills and abilities necessary to sell their home fairly easily on their own, but the ease with which you sell your home will also depend on whether it is a buyer’s market or a seller’s market. If you are considering listing your home in a buyer’s market, you may find the services of a real estate broker more beneficial.
Test your readiness to list your home for sale by owner, take this True or False quiz…
- I have lots of time and am easy to reach. I have a flexible schedule to devote to the planning, preparation, and showing of my home whenever it is convenient to a buyer.
- I know how to screen prospects and I’m OK with letting strangers into my home for Open Houses and showings without sacrificing my security.
- I will stay out of their way when they view my home, and I won’t take it personally if they criticize it.
- I know where and how to advertise for results. I have marketing experience to apply to my home sale through the Internet, newspaper, color flyers, professional quality photos, and more – and a budget to spend on these items.
- I can price my home competitively, not subjectively, and I have studied the current real estate trends and the home sales in my neighborhood.
- I understand that buyers typically have their own agent representing them at no cost to them. I know that they may not feel comfortable negotiating directly with me as owner.
- I realize that “courtesy to buyer’s agent” doesn’t mean I smile and serve cookies. It means that I am expected to pay around 2.5% – 3% to the buyer’s agent for their work.
- I can comfortably negotiate with buyers on price and terms, without becoming emotionally involved or eroding my position. I know how to compromise to achieve my goal.
- I am an attorney or am willing to hire one to help me understand the Residential Contract For Sale And Purchase . I am prepared to make counter offers, addenda, and amendments as needed, and I have the technology to create and send digital documents as needed.
- I am comfortable going through the steps needed to qualify a buyer for the mortgage (if applicable), and how to verify the buyer’s cash funds.
- I know how to comply with the latest Federal and State requirements. This includes seller’s disclosures, toxic substances (asbestos, lead, mold, Chinese drywall, etc.), building permits, tenant’s rights, as well as HOA, condo and subdivision documents. I know what I can and can’t say and do regarding Federal and State Fair Housing laws.
- I am prepared to arrange for surveys and termite inspections, and I understand the role of the other professionals involved in the sale such as home inspectors, appraisers, escrow and title officers, termite and flea treatment companies and more.
- After spending the time, trouble, and cash to market my home, I’m convinced that my “bottom line” will be greater than if I just paid a Realtor to handle the sale.
Flunked the Test?
The National Association of REALTORS says that nationwide, over 90% of sellers use an agent.
Passed with flying colors?? I might be a little biased, but you might still want to hire an expert. This little quiz is just the tip of the iceberg of hazards that can arise even with careful planning and the best of intentions.
It costs you nothing to talk to a real estate professional about selling your home before you decide what path to take. Remember that even if you decide to list your home, your Realtor only gets paid if and when they close the deal for you. You risk nothing. And if you think that hiring a professional is too expensive, consider what is at stake with selling your most valuable possession.
If you are determined to go it alone after careful study and preparation, best of luck. I wish you smooth sailing and a fat check at closing.
For further questions or if you wish a no-cost consultation with an experienced professional, please email me directly at NaplesListed@gmail.com