First, and probably most important, is a realtor commission, which is a chunk of change that can look like a huge bite out of the proceeds from the sale of your largest asset.
A typical realtor commission is 6%, so if you’re selling a $500,000 home, it’s $30 grand into someone else’s pocket. Well, of course, your listing agent isn’t keeping the entire 6% for themselves; about half of it goes to the buyer’s agent. Then there is the broker’s share. Also, marketing expenses, licensing costs, and soon.
Still, without a realtor, you could potentially save 3% of the sale price. Potentially. If you know what you’re doing. For some people, who know the industry, it may actually be well worth it.
Second, you may feel like real estate agents get paid for barely doing any work. It seems like the easiest job!
You may be thinking “What does an agent do to earn a commission? They show up once for the listing appointment, and then they call occasionally to shoo me out of my house so they can show it to people that I don’t even get to see or decide if I want them in my house!”
Well, in actuality, there is a lot of work going on behind the scenes that sellers are often totally unaware of. I explain this below.
Also, it’s not just the straight-up time that goes into the compensation but also the years of training and expertise. We don’t question doctors who charge $20,000 for a 30-minute surgery, do we?
Anyway, I’ll still explain below the kind of work realtors have to do to close on a home, so you can decide if you can pull it off by yourself.
The third reason may be that you’ve just had a bad experience with an agent in the recent past, and you no longer trust real estate agents in general, especially when they keep calling you, always at the worst time, asking you to list your home with them, when you haven’t even seen them and have no idea what they are like.
I mean, yeah, not all agents are great.
You should choose those who represent you carefully. If a surgeon is dealing with your life and health, a realtor is dealing with the next most important thing: your largest asset. Interview a few realtors, don’t just go for the first one, even if they were recommended by your best friend. And when you find one, have a good, friendly relationship with the person, or persons, who are handling a great deal of your money. You’re nice to your doctors, right?
By the way, if you don’t research your doctors or surgeons, you definitely should.
So why in the world would you want to hire an agent to sell your home?
Let me give you 6 reasons why recruiting the help of a professional may be in your interest.
1. You Can Actually Net More with an Agent, even after paying their commission.
According to NAR (National Association of Realtors) statistics, agent-assisted listings on average sell for 18% more than FSBOs. Even if you don’t believe this 18% (which honestly, seems kind of high), even half of this amount, 9%, is already well above the 6% commission. And, you let them do all the heavy lifting.
Also, keep in mind, as FSBO you’re going to attract bargain hunters with frustrating, lowball offers going after your commission saving.
2. Marketing Isn’t As Easy As You Think
Do you have a lot of free time? How about extra cash for marketing?
In today’s informed, computer-savvy homebuyer age, simply putting up a “For Sale” sign in front of your house won’t get you the traffic streaming to your home. As a FSBO seller you may have to spend a lot of money on advertising.
The trouble is that most of your target audience will still be out of reach if your home is not posted on the multiple listing service (MLS), and you’re going to need an agent for that OR you’d have to pay an outside agency a flat fee of a few hundred dollars to get your home listed.
The MLS provides massive exposure to potential buyers, which explains why more than 80% of buyers find their home through the MLS. Also, the listings that appear on the MLS are automatically syndicated over to such sites as Zillow, Trulia, Realtor.com and so on, so your home can get a wider exposure.
Besides the MLS, agents have access to a vast network of realtors, have the tools (MLS, CRM, developed social media and web presence, YouTube channels, etc.) to gain a wide, yet very targeted market exposure, and have a superior knowledge of the market trends and local neighborhood specifics. Speaking of YouTube, check out our channel.
3. Hidden Costs Can Add Up Quickly
You may not know this but many realtors bear much of the burden of expenses related to getting your home marketed and sold. A list of expenses can include
· professional photography, which can be costly
· membership access to the MLS (also not cheap)
· targeted social media campaigns
· web and You Tube video posts
· signage and print advertising (not much of a thing anymore, except with older agents)
· and of course, the opportunity cost of the time spent on the long and complex process of selling your home.
Munara and I, for example, routinely spend hundreds of dollars to market each of our listings. These expenses come out from the agent’s uncertain future commission, and sellers with representation are often blissfully unaware of these costs. In fact, agents do all the work and pay marketing costs without getting paid for weeks or months (sometimes never, if there is no closing).
4. Agents Are Better at Pricing (some agents, anyway)
It doesn’t matter how uniquely beautiful your house is (and how much you love it and how much work you’ve put into it). Sorry to break it to you but it won’t sell if you’ve priced it too high. Yeah, you may get really lucky if you come across a buyer to whom your house is a ‘love at first sight’ and who also has the money to back it up.
But chances are, you just can’t beat the market (ask anyone in finance). Not by much anyway. Yes, sure, it’s possible to get a bit of a premium, with a carefully planned approach and masterful marketing. Munara and I do it all the time. But you still have to be smart about pricing your home.
If you overprice your home beyond what the market can bear, you risk letting your house sit on the market too long, making it look stale and undesirable. People are going to start wondering what’s wrong with the house. Also, buyers won’t feel the urgency to put in an offer.
An accurate pricing strategy isn’t easy. You have to have a PhD in economics for that! 😄
Well, every house is different, and good pricing requires deep knowledge of factors that affect house values, as well as the current local housing market trends, neighborhood specifics, and the economy overall.
5. Save Yourself from Drowning in the Paperwork
Unless you love dealing with contracts, counteroffers, riders, addenda, disclosures, inspection reports, appraisals, HOA approvals, contractor permits… I think you get the drift. The stack of papers you’d have to deal with can be thicker than your thigh. Literally.
6. Showings Can Be Draining
Buyers can’t buy if they can’t see your house, so you would need to make it available often, at various times of the day, and on a short notice. Are you prepared to make quick changes to your schedule or plans? Can you call in sick every time a buyer wants to see your home?
Also consider this, most buyers’ agents as well as buyers are uncomfortable when the owner is present during a showing.
What to Do If You Don’t Use a Real Estate Agent
So you’ve decided not to hire an agent. That’s fine because it’s not like it can’t be done. There are people who sell their own homes successfully. Remember, though, you’ll need to do your research first—on recently sold properties in your area and properties currently on the market—to determine an attractive selling price. Keep in mind that most home prices have an agent’s commission factored in, so you may have to discount your price as a result.
You’ll be responsible for your own marketing, so make sure to get your home on the multiple listing service (MLS) in your geographic area to reach the widest number of buyers. Because you have no agent, you’ll be the one showing the house and negotiating the sale with the buyer’s agent, which can be time-consuming, stressful, and emotional for some people.
Because you’re forgoing an agent, consider hiring a real estate attorney to help you with the finer points of the transaction and the escrow process. Even with attorney’s fees, selling a home yourself can save you thousands. If the buyer has an agent, however, they’ll expect to be compensated. This cost is typically covered by the seller, so you’ll still need to pay 1% to 3% of the home’s sale price to the buyer’s agent.1
Setting an Unrealistic Price
Whether you’re working with an agent or going it alone, setting the right asking price is key. Remember the comparative market analysis you or your agent did when you bought your home to determine a fair offering price? Buyers will do this for your home, too, so as a seller you should be one step ahead of them.
You may think your home is worth more, but remember to set a realistic price based on comparable homes in the area.
Absent a housing bubble, overpriced homes generally don’t sell. In a survey conducted by the informational home sale website HomeLight.com, 70% of real estate agents said that overpricing is the No.1 mistake that sellers make.2 Don’t worry too much about setting a price that’s on the low side, because in theory, this will generate multiple offers and bid the price up to the home’s actual market value. In fact, underpricing your home can be a strategy to generate extra interest in your listing, and you can always refuse an offer that’s too low.3
Expecting the Asking Price
Any smart buyer will negotiate, and if you want to complete the sale, you may have to play ball. Most people want to list their homes at a price that will attract buyers while still leaving some breathing room for negotiations—the opposite of the underpricing strategy described above. This may work, allowing the buyer to feel like they are getting good value while allowing you to get the amount of money you need from the sale.
Of course, whether you end up with more or less than your asking price will likely depend not just on your pricing strategy but also on whether you’re in a buyer’s market or a seller’s market and how well you have staged and modernized your home.
Selling During Winter Months
Believe it or not, there really is a right time to sell during the year. Winter, especially around the holidays, is typically a slow time of year for home sales. People are busy with social engagements, and the cold weather across much of the country makes it more appealing just to stay home. Because fewer buyers are likely to be looking, it may take longer to sell your home, and you may not get as much money. However, you can take some consolation in knowing that while there may not be as many active buyers, there also won’t be as many competing sellers, which can sometimes work to your advantage.
You may be better off waiting. Barring any mitigating circumstances that may force you to sell during the winter or holidays, consider listing when the weather begins to warm up. People are usually ready and willing to purchase a home when it’s warmer.4
Skimping on Listing Photos
Because so many buyers look for homes online these days, and so many of those homes have photos, you’ll be doing yourself a real disservice if you don’t have any visuals of your home. At the same time, there are so many poor photos of homes for sale that if you do a good job, it will set your listing apart and help generate extra interest.
Good photos should be crisp and clear and taken during the day when there is plenty of natural light available. They should showcase your home’s best assets. Consider using a wide-angle lens if possible—this allows you to give potential buyers a better idea of what entire rooms look like. Ideally, hire a professional real estate photographer to get top-quality results instead of just letting your agent take snapshots on a phone.
And don’t just stop at photos. Consider adding a video tour or 360-degree view to further enhance your listing. This can be easily done with any smartphone. You can certainly entice more potential buyers into walking through your doors for showings. You may even get more offers if you give them an introductory walk-through of your property.
Not Carrying Proper Insurance
Your lender may have required you to acquire a homeowners insurance policy. If not, you’ll want to make sure you’re insured in case a viewer has an accident on the premises and tries to sue you for damages. You also want to make sure there are no obvious hazards at the property or that you take steps to mitigate them (keeping the children of potential buyers away from your pool and getting your dog out of the house during showings, for example).
Hiding Major Problems
Think you can get away with hiding major problems with your property? Any problem will be uncovered during the buyer’s inspection. You have three options for dealing with any issues. Either fix the problem ahead of time, price the property below market value to account for it, or list the property at a normal price and offer the buyer a credit to fix the problem.
Remember: If you don’t fix the problem in advance, you may eliminate a fair number of buyers who want a turnkey home. Having your home inspected before listing is a good idea if you want to avoid costly surprises after the home is under contract. Further, many states have disclosure rules.5 Some require sellers to disclose known problems about their homes if buyers ask directly, while others decree that sellers must voluntarily disclose certain issues.
Not Preparing for the Sale
Sellers who do not clean and stage their homes throw money down the drain. Don’t worry if you can’t afford to hire a professional. There are many things you can do on your own. Failing to do these things can reduce your sales price and may also prevent you from getting a sale at all. If you haven’t attended to minor issues, such as a broken doorknob or dripping faucet, a potential buyer may wonder whether the house has larger, costlier issues that haven’t been addressed either.
Have a friend or an agent (someone with a fresh pair of eyes) point out areas of your home that need work. Because of your familiarity with the home, you may be immune to its trouble spots. Decluttering, cleaning thoroughly, putting a fresh coat of paint on the walls, and getting rid of any odors will also help you make a good impression on buyers.
Not Accommodating Buyers
If someone wants to view your house, you need to accommodate them, even if it inconveniences you. And yes, you have to clean and tidy the house before every single visit. A buyer won’t know or care if your house was clean last week. It’s a lot of work, but stay focused on the prize.
Selling to Unqualified Buyers
It’s more than reasonable to expect a buyer to bring a pre-approval letter from a mortgage lender or proof of funds (POF) for cash purchases to show that they have the money to buy the home. Signing a contract with a buyer may be contingent on the sale of their own property, which may put you in a serious bind if you need to close by a particular date.
Can You Sell a House With a Mortgage?
Yes, you can sell a house with a mortgage. During the escrow process, you will get a mortgage payoff statement (sometimes called a payoff quote) from the lender holding your mortgage that lists the exact remaining balance. When your loan closes, the escrow agent will send the balance of your mortgage to your lender, paying off your mortgage.
Should I Stage My House?
Yes, probably. Staging a home can lead to quicker sales and higher home prices.6 However, not everyone needs to hire a professional staging service. Just taking a few steps like cleaning and decluttering can have a significant impact on a home’s sale and will need to be done before moving regardless of the sale.
How Much Will I Make Selling My House?
How much you will make depends on the sale price, agent commissions, closing costs, and the remaining mortgage balance. If working with a real estate agent, you should receive a seller’s net sheet before you even list your property, which details what you can estimate to make.7 When you have accepted an offer and are in escrow, you will get a closing disclosure from your lender that details exactly how much you will receive after your loan closes.