Selling Your House Without A Realtor (PROS & CONS)

By James Young on May 21, 2014
Selling Your House Without A Realtor (PROS & CONS)

Selling your house without a realtor can be very tempting at first glance, especially when you start punching the numbers on saving what can typically be as much as 6 percent sales commission. But before you start posting those “For Sale by Owner” signs in the front yard, take a moment to consider the pros and cons before making the big decision to go it alone in today’s housing market.

Choosing For Sale by Owner (FSBO)

It’s not too difficult to come up with the primary reason to try to sell your house on your own: no real estate agency commission. Unless you are able to negotiate something with the buyer, you are likely to be the one covering the entire commission.

This can run as high as 5 to 6 percent of the sales price, and is typically split evenly between the seller’s agency and the buyer’s agency. If your house sells for $275,000, for example, you could expect to pay a total of $16,500 to the two brokerages involved if you owe a 6 percent commission.

There are other lesser perceived advantages to FSBO, most related to control:

  • As the owner, you may feel you are better-prepared to show off your property’s best assets.
  • Negotiations may be easier for you because you won’t have to take into consideration the cost of the real estate commission.
  • The growing number of housing market sites offering free listings, such as Zillow and Trulia, make it easier for home owners to market their properties inexpensively to wide audiences.
  • You have complete control over showing requests, the negotiation process and marketing of your property.

Drawbacks of going it alone

But there is another side to the commission coin. According to the National Association of Realtors (NAR), only 9 percent of today’s sellers are FSBO. The category has been on a downward trend since hitting a high of 19 percent in 1997.

Among those sellers who decided to go the FSBO route, about 40 percent of sales are completed as a closed transaction. This means the homeowner already knew the buyer, either as a friend, acquaintance or family member. Of those who did not previously know the buyer, 18 percent were contracted directly by the buyer to express interest in the property.

Taking all these factors into account, it becomes clear that the portion of FSBO sellers who sold their home without knowing the buyer and who were not directly contacted by a buyer, is significantly smaller than the 9 percent.

In addition, FSBOs typically have a lower median selling price, with the typical FSBO home selling for $174,000 compared to $215,000 for agent-assisted sales.

Even after commission is paid at the full 6 percent, the agent-assisted home owner would receive $202,100 compared with $174,000 for the FSBO. Suddenly, the commission becomes less of a factor once the expected difference in selling price is taken into account.

Benefits of a realtor

This higher sales prices is generally attributed to your real estate agent’s ability to expose your listing to a much larger audience than you can, even with the growing number of available housing market websites. In addition, there are other advantages to securing the services of a real estate agency:

  • You do not have the added time commitment of showing your home or missing a sale because you were unavailable.
  • A real estate agent is only bringing qualified buyers to your door. You do not have the risks associated with inviting total strangers to walk through your home.
  • Your real estate agent will handle all the messy paperwork, dotting the i’s and crossing the t’s to assure everything is legal and complete.
  • Real estate agents can be an invaluable resource every step of the way. For instance, an agent often knows which lender will work hardest to get a buyer with a so-so credit score approved.
  • Because an agent can expose your property to a wider audience of potential buyers, they are often able to obtain a higher sales price for your home, which can offset some or all of their commission.

Bottom line: Paying a commission to real estate agencies is more likely to bring you top dollar for your home. Unless you are a lawyer well-versed in real estate law, it also brings the benefit of knowing your paperwork and transactions are thorough, legal and meet all local requirements.

Finally, your investment provides you with an experienced professional who knows the real estate market, knows how to price your home, understands how to incrementally lower the price to stir interest, and has access to some of the best marketing tools available.

If you still aren’t convinced, you may want to look into a limited service provider, such as a discount broker, to at least help you through the legal work.

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About James Young

My name is James Young- I love red wine, sailing, and playing guitar. I believe that everyday is truly a gift. I'm blessed to live five minutes from the sand in the beautiful city of Long Beach, CA. When I'm not assisting homeowners, you'll find me belting melodies with friends around a campfire, wandering the halls of an art exhibit, or watching ESPN re-runs until the sun comes up. So what am I doing here, you might ask? In a couple of sentences- I'm passionate about empowering first-time and experienced home buyers to make their dreams a reality. Whether it's saving thousands on your home loan, buying your first home, or acquiring your first investment property, I'm always here to help. Don't hesitate to ask questions, and please remember to "share the love"! :) #loveloans #loverealestate #lovelife!