Should I Sell Privately or Work with a Realtor: The Pros & Cons
While selling your home yourself is an option, it’s important to balance the savings made not paying a commission with the work and risks involved.
Selling your home on your own (also know as a For Sale By Owner or FSBO) can be difficult and time consuming, especially in our current market. There are many considerations, including: “am I a good negotiator?”; “am I aware of all of the legal issues including disclosures?”; “what is the right price to set?”; “do I want a fast sale?” or “ how does a bidding war work?”. There are many questions to get the answers to in order to make an informed decision.
There are no barriers to a homeowner selling their home themselves. There are many websites catering to those who opt to take this route. There are also brokerages that will post your home on the MLS for a fee, some even sell “for sale by owner” kits.
The main reason that home sellers choose to sell themselves is to save money on the commission.
When choosing the FSBO route, here’s what you must consider:
- HOW MUCH TIME DO I HAVE TO DEDICATE TO SELLING? Pricing, marketing, phone calls, follow up, open houses, qualifying buyers and following the ever changing market conditions to adjust as needed are a part of what your Realtor does for you in their daily routine. It’s a full time job.
- ARE YOU THE TYPE OF PERSON WHO LIKES TO BE IN CHARGE? If not, taking on the onerous job of selling your own home is a big project to be in control of.
- ARE YOU A NEGOTIATOR? Negotiating an offer can be stressful. The only way to gauge the intent of a potential buyer is through the back and forth process of offer/counter/offer. Getting top dollar is a Realtor’s forte.
- Many private Sellers offer a Buyer agent commission to ensure that they have access to the majority of buyers who are under Buyer contracts. A Buyer Agent receives up to half of the negotiated total commission a Seller pays to their Agent. Offering a buyer’s commission must be factored into the cost and will diminish the amount of money selling on your own saves you.
- ARE THERE HELP/RESOURCES AVAILABLE TO PRIVATE SELLERS? There are a multitude of sites available to those who entertain selling their own home. Managing the costs and getting access to the best ones, along with accessing reliable trades and services, will be an integral part of your process prior to placing a For Sale sign on your yard.
What Are The Benefits Of Employing An Experienced Realtor?
Realtors start working for you before their “For Sale” sign is posted on your lawn. They will go through your home with an professional’s eye to preparing it to attract the buyers to whom it will appeal by offering tips for staging, small repairs and referrals to their network or trades (if required). Many of these services may be included in the Listing Agents portion of the gross commission. Your Realtor will also prepare an In Depth Home Analysis to determine the optimal listing price. This price will be based on current market conditions, the condition of your home and your time frame for selling.
A Realtor will review with you various strategies for getting top dollar based on the current market conditions. They will know whether or not to set the price lower to trigger a bidding war or near the projected selling price in a slower market.
What Are The Costs And Risks Of Selling Without A Realtor?
- Extra legal fees, as your lawyer will need to prepare and review all contracts prior to your signature and at each point in your negotiations.
- Buyer Agent commissions and potential losses on the selling price if your negotiating skills do not match that of the buyer or their Realtor.
- DISCLOSURE IS ESSENTIAL IN A REAL ESTATE SALE: You need to be aware of what latent defects exist in your home that you must disclose to any potential buyer. If you are aware of water issues, structural or electrical issues, etc… that cannot be seen on a visual inspection, failure to tell a potential buyer prior to an offer or upon receipt of an offer can lead to hefty lawsuits. Unlike a realtor, who carries error and omission insurance to cover inadvertent missteps, a private seller has no such protection from a potentially large bill.
- FINDING AND QUALIFYING A BUYER: Anyone can call and ask to come and see your house. Do they have a pre approved mortgage? Do they have an Agent that they must pay themselves if you are not offering a selling commission? When are they looking to buy? Do they have a house to sell? Is there the potential of criminal intent? As someone who has not sold a house, finding out about motivation and circumstances from a stranger you show through your home can prove difficult.
- WHO WILL SEE MY HOUSE? As a private seller you are your agent and do not have a list of buyer clients that all realtors do. Realtors also network with each other and have relationships with other realtors and buyer groups. A FSBO will not likely have this network and will have to work hard to find the right buyer.
A Realtor Is Worth The Commission They Charge For The Work They Do
- They sift through all relevant data to determine the ideal listing price to both attract buyers to visit your home and get you the highest price possible in the current market.
- They eliminate lookers by qualifying buyers prior to taking them to see any homes. This is an acquired skill which Realtors are experts at.
- They are able to show your home and get a buyers actual thoughts regarding condition and price as buyers are more likely to be open with their Realtor. Polite buyers may not want to tell the home owner what they don’t like.
- Realtors have a network of professionals who are available quickly, do quality work and may have better pricing available to help get you home ready for sale. Some of these services may be covered under the commission that your chosen listing Realtor charges.
Listing commission can vary from 3-6% of the selling price depending on your homes value, location and market conditions. Up to half of the negotiated commission is offered to a Buyer’s agent if they are involved in the sale. That reduces your potential savings by 1-2.5%. Out of that saving you will pay the costs of your marketing, signs, lawyer, etc… along with taking all of the risks and not accounting for your time.
A key point to ponder is, buyers who are looking for private sales are themselves looking to save money and expect the listed price to be lower than similar homes on MLS reflecting that no commissions are being paid by the Seller. Even if it’s only the Listing portion, a potential buyer may expect to pay 2% + less than similar homes posted on the MLS. When they craft their offer that may well be reflected in it.
Many professional buyers, who have no obligation to be fair and transparent, look to private sales to get a great deal.
When Selling Your Home On Your Own What Are The Must Dos?
- Clean, organize, repair and stage to attract the buyers looking in your neighbourhood and to get the best price possible.
- Professional photos including video tours to be posted on heavily trafficked websites are a must.
- Employ a lawyer (pay a retainer) versed in Real Estate sales who has the time to meet with you on short notice.
- Manage all of your calls, emails, showings and offers.
- Finally, be ready to act strongly on your behalf to ensure you get the highest price possible with the best terms on the offer that you ultimately accept.
Not All Houses Listed For Sale Sell
If you make errors along the way or decide that selling your own home is not for you then decide to hire a Realtor to take over, you may have lost out on getting top dollar. First impressions are everything.
Buyers following listings in your neighbourhood have already seen and dismissed your home. Your new Realtor will need to start from scratch and repackage your home to attract new buyers and potentially entice those who had previously seen it to revisit. You’ve also established that your asking price was not attractive in the current market.
If you are a busy person who does not like to answer phones, negotiate legal paperwork, have a tenanted home, are in a rush or worry you may make a legal misstep, selling your own home may not be the right move for you.