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Hire a Realtor or Sell it Yourself?

With a lot of money at stake, this is a question many potential sellers are asking themselves today.

Thinking about selling?  Maybe you can save on the commission and do it yourself.  Your house isn’t worth what it used to be, times are tough and it’s a big expense.  If you could do without you would pocket thousands of dollars more on the sale of your home, right?

In order to help understand how this works let’s assume that you’re trying to sell a house worth approximately $500,000 and that you would expect to pay a 5 percent commission.  The commission on the sale of the home would be $25,000—clearly a lot of money. 

Follow the money

Although you sign a contract (listing agreement) with one broker, and agree to pay 5 percent on the sale, that money actually goes to pay four different parties.  The real estate company you hired, your listing agent, the real estate company representing the buyer’s agent and the buyer’s agent.  For simplicity, let’s assume they are each getting $6,250 as their share.

The companies on each side of the transaction are responsible for the agents that represent them who have unfettered access to every home on the multiple listing service (MLS) and supervise them to prevent fraud or improper dealing. They will also cover their own overhead, advertise and provide a multitude of ancillary services to help sell homes.  The agents, who traditionally do not receive salaries, will do all the legwork to sell your home, negotiate on your behalf and will not be paid a cent for their time, efforts, experience or expenses in the event your home doesn’t sell.  Many homes don’t so those that do are absorbing the expense for those that don’t. 

Okay, you’re probably thinking what about when the house is worth a lot more and they still get 5 percent? 

Fair enough, but keep in mind that the more the house is worth the fewer buyers there are in that price bracket and the harder it is to sell the home. That means a longer market time and more expense for everyone involved.  Homes that sell quickly help compensate for others that take much longer.

For sale by owner or by a realtor?

A good real estate agent has experience and objectivity. When you hire a real estate agent they have a vested interest in selling your house. They will tell you if you need to re-price, re-position, change, clean or deodorize.  Your family and friends may not. Some homeowners who are selling on their own (known as a FSBO) try to get feedback from various agents throughout the process however objectivity is lost here because the agents are not stakeholders in the sale. 

Buyers who work with real estate agents don’t pay a fee.  The commission, as stated, comes out of the sale price and therefore is paid by the seller.  Agents give buyers detailed information about neighborhoods, communities, schools, houses of worship, current inventory, past sales, service providers; etc. all while driving them around, setting an itinerary and giving them easy access to all the houses on the MLS.  With FSBO, on the other hand, buyers would have to find and arrange everything on their own.

Buyers realize a FSBO isn’t paying a real estate commission and many will want to pay 5 percent less than what they would otherwise pay for the same home.  They want the savings for themselves.  Therefore, in many cases a FSBO ends up doing all the work and still paying the fee in the end.  Some FSBO decide to pay half the commission by offering agents the opportunity to bring their buyers and still be paid.  In this case a FSBO’s savings are cut in half, they often resort to this after being unsuccessful as a true FSBO. 

Problem is—they still don’t have an experienced person working on their behalf.  They’re doing most of the work, their house is often difficult to access and buyers are uncomfortable having to visit the home with the seller there. 

Sellers who hire an agent have the added benefit of a buffer between them and the buyer/buyer’s agent.  It’s difficult negotiating your own home without taking offense of issues that arise and comments that are made.  A home is a very personal asset and many people have a lot of emotion tied up in it. 

Liability is another concern.  What is the NYS Property Condition Disclosure statement?  Should you fill it out and if not why not?  What will it cost if you don’t?  As a seller, you are responsible for statements that you make in representing your home.  If they prove to be incorrect you could be liable.  A FSBO who agrees to pay an agent bringing a buyer is responsible for representations that agent makes about their home even though the agent likely has little or no specific knowledge about the home.  It’s called vicarious liability and can only be avoided with the proper paperwork exchanged and agreed upon beforehand.

Finding the buyer is really just the first step, guiding the transaction to a smooth closing is a major part of what an agent is hired to do.  Pre-approvals, inspections, mortgage commitments, and appraisals are all critical steps. 

In the end, the money you try to save may cost you more—or worse, keep you from achieving the goal of selling your home.

Gfreezman April 08, 2011 at 08:48 PM
Why not be able to pay for the services of the realtor from contract to close as a consultant and advocate. If the buyer pays for the representation he receives, then there is no issue about giving the buyer back the additional money being held for his agent.
Nelson Salazar April 08, 2011 at 09:10 PM
Some markets have tried a' la carte real state services. I'm always willing to discuss alternate arrangements with my clients. Like any business transaction, it needs to make sense for all parties involved.

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