If you have ever sold a home before then you know that closing costs can be pricey. A large part of that price is realtor costs for both yourself and the buyer. Many home sellers fail to see the value that the realtor brought to the table. This is primarily because the seller is trying to measure the realtor’s value in time.
When you purchase or sell a home with a realtor you are not paying for their labor as much as you are paying for their expertise. Realtors are required to pass extensive tests and stay up to date on their industry. Most realtors have sold dozens of homes in their lifetime and have a great idea of what to look for, where future problems might arise, and the ease with which you will be able to sell the home in the future.
Unfortunately some sellers do not see this value and try to sell their home using for sale by owner methods. There are a variety of ways this is done, whether online or through a sign in the front yard, but most of them almost always fail. Here are a number of reasons for this failure.
1. Novice Verses Professional
You will be selling your home as the owner, but it is highly likely that the buyer will be purchasing their home through a real estate agent. This puts the seller at a distinct disadvantage. The buyer’s real estate agent has been in the market for years. They know all of the legal complexities that go into real estate purchases and know multiple tricks that will benefit their client.
As the seller you will likely not have the legal experience that is necessary to vet the contract you are getting into. This could leave you open to lawsuits or legal action in the future. There is also a good chance that you aren’t as skilled of a negotiator as the buyers agent which means you could get a worse deal then if you had just paid an agent to act in your behalf. Many for sale by owner sellers end up losing more money through a bad deal then they would have if they had just paid a real estate agent from the beginning.
Many sellers do not realize that realtors have access to a world of data that other people do not. This data is extremely up-to-date and is used to make smart, informed decisions.
For example, a realtor has access to comps which gives them the ability to look at multiple houses that are similar and see what they are selling for. This gives them the ability to price the home effectively and know when the best deal possible has been reached. This data is either not available to many for sale by owner sellers, or it comes at a steep cost.
Data can also be used to perform technical analysis to analyze the markets and determine good times to purchase homes throughout the year based on supply and demand.
If you are a homeowner then there is a good chance you are also quite busy. You know the feeling of getting home from work, running kids to soccer practice, attending dinners and neighborhood events, attending parent teacher conferences, and having dozens of other important events that threaten to consume every second of time your calendar has available.
This schedule makes it incredibly hard to show a home to potential buyers. Most buyers are also running on tight schedules. They may only have an hour each day that they are available to look at homes. This makes it extremely hard to match up schedules to show potential buyers the property.
Some purchases will be cookie cutter purchases. Everything will go according to plan. All the dates will line up. Inspections will all work out perfectly. Financing will be smooth and on schedule, and everyone will feel good at the end.
Most of the time this will not be the case, however. There are basic selling contracts that can be found online, but there are hundreds, if not thousands of important alternatives to the base contract. Perhaps the dates don’t align right for one or both of you. Maybe the buyer wants to try renting for a little bit before the purchase. Or, even more common an appearance, perhaps there are issues with inspections and appraisals.
When you are selling as the owner you have no access to any kind of legal or administrative assistance through this. You will have to figure out alternatives on your own, and you will have to try to work out inspection and financing issues with no prior experience and no understanding of what possible alternatives could be. As discussed before, you will be working these out with the buyers agent, meaning you will have the lower hand as you negotiate with a professional with years of experience.
For some it still comes down to money. Obviously there will be no money spent on commission fees if you choose to sell without a realtor. You are far from being guaranteed a higher profit from the sale, however. Statistics show that there is a difference of over $40,000 dollars between the average price of homes sold with a realtor and those sold as FSBO. That means that on average, homes that use a realtor sell for $40,000 more than those that don’t. Obviously there are other factors that can play into this, but they likely don’t add up to $40,000.
What this means is that even if you manage to save a few thousand dollars on realtor fees, you may lose tens of thousands of dollars throughout the selling process by missing out on professional help, advice and network.
There is a reason that nearly 90% of homes sold still go through realtors. While it may be tempting to try it on your own, it is almost always wiser to go with someone that knows the ropes of the industry and is looking out for your interests specifically. Obviously there are some situations where FSBO may be appropriate (if you are a realtor, for example), but by and large going with a realtor will always result in a better experience.