7 REASONS YOU SHOULD NEVER SELL YOUR HOUSE FOR SALE BY OWNER
By Casey Lewis
In a sellers market it can certainly be tempting for you to sell your home For Sale By Owner and save the money on the Realtor commission. But in almost every case I’ve come across it will cost you more money, a lot more time, and cause a significant amount more stress in your life versus hiring a professional.
Okay. So I’m a licensed, practicing Realtor. I sell a bunch of houses in Texas and refer real estate agents around the country. I’m supposed to say this, right?
For a minute though, set that fact aside and lets just look at some logical reasons why selling your house For Sale By Owner is a bad idea.
1. Time: There’s a lot more to selling a home than just putting a sign in the yard, taking pretty pictures, holding an open house, and waiting for a buyer. When you show your home, someone has to let the buyer in, allow them to walk through the house, spend time with them, and answer any questions about the home or neighborhood. There are all of the calls that come in off of the sign in your yard. There are all of the other real estate agents calling you to ask you about your house. If you show your home to 15 buyers at 30 minutes each you’ve personally invested 8 hours of your life into just showing your home.
And all of this is before you even get an offer. Then there’s the time to negotiate, time to go through inspections, time to coordinate closing with lenders and title companies.
2. Preparing Your Home: No offense here, but you aren’t necessarily unbiased about your home. When you hire a Realtor to come in they will point out the dirt on your baseboards that you’ve stopped noticing or the kids finger prints and scuffs on your kitchen cabinets. I don’t care how great of a decorator you think you are, your home is not ready to sell.
Home buyers that view your home will also walk through a similar home in a similar price point as yours that a professional pointed out all of the little details that need fixed before listing the home. That seller took care of those things. When you sell your home For Sale By Owner you miss those details and they hurt you by either not generating an offer or an offer comes in below list price because the house wasn’t perfect.
3. Risk: If you sell your home For Sale By Owner you are taking on all of the risk that your transaction was done legally and that you’ve disclosed everything you needed to disclose about your home to the buyer. Did you forget about that plumbing leak from 5 years ago that you thought dried out but in fact caused mold to grow between the drywall of your home? Well, when your buyer rips open that wall for their renovation project they will find that and sue you for non-disclosure and you will be responsible. By hiring a professional they will make sure you’ve disclosed all of the important facts about the home and make sure the transaction is handled correctly.
4. Negotiating: Who do you think is better at negotiating a real estate contract? You after you’ve read several articles on the internet and received a little bit of advice from your friends who sold their home For Sale By Owner? Or a professional that has negotiated 70 or 80 real estate contracts recently? When you sell your home For Sale By Owner you will likely be negotiating with a buyers real estate agent that negotiates contracts for a living. They are better than you at this.
There’s a lot more to a real estate contract than the sales price. There are exclusions, financing options, earnest money deposits, seller closing costs, timelines for surveys and HOA addendums, buyers objection timelines, notices required to be delivered to the buyer, inspection periods, closing dates, home warranty’s, possession dates, settlement expenses, mediation, option periods, and more.
Once you execute on a contract as the seller, you no longer have control of how your home will be sold. The buyer and that contract dictate everything about the sale from that point forward. If you’re not familiar with real estate contracts and don’t put everything in writing prior to signing, your entire deal can fall apart and often does just before you were supposed to close on the sale.
5. Price: This is usually one of the major reasons homeowners choose to sell their home For Sale By Owner in the first place. They think that they’ll be able to save on the real estate agent commission and pocket that money. In reality they almost always sell their home for a lower price and still pay a realtor.
Over 90% of home buyers have hired a Realtor to represent them in a home sale transaction. So with that, most Realtor’s will only show their buyer a home that is listed in the MLS or that has agreed to pay them a buyers agent commission. This amount is typically 1/2 of the total commission that a listing agent charges to the seller.
For example, if a seller hires me to sell their home for them at a 7% commission then I will earn that full 7% commission if I bring a buyer to the seller. However if another agent brings that buyer, then I earn that 7% commission but agree to pay the buyers agent 3.5% (or 1/2) of my total commission.
So if 90% of homebuyers have already hired an agent to represent them, those agents will only show their buyer a home in which they will receive a commission. So if you’re selling For Sale By Owner and 90% of buyers have a Realtor, you must pay a decent Realtor commission in order to get those agents to show your home. For this example, let’s assume 3% commission.
Now as far as listing agents are concerned, a really good one will typically have a sales price vs. list price ratio of 100% or higher. This means that they will typically sell a home near the list price or higher and that they fight in negotiations to get that price.
If you list your house For Sale By Owner for $200,000 and a professional buyers agent brings a buyer to you, they will negotiate with you and you will likely settle on a price around $190,000 to $195,000. Remember, these are professionals that negotiate for a living. You still have to pay them 3%. Did you really save any money or make any more money by doing this on your own? Nope. And you get to add all of the stress that goes into the process to not even make any more money.
This example doesn’t even account for the situation where a professional has better access to comps than you do and can possibly price your home higher than you expected. It doesn’t take into account the situation where an appraisal comes in below your contracted price and you need access to comps to fight for a higher appraisal. It doesn’t factor in that a professional knows how to negotiate contracts up over the list price.
Even if you are able to sell your home for the exact same price that a professional would be able to sell it for, which is highly unlikely, it doesn’t factor in all of the other costs working with a Realtor are able to save you, like marketing costs, time, and negotiating a beneficial contract for you.
6. Marketing and Tools: In order to sell a house it has to be in the MLS. It just does. That’s what puts your house on Realtor.com, on Zillow, and all of the other buyers and agents radars as the home is for sale. There are some agencies and companies that will list your home in the MLS for a flat fee. Sometimes this is $200. Other times it’s $500. But it is a cost you’d have to pay up front whether your home sells or not in addition to the Realtor commission you’ll be paying a buyers agent.
Also, Realtors in most areas have access to a showing or scheduling service. This is a central company that organizes all of the showing requests to come view your home. That way you don’t have to answer your phone every time it rings from an agent that wants to show your house tomorrow at 9am. They call the showing service, the showing service texts you to ask if that’s okay, and arranges the showing with the other agent.
You’ll also need to put really great photos of the house in your MLS listing. Your iPhone camera just doesn’t cut it. Realtors hire professionals photographers to take listing photos, so if you want to compete on the MLS you’ll need to spend that $200 out of your own pocket to get professional marketing photos taken.
There are tons of other tools, tricks, and techniques that Realtors have access to that brings in buyers, markets your home effectively, and generates offers that you just don’t have access to.
7. Relationships: You need to know at least 2 different lenders and a real estate attorney or title company to assist you in closing your transaction when you’re selling For Sale By Owner. You have to stay on top of them the entire time to make sure the transaction goes smoothly.
Realtors already have these relationships and their vendors like title companies and lenders work incredibly hard to keep Realtors happy. If a title company screws up a transaction they know that the Realtor will never use them again and encourage other agents to not use them again. These relationships are already established so you know that a good Realtor has a good team behind them that make things work smoothly.
I know it’s tempting. I know you think you can do this on your own and that you need that extra money to buy the next house or to pay off some debt or to boost your emergency account. But I promise that when it comes to selling your home For Sale By Owner you rarely get that extra money you want and you bring a lot of extra stress into your life in the process. Hire a professional.
(If you’re looking for a professional real estate agent anywhere in the country, I can help.