Selling your home comes with expenses. Repairs, staging, closing costs and of course Realtor commissions in a normal sale. In order to save money, some people try to sell their home on their own, known as for sale by owner, or use a flat rate listing Realtor to get their home in the MLS at a reduced rate. Let’s discuss the pros and cons of each type of sale so you can determine which is right for the sale of your home.
For Sale By Owner
Putting your home up as a FSBO means you will have to handle the entire transaction. From marketing, setting the sales price, showing your home, to all of the paperwork. If you have real estate experience this can be a simple process, but if you’ve only bought one home it can be difficult to maneuver through all of the details from home inspection and renegotiating if there are problems found, appraisal, title issues, and closing. Hiring an attorney can be helpful for the closing process but adds to your expenses.
The main downfall is that you can’t get your home in front of most of the buyers that are available. As a FSBO your home will not be listed in the MLS, Realtor.com, and all of the websites that get their information from those sources. Today, over 90% of buyers are looking online for their next home search. You are also not able to get into the magazines and other Realtor only advertising mediums.
A lot of FSBO’s still offer a commission to any Realtor that brings a buyer, which ends up typically being half of what they would have paid using a Realtor to also list the home. However, a lot of agents don’t want to show FSBO homes because they end up doing all of the work, while worrying that the owner is trying to go around them. This can often cause legal issues.
Statistics show that homes listed with a Realtor sell for 19% more (that would be $40k on a $200k house) and sell 20 days faster. The price difference is mostly because buyers realize you are trying to save money by not using an agent and try to negotiate accordingly. Those numbers only account for those FSBO’s that actually do end up selling on their own, 90% of FSBO’s end up listing with an agent because they don’t get any viewings.
Flat Fee Listing
A flat fee listing gets rid of a few of the problems FSBO’s deal with, the most important being having your home listed in the MLS and all associated websites. Flat fee listings can include a wide range of benefits. The simplest listing is just that, a listing and all calls and inquiries are sent to you. In this case you are still responsible for showing your home, dealing with negotiations and closing. A lot of flat fee agents have packages that will include more help for a higher fee, including paperwork, closing assistance, etc. This can help alleviate more problems, but you must still be willing to put in a lot more time to sell the house yourself.
You will still pay a commission to an agent that brings a buyer, just like with a FSBO, and you can set this commission so you control your costs. There are some stigmas associated with a flat fee listing that turn off some agents from showing homes listed in this manner, but they are smaller than FSBO listings.
Real Estate Agent
Using an agent of course gets your home listed in the MLS, Realtor.com and all the other websites. Your listing agent is also responsible for talking to all interested parties and arranging showings. The time involved in this can be extreme as they qualify each caller to make sure they are approved for buying a home, make sure your home matches what they are looking for and then takes the time to meet and show them your home. If you are selling FSBO you can only show the home when you are available but an agent has a team that can show the home at any time, even when you are working (or even sleeping, for those that work at night.) They even deal with people that make appointments to see a home and then don’t bother to show up. Imagine taking an afternoon off of work to show your home and then the potential buyer doesn’t even show up, it happens a lot.
An agent can also see what is going on in the market. This can be invaluable for making changes to your pricing if your home isn’t being viewed or you aren’t getting offers. Each market is different and always changing. Your home may be well priced until another home exactly like it 2 blocks away comes on the market for $50k less. An agent stays on top of what is going on and can guide you to make changes to reach your sales goal.
Your agent will also schedule someone to be in your home for the inspection, appraisal process and help you deal with any problems that are found. They work with contractors and know who to call to get things fixed, and of course can schedule all of the work for you. They keep things moving between the home inspector, appraiser, bank, title company, the other agent and their buyer.
All of this takes time. You have to determine if it is worth the extra money you will pay in commission and the potential higher sales price.
There is no right sales process for everyone, each one has their advantages, you have to determine which part of the process you are comfortable with and can handle with your schedule. If you need to attend to work and kids, hiring an agent will probably be the better choice. If you have a background in marketing and real estate you may have some innovative ideas for getting the word out that your house is for sale, so FSBO may be an option.