When you think of selling your home, you really have two options: list it "for sale by owner" or list it on the Multiple Listing Service with a professional real estate agent. What's the difference? What are the pros and cons of each? Read on to find answers to these questions and more.
The Scoop on Realtors
A real estate agent, or Realtor (if they belong to the Realtor trade association), must go through some extensive training in order to lawfully help you sell your home. They must become licensed with your state and maintain a good standing in order to act on your behalf in a real estate transaction.
Some of the common duties real estate agents will perform for you or help you with are:
- Set an asking price
- Point out needed repairs and recommend upgrades
- Screen buyers
- Handle paperwork
- Provide legally required disclosures
- Advertise and market your property to the buying public
- Negotiate with buyers
The traditional fee for real estate agents is 6% of the final selling price of the property. That's $ 18,000 on a property worth $ 300,000. Discount real estate brokers have made a splash in the real estate world with the help of the internet. Sellers can commonly find discount brokers who charge 4% of the final sales price. That's still a $ 12,000 fee for a $ 300,000 property.
The Scoop on FSBO (For Sale By Owner)
The reasons many home owners decide to list their home FSBO should be obvious at this point. There's a lot of money to be saved if one can successfully sell their home on their own. Historically, 13-16% of real estate sold annually in America has been sold by the owner, without the help of a real estate agent. However, almost 9 out of 10 sellers who initially list their home by owner wind up hiring an agent. Why?
The varied reasons include:
- Time. The FSBO did not get offers as fast as needed, and because convinced an agent could help them sell faster.
- Money. The FSBO did not price the home right and therefore did not get any offers.
- Knowledge. The FSBO did not know enough about the steps required to complete the sale.
There are other reasons, but those are the big three. Can they be addressed by the average home owner? Sure they can. Almost all knowledge is available to us on the internet these days, and armed with knowledge, more home owners can successfully sell their home on their own.
The Pros and Cons
Before deciding to list your home for sale, consider how much time you have to devote to the task yourself. If you are extremely busy already already, you may want to hire an agent right off the bat. There is definitely a time requirement when it comes to selling by owner. You'll need to handle advertising and marketing, take calls, show your home, entertain offers and make sure you comply with all the local laws to complete the sale.
There are people and resources available to help you like for sale by owner web sites, where you can advertise your home to a nationwide audience, and your local mortgage broker who can pre-qualify buyers that show interest in your home. Other local professionals like title companies and attorneys can help you with legal requirements.
The immediate benefit of hiring an agent is that all these duties become their responsibility, not yours. You can continue on with your life, avoiding many of the headaches that come with the sale of real estate. That is, until it comes time to actually move. But that's another story. However, hiring an agent can be a double-edged sword. If you hire the wrong one you will probably rue the day for years to come. Most brokers require you to sign a listing contract for at least three months, although most want six months to a year. This means that they have the exclusive right to sell your property for that length of time, and you will have a hard time firing them if things do not work out and you want to go with a different broker.
So do some homework before you hire an agent, if that's the route you choose. Ask questions like:
- How long have you been in the business?
- How many properties did you sell last year?
- How many properties have you sold that far this year?
- Can I call some of your past clients for reference?
- Do you do this full-time?
The answers to these questions should give you a good idea of where a particular agent stands in relation to any other agent.
The Bottom Line
A comparison can be made between going FSBO versus hiring an agent, to selling your car in the newspaper versus trading-in. The former takes a little more time and effort than the latter, but it can save you a bundle.
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by Nate Garin