Do you really need a Real Estate Agent to sell your home?
Every homeowner would probably prefer to have a professional, licensed REALTOR® work on their behalf to sell their home, but, not everyone sees the value of paying a fee for an agent’s expertise. We get it - It is not easy to recognize all of the work and organization that it takes to prepare a home for sale, list and market a home and make sure that everyone involved in a transaction is on schedule and committed all the way through closing.
Selling a home is hard work! Great agents make great partners because they bear the (substantial) cost of marketing, have the ability to expose your home to more buyers, deal with the mounds of paperwork and save you time, stress and, yes, money. Still, homeowners sell their homes as a "For Sale By Owner" every day, sometimes with great success. According to the National Association of REALTORS®, 7% of home sales in the United States are FSBOs, Many (most?) of these sales are not publicly marketed - they are the type where the buyer and seller have a previous relationship, like buying a childhood home from a parent, a friend buying another friend's home, or even selling to a builder or investor.
Selling a home without professional representation is an arduous undertaking, but for some people, it can wind up being the right choice. A FSBO home sale adds a much greater level of complexity and a few extra emotional hurdles for potential buyers - and for you, too. Let's dive in...
Common difficulties for unrepresented sellers
Buyers may look at FSBO homes as “on sale” instead of “for sale”. Homes with unrepresented sellers sell for nearly 33% less and take significantly longer to sell than homes sold through the REALTOR® network.
Some buyers don’t prefer to tour a home with the owner of the property - often, they might not feel that they can speak freely and could feel uncomfortable being followed around by the homeowner. This could make them less likely to make an offer to purchase your home.
Homeowners are emotionally attached to the home, which inhibits their ability to negotiate. This is the reason that professional agents don’t sell their own homes.
Homeowners may not know what is necessary to fix or update in their home, and may overspend preparing their home for sale. A good REALTOR® should be able to provide you with an outline of what features are important to homebuyers and help you prioritize a punch list and keep you from wasting money.
Unrepresented sellers don’t have systems in place to vet qualified buyers. You’ll be inundated with calls from real estate agents who'd like to list and sell your home, “just-looking” types who don’t intend to buy, investors looking for a flip, criminals, as well as earnest buyers who are looking at homes they can’t afford to buy. A professional REALTOR® will, mostly, only work with qualified, motivated buyers.
De-incentivised buyer agents. The vast majority of homes for sale find their buyers through other real estate agents that are helping them shop for a home, not through the homeowner's listing agent. REALTORS® work with buyers for free with the understanding that when they purchase a home the agent will receive a commission on the sale. It takes a lot of work and time touring homes and seeing a purchase of a home through to closing, so it is fair to expect compensation for your professional services. Homeowners that sell their own homes without a REALTOR® usually do so to save on commissions - they either offer no commission to a buyer's agent, or a commission that is lower than the industry standard and, although REALTORS® have a fiduciary responsibility to their clients to find them the best home regardless of compensation, some may steer their clients towards homes that promise a competitive fee.
No access to the MLS. While it is true that many people start their home search on a public website, like Zillow, most agents never look at those sites - we search for homes through a Multiple Listing Service, or MLS database. In other words, Realtors® market your home to other REALTORS®. The MLS is the most up-to-date system, with the most reliable information, for searching for properties. Your home’s buyer will, most likely, come from an agent representing the buyer, so if you aren’t advertising your home where buyer's agents are searching than you aren’t reaching buyers.
No access to real home sale data. Pricing is a crucial component to selling your home. A REALTOR® will look at comparable home sales, neighborhood statistics, use a deep knowledge of every home for sale in the area and a fundamental understanding of the current housing market to arrive at a value for your home. The public websites are unreliable, so an unrepresented seller may not have the right information and, often, they will price their home incorrectly. If you price your home too high it sits on the market and gets stale - one of the first questions buyers ask is “how long has this been on the market?”, and if it has been listed for longer than they feel is appropriate they will, most likely, assume that the consensus is that the home is overvalued and will probably be less inclined to get excited about it and make an offer to purchase it. If you price your home too low then you will probably never maximize your home's value, or see a good return on your investment - buyers are much less likely to make an offer above the asking price on a FSBO than they are on a home listed with a REALTOR® - they, often, want your "savings" on broker fees to be passed on to them, so they offer a lower price.
Advertising! In addition to placement on the MLS, there are many different ways that a REALTOR® will advertise your property, and all of them cost money and take time to create. REALTORS® rely on efficient systems, based on data and experience, that they have put in place. From professional photography, to personal websites, to videos, to targeted digital and print marketing - the expertise necessary to be successful is great and the costs add up - but a good agent absorbs those costs because they believe in your home’s value.
De-personalizing a home for sale is imperative. Having a real estate agent partner with you to comb through your home and start packing up photos and unique items is a huge value-added service. You are moving anyway - might as well get started packing! Most great real estate agents will pay for a consultation with a professional home stager to further declutter and prepare your home for sale. Even better is when your REALTOR® is also a professionally certified home stager, like I am. I will consult with my clients from day one and provide a free staging plan for them to execute, and when they move into their next home I will be there, too, helping with design. As an unrepresented buyer, it is hard to depersonalize your own home, because you are too attached to it. For you it is, ahem, personal - but for me it is about maximizing your home’s value to more prospective buyers.
The amount of paperwork and organization that it takes to guide a home sale transaction from offer through closing is immense. Most unrepresented sellers are not familiar with the process or terminology, nor are they truly aware of all the potential pitfalls and legal protections necessary in a real estate transaction. Having a broker and a full complement of administrative staff , with efficient systems in place, making sure that everything goes smoothly from beginning to end is another incredibly valuable service that you’d miss out on when selling your home without a licensed real estate partner. From offers, to inspections, to your buyers securing financing, clearing title, escrow, attorneys, insurance, contingencies, closing statements and more, many homeowners attempting to sell their home without professional representation will feel overwhelmed and ill-prepared.
It is not impossible to have a great experience selling your home without representation, but having realistic expectations is important. If you are thinking of selling your home and have the time, money and energy to tackle managing the sale of, likely, your biggest investment then I would suggest using this article as a guide to start researching every component that goes into it. Start by organizing your home and tidying up, refresh some areas that may have become dated or weathered (a coat of paint does wonders to improve the brightness and allure of a home) and make minor, inexpensive repairs (and necessary major repairs, too - everything will be uncovered in the inspection). Hire a great attorney! With, or without a REALTOR® a good real estate lawyer can be very helpful to guide you through some of the steps and protect your interests - so CYA - Call Your Attorney! Get familiar with the terminology and roles of your buyers’ important professional partners - you will need to understand the process so that you can negotiate the complications that will inevitably arise between accepting an offer and finalizing the sale. Research marketing strategies. There are millions of articles and videos online giving marketing advice and you will quickly find a few that resonate with you. As long as you are prepared to spend some money on digital marketing to reach buyers, and aren’t easily overwhelmed by technology or the vast amount of competing information available, then you can be successful. Try to attract the attention of the real estate community by offering a full commission to REALTORS® who will, more than likely, be the ones who bring you your buyers. Also, throw a broker open house so that the local agents will know that your home exists in the marketplace, and entice them with free lunch - do this during the week between 10 am and 1 pm on the days that your town's agents normally hold their broker open houses (it's Tuesdays and Thursdays in my part of New Jersey). Lastly, pay attention to your competition! Every home on the market in your town that is in your price range, regardless of style, are all competing for the “Eye of the Buyer”, so make sure that your home measures up, or better yet - stands out!
Most of us don’t sell our own cars by ourselves, act as our own attorneys or manage our own investments. We all, generally, prefer full service to no service, especially when there is a steep learning curve and the stakes are high. For the few of you who prefer increased risk and hard work for a, statistically, lower financial return, I hope that I have been able to help you prepare for the tremendous amount of potential stress that comes with selling your home without the representation of a licensed professional Real Estate partner. Despite what the data suggests, don’t be discouraged - homeowners accross the globe offer their homes for sale as a FSBO all the time, and some of them even find success.
Of course, Colby Sambrotto, one of the founders of ForSaleByOwner.com, isn't one of them - after failing to sell his NYC condo as a FSBO, he ultimately sold it through a licensed, professional REALTOR® - and it sold for 7.5% more than Mr. Sambrotto was asking when he was trying to sell it on his own - so there's that...
Rich Peluso is a former financial analyst and commodities trader, currently helping people with, what is likely, the most important financial decision of their lives. He is a REALTOR® and team lead for Elite Homes Group, Coldwell Banker Residential Brokerage in Chatham, NJ. Visit him at EliteHomesNJ.com
Here are some statistics from the National Association of REALTORS®
FSBOs accounted for 7% of home sales in 2017. The typical FSBO home sold for $200,000 compared to $265,500 for agent-assisted home sales.
FSBO methods used to market home:
Yard sign: 22%
Friends, relatives, or neighbors: 18%
Online classified advertisements: 6%
Open house: 10%
For-sale-by-owner websites: 5%
Social networking websites (e.g. Facebook, Twitter, etc.): 12%
Multiple Listing Service (MLS) website: 4%
Print newspaper advertisement: 2%
Direct mail (flyers, postcards, etc.): 2%
None: Did not actively market home: 49%
Most difficult tasks for FSBO sellers:
Getting the right price: 17%
Understanding and performing paperwork: 12%
Selling within the planned length of time: 5%
Preparing/fixing up home for sale: 8%
Having enough time to devote to all aspects of the sale: 3%
Source: 2018 National Association of REALTORS® Profile of Home Buyers and Sellers